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    Vodafone’s Colao tells it how he sees it

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    Vodafone’s CEO Vittorio Colao gave an interesting keynote speech today at Nokia World. The speech formed a very clear statement of this operator’s priorities, and as Colao acknowledged it probably speaks for most operators.

    I think it stands repetition, and because it also stands a chance of being drowned out amongst all the other news from Nokia World, I thought it might be worth picking up on a few of Colao’s points.

    First off, Colao noted that a while back things were fairly simple between and operator like Vodafone and a device maker like Nokia. Vodafone needed to concentrate on the network, Nokia on the devices, and that was it. There were really only two priorities. Now Colao thinks that the industy needs five things. And here they are, with our comments added.

    Networks

    Keep Investing
    “The industry needs high speed, fast, ubiquitous high bandwidth. What is coming out of Vodafone’s customers’ interviews and research is that the expectation of network quality is rising very fast.
    “We have to invest on all the platforms that can deliver this, not just the radio networks, transmission and access, but also in distribution and care. I would like to stress that we at Vodafone been among the early ones investing in this area, and we have never cut investments in this area. So today 50% of our network delivers speed of 14.4 down and 2Mbps up.”

    We need tiered pricing based on QoS
    “So data will explode; however, data costs and pricing has to adjust. I think today we are already providing caps, and different levels of service to customers, for different times of day, but more will come. The principle here has to be that every class of service must have its own price and every customer must be able to pay for whatever level of service he wants. We cannot penalise those who pay more. It’s very important that we have an intelligent debate on the internet and especially the mobile part of it.

    Comment: The implication is clear. We will invest in the network, indeed we know we have to, and are happy to. But pricing has to adjust in line with our costs. There are also implications here for application development (see part 5).

    Devices and OS

    Competition and choice is all
    “On OS, as we have said many times, we want competition, choice and market-driven success. And I think these principles should be welcomed by Nokia and the Nokia community. We will support whoever adopts those principles. Choice and competition are the most important things to deliver.

    Smartphone affordability
    “Our customers are saying that pricing is becoming more important than features in the new segment of adopters for smartphones. It is essential that affordability becomes available for the emerging market. We are very committed to really leverage on affordable devices for emerging markets, to really push the adoption of data and smartphones.”

    Comment: Don’t fence us in at the top end. Similarly, we have a variety of sectors we have to address and we need the tools to do so in all areas. Get the prices down so we can open up mobile data in emerging markets

    Content and services

    Consumer usage
    “This is what our customers are really doing: taking pictures and video continue to be the most important activities and also calendar management. For smartphone usage, one third of active customers have browsed, 25% played games, 20% email, 15% social networking and 11% actively use maps. These are real consumer customers.”

    Data forecasts
    “Gaming is  the top paid app. After that music. Then social networking, where Facebook is the king, then news, weather and normal content thing. Our forecasts on content and services see social networking useage doubling in the year, with navigation showing an increase of 90%. Personally I believe that media is migrating successfully and quickly into the mobile world.”

    The consumerisation of the corporate:
    “There is a real consumerisation of devices in the corporate. It’s not just about email, but much more off the shelf applications. The consumerisation of business behaviour is happening fast. This isn’t just about the

    Comment:
    Content and services isn’t just about the high end, and not just about the consumer. Location can add to services and is set for growth.

    Applications

    Recommendations for developers
    “We have two recommendations for developers. First, now is the time to tailor apps to individual users. We can have user orientated search and recommendations. We at Vodafone can really help you because we have loads of customer information in a security-sensitive managed way. We can help developers really increase the value of your applications. Second is operator billing. It’s quick and intuitive, pre and post pay. We at Vodafone have already opened up to third parties and the early indications are this is really a good way to increase the adoption of paid apps. Lets think about the billions that will get into smartphones but don’t have a credit card.”

    Adding value to the developer
    “The most important thing is what we can share with developers. We have a great reach of data concerning customers. Who they are, where they are, how they talk, how their handsets behave. And we operators can deliver two more things which I believe will be incredibly important . The first is privacy and the second is security. We need to always protect our customers’ data so privacy and security are not a concern. That could be the only problem we see in front of us.”

    We need WAC and JIL, not closed OS-app models
    “We need to avoid the closed, vertically integrated models. We need to limit the choice for the customers because this will turn into a worse experience for them. We want a truly open environment, the Wholesale Applications Community (WAC) that we’ve started is an example of that – in which OS, devices and apps are decoupled as much as possible and operators are all on the same footing.

    “This means content owners can monetise across the whole base. That’s an opportunity for Nokia and other OS owners to really widen their reach. If a closed model becomes dominant, we will find there’s a  heavy price in terms of loss of competition, not just in OS but for everyone in the value chain. And even if no system prevails and we have fragmentation, we could end up where things are even more complex for developers, and the customer has a more limited experience and sense of being stuck into something.”

    “Developers should be able to develop once and go across all different environments and be able to monetise as much as possible. This is why we at Voda created JIL which now has turned into the WAC. Both initiatives were conceived at the end of the day to remove complexity and increase choice. Personally I beleive that Nokia could be a great partner in that opportunity.”

    Comment:

    This is a really strong statement of operator value to developers – in billing and customer data, but also in reach and openness. It’s also a clear commitment to the WAC open standards model, and one which calls on other OS “owners” to get involved.

    Ecosystem profitability

    “We clearly need to make sure there is the right return for all the players in the ecosystem. This means first pricing should be adjusted to reflect usage and load. You developers have to factor this into your thinking for apps in terms of usage, load, network interaction. We are approaching the end of the free culture.

    “Second, segmentation must drive the right device in the right segment at the right price delivering the right experience. Third, we need to be sure there is enough margin for developer, content owners and the media players to really have a strong incentive to develop locally relevant experiences for the customers.”

    Comment:
    Colao hints here in a change in the way money is going to go around. Developers have to think about the network impact of their apps because there will be a network-related toll at some point, somehow on intensive apps. Device makers need to make sure they have operators’ key segments covered, But Vodafone knows there needs to be margin for everyone involved.

    I hope you agree that was worth recapping. As I said, I think it was a clear statement of how Vodafone sees its business at the moment. It wants to invest in technology and grow data use, but it needs to see pricing change. It also needs to see support from the developer and OS community for a more open model. In return, those partners will see greater paybacks than by working with vertically integrated players.

    Good speech, Vittorio.