Manufacturers are producing more and more phones to keep up, they think, with operator demand. But operators are calling for more quality as well as more phones. Keith Dyer reports on a bumper year for handsets.
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2004 will see more handsets launched than any other. The reason is this is a transition year between 2 and 3G, and manufacturers are having to produce GPRS phones, EDGE compatible phones in some instances, and start to introduce 3G handsets. Allied to this, marketing departments are increasingly segmenting European markets that are all but saturated. This in turn leads to manufacturers trying to meet all these differing definitions with high numbers of phones.
Siemens stormed ahead on the segmentation market by announcing that it would be launching 30 handsets in the year. Siemens Mobile board member Lothar Pauly said that it was crucial to get more MMS handsets into the market.
“MMS is an important trend because it will begin to translate into real business for operators this year. Although 15-20% of phones sold are now MMS capable camera phones, less than 10% of the mobile phones in use are able to fully support MMS. We think that a critical mass of 20% of all phones in use need to be MMS capable for MMS to really pick up and become a source of income for operators,” he says. Pauly thinks that that 205 mark will be reached in the second half of 2004. Siemens tends to reserve a few splashes for CeBit but it did exhibit a couple of very recently launched MMS phones at Cannes, the CX65 and the CF62.
Alcatel too showed something of the trend by announcing, or pre-announcing five of its phones, all to be introduced between now and September 2004. A GPRS phone, the One Touch 756 was marketed as “the tri-band multimedia mobile telephone par excellence” and offers video and sound recording, forwarding and downloading capability. The 556, on the other hand is a “mass market tri-band telephone.” It is also a GPRS phone, has the same Java platform for downloading and playing game. About the only difference is that it cannot record video.
Alcatel also has plans for the 835, which is a flip cover phone with a short video-clip recording capability. The 725I is primarily designed for games playing, having a landscape screen option. Then there is the phone intended primarily for the Latin American market.
Then there is SonyEricsson, which ducked the Cannes scrabble for attention for the release of a tranche of phones a few days later. Included in this were the K700 camera phone, the S700 camera phone, the Z500 EDGE enabled camera phone, the T637 camera phone and the T237 camera phone (both for the US market). All this on just one day. The differences between these phones are not huge. One may have a swivel design, another a clamshell.
At the enterprise end of the market, there is increasing choice as well. Motorola introduced its MPx and MPx100, two Windows Mobile based phones due for launch in the second half of 2004, at 3GSM. Alongside these were the 3G phones the E1000 and A1000, expected out towards the end of 2004. Motorola’s Laith Sadiq says that the move to 3G and mobile broadband will only increase the number of different phone factors.
“If you move to broadband the impact on mobiles will be more on multimedia smart mobiles than PDAs. The mobile will become a more segmented market, so there will be enterprise type mobiles which will have WLAN in them as well as 3G. You’ve got entertainment mobiles which will have more MP3 multimedia type capability built into it.”
The spread of functionalities, entertainment, enterprise computing functionality will not just mean more handsets from the existing makers, it will also mean more players in the market itself, Sadiq reckons.
“Even the PC providers may come into this. You’re going to see a lot of people come into this space to offer the kind of form factor that serves broadband services on the mobile. I think that kind of market will be very healthy because if the end user experience starts to be good then there is a premium to offer these services.”
Sagem is also entering the multiple handset launch market this year, saying it will deliver 20 phones to the European market alone this year. Sagem is never regarded as a top end provider, but it does sweep up a lot of operator contracts in the mid to lower tiers of markets. Sagem’s ceo Gregoire Olivier said that the company was forced to be more responsive to operator needs, rather than producing a range of handsets and letting operators pick from them.
“We sell to operators and we are ready to do whatever suits the operators’ needs in terms of specific design, specific software, things which will support specific services and give exclusivity to operators,” Olivier told one reporter at 3GSM. This jars with the response of Siemens board member Rudy Lamprecht when asked if Siemens Mobile thought co-branding was an issue for handset manufacturers. “Branding is a non-issue,” he replied. Lamprecht’s view was strongly that when it comes to handsets it is the handset maker’s brand that influences buying decision.
Olivier touches on a point that the increasing segmentation of handset launches is designed to address. What do operators want?
O2’s Dave McGlade says he would be happy to see fewer phones on the market if they were better made and truly addressed his customers’ needs. O2 has gone down the route of working directly with manufacturers to develop its XDAs and its recently launched media player.
“Yes, I think 2004 is going to be the biggest proliferation you’ve ever seen but some of it they can’t help. We’ve all got much more segmentation in terms of how we segment customer bases, so that then converts into what kind of specification we give to the manufacturers,” he says.
“I wouldn’t mind seeing less devices that are really, really well made but you know they’re kissing a lot of frogs as well, they never know when a certain device is going to take off. If you look at all the services — you’re going to have some devices which are more general and then there will be some specific devices which are going to be really good in certain areas.”
“You can’t get out of that but I would like to see better quality and manufacturers continue to drive costs down. And if less handsets did that and also satisfied our needs it would be a good thing. But I do think that manufacturers are going in different directions this year, and once one of them does so they all feel compelled to come out with a huge numbers of handsets. It’s also a transitional year because they’ve got to have their 2.5G handsets and their 3G handsets.”
Vodafone’s Arun Sarin made waves at 3GSM by publicly calling for handset manufacturers to get their act together on handset quality and interoperability. Jorma Ollila, ceo of Nokia, replied that developing 3G handsets has not been easy due to the lack of test cases, and of course networks on which to test them. The testing issue is one that the test community has been trying to address, building up a growing number of test bases. But of course the issue is that new 3G handsets not only have to interoperate with other new 3G handsets, they also have to do so with 2G and 2.5G networks. Warren Saunders of Anite Telecoms, says that he recognises the model of a growing number of handset models.
“The main thing that has happened in my experience is that that marketing departments have gained a bit more ground and influence and a lot of manufacturers are following a model Nokia is involved in — which is where you have the same hardware and chipset and build a variety of devices around them. It enables them to build a vast number of handsets with different segmentation. And more segmentation means a bigger testing burden,” Saunders says. One area of difficulty where there is more of a problem, Saunders says, is in the top level application layer — which of course is exactly where more and more functionality is being loaded on to phones.
“There is a big testing burden there. We have had ETSI regulation on the lower level protocol stuff, whereas at the higher level it was more open to the use of proprietary protocols and applications.” Groups like the OMA are now building global standards for the application layers, Saunders points out.
Another issue, Saunders says, is that the European market in particular has always seen a lot of give and take between manufacturers and operators. “It’s not quite clear who owns what,” Saunders says. The principle issue has been in multi RAT (radio access technology) issues. “There is still no absolutely defined certification programme for 3G” Saunders says, although he does think there will be one “by the middle of this year”.
“Every meeting a greater number of tests are ratified and validated. But there is still an amount of testing being done that isn’t globally agreed,” Saunders concludes.
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