More Battles in the Digital War
Ashley Bowen, a seasoned BSSOSS consultant, takes a look at recent events in the formulation of our digital future, and poses an important question about the interplay between standardisation and competition.
The war for our digital future has been raging for some time and battles have been won and battles have been lost.
Like other wars, there are many issues and many protagonists. Was World War I – or as we are now supposed to call it by EU diktat, the First European Civil War – about the nascent German state flexing its muscles or the final demise of the great Austro-Hungarian Empire, or perhaps the death rattle of the Ottoman Empire? When you listen to the arguments in the digital war, it’s also difficult to understand exactly what’s going on, who’s right and who’s wrong.
In the digital war, the old guard are the fixed internet providers, which see it as their birthright to maintain their status.
But then along came the OTTs: the likes of Google, Apple, Facebook and Amazon. They look at things from a different perspective: what does the customer need, rather than what can technology provide? Each OTT is creating a separate ‘walled garden’ providing all the digital services any customer could want – and locking them in as part of the process. The world wide web of open content and services is outside and the OTTs are intent that the infrastructure providers, fixed and mobile, remain purely as providers of infrastructure and little else.
The telecoms operators, seeing their core revenues at risk, and eager for larger slices of the more lucrative service layer, have fought strongly in every battle. The last couple of months have seen a number of high-profile bomb-blasts.
First of all Facebook announced their $1 billion purchase of Instagram – just 13 people strong and with no revenue, yet still said to be a very canny purchase. Its photo-sharing technology extends Facebook into the mobile world, it addresses a seemingly insatiable need for its users to share almost everything, and it removes at a stroke a tasty morsel from the eyes of competitors like Google. The mobile operators’ original vision of MMS being the ideal technology for photo-sharing looks positively antediluvian and very much technology led.
Next came Telefonica Digital with its announcement of a strategic tie-up with the mobile division of Electronic Arts, allowing special promotions on a wide range of mobile games. While others already have similar alliances with EA, this ensures that TEF customers worldwide are not left behind. TEF Digital is an interesting concept in itself, as it is putting together a portfolio of digital offerings for TEF operators worldwide (and therefore O2 and Movistar) to select from. In the past it has been notoriously difficult for central organisations to bond with local affiliates to provide offerings ripe for their individual markets. However, they’ve got some good people involved in this, so let’s see.
Then came the news of the European Mobile Wallet. Wallet services are already up and running in some markets, notably across the pond (aka North America), but also in developing countries like Kenya where banks are not prevalent and the mobile wallet is the first widespread payments infrastructure in the country, oiling the whole Kenyan economy. The Kenyan mobile wallet, directly holding credit, looks very different to existing and future wallets in the developed world, which have links to customers’ existing credit cards and bank accounts.
In Europe, EE, O2 and Vodafone announced last summer that they wanted to set up a joint venture for wallet services using the UK as the launch market. The operators were wise to take lessons from established banks, realising that they cannot go it alone. Can you imagine a customer of Barclays or HSBC only being able to make payments to customers of the same bank? Long ago the banks set up national and international clearing houses and the mobile operators are now looking to do something similar.
The aim is to provide a single common mobile wallet infrastructure available to banks, retailers and mobile customers. Initial intentions were for a highly visible ‘big bang’ launch at the London Olympics in line with other new technologies being showcased at the event.
Alas, the big operators did not silence the opposition and have been taken to task at the EU level. Google, who hope to launch their own European offering, have lodged an objection, as have Hutchison 3G (who were not invited to be part of the initiative). The stated fears of the EU’s Competition Commissioner are that the planned joint venture would stifle competition and innovation from others. They say: “we need to make sure that competing services can keep emerging on this market, so that incentives to innovate remain”.
While there are vested interests on both sides, each has valid non-commercial arguments as well. Tie something down too early and innovation is stifled. However, without a critical mass, any single organisation’s wallet offering would struggle to take-off with markets remaining fragmented.
Whatever the EU decides, and they are allowed up to August 27th to make their ruling, the offering will now miss the opportunity of a ‘big bang’ launch at Olympics 2012. This gives time for others, Google included, to hone their own offerings.
As in all wars, many of us are innocent bystanders, but the outcome of each and every battle affects millions of individuals across the globe. This tension between openess and competition on the one hand, and a standard platform for innovation on the other, is set to replay I suspect many times. What customers want versus what regulators think they should have, versus commercial interests, is a very interesting intersect in the digital war.