Come Together?
By Peggy Anne Salz, Tue Feb 10 09:15:00 GMT 2004

When giants NTT DoCoMo and Vodafone took the stage in separate sessions at MIDEM to share their views on what needs to be done to drive mobile data - and operator revenues - their messages were strangely identical. But their tactics are miles apart.

Like preachers on a roll, both Takeshi Natsuno, NTT DoCoMo, Managing Director, i-mode Strategy, and Graeme Ferguson, Vodafone Global Content Services, Head of Business Development & Content, evangelised that vendors, content owners and operators have to join together to make the market happen. But it was only in a series of exclusive interviews after the event that it was finally clear who should coordinate this new industry-wide cooperation.

Ultimately, just as the success of the NTT DoCoMo business model illustrates, operators have to take the position of a benevolent dictator and take the lead in mobile data, Natsuno observes. "It's the role and the responsibility of the operator, at least in the initial stages of the service, to focus on getting the handsets right and developing the business model for the content community," he observes. A "compromise" here, he adds, "isn't the best approach." And history proves it.

Natsuno argues it was the string of compromises in the "very political and very diplomatic" mobile industry that directly led the failure of WAP. In contrast, it was the determination of NTT DoCoMo to develop a business model (with a fair revenue split) and push de facto standards that has allowed i-mode to prosper. Natsuno is further convinced that NTT DoCoMo will grow to 100 million subscribers by 2010 now that the industry is beginning to recognize it's the operator who's running the show. (In fact, Natsuno commends Vodafone for making his point. It essentially borrowed from the i-mode and the success of Vodafone Live! further confirms operator responsibility to orchestrate the handset & content/service ecosystem.)

To take it a step further, Natsuno maintains that vendor rivalries and standards debates have been the major obstacles in the mobile space. "It's similar to what happened in the automobile industry 25 years ago," he says. Then the "Big Three" carmakers made their money mass-producing cars for the mass market. The other niche car companies were left to divide the crumbs. This all changed when companies like Toyota introduced more efficient production models and targeted smaller customer segments with different model cars - and the "Big Three" went belly-up. "The industry was forced to move from mass market to personalization - and the same thing is happening in mobile."

Nimble newcomer Asian handset vendors are not only turning up the pressure on established handset vendors - they are showing that the standards that they spend so much effort ironing out can actually be an obstacle to progress. After all, Natsuno points out, isn't NTT DoCoMo pushing the envelope when it comes to innovation? In February it began shipping FOMA i900 handsets chock-block with features including 2 megapixel cameras when the best the rest of the industry can do is 1 megapixel. This proves that efforts in the mobile industry (particularly among vendors) to establish standards and a common Modus Operandi have "effectively slowed the speed of innovation for the whole mobile industry." A strong accusation - but backed by an equally strong argument.

So, to hear it from Natsuno, you'd have to conclude that industry squabbles and standards debates have stunted bigger, better, faster handsets and slowed mobile data take up outside Japan. That's not what Vodafone's Ferguson believes. Granted, Vodafone Live! applied the lessons it learned in Japan, but the role of the operator is to "offer guidance" and not deliver an ultimatum.

"I agree (with Natsuno) that it can be extremely frustrating when you look at the length of time it takes for the industry to reach agreement, but I'm not sure that a 'Wild West' (of standards) is commercially sustainable. We need standards - and we need collaboration."

For one, the mobile industry needs more content/rights owner buy-in. Licensing content, as operators have done up till now, is essentially a flawed business model. "Licensing is arm's length," Ferguson observes. "Content owners have to take more of a stake and be more involved in the success of the content. Content owners can drive the creation of content, but, if they're doing it on a licensing basis, then there is less motivation for them to do so."

Instead, all companies in the mobile data value chain have to take an interest in learning what the consumer wants and share the knowledge of what works and why. "This is what will drive innovation. What won't drive innovation is people going around with bags of money, buying rights and delivering the content. That's not sustainable in the long-term," Ferguson stresses. "Content is king, but it's not going to succeed on its own. It needs the operators. But it's a symbiotic relationship, so one will not succeed without the other."

Ferguson is convinced that success going forward will hinge on increased collaboration between operators, vendors and content owners. But he disagrees with Natsuno on many points (or Natsuno disagrees with him...)

Against this backdrop, it's unclear (and unlikely) that the industry will achieve its goal of increased collaboration when we have so far failed to reach consensus on some key issues. Who should collaborate what and with whom? And who should coordinate this mammoth knowledge-sharing project in the first place? Vendors? Content owners? Operators? And if it's the operators, should they be at the helm like NTT DoCoMo- or in the background like operators across Europe and the US? Ironically, Ferguson and Natsuno agreed that only the market will decide which of their strategies is the right one.