Telcos caught in mobile ecosystem battle

Tony Cripps/Ovum
07 Nov 2012

The third quarter of 2012 saw the main focus among major OTT and smart device vendors return to hardware and the software platforms that power them, following several months when new service launches and growth dominated.

Key developments in the quarter affecting service providers include the launch of Apple’s iPhone 5, strong sales for Google’s Nexus 7 tablet, the launch of new members of Amazon’s Kindle Fire tablet family, and previews of numerous devices based on the Microsoft’s Windows Phone 8 and Windows 8 RT software platforms, many of which are now available.

Device arms race underpins battle for ecosystem control

Device shipments are a key indicator of the potential of major OTT and smart device vendors to disrupt the relationship between carriers and their subscribers, providing the “Trojan horses” on top of which those same companies launch their own competing services. The level of inter-application integration and single sign-on achievable using this approach helps improve user experience and creates a considerable amount of “stickiness” both to the service themselves and to the underlying software platform, if not necessarily to the hardware vendor (unless the hardware vendor is also the device manufacturer).

Moreover, the device software platforms owned by the major smart vendors, namely Apple, Google and Microsoft, also provide the keys to controlling ecosystems of third parties (e.g. application developers, content providers, and advertisers). As such they are also the primary cause of carrier disintermediation both in terms of existing and potential business models.

They have also become a closed shop, with few – if any – other vendors now in a position to break the stranglehold on the device market possessed by these companies. Some are at least trying. Amazon’s Kindle Fire – based on a forked version of Android that is not integrated with Google Play – is a good example of this approach, although not one that is likely to threaten the major players in terms of absolute volume shipments.

Nor is having the right business credentials a guarantee of success in this market as Microsoft has found. Nonetheless, Ovum still considers Microsoft as the only serious candidate to fill the much hoped-for “third ecosystem” after Apple and Android. The only other candidate that Ovum sees here is Samsung, whose growing strength in smart device hardware is partially undermined by the low potential for it to leverage that hardware to pursue additional business opportunities.

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