You can download it as a 96kbps MP3 here (27 meg, 38 minutes).
Additionally the full transcript is below. To distinguish between us I've indented Andreas.
Transcript
Good morning Andreas, how are you today?
Good morning, Lee. I'm very good, thank you.
You are working for VisionMobile. Could you say what you are doing there?
I'm the Research Director at VisionMobile. We are an analyst firm doing a variety of things such as research reports, workshops, advisory work, and what we call "Market How Maps". Basically, we specialize in mobile software, ecosystem strategy, services, open source, and definitely, I look into the forward-looking areas of the industry.
Okay, I took a quick look at the VisionMobile website. The first blog post that hit me was "Network as a Service" (NaaS). Could you tell me something about network as a service?
It's a very hot topic, that particular one, because it's all about reselling assets that operators have, which are mostly under exploited. These are assets; like subscriber information, contacts, social graph, information about usage building, and what have you. And secondly, services; exposing the likes of SMS and billing and chat and voicemail and MMS and any sort of operator service, to the mass market of developers. That's the basic concept.
The reason why it's interesting is because it's really under exploited; i.e. there are a lot of developers and third parties who would like to tap into information about the user, such as their social graph, like ability to send messages to the user through a variety of means, voicemail, SMS, etc. But, so far, that kind of access is limited to the top of the pyramid, meaning there are very few service providers who have aggregator agreements or very big...
Okay, so it's not available to developers on mass.
Exactly
The thing is, this notion of turning the network inside out, pretty much like Amazon has done with their infrastructure, has been on the go - that's a Telco 2.0 meme. I know Martin and I have been speaking about that for many years, turning the network inside out.
But the actual reality on the ground, even if you just took one core piece of information that operators have in their network, which is location, you see that they've done nothing, pretty much, with location, let alone other things. Now, at the last eComm show, you saw Fire Eagle from Yahoo, which at least has some teeth to it. When it comes to mobile operators, if they can't even expose location, this is just blue-sky thinking, surely.
I would say that they can expose location but for various reasons they've been very slow. You're absolutely right; there is little out there. In the U.K., there are location aggregators, but it's extremely difficult if you're a small developer house or a one-man-band developer, to go and approach operators.
You used to do it by aggregators, and location particularly, is on a per request charge. It's very expensive to scale. This is changing via what's called NaaS, meaning Network as a Service, where this is sort of moving from the top to the bottom of the pyramid. It is happening over time, especially during 2007 and 2008, we have seen the Orange partner effort to launch many more API's, including location, Vodafone Betavine release, what is practically six API's, I believe excluding location. There is BT Web21C, which also has five or six API's. I think we're seeing the beginning of this NaaS market.
Okay, so the BTCN doesn't give you location.
I don't think so, no.
The Vodafone Betavine doesn't give you location, you said.
I have to double check, but I don't think it does.
Okay, does anybody give you location?
Yes, I can confirm there is now location, as it stands, on Betavine. Orange does have a location API in what it calls "Instant API's" but it's in an Alpha stage. It's likely that it's only available in Orange France, as well, as most Orange API's are. In short, a location reflects, pretty much, the status of all other API's, which is that of a nascent stage, with a lot of teething problems.
Yeah, but this is 2009 and we were talking about telecom API's back in 2005, pretty strongly. I must admit; I don't have a great deal of enthusiasm that anything quick will happen. I think what we're doing is hitting on a key issue, which I'm sure you'll accept, and that is the lack of innovation. I think you're in a position where you could comment on the lack of innovation in the mobile industry. Firstly, do you agree that there is a lack of innovation, and if you do, why do you think there is a lack of innovation?
There is a lack of innovation, primarily because operators who control most of the money, around seventy percent of the revenue in the industry, and the delivery of services are the worst innovators in the industry. They're extremely slow. They usually have an ivory tower attitude. The operator organizations, typically, descended from a network-centric, a closed network view where everything is tightly specified and controlled. The lack of innovation is because there wasn't the opportunity for the bottom of the pyramid to engage and deliver services, whatever these are, voice, or data, on mobile phones.
What changes do you see? I seem to hear a hint in your voice that the bottom of the pyramid, as in the mass developers, every man may have opportunities. Where do you see this opportunity, again, assuming you do, but your voice seems to indicate that you do?
There is definitely an opportunity, but it's one that's going to be unfolding very slowly. I totally agree with your criticism of the lack of innovation, particularly the slow evolution of this NaaS market. API's are becoming available for the bottom of the pyramid, but I don't think we'll have reliable cross-operator location, for example, provided before the end of 2010. Even that might be ambitious because there is the issue of each operator providing it independently, and secondly, someone like the GSMA having a sort of way to abstract these APIs, so essentially, you can access any subscriber, not just a single operator subscriber.
GSMA does have an initiative in place, but judging by the network speed of how services have evolved, I think NaaS will also be evolving in network speeds, and not web speeds, meaning telephony network speeds rather than Telco 2.0 speeds.
Okay, so you don't sound overly optimistic of the fast pace and innovation in mobile. Am I correct?
Yes, you are correct. The only place where there is innovation is where there is an "open platform". I hesitate to use the word because it's over used. In platforms where you have a couple of things, one is an open access to API's, whether these are network or device API's. Secondly, there is an open route to commercialization. That means ability for any third party, big or small, to take their service to market. These two examples - considered the applications developers have been able to develop on Symbian systems since 2000, until recently. Then, consider the commercial route to market that the likes of the Apple's App Store have established. From 2008, with some exceptions, developers have had open route to market, again, from a commercial perspective rather than just API's.
Okay, so regarding application developers having a route to market, you've got the App Store. You have Google's Marketplace. Are you aware of cCommunity, with T-Mobile?
Each operator is trying to do their own mobile applications store. We've done some research on this topic. We published an article two months ago, called "The Mobile Application Store Phenomenon," where we looked at two things. One was a side-by-side comparison of five vendors of mobile applications stores. We saw the Apple App Store, Qualcomm Brew, Nokia Download, Handango, and GetJar.
We also looked at what is it that makes a mobile application store successful. What is the recipe behind a successful mobile application store, like Apple's App Store? We came up with a five-point list, which you can read on our article, rather than me going into a discussion here. It's a rather complicated solution to develop, for any one player, whether it is OEM or operator.
Okay, so we've had pessimism of innovation in mobile, and probably pessimism is reality. Where do you see the opportunity, where is your hope? You can say "none" if you like. [Laughs]
I'm an optimist by nature so I tend to gravitate towards optimism. I would say this optimism is in the resolution and slight convergence of choices for delivering services, and developing handsets, meaning it's easier to develop services - let's say, since 2008 onwards, and certainly moving forward. The choices for developing smart phones today are clear, S60 or Android. The choices for deploying services are clear, Java for mass market or if you want to have a quick demo, use Android or the iPhone platform. The choices for [13:01.0 unclear] won't change. There was a lot of debate whether [13:05.9 unclear] would be around. They are around; they will be around for a long time.
I think we have some clarity and consolidation into the multitude of OS's. The choices a developer or an OEM had to make or had to decide upon, but nothing is clear. So I look at this with optimism.
So, in summary, what's your optimism?
In summary, both mobile application developers will have a gradually easier way of deploying applications and services, mass market.
It doesn't get me that excited.
Well...
It sounds rather glacial.
It is exciting, only if you look at it from a high level. You won't see a difference from one month to the next month. The immediate differences you have seen is anyone who wants to demo something to a large audience, now goes to iPhone or Android because of the reasons I mentioned earlier. There is a difference there in going to market.
I know you're trying to play all even, and so on, in the way you're talking about platforms, but what you've just said there is people want to demo something, they will use the Google Store of they'll use the iTunes Store. That, in itself, seems to be saying that the other players are screwed, going forward.
Nokia Download, is it any good, yes or no?
If we're looking at mobile application stores, Nokia Download is pretty much a disappointment, both for Nokia and a failure for everyone else.
So Nokia Download is a failure for Nokia. Why is it a failure, briefly?
Briefly, because they failed to get four out of five ingredients of the mobile application store right. These ingredients they failed to get are decent revenue share for developers, other than premium SMS, distribution is partial. Provisioning on handsets is again, partial and it's only on a case-by-case basis, depending on which region the handset is sold into. On-device discovery doesn't have a global search. It's split down into shop and shops. Even Nokia's own applications are hard to find. There is no transparent way of submitting your own applications. Pretty much, everything that the iPhone App Store got right, Nokia Download got wrong.
How could Nokia get four out of five wrong? They had an example to look at. They had the iPhone Store, iTunes. How did they manage to get four out of five wrong?
If you look back, Nokia had Prime Minute up until June 2006, where it replaced this online marketplace with Nokia Content Discover (NCD). Essentially, back then with Prime Minute, you had the very well designed, well-structured marketplace for submitting, pricing, and distributing your applications. But that was network only. There was no on-device storefront.
They replaced that with NCD, which was an on-device storefront. It was the wrong decision to start with - it all started back then with the very wrong decision to shut down Prime Minute. Back then, the decision was, I believe, because they were having a hard time selling Prime Minute to operators. Then, pretty much no one, perhaps with the exception of Qualcomm Brew, had a control of the entire service delivery chain, meaning controlling everything from the marketplace, to the on-device storefront.
Nokia, I think, got quite a few things wrong. The App Store wasn't around to copy back in 2006 or 2007. Still, they could have done things much better than they did. It was just a quick and dirty solution.
We're now in 2009. You would have thought; they've got something to look at. They could have achieved something, by now. It's just a case of them falling further and further behind, surely.
Yes, I think they will have admit to that themselves. I remember being on an analyst call with Nokia and hearing one of their VP's say, "We definitely have a lot of things to learn from the Apple App Store".
Okay, so you have a computer manufacturer, Apple. You've got an Internet search engine, Google. Both have demonstrated to the mobile industry how to do things, in terms of offering applications all the way through to delivery. Would you agree that a computer manufacturer and a search engine, people from outside of the space, are actually leading the way, leading the march?
I would agree about Apple; I wouldn't agree about Google. Google, I see as an advertising company, whose inventory is delivered by search mechanism, a very good search engine. But, the Android market has still not proven itself. It's very, very far away from the numbers that the Apple App Store is making, in terms of revenues and downloads. It still hasn't proven itself, in terms of the success of Android, whether it will present the single platform versus a fragmented platform for developers. We haven't seen any significant innovation in the industrial design. So Google still has a lot of things to prove in the mobile industry. Apple is far more of a role model. That is because it is a single player who dictated to operators how it was going to run things. It was able to control everything from top to bottom.
In saying that Nokia Download was a failure, out of whatever five metrics you used - four out of five; it was a failure. How does the Android market compare?
It still is somewhat early, but from the parts of this mobile application store recipe that are clear, they have some elements they've got right, which is on-device discovery and provisioning. Because of their lack of handsets, it's unclear how distribution will work, whether or not the application developer will be able to distribute to all Android handsets or if there will be some OEM restrictions. It's unclear whether operators who launch more devices like the G1 will have any additional certification requirements, which creates the problem that Brew is facing, like having very stringent certification requirements. As to a centralized billing, I cannot offer you an opinion at this stage, simply because we have not studied the particular solution in depth.
Okay, so we're beginning to see a shift in the mobile industry, in terms of power, the balance of power. Would you care to describe how the balance of power is shifting in the mobile industry?
Absolutely, you have to look back a few years, as far back as the early 1990's, when there were the first handsets. Where you would see the IBM model of the early 1980's, meaning the all-in-one company, which integrated everything from hardware to software, to logistics, the whole thing. It was a vertically integrated model, similar to the one IBM had in the early 1980's.
Over time, this has moved to a horizontal model again now that is now changing. Trying to answer your question a bit more directly, the power now is moving back into a vertical arrangement, to the players who can put together all the necessary elements from handset, including hardware and software and the UI, to the services and the developer SDK and platform. The players who have the resources and the ability to put together both access to these services and the handset, under one roof, we see a consistent consolidation of power along these vendors.
Let me give you some examples. These are vendors like Qualcomm, who controls everything from hardware and IPR, to service delivery enablers. You have Nokia, obviously, now all on Symbian and via the Symbian Foundation has access to the complete stack. It owns Qt for service delivery. It owns - has SDK's go to market routes etc.
How does Qt, Qtopia enable service delivery?
Qt is very interesting. In fact, I would say if Qt knew that it was the only choice for Nokia during the acquisition, it would have made a much higher sale price, rather than the one hundred or so Euros that it made back then.
Hundred Euros?
Sorry, hundred million Euros. Qt will be used for Nokia to deliver its own signature applications, its own uniquely branded, unique flavor applications. Secondly, its Ovi services. The reason I mentioned Qt and Trolltech's unique position is because it's the only application environment that is rich enough for someone to write core applications on top and it can be ported on both mobile and PC and MID or non-mobile environments. It's exactly the solution that Nokia was looking for at that stage, as I said, for Ovi and its own applications. There is no other type of solution that allows Nokia to port its services and applications on such a wide variety of handsets.
Can you pass comment on Ovi?
At this point, Nokia is the only one with enough cash creating profits to invest massively in services. Ovi, I think, is just unfolding. There are a lot of deals happening with operators, with brands, with service providers behind the scenes. I believe it's the cornerstone of Nokia's transformation into an Internet company, meaning a way from a manufacturer of handsets into an Internet company, which is providing services across any handset, competitor handsets included, PC's, home, the living room, etc. As I said, we've only seen the tail of the lion. We haven't seen the lion, the majority of the power of Ovi and the services that Nokia is building behind it.
Okay, if I look at Ovi website at the moment, it reminds me a little bit of the Apple website they designed. It looks a bit like MobileMe, some of the graphics being used here. The last time I tried to use a Nokia service; it was downloadable for Windows only. My few experiences - when I've tried using Nokia software hasn't actually been favorable at all, to be honest. Do you see the likes of Ovi running up against Apple, with their App store?
I wouldn't compare Ovi to the App store. I would compare Nokia Download, as part of Ovi, to the App Store. I would say firstly, Ovi has S60 clients for each one of its services. You have to give it some credit for trying to do too many things at the same time, even being such a huge corporation. If you look at other OEM's, no other OEM's come close to releasing so many services, one after the other. Overall, Ovi is competing with the likes of Apple, although Ovi is more of an Internet company, the services company, whereas Apple primarily makes money from manufacturing, not from subscriptions.
The interesting thing to try and predict is whether the other OEM's, the other handset OEM's will be so desperate for their own services, for service revenue ad so cash strapped, as they are today, that they will end up licensing Ovi, maybe co-brand or with a white label license. They will have Ovi as their only, or one of the very few options available to them for generating post-sales revenue.
Have you looked at all at Xpress Music, from Nokia? Again, I looked at that and I just personally saw failings.
The one surprising thing about Nokia's music services is the lack of or relatively lack of DRM or tied DRM. With the new handset, you get a one-year subscription to a whole lot of music, which is not monetized, traditionally, on a per track basis but on an unlimited basis. That makes me wonder how Nokia is going to make that money up in terms of payments to the music labels. Other than that, I haven't played with the service myself, so I couldn't tell you if it has glitches here and there. I imagine it has.
Okay, why do you think Nokia went in to fully acquire Symbian?
It's a rather complex argument. If I try and simplify that, Symbian was costing Nokia over a hundred million dollars per year. It had forty-eight percent of ownership so relative control but not one hundred percent control over the source code. The platform was closed to innovation. It was difficult for third-party developers to build on top of Symbian, at least substantially.
By acquiring Symbian, for which by the way paid about the equivalent of two and a half years of royalties, by acquiring Symbian, Nokia firstly reduces its operating expenses. Secondly, the Symbian Foundation, the operations around Symbian are much leaner. It can control the roadmap of Symbian more effectively because it will have the most engineers working on the source code. Also, by going open source, and zero royalty - technically that's not one hundred percent true - by going open source, it decentivizes OEM's from using Microsoft. It sort of pushes Microsoft into becoming even more irrelevant. More importantly, it took out UIQ and MOAP from being competitors.
Okay, have you looked at LiMo?
Oh yes, in depth
What do you feel about LiMo? Can you share some opinions on LiMo?
Yes, LiMo started with an extremely impressive lineup of founders, the Who's Who of open source, in both operators and manufacturers. Over the last three years, LiMo has primarily focused on getting new members on and getting industry endorsement, with very little on actually producing a single software base for handsets.
In fact, if you ask the LiMo Foundation whether all the handsets that are LiMo compliant have even the same piece of software, even how small that might be; you will not get a straight answer. What I mean is that most of the LiMo efforts and most of the LiMo success is in helping software vendors get operator attention, via the foundation, and help market its members, especially the smaller ones, rather than being a standards body that mandates or defines a specific software stack for handsets, which it was supposed to be initially.
Okay, that's news to me. You also have mentioned before that Android has a darker side. You speak about fragmentation and control. Tell me about the darker side of Android.
There are two main problems with Android, as it stands. One is the fragmentation and there is a lot of debate.
Can you tell me more about the fragmentation?
The APL2 license, the Apache 2 license says that you can fork, you can branch the source code without needing to contribute any of your modifications to that source code, back to the community. In that sense, it's a non-copyleft license. Now, that means that essentially, you can have as many Android flavors as you have phones, which of course creates a problem that developers write one Android application and they have to port to every single handset model, which is what you have with Java. This is the worst-case scenario. I think things will be less fragmented but still fragmented. Although Google is rumored to be using some sort of agreement, a non-fragmentation agreement, in practice there will be differences across OEM's. Fundamentally, OEM's need to change the operating system software in order to create differentiation. That is both on the UI side and on the middleware side. Android will end up with a lot of fragmentation.
Do you see any other problems with Android?
Yes, its industrial design suffers at the moment. People were expecting far more from the G1, a far sexier device.
It's been selling very well.
Yes, but again, if you see the industrial design behind the mass marketed Nokia handsets, it's just amazing how Nokia has been able to slightly alter the plastics, material, and the format and buttons and everything else, and create very appealing designs.
Companies like HTC, or generally the Asian or DM type of manufacturer do not have an edge on industrial design. Now, at the same time, it's worth noting that HTC acquired an industrial design firm based in San Francisco, which was very well respected. We should be seeing some far cooler handsets from HTC. But still, given that Android does not provide any form of industrial design as part of the package, it will easily face the problems that Windows Mobile is facing, which is a lot of handsets from lesser-known ODM's, but quite boring handsets, as such.
Okay, so Android may end up being predominately on ugly handsets, shall we say?
That's correct.
How do you feel about Windows Mobile, looking forward?
It's had a lot of potential, but I think, especially since the third quarter, it's facing challenge after challenge. In the third quarter, it was the first quarter where both iPhone and RIM had more sales than Windows Mobile, despite Windows Mobile being around since 2002.
The major problems it's facing are; it's still an enterprise phone. The major OEM's, the tier one OEM's will only use it as a high-end prosumer or enterprise phone. The smaller ODM's don't have the industrial design expertise to create cool consumer phones. Windows Mobile next generation, I believe it's 7, is way late. We were expecting it definitely in 2008. It won't be ready, according to several sources, before the end of 2009.
In addition, Microsoft recently acknowledged that they are spreading themselves too thin on too many ODM's and too many manufacturers, whereas their new strategy is more resources on fewer handset models, which are higher sellers.
Almost finally, I would like to ask about Brew. Are there any feelings there and their position of Brew in the marketplace, looking forward?
Brew, overall, in the last one or two years, and what's continually predicted for 2009, has a market share of around eleven percent of total sales, which is pretty impressive. One in ten handsets is Brew-based. However, if you look at the revenues the QIS division is making, last time I checked it was below eight percent of the total revenues. If you look back at why Brew was created, it was created to drive sales of the Qualcomm chipset's QTC business, and QTL the licensing business, which make up about fifteen to thirty percent of Qualcomm revenues: which make up about fifty and thirty percent of Qualcomm revenues, respectively
Since Brew isn't making that much money, they are looking at alternatives. There are a lot of handsets shipping with Windows Mobile on top of Qualcomm chipsets. There is what appears to be significant movement at Qualcomm B and behind this Brew mobile platform, the new mobile platform they announced a few months ago, for which unfortunately, there isn't enough detail out yet on what exactly is being planned. There are discussions about a deep integration of Flash on Brew, but what is not clear is what is the future for UiOne, how will Flash interact with UiOne commercially, and generally, I would say there is some uncertainty for Brew as an OS. Certainly, not for Qualcomm as a chipset vendor, or IPR licensor.
Looking ahead, let's pretend we're putting bets on at the bookies. Which horses are you going to back in the race circuit, and why?
I would definitely back Qualcomm, both because of the expertise - it has really strong people on board, everywhere you look at Qualcomm; the teams there are top notch; and, because of its existing investments and its ability to invest a lot of new chipsets and new platforms.
I would continue banking on Apple. Steve Jobs, now, is apparently taking a step back, due to health issues, but it's the single company that can command everything from chipsets to services.
I would also say Intel. This is mostly a hunch because they are investing massively in their new Atom processor, in which case, they're competing with Qualcomm and ARM. Obviously, we know that there is one billion plus handsets shipping a year so chipset wise, there is a huge market for anyone.
Covering chipsets and OS's as horses here.
Yes
Okay
In the case of Intel, I would say mostly chipsets because Moblin is only good for MID's which is a really small market now.
In terms of other players, let me think; I wouldn't bank on LiMo. It's quite clear that there is an expiry date.
And Android?
That's a difficult one to predict. There are a lot of things in its favor, an extremely strong architecture and OEM and M&O that has operator endorsement. At the same time, the developer stories are not clear. As I said, whether we will have fragmentation or not, as I said, I'm still not convinced whether we will see very sexy devices, really hot sellers coming with an Android OS.
If you look at Linux, Linux didn't specify aluminum and glass computer cases, but Linux is powering the Worldwide Web.
But there you're making - you're drawing a parallel to the PC or Internet industry, which is totally different. Users will never specify what software they want on their handsets, which is why you need to have some correlation between the OS and the industrial design, meaning a good OS will only sell if it comes into a good industrial design.
So, people are not going to be asking for an OS at the shop; they're going to be saying small and pink.
Definitely, yeah, that's never going to happen. There is absolutely no reason for it to happen. It would be distorting the consumer perception to say that, or to embark on such an effort.
Okay, so industrial design - us geeks might talk about OS's but the average consumer is more industrial design
It's all about the package. It doesn't matter what you have inside; it's about the package. Of course, I'm not saying it doesn't matter if the OS is buggy or not, of course it matters. That's part of the package. If the user experience is smooth, if you get what you expect, don't have any problems calling someone, it's straightforward to text a person, etc., by and large you need a strong industrial design to win, in terms of consumer preferences.
It sounds to me like the iPhone is just going to keep getting stronger.
I would agree, with a small reservation, regarding whether Apple's ability to create innovative designs will saturate because obviously, everyone is talking about the iPhone Nano now. That's like a small version of the iPhone. Nokia has tens of models out every year. How can you cater to all the different consumer tastes? You can't do that with two or three models.
Have you looked at the Nokia Touch?
Yes
It feels it lags behind the iPhone, it doesn't have two point touch. It isn't as simple to use. It just doesn't feel as intuitive. Okay, it came after the iPhone, but it certainly didn't catch up with it, let alone, go ahead of it. I must admit, I do feel disappointed in Nokia's Touch phone.
Yeah, it's really a touch screen UI, strapped on top of a Symbian OS.
Yeah, exactly, that's the feeling that you get.
It's certainly not designed from scratch.
Okay, it's been really fantastic speaking with you. We're just coming up for the hour here, so I better let you get on with your day. Thank you very much, Andreas.
Thanks for the opportunity, Lee.
Subscribe to this blog's feed
Leave a comment