Mobile Europe: Skuli, why are mobile email and mobile instant messaging such important areas right now for mobile operators?
Skuli Mogensen: If you think about it, you have over one billion email users in the world today, and hundreds of millions of IM users are sending tens of billions of messages every day on the public internet. However, these services until very recently were not mobilised — meaning the average consumer is not able to get easy, affordable access to desktop communications services on the mobile.
By marrying the fixed and mobile environments, you are expanding your network overnight, significantly increasing reach, customer loyalty and revenue. That’s a huge opportunity, and a “no-brainer”, for operators. Every operator will be offering a consumer email product in the next two years. That’s something no one can ignore, and the buying decisions to provide the service are already made, or are about to be made.
ME: Why is the pre-loaded client such an advantage to the user experience?
SM: A pre-loaded/embedded client greatly improves two key areas of the user experience. First and foremost, it simplifies the initial discovery and provisioning of the application which significantly improves the initial take rates. With a pre-loaded client, you simply click on the instantly recognizable application that is located on the top level menu, enter your existing user name and password and “bingo”, you are connected to your existing IM or email account. There is no need for further configuration or sign in. Secondly, properly preloaded/embedded clients run much faster and are better integrated into the phone menu than clients that have to be downloaded, thus greatly improving the performance and usability of the application. As a result, OZ has experienced consistent take rates north of 10% on phones that have a properly preloaded/embedded branded IM or email client.
ME: There has been talk of mobile email for years now. Why do you think its time has now come for the mass market?
SM: It’s all about timing! OZ started working with Ericsson in 1998 on advanced real time communications technologies. From 1998 to 2001, during the internet and telecom boom, we built extensive and very advanced communications solutions, including IM, presence, VoIP and converged interfaces. We completed 18 operator trials around the world at that time but had no success! However, we learned some critical lessons about the industry during that time. While I believe many of the early trials were based on sound ideas, we were much too early. The phones were not sophisticated enough, the networks were too slow, there were no standards in place and even the consumers at that time still viewed their phones as something to use for voice calls and not much more.
All of the these issues have evolved dramatically over the last three years, and as a result we now finally have in place the essential building blocks required to offer a rich messaging experience on mass market devices in place. These building blocks include consumers who are ready and willing to pay for access to their personal IM and email accounts on their mobile phones, devices that are capable of handling mobile messaging solutions, and a solid and proven business case for operators to deploy mobile messaging services.
Obviously there are still a number of challenges that need to be resolved in order to deliver a solid consumer email experience on mass market devices. You must have a high performance pre-loaded/embedded branded client that can fit onto mass market devices and still offer a rich consumer experience. This is one area where OZ has done a remarkable job working with all the major email providers on their branding and user experiences as well as with all the major handset manufactures. OZ has succeeded in getting a pre-loaded OZ messaging client into over 30 million phones out into the market. Another reason why mobile email’s time has come is that the gateway that is required to make the service effective is available; the OZ mobile email gateway connects to the portals in an authentic manner to take care of the traffic handling, protocol conversion, billing, monitoring and operational interfaces needed to handle billions of messages. OZ gateways support all of these requirements and we have deployed them in multiple operator environments connecting to all of the major portals. Finally, there must be the proper business arrangements in place between the mobile operators, the handset manufacturers and the portals.
ME: So which handset manufacturers do you have relationships with?
SM: We have already licensed our clients to nearly all the major handset vendors, such as Nokia, Samsung, Motorola and SonyEricsson. We work closely with operators and handset manufacturers on specifying exactly what clients they would like to see go on what mass market or high-end handsets. So, our success to date has been fantastic. OZ is the market leader in the number of phones shipped, with 30 million pre-loaded IM clients shipped in the USA alone. We have relationships with 10 operators for IM and email in North America and are enjoying healthy growth with both services. This year we are aggressively marketing our mobile messaging services in Europe. OZ is powering IM services with KPN and Bouygues Telecom, and the feedback on usage from both is very positive. We are also expanding in Asia, and have appointed a senior executive to run our Asia office in Hong Kong. Some may view OZ as a North American company — since our headquarters are in Montreal — but our employees come from all parts of the world, in fact over 18 countries are represented here at OZ. Additionally, a significant part of the team, including myself, is of European origin. In all, we truly have an international outlook and organisation.
ME: There have been murmurs that offering a gateway to an existing portal, especially one with the brand power of an AOL, MSN or Yahoo!, may compromise operators’ own status and possibly even revenues. Can you provide a solution that answers that?
SM: This is a key question and the answer varies by market and depends on the mobile operator’s strategy, the size of the operator, the PC penetration in that given market, the maturity of the mobile market and the market share that the operator has in its respective market. All these factors play an important role in determining if and how to embrace the internet portals and what strategies should be used going forward.
OZ has obviously also been very successful in working with US carriers who have interconnected with AOL, MSN and Yahoo!, allowing the portals to mobilise their consumer IM and email services; this has proved to be very lucrative for the US carriers and is an appealing differentiator. The OZ mobile messaging solutions have gained great attention and as a result, OZ has been perceived as only helping carriers interconnect with the portals. This overlooks OZ’s operator-centric approach and the fact that we are currently working with several mobile operators on implementing their IMPS strategy for building operator-branded and controlled communities. We already have fully certified IMPS clients and servers that have been commercially available for the last three years.
OZ has been working on IMPS solutions since 1997 and actively participated and contributed to the foundation of Wireless Village and subsequently OMA, where Claude Kawa from OZ is the Chairman of the Messaging Work Group – IM sub-committee, and we are also active members in GSMA. Simply put, OZ is about mass market mobile messaging and our background is all about enabling our customers to take the best route that suits them to address this great opportunity, be it IMPS, IM Gateway, Email Gateway, or as it is often the case, all of the above!
ME: So in what circumstances do you think a server-based, or a gateway-based, approach would be most suitable?
SM: It is all about balance and understanding consumer needs and the different dynamics of each market. We do not see our business as simply mobilising portals. We have always taken an operator-centric approach focusing on addressing their needs. Actually going forward, I would expect most, if not all mobile operators to offer both a carrier-centric IMPS community, in keeping with their services, as well as access to the leading desktop IM services. The question is how to do it in an economic fashion.
It’s true that some early IMPS communities were not successful because there was no interoperability between operators and existing messaging communities. Early IMPS communities also suffered from poor clients and unclear marketing on behalf of the operators which left the consumers wondering why they needed yet another messaging application. However, as already stated, it’s all about timing. Mobile operators have a huge opportunity to leverage their existing SMS traffic and mobile community, to take advantage of their existing billing relationship with their subscribers and their strong presence in most countries.
What I find very interesting is that SMS is a 20 year old technology generating $50 billion in annual revenues for the operators and is not leveraging any of their new network or handset capabilities. It’s that discrepancy that creates this massive opportunity to take SMS to the next level; IMPS is a key underlying technology on that path. So to me the portal versus non portal strategy is usually not an either/or play for operators. Operators have an active billing community on SMS that they can definitely take advantage of. But those same customers also have other messaging services residing on the desktop. We believe that we can create a win-win situation for all parties involved by marrying the best of the desktop experience to the best of the mobile experience.
But that marriage does raise some complications and compromises as well. Yes, there are multiple business issues, the political relationships are complicated, the client-server relationship is complicated, the items of control are complicated. But these are challenges that can be resolved; in fact, OZ has already tackled and prevailed over these challenges. In areas of very high mobile and PC penetration, such as Scandinavia, there is clearly a huge opportunity for operators, but even more so if they can work in harmony with the huge PC-based client base. In Southern Europe where there is lower PC penetration, the focus would be more on an IMPS strategy, with portals as a lower priority. But for any operator it is critical to have a solution provider in place that can flexibly work without getting stuck down one path or another. It will continue to be a case of testing the market and incrementally improving the service offerings for some time to come, and our message is that we have fully-built solutions for both IMPS and portal mobilization. The point is that there is not a “one size fits all” answer to these key questions and the answers will continue to evolve. With new entrants such as Skype and Google, more access points and evolving core technologies, there are risks and you need a flexible solution. You need a partner with a fundamental understanding of the technology, standards, the industry and a proven track record — thus a trustworthy partner that can grow with you as the market dynamics continue to evolve.
ME: The other principal worry for operators with instant messaging is that it will dent their SMS revenues. Should they be worried?
SM: Yes, they should be worried. SMS is obviously an extremely important revenue generator for all carriers today. However, ultimately the right question is not, “Will SMS revenue go down?” The right question is, “How can I continue to grow overall messaging revenues and increase profitability?” So that’s what we need to keep in mind. It is remarkable how successful SMS is, and equally remarkable that 80-90% of data revenues still comes from a 20 year old technology despite all the improvements to networks and devices and capital spent on applications and services. It’s coming to the point where you need to flip the iceberg. While operators should seek to protect their SMS revenue pipe, they need to embrace the new modes of communications and traffic generation on the internet in a more proactive fashion.
To me it’s obvious that, given the opportunity, people will want to check their emails where they are on-the-go, as long as it’s easy and affordable. The competition here is really the internet cafés! We can argue if it’s going to be 20-50 or 80% of users and when we reach such penetration levels but it’s precisely that, only a question of time. The same applies to IM. The IM experience has evolved fast on the desktop and people are now very familiar with various presence elements and personalization of their IM experience and communications. IM and email are also the dominant means for all filesharing on the internet. Clearly the mobile world should take advantage of those developments and evolve SMS accordingly. It should not only be a means for communications, but also a platform for filesharing at large and a bridge between the mobile and the fixed domains. Of course, these functions need to be tightly integrated into the addressbook and with other applications and services available in the phone. Ultimately is all about the end user experience — we as an industry must deliver real value to our subscribers. If we do, they will be willing to pay for the experience and benefits.
ME: And as for OZ Communications, where do you think this exciting opportunity can take your company?
SM: We have a number of impressive deployments lined up for mobile email and mobile IM in Europe and North America in 2006, so it’s going to be a very interesting year. We have a great team that has worked very hard on getting OZ this far and are confident and enthusiastic about the upcoming challenges in taking mobile messaging to the next level. The only way we can do that is by continuing to work closely with all parties in our ecosystem — the mobile operators, the handset manufacturers, the portals and the consumer. Together we are on track to make OZ the leading mobile messaging company in the world.
O2 Germany is launching ‘O2 Global Friends’, a service that allows users to call five friends who live abroad using a local number.
Telefonica said that the German service is the first in a series of services it will launch using the Jajah technology. The advantage of the operator-based system is that users can access IP Telephony without the hassle of software downloads, new hardware or complex installs.
The obvious downside of the service for users is that it is a “limited” service so far – keeping users to a international friends and family product. It’s not Skype. But for the operator it is a start in the process of marketing ad exploiting IP telephony at the customer end.
The introduction of an IP-based calling service by a mainstream carrier shows the maturity of this market and we can expect other telcos to follow with similar services,” said Charlotte Patrick, Principal Analyst at Gartner. “Telefónica’s purchase of JAJAH has given it some really interesting long distance calling propositions and their impact on the market should give us an insight into carrier’s future strategy in this area.
Trevor Healy, CEO of JAJAH and an executive director on Telefonica Europe’s board, answers Keith Dyer’s questions on this service.
KD: How does the service work?
TH: The cool thing is that we take a lot of the complexity out of VoIP. There’s no need for a new phone, headset or software download. The user simply enters a local number against his contact’s name, and that number acts as an international number.
The nice thing about our technology is that it uses traditional GSM activity to the handset, and then when contact is made with the Jajah servers we take that across the ocean on IP, and then deliver that to AT&T.
KD: So in that regard – breaking out international traffic onto IP – it’s not that different to how operators already handle international traffic, aside from the number translation aspect?
TH: I think it’s different in that it’s quite a complicated algorithm that helps you use the numbers, carrying out the look up so that you can call a number and find your friend in Cairo, and I could call the same number and find my friend in Dublin. But yes, the days when it would be a strange thing for a carrier to use an IP network are over.
KD: The release says this is the first of many services, what other services do you have planned?
TH: I think we’ll see this service rolled out in other territories. In terms of other services – at Jajah we want to act as a platform for innovation within O2, delivering a range of new products to market. Of course, I can’t share what they are yet.