Live! - An Agent of Change
By Carlo Longino, Tue Apr 29 11:45:00 GMT 2003

Will Vodafone Live! shake up the mobile world beyond carrier portals?

Vodafone has had a lot of early success with its Live! offering - an integrated portal of services including advanced features like MMS and Java downloads. While Vodafone users have warmly accepted the new service, Live! also brings forward some issues in the mobile world.

But first let's take Live! for what it is: a carrier portal. But what sets it apart from previous efforts are its use of advanced technologies (like MMS and Java) and new advanced handsets, but more importantly, it's an end-to-end ecosystem overseen by Vodafone to ensure simply that everything works for the end user. Sound familiar? Of course, as it copies the i-mode/EZWeb/J-Sky model. So it looks like Vodafone was as interested in J-Phone for its educational value as much as its financial value.

On the face of it, Live! is simply a portal that works. Is that something a carrier should be congratulated for? Not necessarily, but considering earlier efforts and the more than respectable subscriber and sales figures Vodafone is seeing, Live! is looking pretty impressive. Some observers have remarked that Live! looks much like the mobile space's answer to AOL of the early and mid-'90s. But while AOL was built on paid access to a walled-garden community, Live! is all about a walled garden of content.

Walled Gardens - Again

But will this walled garden approach work? It failed pretty miserably on the first go-round of WAP portals a few years ago. Users weren't always happy with the limited amount of content they could access, or the sources their carriers had chosen, while content providers were shut out of the loop unless they wanted to play ball with the operators.

But in reality, this approach makes sense, says Seamus McAteer, principal analyst with the Zelos Group, a San Francisco-based consultancy, especially as content and applications grow more advanced. He says that although Live! and similar services may use standards-based technologies like MMS and J2ME, the implementation of those standards can still vary among handset manufacturers and content providers.

"You can't have a fully open approach for over-the-air applications and MMS because of incompatibility," he says. "As you move to a more complex, evolved media, you need a bigger ecosystem and an entity to mediate relationships."

Someone basically has to protect the user and ensure quality of service across the entire system, and the carrier, with the closest relationship to the consumer, is best placed to do that. Again, this follows the Japanese model of creating an end-to-end ecosystem encompassing content distribution and payment, with the carrier ensuring that everything works together.

And although the Japanese networks are open and let users access any site, not just "official" ones, those official sites can take advantage of billing mechanisms and are put through testing to ensure they work, but most importantly find their way onto the carriers' portals' listing pages, where having top billing can have a dramatic effect on traffic.

But McAteer says in most cases, users tend to stick to sites listed on a carrier portal, even if they can access any other site, and that the importance of having an "open" system is overstated for most users, and outweighed by the QoS benefits a closed one can deliver.

Device Struggle

But perhaps the most profound issue that Vodafone Live! raises is the introduction of large-scale handset customization outside Asia. While we've seen customized devices like the Orange SPV and O2 xda, they were aimed at high-end users, not the mass market, and their development was largely driven by Microsoft, looking to give its mobile-device OSes some market traction.

But Vodafone launched two handsets customized for Live!, one each from Japanese manufacturers Sharp and Panasonic (they also offer two Nokia handsets for use with the service) featuring another i-mode staple: a special button with one-touch access to the Live! home page.

While customizing handsets for carriers is nothing new to Asian manufacturers, it's something European device makers have for the most part resisted. There have even been rumors that some manufacturers are considering adding their own one-touch hotkeys that would take users to a portal of their own, perhaps setting the stage for a face-off with operators.

It's an interesting scenario: Nokia for example, which commands about 40% of the global handset market (its share is even higher in Europe), has a tremendous brand. Consultancy Interbrand ranked Nokia as number 6 out of 100 on its top global brands in 2002, while carriers like Vodafone didn't even make the list. But a global operator the size of Vodafone carries a tremendous amount of market heft to force handset manufacturers to get in line behind it, lest they lose access to its millions of subscribers. Add in Asian manufacturers who see being open to European carriers' customization requests as a way into the market, and it could be quite a battle.

McAteer points back to the differences in implementation of standards and says that this gives carriers the upper hand. At the end of the day, he says, when something doesn't work, customers will look to the carriers for support. "The carrier is Nokia's customer," he adds, since handset manufacturers rely on carrier subsidies to sell mid- and high-end phones.

He describes the relationship between big handset manufacturers and carriers as one of "mutual respect" and "enlightened self-interest". He says that consumers demand handsets from established brands like Nokia, and will wait for them instead of buying customized handsets from lesser-known Asian manufacturers, and that carriers realize device makers have done things to extend their services and networks, like Nokia's establishment of a standard for sending smart-message ringtones. But he also adds that the traditional handset powers couldn't cut out the carriers and sell devices directly to end users because they are reliant in so many cases on subsidies.

So what will be the upshot of this struggle? Little change, McAteer says, as both sides look to protect their interests. "Asian OEMs will get an incremental share of the European and US market because of the help they can give to bring new services to market," utilizing their previous experience in Asia, he says. "They'll take share from second-tier manufacturers." But he doesn't see the influence - or market share - of major players like Nokia diminishing, but also sees them backing off some of their previous statements that content distribution would become their most important business.

Carlo Longino is a freelance writer based in Austin, Texas. His previous experience includes work for The Wall Street Journal, Dow Jones Newswires, and Hoover's Online.