Fragmentation, OTT drive need to redefine market

Thursday 4 April 2013 | 11:51 CET | Background

The mobile phone is celebrating its 40th birthday. Since its creation the mobile has changed from a cumbersome device for the business market to an essential piece of technology for the mass market. Mobile penetration is already over 100 percent of the population in many countries, without even counting M2M connections, and in many more places it exceeds the use of fixed lines. Other recent birthdays include seven years of Twitter and 25 years of SMS. While Twitter is a consumer application from the start, mobile, SMS and even the internet all started as business or academic applications that were quickly adopted by the mass market. For the mobile phone, can it continue to gain in popularity or is it past its high point? Furthermore, is the emergence of new services leading slowly to a need to define and stake out markets differently?

The mobile phone's popularity increased as it became smaller and more manageable, but even more important it offered a new form of freedom: we were no longer dependent on a fixed line and could call from anywhere. The optimal user interface was also an important factor. While we are already well versed in the screen, keyboard, remote control and menu structures, the mobile phone introduced the touch screen, the on-screen keyboard, voice control, motion control, camera and any number of sensors (GPS, accelerator, gyroscope, etc.).


The result is enormous growth in the variety of handsets. The tablet was introduced and a range of in-between form factors termed 'phablet' (a mix of a phone and a tablet) has emerged. The fragmentation on the handset side is huge - apparently due to a need for everyone to have their own individual style. There are also recently completely new forms introduced, such as glasses (under development by Google, Sony and Baidu), watches (Apple, Google, Samsung and LG are working on a new generation of 'smart watches') and the connected car.

This raises the question should all the Sim cards needed for these devices count towards the total mobile market, as Telefonica, T-Mobile, Orange and KPN do? Where is the eventual limit: with a tablet, glasses and a watch because these are used by consumers, but not machine-to-machine (M2M) applications, such as an energy meter or stoplight, as Vodafone for example does? But what does that mean for the connected car, which is a combination of a consumer device and M2M? And if the connected TV is connected over Wi-Fi to the fixed line, then that doesn't count, but if the Wi-Fi backhaul is a LTE connection, then should the TV be counted towards the mobile market?


On the services side as well, there is increasing fragmentation. It has been a while since the communications market could be defined in terms of just calls (fixed and mobile) and SMS. New additions include chat/instant messaging (first MSN, now WhatsApp et al), e-mail, blogs (weblogs, Twitter) and social networking (Facebook). In volume terms, measured for example in time spent, the overall 'pie' is growing. (Leading some to lament the loss of personal, face-to-face contact, but that is a discussion for another time.) In value terms though the market is contracting, as most of the above new services are (nearly) free. We haven't even started on VoIP (Skype, Viber), as from a consumer perspective, that is just calling. Bringing us back to the often-discussed threat of OTT service providers. 


Fragmentation is less pronounced on the entertainment market. Linear TV and film are receiving more competition from video-on-demand, which the same as the mobile phone, offers a new form of freedom, to watch whenever you like. With the emergence of TV Everywhere services, one can also add: wherever you want. User-generated content (YouTube and crowd-sourcing efforts such as the recent project by Ziggo and Paul Verhoeven) has become an important niche, but it is mainly the gaming sector that has helped grow the market significantly. The threat for the traditional operator is not just that the operator offers VoD, but also over-the-top players such as Netflix and Lovefilm (Amazon). The situation is even more intense in gaming: this is only offered OTT and not by the operator. The provider ViaSat inSweden offers an interesting development here. The Modern Times Group subsidiary offers in addition to satellite TV its own content over-the-top through the service ViaPlay. A new service is ViaGame, offering gaming throughout Scandinavia.


While we could not think of doing without the 40-year-old mobile phone, the handset is gaining competition from any number of devices. As long as these continue to use the mobile network (through Sim cards), it can only be positive for the mobile operators. 

Telecompaper is organising on 12 June in Laren the conference Connected 2013Over-the-top VOD and gaming will feature among the topics to be discussed. 

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