Research Notes

Mobile World Congress 2016 – a Preview by John Strand, Strand Consult

Each year Strand Consult publishes a preview of the Mobile World Congress. MWC 2016 has all the ingredients to become one the biggest gadget years in the event’s 20 year history. This year’s Mobile World Congress reminds me of the event in the pre-2000 years when the industry hyped 3G up so much that it helped to create an IT/telecom bubble which later burst.

Let’s say it right away: CES is about gadgets and MWC is about telecom and infrastructure. Many were pleasantly surprised about the many gadgets and value added services in Las Vegas in January. They will likely be surprised Barcelona in February too. MWC is the mobile industry’s answer to “Barbie: Life in the Dreamhouse.” The world is stylized perfect life in Malibu where the people are beautiful dolls, the gadgetry works like magic, and money is no problem.

Last year I wrote this about MWC 2015. I feared that GSMA lost its influence in policy and regulatory circles. Those who know Strand Consult know our views and analysis about the challenges facing the industry, particularly on consolidation. We are concerned about increasing government control of telecommunications and growing regulation.

A review of this year’s exciting program reveals that GSMA has cleansed the agenda of any topics that would stir political debate, but these topics are more important than ever to investors. So as not to spoil the illusion of Barbie: Life in the Dreamhouse, all things relating to policy and regulation have been shunted away to the closed, invitation-only Mobile World Summit and Ministerial Programme. This is likely a political decision by GSMA to make the mainline MWC 2016 an event that cultivates the mobile dream world and leaves the reality of the massive political and regulatory obstacles challenging the industry to another day. There is no doubt that governments increasingly sees telecommunications as a tool to be used to monitor citizens. Surveillance is a downer, so why distract from the time in Barcelona to eat, drink, and be merry?

In any case, we expect that MWC 2016 will produce many newsworthy announcements and that the engineers will outdo each other trying to impress journalists with their version of Barbie: Life in the Dreamhouse, which now is a smart home.

Here are the topics of this research note

1. Internet of Things, connected devices, connected cars, and everything becomes easier to connect to the network
2. 5G: the hype will rival the buzz around 3G before 2000

Wi-Fi vs. LTE-U: competitors or cousins?

4. Services, services, services and so many apps

5. Mobile phones, form factors, and funny names

6. Mark Zuckerberg, the keynote for the third consecutive year. How Facebook will beat Google.

7. Visitors who explore will be rewarded – Things happen in the corners

8. 10 things which will get attention or shouldn’t get attention

In my 2016 predictions for the mobile industry, I described some of the things we will see in Barcelona. I predicted that the industry had to think in new ways, focus on new business models, and find different technical solutions. The mobile industry is the surfer looking for the next wave. The good news is that in Barcelona you will see many ideas about what waves will come in the next few years. The bad news is that life is not Barbie: Life in the Dreamhouse, and operators still need to create business cases and business models.

The Internet of Things
The year’s overall theme is IoT with connected devices. The news in this area will likely exceed the expectations of the 100,000 visitors to Barcelona. Just as IoT was big at CES, IoT will be big at MWC. The objective is to show how to deliver more connected things without removing the focus on the infrastructure that is the foundation for everything.

It will also be the year where we’re going to hear a lot more about road toward 5G and where many players will present their visions for what 5G will be. The hype for 5G rivals that we experienced for 3G and the promise that the technology would double ARPU. That never happened. No 3G business models ever emerged, and there are still no business models for 5G. Right now 5G is mainly about marketing. Consider the rebranding of the 3G Americas organization to 4G and now 5G Americas.

To be sure, 5G could contribute many new technological solutions to the challenges we know today. But without the business models, 5G is hardly a goldmine for mobile operators, and it will probably not be able to compensate for the revenue decline experienced from the last decade of OTT competition and increasing regulation.

Another exciting areas is unlicensed spectrum and how Wi-Fi and LTE-U will play together. We hope there will be room to discuss whether Wi-Fi and LTE-U are competitors or cousins. There needs to be focus on what it actually costs to implement the various technologies in devices. It will be interesting to learn more about LTE-U and the costs associated with the production of the devices with the patented technology. Will the patent cost make LTE-U a technology reserved for high end and very specialized devices, leaving Wi-Fi as the dominant technology? Or will business models make the chips ubiquitous?

The exhibitor list of more than 2200 companies is a MWC record. Just as CES has succeeded to broaden the audience of exhibitors and attendees, MWC is doing the same. Small businesses and startups increasingly participate. The conference program offers many events outside the main program where it’s possible to get inspiration and see services and apps presented in a cool way.

A key trend is to add a cloud-based solution on top of classic product and connect this to the cellular or Wi-Fi network. We see these solutions for watches, sports/fitness equipment, cars, and other connected devices.

Mobile phone manufacturers have not participated with much innovation since Apple launched the iPhone, which was a rebirth the Palm and Handspring form factors from around year 2000. Let’s face it: the handset part of the program leaves something to be desired. Apple never comes to MWC anyway, and Samsung primarily makes classic Android phones. Microsoft mobile is not exciting, and Google´s Android is wining with only limited innovation.

Google will attempt to tackle the fragmentation on the Android market. The company that has built itself on the premise of “openness” now finds that unwieldly and needs a proprietary solution in AndroidOne to shore up the many versions of its operating systems and to get control of value added service market which is so important for a company that lives by advertising.

On the policy front, Google expends considerable resources to deter competition emerging from Facebook, mobile operators, and other players. Google has funded and fueled net neutrality campaigns around the world so that whenever a potential competitor emerges, net neutrality advocates are ready to crush it.

The recent showdown was India where the Telecom Regulatory Authority of India (TRAI) outlawed price differentiation, the ability of market actors to compete on price and service. It is an extreme decision which probably contravenes India’s telecom laws and constitution. In any case, the ruling effectively prohibits competition that would challenge Google. Not only is Facebook barred from competing with Google, but so is any Indian company.

To be sure, all players should be able to compete, and consumers should decide what kind of packages and services they want. But the country which was considered was one of the world’s great mobile success stories, which over a decade increased subscribership by more than 500 percent and lowered prices by 95 percent through market-based competition and limited regulation, has decided that cronyism is better. The January ruling was delivered just in time for Google’s launch of the Freedom 251, a $4 smartphone pre-loaded with Google’s apps. If TRAI were consistent and if advocates were not on the take from Google, the Google/Android smartphone would also be banned, as bundling a phone and operating system is a form of price differentiation. Just to be clear, India’s activists don’t want the poor to see Facebook’s advertising, but Google’s is ok.

In none of the 50 countries with net neutrality rules have regulators made a cost-benefit analysis or regulatory impact assessment before imposing rules. As the FCC’s chief economist observed upon retiring from the agency, the Open Internet Order is an “economics-free zone”. To date, neither GSMA nor telecom operators have had success to stop the descent into regulatory abyss. Fortunately some operators are challenging the madness in court and let’s hope GSMA’s new regulatory framework gets traction.

For the third year in a row, Facebook’s Mark Zuckerberg will headline at MWC. He does a good job, but it’s interesting that GSMA has not been able to find a serious alternative from the Internet world. Google is the persona non-grata, and Microsoft is having a tough time in mobile. Apple’s Tim Cook doesn’t bother to come. It’s too bad because he could get a lot solidarity for the fight against the FBI. Neither Apple nor the world’s mobile operators want to be tools for governments’ growing surveillance state. Let’s hope that Mark Zuckerberg talks about Facebook’s struggle in India and creates transparency about how Google, its advocates, and TRAI have ganged up against efforts to help the poor.

Strand Consult believes that 2016 is the year where the many sideline activities probably will give participants a greater experience than those found in the official conference program. One interesting presentation will come from 4YFN, an organization helping to promote the greater Barcelona area for technology companies to establish themselves.4YFN has made an exciting event to be held during the MWC umbrella. This is likely to be one of a number of events that will delight and surprise visitors at MWC 2016.

Strand Consult usually makes a list of the 10 things that will get the most attention at MWC and those that shouldn’t. This year we focus on the top 5.

1. Everything that can be connected will be connected. Barcelona will offer plenty of visions of the mobile industry’s version of Barbie: Life in the Dreamhouse. But it can be overwhelming.

Unfortunately, there is not much focus on the underlying business models and how and whether this promise of the future can help lift earnings in an industry struggling with declining revenue and decreases margins.

2. 5G and how 5G is going to look like when it comes to software based networking that is intelligent and more efficient to utilize the spectrum. The wireless future becomes more and more impressive.

Unfortunately, there is not much focus on how 5G hype may affect industry’s costs. It is as if one has forgotten what happened with 3G and how hype evolved into a financial bomb under the telecommunications industry.

3. There will be much focus on new phones, new names, unknown producers and better specifications. This year will be the year when the focus is moved once and for all from the feature phone market and the smartphone market.

Unfortunately, there will not be much focus on how these phones perform in a network and how the challenge of poor handset antennas affect end-user experiences. The quality of mobile phones is the mobile operators’ Achilles heel when it comes to network experience.

4. There will be much focus on network security, focusing on the need for solutions that create safe communication between connected devices and solutions that are in the cloud.

Unfortunately, there will not be much focus on how governments around the world are increasingly putting pressure on hardware and software manufacturers and telecom operators when it comes to surveilling citizens.

5. There will be much focus on the many celebrities appearing in Barcelona. The list of keynote speakers is long, and there are many exciting names which will get lots of well-deserved attention.

Unfortunately, many of these personalities will not talk about the many major challenges facing the mobile industry. We are talking about political and regulatory challenges that will affect the companies and their investors.

MWC 2016 will likely be an amazing gathering of more than 100,000 people where the number of mobile industry stars will get plenty of attention.

Strand Consult provides both pre and post review of the Mobile World Congress. Read our reviews from the past eleven years.

If you would like to meet with Strand Consult during the MWC, please contact us.
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