The market for mobile services is about to explode. Anyone with a new cell phone knows that the little devices are going way beyond voice. E-mail, Internet access, and games are redefining the medium (see BW Online, 10/16/03, "These Wireless "Phones" Rate a Wow!"). But the transition to new services over faster networks also faces a huge hurdle. These new offerings, networks, and handsets are based on a jumble of incompatible standards that have warped the nascent industry's business model. It doesn't work. And the still-troubled telecom sector can't really recover until this critical issue is resolved.
Software developers, the people who create the new services that have the potential to power telecom growth, don't have enough economic incentive to deliver the goods. It's not that their products aren't popular. They are -- some European mobile operators get about 20% of their average revenue per user from the sale of games for handsets (see BW Online, 10/15/03, "Telecom's Hottest Tech, Coolest Gadgets").
But by the time these games are customized for dozens of phones based on different standards -- which can vary even within a single manufacturer's product lineup -- the cost of producing new services goes through the roof. And simplicity and reliability, so crucial from the customer's perspective, suffer.
SETTING THE RULES. Cell-phone giant Vodafone (VOD) is using its enormous power to try to fix the problem. It attacked the issue on two fronts at the ITU Telecom World 2003, the massive trade show held once every four years in Geneva under the auspices of the U.N.'s International Telecommunications Union. First, on Oct. 13, it unveiled a partnership with Microsoft (MSFT). The plan would create common standards so that application developers can communicate with mobile-phone companies (see BW Online, 10/13/03, "Time for New Thinking in Telecom"). That would solve half the standards problem.
Vodafone addressed the other half of the problem the following day. Chief executive Arun Sarin shook up a panel discussion by saying handset makers better get their act together and start producing phones around a common standard. "In terms of 3G handsets being available in high volumes, we'll be in a fantastic position to launch services by September or October, 2004, but we need to make sure that the services are going to be better than 2G or 2.5G. That being the case, we'll bring our formidable size to bear on vendors to ensure that there's interoperability," he said, according to a report in ITU Telecom World's official daily newspaper.
It remains to be seen whether Vodafone will succeed. It faces two risks. One lies with Microsoft and Vodafone, and the other with rival mobile-phone outfits.
CRUCIAL TEST. The industry is understandably suspicious of Microsoft. The fear is that the software giant will try to impose proprietary standards on telecom, just as it did in the computing world. So far, Microsoft and Vodafone are suggesting that they'll work with the industry. They've invited participation at a developers conference this month in Los Angeles and a workshop in January in London, where the world will get a first glimpse of the standards.
The January workshop is the crucial test. If it appears that there's anything proprietary about the standards, if -- heaven forbid -- they only work on Windows Media, the whole enterprise could be doomed.
There's some reason for optimism. So far, Microsoft and Vodafone are talking the right talk. And the partnership appears to have been spearheaded by Vodafone, which, judging from the tone of Sarin's comments, is quite serious. BusinessWeek Online has learned that the talks were initiated by the Vodafone content department responsible for its live! package of wireless services and hammered out with Microsoft's Windows Server Group.
ABSURD SITUATION. The other big problem is that mobile-phone outfits are probably more scared of Vodafone than they are of Microsoft. With 120 million subscribers in 26 countries, it's the biggest telco in the world. Other mobile-phone conerns, such as T-Mobile and Orange, have organized an alliance to counter its weight and hope to address the industry's problems in their own fashion.
It's critical that telecom fixes the problem. Just imagine what would have happened to the TV industry if certain shows could only be viewed with certain TV sets. Ridiculous, right? The current incompatibility in the wireless world is just as absurd. Wireless could evole into a powerful new medium like TV, changing the world just as TV has done. But that just won't happen unless it has workable standards.
It's true that this year's convention is much smaller than the last one, held at the height of the tech bubble in 1999. That's O.K. It's a reflection of economic reality. The industry has come through hard times and has less money to blow in Geneva, one of the most expensive cities in the world. But if telecom leaders can emerge from this meeting determined to tackle the business' most vexing problem, it could be remembered as something important. By Steve Rosenbush at ITU Telecom World 2003 in Geneva