Yesterday was the 5th of November, or better known as Guy Fawkes day in England and many commonwealth countries. Guy Fawkes is celebrated with fireworks and bonfires and commemorates the day when that crazy man, Mr Fawkes, tried to blow up the Houses of Parliament in 1605. The 5th of November 2007 will also be significant and celebrated globally as the G Fone day (G F, get it?). The day when Google lit a fire under the mobile phone industry! I am not sure how we are going to ultimately celebrate it, but maybe once a year our cell phone screens will depict a spectacular fireworks display created by an application on our phone.
Guy Fawkes may not have been successful in his criminal plot, but he certainly made a name for himself! Maybe this is going to be the way that Google is best remembered, or are they in fact going to be successful with their new mobile strategy?
Just in case you have just crawled out of a cheese, here is what happened. Google finally announced their long awaited entry into the mobile phone market. Rumors and fake photo’s predicted a new branded Google phone, however, Google announced that they were going to develop, promote and support an open source mobile operating system and eco-system, called Android. Many industry heavyweights, like Motorola, Qualcomm, HTC, Samsung, LG, T-Mobile, China Mobile and others participated in the announcement and collectively they have formed the OHA (Open Handset Alliance).
At Brightspark, we have been intimately involved in the mobile industry since 2000. We have seen its evolution and witnessed first hand the enormous challenges in this industry. At the same time, mobile computing is without doubt the single largest consumer opportunity since the birth of personal computing. There are over 3 billion cell phones in use worldwide and all of them are computing devices of some sort. However, the challenges of the mobile industry are unique. We have multiple handset manufacturers, which is good, however, unlike in the PC world where each computer is built to run Windows, each phone is created with a unique proprietary user interface using proprietary operating systems and hardware. This means a different user experience from each manufacturer and for each model of phone. There are exceptions, like Windows Mobile and the Symbian based phones (and in many cases these are also customized by both the handset OEM and carrier) but they represent a very small portion of the entire market.
The carriers are perhaps the biggest impediment to the industry. Walt Mossberg, of the WSJ, likens them to the former “Soviet Ministries”, namely, highly bureaucratic organizations where the executives are in their late 50’s and come from a telephony background. But most importantly, they are not in touch with the realities of the Internet and mobile computing. I do feel sorry for the carriers, they are in a tough position; the high capital cost and regulatory restrictions limit the number of carriers in each geography and they need to maximize their investment, which means that they need to attempt to monetize all activity on their network. Can’t blame them, that’s the business they are in, however, if you witness the ways in which they put this into practice it will be obvious that they are inhibiting growth as opposed to fuelling it. As an example, take downloadable applications - literally billions of phones today can (in theory) download and run Java applications. There should be thousands of entrepreneurs and companies creating and selling software for phones, yet all that exists are a handful of the major media companies offering very poor games. Why is this? The carriers decided that their worst nightmare would be to become a “bit pipe”. They believed that they own the network and are as such entitled to make a premium off anything that gets put on their phone, across their network. So, instead of just charging for the data, they put in place elaborate programs where the number of applications made available to their customers would be restricted to applications that met certain criteria in terms of quality and brand recognition (they wont openly admit to this). Also, they decided that they would keep anywhere from 30% to 70% of the revenue from the application. This strategy has proved to be very shortsighted for multiple reasons:
• Their requirements to review and approve each application has created costly overhead and an artificial bottleneck
• The requirement for a revenue share has precluded advertising funded or free applications which would otherwise expose average subscribers to new ways in which to use their phones
The result is that the mobile application market is a relatively small industry dominated by major brands such as Disney, EA, Vivendi, Ubisoft (Gameloft) and others.
The folks at Google figured this out and realized that the only way in which they will be able to participate in mobile computing is to change the rules of the game. This means that you need to change the way that handsets download and present applications. The applications would have to be an intrinsic part of the phone, with full access to the system, and not a kludgy, restricted addition. Additionally, you would need to get the carriers on board, to prevent them getting in the way of application creation and download. The handset guys and the carriers had to make a choice - bet on Google or bet against them. The members of the OHA bare testament to this difficult decision. We see some notable participants, like HTC, Motorola, Samsung, LG, T-Mobile and Telefonica (there are others) with the notable lack of participation from Verizon, Vodaphone, Nokia, Sony-Ericsson and others. I commend the participants, however, I am eagerly waiting to see how this consortium translates the press release into execution. As an example, T-Mobile USA has been one of the most restrictive participants in the mobile application space. They have aggressively restricted open access to their network by third parties and so their participation in an open unrestricted platform must represent a serious change of heart.
Finally, one of the most significant pieces of the Google announcement was their focus on providing a comprehensive SDK (software development kit) so that developers would be free to create any application for the mobile phone. The SDK is due to be announced next week. This is another piece of the puzzle that does not fit well into reality. In reality, mobile phones come in various shapes and sizes, with different screen sizes, colors per pixel, input methods, peripherals, network speeds, keypads, etc. Java on mobile phones has existed for the last 7 years and is present on most modern mobile devices. It presents a standard API to developers, but reality has proved that the actual implementation of the API’s differ between different manufacturers and even between models from the same manufacturer. This same issue will undoubtedly be a factor with Android, unless the consortium all agree on a standard one size fits all device (which I doubt). One of our portfolio companies , Tira Wireless, has made a business out of providing the tools and services for creating mobile applications that will work on the majority of modern mobile phones. I look forward to seeing how Google has solved this complex issues. (Remember when Microsoft demanded all Windows on PCs to be the same it led to standard applications, but Microsoft being called a monopolistic bully. Google does not want to look like Microsoft of old, but can they create standards without being a bully?)
So, will this announcement lead to Cell phone nirvana? I doubt it. I think the carriers are filled with too many bean counters and lawyers who will inhibit the open software initiative. The actual devices will almost certainly be cool, but to application developers, it will be just another platform to support, and even within the platform, there is bound to be fragmentation. After all, it is an open source platform and anybody can modify it. The only good news is that some major carriers have stood up and proclaimed their support for open platforms. I anxiously await to see their reaction to other initiatives from companies like Tira Wireless and Cascada Mobile who are extending mobile computing to all software developers.
