Handsets Fiddle at MWC; Do Networks Then Burn?

MWC kicks off this week, a show working to transition itself to relevance in a market that’s trying to do the same.  The questions are first whether either of the two transitions are possible, and second whether there’s a single direction that accomplishes both.

For the show, relevance means embracing social networks, handsets, developer programs, and all the things that speak “mobile” to consumers.  Facebook will give a keynote this year, the first time a social network player has had that honor.  But hey, a recent study says that one out of every eleven web accesses is to Facebook.  Nevertheless, simply saying that consumerism in general and social networks in particular are major drivers for mobile networking doesn’t address the problem of the mobile market, which more and more pundits and insiders are now willing to admit.  Look at what GigaOm said:  http://gigaom.com/2012/02/25/its-the-end-of-the-line-for-telco/

Mobile is falling into the same black hole as wireline, a black hole that has seriously eroded wireline capex—to the point where it’s been experiencing negative growth for years now.  Operators in high-competition market zones like Europe have long been fleeing to emerging markets for improved margins, but this year it’s clear that even the higher margins available in emerging markets in boom times won’t compensate for erosion in profits at home.  And these days are hardly boom times for emerging markets.

In my view, you can see battle lines being drawn.  Everyone, including giants like Google, knows that there cannot be a continuation of traffic growth without revenue growth, but everyone is hoping that the problem will solve itself, and in a way that hurts nobody or the other guy.  OTTs hope that operators will somehow make heaps more bits for heaps less bucks.  Equipment vendors hope that operators will magically make users pay for QoS.  Operators hope that things like usage pricing will save them.  All of these players acknowledge that their favorite remedy would work major hardship on everyone else in the ecosystem.

If Wall Street is right, and I think they likely are, then 2012 is the year we either solve the problem of network profit once and for all, or reach a point where there’s no longer time to apply a solution before the profit crunch hits operators and consolidation and commoditization results.  That’s alarming given the fact that few monetization projects launched to add revenue sources have advanced to at least a proof-of-concept trial, and we estimate that even by the end of 2012 we’ll have little progress.  Remember, mobile ARPU growth is slated to turn negative around the end of this year.  Time is passing the network by.

Even at MWC, the mobile network show.  The big media splash from MWC has been phones, predictably, and that only exacerbates the problems of the operators.  To most consumers, the phone is the service.  To most of those who feel otherwise, it’s the portal.  The operator is rarely on the list, unless something goes wrong.  Then the operator gets the call no matter what the symptoms or source; that’s how operators see it anyway.  Sadly, they’re right.


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