Is Economic Timing Finally Helping The Mobile Industry?

Remember mobile telecoms in 2002? Radical overbidding for 3G spectrum on the heels of the dot com craze was followed by the dot.bomb fallout, and carriers found themselves burdened with debt on 3G spectrum that didn't provide any useful new services to customers. Leading carriers that deployed 3G pilots demonstrated that even when 2G networks were modernized, they still would not see ARPU growth in data services because the handsets and services were not yet appealing to customers.

Early launches of 3G proved questionable, given that the leading carriers had to suffer the most from the learning curve. Think of DoCoMo's early problems with FOMA, or of Hutch '3' UK's terrible struggles trying to find appeal with subscribers.

It was in this era that we all learned that to truly grow the mobile data market, and to begin to replace falling voice ARPU with increased data services ARPU, the 'whole product' served to consumers would require all three legs of the stool to support its mass: capable networks, appealing devices, and useful apps and services.

In this era, carriers decided to delay their 3G deployments for lack of demand, and vendors suffered many quarters of missed sales expectations. Hard times indeed. Some carriers pinned their hopes on services like mobile video that could soak up the new bandwidth, but that was a technology in search of a market, not the opposite.

In the ensuing years, the industry has worked towards strengthening the three support columns for successful mobile data services. 3G networks, and even 3.5G have been deployed across many nations. Wi-Fi support has been added to some devices, and quad-band CDMA/GSM roaming phones are increasingly common. The network piece seems to be ready.

With the exception of the very old SMS and the 1999 release of Blackberry, useful apps and services, have proven more difficult to refine than the networks. We had to tolerate "transcoded" web services, which weren't truly geared for mobile use. Mobile games struck a chord with a subset of the market, but it proved to be a finite subset. Mobile browsers did a poor job of offering a window on the WWW. Carriers limited walled gardens stifled variety, creativity, and incentives to create.

It wasn't until 2006 or so that great mobile apps like the Opera browser, Safari browser, Google Maps and Yahoo Onesearch started emerging. In fact, in 2008, I would say apps and services are just now coming of age. Today, there are finally data services on mobile, and the walled garden seems to have ended its dreadful reign.

With respect to devices, I've been clearly on the bandwagon that thinks June 2007 saw the release of the revolutionary device that marked the start of the era of usability. Yeah, you know which device I mean. This seminal device will have repercussions based on its competitive influence on all devices to come. All devices will improve as a result.

So the upshot is that by mid-2007, 7 years after the first 3G spectrum auctions took place, the mobile telecoms industry was finally positioned to offer the "whole product" that could truly persuade the public to open the purse strings, pay for a device, and buy satisfying and useful mobile data services.... just in time for a US-led global decline in consumer confidence, a recession, and a drop in disposable income. D-oh!

But I argue that this time, unlike 2002, market timing is in our favor. If our industry were continuing just status quo, we would expect to be heavily impacted by the economic downturn. However, the late-arriving maturity of mobile data markets is perfectly placed to offset the broader economic weakness. By (finally) offering truly delightful, useful, innovative, readily available, and most importantly, highly usable mobile services, mobile telecoms stands to sell more high-end hardware, more network traffic, and more value-added services than ever before. And those revenues will be spread among a wider swath of stakeholders than they ever could have in 2002.

This optimism is borne out by the fact that, so far, mobile execs have said that their numbers are holding up despite a sliding general economy. While "holding up" is faint praise, it is undeniably better than the likely alternative. My prediction is, unless the recession proves to be extremely severe, the mobile industry will remain stable throughout. And when we emerge, the industry will demonstrate the growth that it has promised since the first 3G auctions in 2000.