Thursday, November 29, 2007

Mobile Phone Operating Systems - Open or Closed ? - Part II

On Tuesday, I wrote briefly about the mobile phone panel I attended at PARC. Here are some highlights of the discussion. Andy Seybold put up a slide showing the market share for the various OSs currently. Though the space seems fragmented, Symbian does control the majority of installed mobile phone OSs with over 165M installed. ( I still have my Diamond Mako clamshell from SONICblue with the Psion OS from Symbian. :-) It was pretty cool then, but way ahead of its time. ) With over a billion phones shipping per year this is a very respectable market share. (In comparison about 200M PCs ship per year. ) Microsoft shipped over 11M mobile phone OSs in 2006 and expects to ship 20M this year. Monta Vista was one of the lesser known names on the panel, but they control over 95% of Linux OSs on mobile phones. It was interesting that they said that they are supported by many OEMs just because they are not Microsoft. :-) Google also seems to be hoping for this "not Microsoft" effect to help them. :-) Of course, they are also giving away Android with much of its open stack and hoping many developers will write to this platform. Their goal, of course, is to have a much larger playing field for advertising revenue. Rich Miner of Google commented that lots of information was accessible from the cell phone and it tied in nicely with their goal of organizing and making information accessible. In any case, with over 2.5 billion cell phones in use worldwide and growing, the market size is about 3X the number of TVs worldwide, and the opportunity is large by any reckoning.

The first question the panel considered was - why the push for an OS on mobile phones now ? The consensus seemed to be that phones have grown to become mini-PCs with many applications and power management requirements and lots of peripheral functionality, larger screens and other capabilities. With this level of sophistication and the constrained power requirements a targeted OS was required. There was some discussion on what was really open or closed. Microsoft claimed that since there were 100,000 people downloading their SDK and about 18000 apps built on their platform, they could be considered an open platform. One of the panelists pointed out that the baseband functionality in Google's Android was not open sourced for security and other reasons. Symbian pointed out that FCC regulations governing usability prevented some of the control code being open sourced. There was no closure on this discussion.

The panel talked about having the full browser or Outlook on a mobile phone and seemed to agree that it was about context and not about having the full functionality. Alan Brenner, SVP of Blackberry platforms for RIM commented that data usage was less than 10% on mobile phones today and as the usage climbed more applications would be enabled. Rich Miner's (Google) view was that today's smart phone was tomorrow's feature phone.

There was heated debate among the panelists on the cost of the mobile phone OS. One view was that it was insignificant with relation to the overall cost of the device. Rich Miner of Google pointed out that some phones which are available to service provider customers for $100 typically cost about $50 and Microsoft was charging between $10-$12 for the operating system with the Opera browser, which was not insignificant. Microsoft's Gerardo Dada responded that Microsoft provided value for the cost and that they spent significantly on R&D compared to the rest of the industry. Microsoft did acknowledge that the trend of giving away software and generating revenue from service was something that they see and have ways of addressing. Symbian's VP of US Operations, Jerry Panagrossi pointed out that free code was not necessarily good, especially if it was poorly tested. Alan Brenner quotes the CEO of Verizon saying that the return rate on open devices was over 40%, while the return rate on Blackberries was only 3%. In all, a fairly lively debate :-)

The panel deplored the lack of control of the features and settings on mobile phones today and attributed it to control of the ecosystem by the carriers and mobile phone OEMs. This was expected to reduce over time. Alan Brenner mentioned the availability of the Blackberry Unite(?) next month which would allow changing settings. Nokia's Victor Brilon mentioned that you can do this on some Nokia smart phones today by downloading software and using a USB connection. He pointed out that some of the difficulty with opening up the settings was the cost of the ensuing support requirements.

The panel seemed to agree that much of the increase of rate of growth in mobile phones would come in emerging markets in Asia and Africa with data services growing in India, China and Africa. Today with 250M phones in the US, the market was 80% penetrated. However, Andy Seybold said that could go to 300% with users having multiple devices. This is certainly true of many people I know. Though, there is the possibility of integration as with the iPhone. People certainly do not like carrying more devices than they have to.

The panel discussed the opportunity for application developers. Most of the panelist companies have active developer programs. However, Rich Miner of Google pointed out the lack of return for many application developers for mobile phones. Very few companies which were funded to do mobile phone apps generated successful exits. Part of the reason for this was the considerable fragmentation in the market and lack of opportunities for sales to end customers. (However, ring tones did generate significant revenue for some people, mostly in Asia. ) Google is giving away $10M to applications developers to write apps for Android, though ! I am sure there will be some interest in that :-)

In any case, a very interesting panel which made it clear that all the major software players were going to give of their best to control a large fragmented market.


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