MWC: Vodafone’s gloves come off with frenemy Google
18 March 2010
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Extract from Vodafonewatch, issue 2010.02. Click through for: the Executive Brief from this month’s report; the Issue Snapshot; or to contact us for more information about the full 96-page issue, this industry standard monthly report service, and ongoing subscription access.
Vittorio Colao, Vodafone’s Group Chief Executive, again used his keynote slot at the annual Mobile World Congress (MWC) to highlight the company’s over-riding regulatory concerns of the day — although much of his focus was this time trained on one company: Google; rather than the generic call for lighter touch, recession friendly regulatory environment heard twelve months before (Vodafonewatch, 2009.02).
Colao did not explicitly call for an investigation into Google’s market power, but nevertheless sought to lobby for greater scrutiny into the impact that extending the company’s online search dominance to the mobile sector will have on competition, especially if little in the way of serious opposition (at least in Europe) remains evident. He said it will be important for the European Commission (EC) to “examine the whole value chain”, rather than just the state of inter mobile operator rivalry, to ensure a competitive environment, and suggested Vodafone could look elsewhere for search engine partnerships.
” I would like to have more competition everywhere. At the moment, you have three players [Google, Yahoo!, and Microsoft] in the fixed space. You have two in the mobile, but only kind of one [Google]. ”
– Calao.
While none of these observations are new, the timing is interesting — Colao suggested action is urgent, calling for policymakers to consider how to avoid concentration of market power “before it is too late”. However, given long expressed concerns about Google’s search dominance, and Vodafone’s willingness to form various tie ups with the company in spite of its fears, it seems possible that the competitive threat level associated with the US company within Vodafone, rather than any wider danger Google presents for the competitive health of the industry, is what was really on Colao’s mind. As such, Google may now have risen to the top of Vodafone’s league table of industry ‘frenemies’ — previously also featuring, to different extents, Apple, Nokia, Research In Motion, and Microsoft.
Also noteworthy is Colao’s decision to focus warnings on the search market: the engine room from which Google’s power emanates, and presumably the area where Vodafone sees the largest opportunity to bog it down in regulatory quicksand, particularly in Europe. This appeared evidenced just a few days after MWC, when the European Commission (EC) opened an investigation into how Google ranks paid for search listings, following claims by price comparison websites Foundem and Ciao! that they are being penalised by the company for competitive reasons, and prompting suggestions that the move could prompt wider scrutiny. However, Vodafone’s competitive concerns about Google are likely to stretch more widely than search services, with the company seen as the main potential source of disenfranchisement for operators in overall mobile value-added service (VAS) provision, convergence, and ‘customer ownership’.
It could also be significant that Colao’s effort to focus attention on Google in the regulatory sphere comes at a time when Vodafone 360, the customer facing end of Vodafone’s own updated VAS activity, is seen as under pressure, with reports that the platform is to be reformed via a new unit in Germany; management changes rumoured to be afoot (Vodafonewatch, 2010.01); and Vodafone announcing at MWC an unspectacular 300,000 shipments of the LiMo-based Vodafone 360 Samsung H1 and M1 phones since their debut in early November 2009. It remains early days for 360 — Pieter Knook, Group Internet Services Director, recently described its launch as merely the “first step in the next phase of our mobile internet journey” — but Vodafonewatch feels the Group has yet to properly outline that vision, and how its various application development efforts fit together: including the recently announced, cross operator Wholesale Applications Community, and the enabling Vodafone-backed Joint Innovation Lab scheme.
Regarding Colao’s attitude towards 360, Vodafonewatch found an interview with him in the Financial Times, published during MWC, quite revealing, with the Chief Executive hardly giving it a ringing endorsement. He described navigation of the platform on his Samsung handset as “a bit difficult to get used to because the logic is different, but I do use it. It’s less business and more social, personal fun”. Colao is said to have had four handsets on the go at the time of the interview: with a BlackBerry, which he uses for business email and to “swap SMS messages with my colleagues”, and an iPhone appearing his core phones — suggesting his personal preferences are perfectly aligned with the prevailing trends in smartphone adoption; and tallying with recent assertions by Vodafone UK of the iPhone‘s enterprise appeal (Vodafonewatch, 2010.01). Colao told the paper that “if you ask me, over time we will see more and more consumers using BlackBerries, and more and more corporates using iPhones, and more supposedly low end people requiring email and other services”. His fourth device was the Google Nexus One, meaning an absence in his collection of handsets based on Windows Mobile or Symbian, both preferred phone operating systems at Vodafone — although Colao is likely to be regularly rotating his non core handsets to keep up with market and partner development and competitive threats. The iPhone appears to be a long term fixture, though — he was caught sporting one at an October 2009 presentation, prompting audience jibes, due to the then absence of the device from the portfolios of Vodafone UK and Verizon Wireless (Vodafonewatch, 2009.10).
Colao reiterates backing for tiered data access
Colao’s MWC speech also addressed other regulatory issues facing European authorities, including the thorny area of internet neutrality, on which Colao reiterated his company’s position operators should have the right to charge quality of service (QoS) fees to providers of bandwidth hungry material (Vodafonewatch, 2009.11). “I do not want to be forced to go to the customers only to fund my investment. I might go to the content world if there is any interest”, Colao said. He also repeated backing for priority access for mobile data customers that are prepared to pay for this, following the recent launch of an ‘enhanced access’ package in Spain (Vodafonewatch, 2009.11) and the rebranded 3G QoS enhancing Sure Signal femtocells in the UK. “If one customer wants to pay for higher bandwidth they should be allowed to; we need the ability to deal up and down the value chain or our efficiency will be reduced”, he added. His words came as internet neutrality issues are being mulled over by regulators in the US and Europe.
More open access to fibre networks urged
Beyond mobile data, Colao urged European authorities to focus regulatory attention on conditions being imposed by incumbent fixed line operators for access to fibre infrastructure, particularly in Spain and Germany, where he said there is risk of “monopolistic next generation networks” being created by Vodafone arch rivals Telefónica and Deutsche Telekom. Colao argued that high speed networks should be opened to at least two competitors, but not at a cost disadvantage to the host network. He also called for European governments to stop viewing the telecoms sectors as a “tax target”, saying the industry has “not yet been identified as key to redesigning society after the economic crisis”.
Nevertheless, Colao painted a bullish medium term outlook for the mobile sector, referring to 2010-2015 as a “seeding period” for future economic growth, if healthy competition is assured. With mobile data expansion set to continue, “it will be like the first half of the 90s and what we did with GSM”, he added.
[Further reference: Vittorio Colao: ‘I'm a fan of Facebook, but not of video calls' -- Financial Times (may require registration/subscription), 15 February 2010; Mobile operators unite on global apps platform -- GSMA Mobile Business Briefing, 15 February 2010; Vodafone 360 Update -- Vodafone, 15 February 2010; Google ascendancy vexes Vodafone -- Financial Times, 16 February 2010; Vodafone CEO wants Google's power curtailed -- Rethink Wireless, 17 February 2010; EU initiates probe into Google's search business -- Rethink Wireless, 24 February 2010.]
About Vodafonewatch
Issue: 2010.02
Covering: February 2010
Published: March 2010
Next issue: March/April 2010
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