Canaan Conference Summary:
The GSMA Mobile World Congress 2009
February 16-19, Barcelona
Eli Novershtern – March 2, 2009
The general impression of many visitors to the 2009 Mobile World Congress (formerly and popularly known as
3GSM) was one of disappointment. Innovations were underwhelming, and the industry is clearly operating under
increased uncertainty, stemming in large part from the general economic slowdown, which inhibits bold investments.
Handsets: Touch screens were at the center of several improvements to handset “sensory” interfaces. Audio
improvements and high-end multimedia capabilities (surround sound, attempts at high-definition video)
complemented this trend. Most notably, the industry is attempting to emulate iPhone’s success, with handset
manufacturers offering iPhone lookalikes and attempting to create mobile application stores similar to Apple’s.
Mobile Applications: Increased demand will create an open ecosystem for mobile applications, which may behave
much like entertainment titles, requiring a constant supply of fresh applications and platforms that will enable quick
and cost-effective application deployments. Therefore, those players providing the leading enabling platforms may be
in the best position to benefit from the emerging application ecosystem.
The Mobile Network: Operators are attempting to extend the reach and revenue of their mobile networks by
promoting new applications, such as mobile payments, machine-to-machine communications over the mobile
infrastructure, mobile broadband subscriptions, and personalized advertizing - a space with many varied offerings but
no clear winners as of yet.
Femtocells: Femtocells were at the forefront of attempts to extend the reach of mobile communications in the home
and position mobile operators to win the battle over Fixed Mobile Convergence (FMC).
Infrastructure: Infrastructure improvements seem sluggish and underwhelming, due to the overall economic
situation and the growing uncertainty it yields, with LTE seemingly the preferred option for upgrades among existing
operators. Infrastructure improvements may provide, however, interesting growth opportunities in the future, as
operators may be forced to expand capacity as communications volumes grow, driven by data applications.
“Green” Energy: Attempts at utilizing renewable energy both on the handset and base station will increase
for ecological and economic reasons and to enable mobile networks’ expansion to underdeveloped areas where
electricity is not readily available.
The following is a brief and non-exhaustive summary of several trends we thought may be helpful to share with you.
Handsets: iPhone After-Shock
• Trying to catch up with the iPhone: Most significant handset manufacturers presented iPhone lookalikes,
some embarrassingly similar to the original trendsetter, with varying degrees of market-readiness.
• Touch: Touch screens were the most dominant trend we observed in the handset space. Samsung, for example,
is putting touch screens at the center of its handset strategy.
• Auditory improvements: Both startups and large handset manufacturers attempted to tackle audio quality, a
long-standing pain of mobile users. Audience, a semiconductor startup based in the Silicon Valley, exhibited
a chip-based solution that mimics the human ear in its ability to filter out background noise and enhance
audio quality. Motorola, in an attempt to overcome its decline in the handset market, attempted to feature
advanced noise-cancellation software as a differentiating factor.
• High-end multimedia: LG offered the Arena multimedia phone, enhanced by a Dolby mobile sound system
which can play surround sound, and Samsung offered its “Beat” handset, featuring Bang & Olufsen speakers,
in another effort to cater to high-end media consumers. This was complemented by larger and better-quality
video screens, and initial attempts at capturing Hi-Definition video.
• Pico projectors were offered by several handset manufacturers to enhance handset audiovisual capabilities.
Mobile Applications: An Emerging Ecosystem
• Application stores: Various players are seeking to emulate the success of Apple’s mobile application store by
setting up their own stores and platforms. Apple’s successful app store is especially envied as it managed
to create differentiation, stickiness, and above all – revenue, over the head of the industry’s formidable
gatekeepers (and toll collectors) – the operators. Nokia’s Ovi is a heavily-promoted attempt to recreate such a
success. Vendors are reacting to this trend, proclaiming they will provide infrastructure and platforms for the
creation of app stores.
• Opening up the ecosystem: In order to satisfy the need for innovative and appealing applications, large
industry players (including equipment vendors, mobile operators, and handset manufacturers) realized that
it is in their best interest to harness the innovation of startups in order to create a rich application offering.
Many have set up partnership programs, through which they seek to integrate startups’ innovations into their
• Applications as entertainment: With consumer demand for mobile applications being unpredictable and
volatile – as evident in the interchangeability of the most popular iPhone applications – application sellers
will need continuous fresh supplies of innovative applications. As it seems virtually impossible to predict the
winning titles in this space, we believe that the market for mobile applications will behave in a similar way
to the market for entertainment content, in which many titles are continuously offered, catering to many
different tastes, and creating few hits followed by a “long tail.”
• Titles vs. platforms: In order to satisfy the application market, sellers will need to dramatically cut costs and
shorten implementation times to bring new applications to the market. Therefore, those best positioned
to win in this market may be the platform providers: those who could lower costs and accelerate time to
market across many operators and handsets will be able to concentrate much of the application market and
create strong positions regardless of the popularity of specific titles. Accenture is attempting to create such
a platform, promising to enable deployment within 3 months or so, instead of 18-24 months, as they claim
the situation is today among operators.
Extending the Reach - and Revenue - of the Mobile Network
In a quest to find growth in their mature markets, operators are seeking to find new uses for the mobile
infrastructure they own, especially on the data side. Examples for such uses include:
• Mobile Payments: Visa was prominently present at the exhibition, in an attempt to claim ground in the
nascent mobile payment space.
• Embedded, Machine-to-Machine (M2M) uses, such as mobile remote control of home appliances (lights,
locks, etc.), or using the mobile network as communications infrastructure for commercial applications (e.g.
security cameras) were also prominently present.
• Broadband: Operators and supporting vendors are attempting to compete with landline broadband providers
(cable, DSL) by offering mobile USB modems that are competitive in quality and price with landline
subscriptions. These seem to be especially attractive to second-home owners, who by using their mobile
modem across locations can eliminate broadband subscriptions.
• Personalized advertising, often using the knowledge operators already have on their subscribers
(demographics, calling patterns and destinations, etc.) is creating a large ecosystem. A multitude of different
companies and business models were offered, yet the winning positions still seem up for grabs.
• Specialized advertising models targeting developing countries where technological capabilities may be
limited, but mobile may be an attractive advertising channel as it has greater reach compared to the web,
were are also offered. These models (for example the one offered by the Israeli company Pudding Media)
often use seemingly simple technologies such as SMS.
The Battle for the Home: Femtocells as an Alternative to FMC
Another way for operators to seek growth in mature markets is to gain control of their existing mobile
customers’ home communications, displacing landline vendors.
The most prominent tool utilized in this regard is Femtocells, home-sized cells backhauled via broadband, which
enable the mobile handset to be used instead of a home cordless phone. This increases the reach of the mobile
network to spaces it sometimes cannot access and unloads traffic from the already saturated mobile RF space.
More importantly, from the mobile operators’ point of view, Femtocells place them in a winning position in the
arena for Fixed Mobile Convergence (FMC), presenting an effective alternative to earlier approaches to FMC:
instead of changing the handset (by adapting it to use with landline-based access points, such as WiFi, which
threatens mobile operators’ core business), it changes the access point, while maintaining the seamless use of
existing mobile handsets.
Backhaul & Infrastructure: Sluggish, Uncertain Progress, Dominated by LTE
Even though WiMax, which is thought to appeal more to new entrants rather than to established players,
is usually less prevalent at MWC, its relative absence was still noted this year. The cost of re-deploying new
infrastructure compared to enhancing existing networks seems a major inhibitor to WiMax adoption (with the
exception of new markets which have no infrastructure at all).
The Long-Term Evolution (LTE) of existing UMTS infrastructure, the more incremental approach to network
upgrades, was also disappointing in capabilities and uptake, with DoCoMo, a traditional pioneer in the mobile
industry, announcing first commercial deployments only in 2010.
However, even given the current reluctance to make significant infrastructure investments, due to the current
economic gloom and increased uncertainty, network capacity enhancements may still provide interesting
opportunities in the future. This would be especially true if operators succeed in increasing data traffic, thus
over-burdening mobile infrastructure which is often already saturated.
“Green” Energy Going Mobile
The renewable energy trend has reached the mobile world as well, with vendors like Samsung offering the “Blue
Earth” handset, made partly out of recycled materials and with a solar-based charger on its back –
a feature that independent vendors are offering as an add-on. Even more significant in terms of energy-saving
are several efforts to utilize renewable energy for base stations, such as solar panels or wind turbines to be
mounted on base stations.
Expanding to Underserved, Developing Markets
Renewable energy, in addition to being more environment-friendly, enables deploying mobile networks and
handsets to underserved areas where electricity is not readily available. Several solar and manual charging
mechanisms were offered for such areas.
In addition, providers offered more cost-effective networks that will enable deploying mobile networks to
developing rural areas, where traditional networks are not cost-effective. Such low-cost networks are enabled
by modular “DIY” base stations, placed on village rooftops without requiring engineers for deployments.
To Our Portfolio CEOs:
As your partner, Canaan is here to give you the actionable tools, resources and support you need to make your business a
success. The Canaan Conference Summaries have been developed to give you a recap of the industry’s biggest and most
influential conferences. If you have any questions or suggestions on how we can better serve you, or if you would like to
be added to or removed from this distribution, please contact Gina Vakili at firstname.lastname@example.org.
ebr ati n
c el l e n