MWC – Men Want Connections

Don’t worry – it’s not a blog about Tindr or Grindr.  The connections we’re talking about here are mobile subscriptions and the men are those at this year’s Mobile World Congress in Barcelona.  It is still mostly men.  Despite the best efforts of the GSMA with sub-events like the Connected Women’s Summit and France’s promotion of its exhibiting companies as “La France Tech” (which must have had the members of the Académie Française heading to their graves for some early turning), MWC remained defiantly male.  In the opening keynotes around 85% of the audience were men.  Telecoms, for all of its populist marketing, is still largely a suited profession.

What was exercising the males of the species this year was numbers.  Back in 2009, Ericsson predicted that there would be 50 billion mobile connections by 2020.  At the time it seemed possible; phone usage was growing and everyone expected that the things around us would follow suit by getting their own mobile connections, leading us to that kind of number.  It’s now beginning to strike the CEOs within the industry that five and a half years have passed and we’re half-way there.  Yet we’ve still only connected a few tens of millions of machines.  That’s why they’re getting so excited about wearables and the Internet of Things as the only way to make those predictions come true.

The Mobile World Congress is a massive show, attracting over 90,000 visitors from every corner of the connected world, featuring top names in the industry and showcasing the latest in technology.  Yet it remains a very focused show which is predominantly about selling things to telecoms operators.  Some of the exhibition halls have multi-million dollar stands which are effectively exclusive meeting rooms where the heads of the industry meet in private to do deals and map out their future plans.  Nestling up to them are hundreds of smaller, secretive cubicles where the future is discussed and planned away from prying eyes.  Outside them, open to public gaze, other exhibitors are displaying anything and everything related to mobile.  Thousands of delegates pack five large auditoria each day to hear the thoughts of those who have the power to chart the direction of the industry’s evolution, from Mark Zuckerberg to Hans Vestberg (the original source of the 50 billion quote), and Brian Kraznic (Intel’s CEO) to Will.i.am. This year much of the discussion was framed by that concern of how to reach 50 billion connections in just five short years.

For most of its life the telecoms industry has relied on one metric above any other – ARPU.  ARPU stands for Average Revenue Per User, or how much money an operator can make from each customer.  Over the years they’ve maintained it by innovating with different plans and subsidies, but for established markets ARPU has been falling, not least because of data and OTT services which take revenue away from voice and SMS.  Operators have managed to mitigate that somewhat by persuading people to purchase secondary contracts for additional devices such as laptops and tablets, but that will only go so far.  They’ve finally realised that the only route to the 50 billion is for all of us to start buying and connecting lots more devices.  Not just an extra tablet or two, but watches, coffee makers, fridges, cars, TVs, washing machines, door locks, thermostats, children, pool pumps, fitness trackers, pets, health devices, toys, and anything else that might warrant a SIM card. They would like a mobile subscription for everything we own and everything we do.

The first keynote speaker to claim we’re still on track for 50 billion connections was Ralph de la Vega – AT&T’s president and CEO.  He showed their “Connected Life” video which painted a Jetson’s-like view of connected things controlling our lives in just a few short years’ time.  It’s remarkably similar to Orange’s “The Future’s Bright, The Future’s Orange” video, which was made in 1999, which shows how easily a network operator can be sixteen years ahead of their time or sixteen years behind it.  And how glibly their marketing agencies can rehash the same content almost two decades after it first appeared despite pitifully little progress towards achieving any of it.

The videos and strands and MWC were full of connected cars.  Whilst they look good and are an important part of that story, they won’t grow the numbers quickly.  Renault-Nissan’s Carlos Ghosn pointed out that whilst connected cars are appearing, it takes time to get new features approved and they will trickle down slowly from high end models.  To get significant levels of connectivity will take a decade.  It will happen, but it will happen gradually.  That leave the networks with two great white hopes to grow their numbers – wearables and the IoT.

I’ve been following the wearables market and recently released a report which estimates that the market revenue could exceed $30 billion in 2020.  The question is whether these products will result in any new connections or revenue for mobile operators.  There were plenty of smart watches and slick activity bands in evidence on the phone manufacturers’ stands, but no real sign of traction.  For that you needed to be in the wearables conference session.  About a thousand people packed the auditorium to hear Eric Migicovsky describe Pebble’s journey and then announce the Pebble Steel.  When he told the audience that those who had already signed up for a Pebble Time could easily upgrade, the cheer could be heard through most of Hall 4, implying that the audience contained a significant number of the early supporters for what is now the most funded project on Kickstarter.  Within 24 hours of Eric’s announcement of the Steel another $3 million had been pledged.  There is little doubt that the Pebble is the most popular smart watch currently shipping.  It’s interesting that it’s one of the few smart watches that’s not designed by a phone company.  That may be significant.

Why it may be significant was reinforced by Joan Ng of Swarovski, who talked about their cooperation with Misfit to develop the Swarovski Shine.  I’ve been impressed by this since it was first announced and would urge anyone interested in wearables to watch their promotional video.  Joan opened with a simple but telling slide comparing the number of shoes owned by an average man and woman.  I don’t have her slide, but it looked very much like this:

It’s a telling statement of where the industry is going wrong by concentrating on tech over fashion and hence missing at least half of their potential customers, as well as multiple purchases by that half.  Swarovski have worked with Misfit to provide a range of fashionable holders that largely conceals the fitness tracker, despite the fact that the Shine is already one of the best looking ones.  The end result – a beautiful wearable with a four month battery life.  That’s where the second important piece of learning came in.  When Swarovski asked their customers if they liked the four month battery life they were told by their target market that they already had drawers full of watches with dead batteries.  Their users never charged or replaced them.  So Swarovski recut their crystal to focus light on an embedded photoelectric cell, providing enough power to keep the Shine working for its entire life.  Swarovski is a company which understands wearables in the way that most others don’t; largely because they understand their customers.

Other than these two I only saw one other notable innovation in wearable tech, which was a miniature projector built into a ceramic pendant from a Beijing start-up called Miragii. It lets a user project a text or message onto their hand and use a gesture to control their response.  Like Swarovski, they’re aiming it at women, describing it as “satisfying a desire for both beauty and fashion”.  I don’t think they’ve quite got it right – they’re trying to squeeze too much tech into it. As a result it looks too much like a camera and is made bulky by incorporating a slide-out Bluetooth headset, but it was head and shoulders above the multiplicity of watches and wristbands being shown off by the phone vendors.  Given the Swarovski treatment it could be a winner.  In real life, the display is impressive, as is the gesture recognition.  It means you start to use the wearable instead of using your phone, which I think’s an important feature.  If you want one, their first batch is only 600 units, so order now.

Outside these, there were lots of sleek wrist tech, mostly from phone companies, typically named something like the SmartBand 3, 4 or 5, signifying how many attempts they’ve already made at missing the point of wearables.  They will sell to some degree, but the missing elephant at MWC which will probably trample all of them was the Apple Watch.  I don’t think the forthcoming Apple announcement will affect Pebble or Swarovski, but I doubt it will be good news for any of the others or the network operators.  I can see both Pebble and Swarovski selling millions because they’re both listening to their users. However I don’t see either providing any new revenue or connections for network operators.  That’s not a problem for them – it’s a problem for the network operators.  Others might, but wearables are more likely to move service revenues elsewhere.  They may even diminish our love affair with smartphones if they become a more compelling way of interacting with our communications.  I’ll be revisiting that idea after the Apple announcement.

Which leaves us with the Internet of Things, which has always been the most likely means of getting those extra connections, as it’s about connecting things directly to the Internet, rather than making what are essentially just upmarket Appcessories.  Every telecoms speaker had an IoT story and plenty of exhibitors had a potential solution.  Enough at least to prompt ABI’s analyst Aapo Markkanen to tweet that if he heard someone say “IoT platform” one more time he’d scream.

It was difficult to work out what most companies claiming to be part of the IoT were doing, other than jumping on a bandwagon.  Essentially the offerings fell into two categories – better and cheaper ways of providing the connection infrastructure and methods to manage the devices and get value from the data they supply.  To achieve any volumes of connections, we need both.

The first is an important one, as despite the hopes of the mobile operators it will remain too expensive to embed cellular modems in many products. Not only does the hardware cost too much, but it also takes too much power. What the industry needs is a new Infrastructure of Things – some form of low power, long range radio which can cost-effectively connect the machines around us to the cloud.  The most well known contender today is SigFox, who were there promoting their system and partners.  They’re deploying infrastructure and products in a number of European countries and claim they are leading the market.  How much of that is marketing is difficult to unravel.  Their closest competitor is LoRa, championed by the chip vendor Semtech, but now also available from Microchip, although it’s unclear whether they’re making their own chips or using Semtech’s.  LoRa took advantage of MWC to launch their first user LoRa Alliance forum, clearly staking their place as a contender.  A third interesting approach was the joint Huawei / Vodafone initiative, based around the technology Huawei acquired from Neul, which was being demonstrated on the Vodafone stand. This is currently being pushed through the ETSI standards process and has the advantage of operating in an existing part of the cellular spectrum.  That means that an operator should be able to switch it on as a software upgrade to their base station network.  That’s a very major market advantage which should not be underestimated.  However, I suspect that none of these will be the final long range, low power wireless standard that is needed to make the Internet of Things explode into the tens of billions.  For that we will probably need to wait at least another ten years.  In the meantime there is a lot the industry still has to learn about connected devices.

Which is where the second group of the IoT companies come in.  You don’t get an Internet of Things just by putting a cellular modem or some other form of connection into a product.  You need to be able to deploy it, provision it so that it connects, manage it, get it to send its data, store it and aggregate that with other relevant data inputs, and apply analytics to extract value from it, all the while ensuring that every part of the chain is secure.  A lot of companies claim to do one, or at least part of one of those things, but if we’re going to make progress at any scale we need companies who can stitch much more of it together.  Whilst I hear a lot of fine sounding words (such as the AT&T video) there was a dearth of solid experience.   But there were a few.  I was impressed by Stream Communications’ iot-x, which provides an apparently seamless set of connectivity options ranging from Wi-Fi to satellite, and a security model running through an mbed module on the device to an mbed device server and thence to their data aggregator partners wot.io and Thingworx.  It cleans up a lot of pieces of the puzzle and should appeal to commercial and industrial users.  ARM, who created the mbed platform was also showing their parts of that solution on their stand.  Their device server, coming out of their Sensinode acquisition looks as if it may enable a number of IoT platforms.  In a nice example of practising what they preach they’d instrumented their stand with a range of 6LoWPAN sensors, measuring everything from temperature to volume of conversation to the height of their visitors.  At a point where the industry is promoting the need for more connected devices, they were one of the few actively demonstrating the reality.  The other of note was Nordic Semiconductor – a supplier of Bluetooth chips, who had integrated their 6LoWPAN Bluetooth stack in a coffee machine and were serving a very welcome cup of digital coffee.

It showed that progress is being made.  However, many of these devices, which will start to appear over the next few years will use Bluetooth or Wi-Fi to connect to hubs, and probably use wired broadband to reach the internet.  Mass volume mobile connections will need to wait for the lower powered, long range radio standards which are a decade away.  So where does that leave the vision of 50 billion connected devices?

I think it may be possible to get to that many connected devices in the next five years, but many will only connect to a smartphone.  The app on the phone might send data to somewhere on the internet, but it will use the subscriber’s existing data plan.  We will get a few tens of millions of connected cars; possibly another fifty million of connected commercial vehicles, which will use cellular to connect.  We might add a similar number of people trackers with inbuilt cellular, but it’s difficult to see where the billions come from.  As I write this, the GSMA reckon that there are around 7.4 billion connections, including M2M.  It’s taken around 25 years to reach that.  If we’re going to reach 50 billion by the end of 2020, we need to add a further 7.1 billion new subscriptions in every one of the next six years.  Plenty of speakers at MWC still seemed to believe that’s possible.  I don’t.  Instead of talking up the impossible, it seems that time and money would be better spent on looking at the network infrastructure that would be needed to make the products and services viable.

That’s bad news for the telecoms industry and operators, but it could be good news for device manufacturers and companies offering new services.  It’s unclear at the moment where the winners will emerge from?  At MWC this year telcos implied it was their God given right to claim the IoT market for themselves.  If they want to do that, they will need to do more than wheel out the same old videos.  The IoT needs a lot more effort than slick marketing.  By the end of this year we should have an indication of whether the IoT is moving past the hype peak into any form of reality.  My guess is that by MWC next February, the industry should be stepping back from reiterating the 50 billion vision for 2020 and starting to concentrate on what really comes next.