> Opinion Paper

M obile Internet Ecosystems

and Carrier Strategies

2009 / 02

www.detecon.com
 Mobile Internet Ecosystems and Carrier Strategies

Table of Contents
1 Mobile Internet Ecosystems and Carrier Strategies ............................................ 2
1.1 Current Mobile Ecosystem Players.............................................................. 3
1.2 Internet Players ........................................................................................... 7
2 Carrier Responses............................................................................................. 11
2.1 Current Initiatives....................................................................................... 11
2.2 Looking Forward ........................................................................................ 15
3 Author ................................................................................................................ 16
4 The Company .................................................................................................... 17

Opinion Paper 1 Detecon International GmbH

 Mobile Internet Ecosystems and Carrier Strategies

1 Mobile Internet Ecosystems and Carrier Strategies

Introduction

After many years of promises, the mobile Internet is finally taking off in markets around the
world. New consumer-focused devices and software delivered by Apple, Google and
Research in Motion (RIM) have created excitement over mobile Internet applications which
are a powerful, easy-to-use and fun part of everyday life. Recently the iPhone claimed the
title as the top-selling mobile device in the US despite the economic downturn. Consumers
are not merely interested in the device, but in the thousands of applications and mobile
Internet services available on the device through the mobile Internet and the App Store. And
many other companies have noticed this trend as well.

Mobile device manufacturers, Internet players and carriers are working to position
themselves at the center of mobile Internet ecosystems. Although these companies often
have different monetization models in mind, each company wants to be a hub for compelling
mobile devices which allow users to access traditional and innovative mobile Internet content
provided by partners. Many players see great value in being the “platform,” which allows
them to control the look and feel of users’ Internet experience while users access the content
they want. Currently the “platform” consists of a combination of devices, mobile operating
systems, mobile applications and mobile Internet services. As companies seek to take a
leading role in becoming a platform, they will need to determine which roles they can play
effectively and whom they should partner with to fill other roles. For carriers, this means
understanding their advantages and limitations while preparing effective partnerships which
will place them at the center of the mobile Internet platform for years to come.

Global Growth of Mobile Web Browsers (Mio) Data Average Revenue per Subscription (US$ /year)

+6.0%
1532 64
+27.6% 60
1329 56
50 53
1091
818
577

2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Mobile Internet Users Responding to Mobile Ads (Mio) Growth of Mobile Advertisement Spending (US$ /Mio)

663
$6.417
+47.7% 532 +49.0% $5.164
388 $3.691
249 $2.361
139 $1.302

2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Source: Juniper Research

Fig 1: Mobile Internet and mobile Internet Service usage are expected to grow rapidly in the coming years.
Carrier data ARPU is expected to grow as well, but not as quickly. Mobile Internet service usage is expected
to be monetized in other ways, such as through app sales through mobile marketplaces and increased
mobile advertising.

Opinion Paper 2 Detecon International GmbH

 Mobile Internet Ecosystems and Carrier Strategies

1.1 Current Mobile Ecosystem Players

Device Manufacturers

Mobile device manufacturers are increasingly trying to differentiate themselves by offering

both innovative handset design and a unique and powerful application experience. Mobile
device original equipment manufacturers (OEMs) hope to create a powerful suite of
applications in a unique ecosystem centered around their devices, with the intention that
consumer demand for key applications will drive demand and sales of hardware. Because
OEMs often ship devices to dozens of markets worldwide, OEMs believe they have the
global scale necessary to serve as a unifying platform for mobile Internet services.

Nokia

Innovative OEMs such as Nokia, Apple and RIM have led the way in developing an
ecosystem of services around their handsets, but other handset manufacturers can be
expected to follow. Nokia began the push into services by aggressively buying service
players such as location service provider NavTeq. Nokia then bundled services together on
the Ovi platform, Nokia’s central interface for services and content sharing. Ovi serves as a
marketplace for music, games and maps and it can function as a multiplayer gaming
platform. Nokia seeks to continue its service innovation with its Comes With Music offering,
which will allow users to download nearly unlimited amounts of songs for a subscription fee.
By aggressively buying services and working to align them under one common application
platform, Nokia has been able to form a unique platform of services which can help
differentiate the hundreds of millions of devices it ships around the globe.

Nokia’s mobile Internet service ecosystem has encountered some challenges. Many carriers
have grown concerned with Nokia’s Ovi offerings because they see Nokia services being
offered in areas where carriers offer competitive services. The Comes With Music offering
does not allow over-the-air downloads because it frequently competes with carrier offerings.
Nokia was also not seen as very open to partnering with mobile Internet service providers
because Nokia wanted to control most aspects of its handset and ecosystem. Therefore
many recognized service brands could not easily get their applications installed on Nokia’s
S40 handsets even where they did not compete with Nokia functionality. However Nokia
seems to be changing its course and becoming more open. The Nokia S60 series is an open
mobile OS which will become open source in 2010. Nokia may prove more open to
partnership as new mobile Internet ecosystems take shape and over-the-air application
downloads become more popular in emerging markets.

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 Mobile Internet Ecosystems and Carrier Strategies

Apple

In contrast to Nokia, Apple offers relatively few of its own branded services on its one mobile
device, the iPhone. Instead Apple offers branded services from a major Internet player on its
desktop, in the form of Google Maps and a YouTube widget. Apple also offers thousands of
mobile applications for download, all controlled through the iTunes App Store. The App Store
allows third party developers to leverage the iPhone platform to bring far more content and
services to consumers than Apple could hope to offer by itself. The App Store contains
offerings from well-known content or service companies like Google, Facebook and Loopt as
well as many applications from smaller companies or individual developers. Many
applications are free, but if developers charge for an app there is a 70%-30% revenue split
between the developer and Apple. This model has proven successful with over 15,000 apps
available and 500 million apps downloaded worldwide within six months of the App Store’s
launch. Apple further sought to develop its platform by announcing a $100 million iFund to
fund startups that will develop iPhone mobile applications. The iFund was created by a
venture capital firm with support from Apple. Nokia and RIM followed suit by announcing
similar funds for their platforms. The App Store has certainly driven demand for the iPhone
and extended the Apple iTunes ecosystem, which allows users to buy apps, music and
videos for their mobile device.

IPhone App Distribution by Pricing

3.500

3.000
Actual number of iPhone apps

2.500

2.000

1.500

1.000

500

0 $
8.99
9.99

14.99
15.99
16.99

18.99
19.99
20.99
21.99
23.99
24.99

27.99
28.99
29.99

49.99
0.00
0.99
1.99
2.99
3.99

6.99
7.99

10.99
11.99
12.99
13.99

17.99

25.99
26.99

31.99
32.99

41.99
44.99
4.99
5.99

34.99
37.99
39.99

Source: Edible Apple

Fig 2: Distribution of iPhone apps by price. Most apps are free or cheap to spur adoption.

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 Mobile Internet Ecosystems and Carrier Strategies

IPhone App Popularity (on a 0 to 1 scale – shown logarithmically)

> $1
99 cent
FREE

Not Popular 0,01 0,02 0,03 0,05 0,1 0,2 0,3 0,5 Popular

Source: Media Orchard

Fig 3: Popularity of iPhone apps when compared across price buckets.

Free apps are the most popular, but more expensive apps are still quite popular.

It is not clear whether the App Store in its current form is the final evolution of the mobile
Internet ecosystem. Many developers have questioned the control Apple exercises over the
App Store and the applications it chooses to carry. Carriers have generally benefitted from
the iPhone and they do not feel as threatened by Apple’s control over a closed ecosystem.
Currently Apple’s ecosystem only covers one device aimed at high-end users, and Apple’s
control over App Store offerings helps ensure the quality and security of apps for carriers.
Carriers could grow concerned if Apple ecosystem begins approaching the size or strength
of Nokia in key markets, and carriers want to ensure they reap the benefits of mobile Internet
services beyond simply providing mobile Internet access.

RIM

One final OEM player worth noting is RIM. Maker of the popular Blackberry devices, RIM has
long been a favorite smartphone manufacturer for enterprises due to its focus on enterprise-
level messaging and security features. Recently RIM has begun to target consumers with
new devices designs and features like easy-to-use device setup programs. In addition, RIM
has begun partnering with premium content and service providers to build out the ecosystem
of services available on Blackberry phones. Blackberry has mobile applications partners
such as social network Facebook, banking player Bank of America, investment company
Fidelity and sports news site ESPN. Similar to Apple, RIM will soon launch a Blackberry
Application Storefront which will allow users to download mobile applications. RIM is hoping
the Blackberry Application Storefront can provide the functionality and services consumers
want in addition to the enterprise-level security features which RIM has provided in the past.
RIM is using its application ecosystem to help it change its device focus and strategy.

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 Mobile Internet Ecosystems and Carrier Strategies

Q Enterprise-focused
Products

Q Smartphones and low-end Q iPhone

smartphones
feature phones
Key

Q App Store for expanding

Q Ovi platform to unite services
across phone models
Q App Center planned for
iPhone ecosystem while
distribution of apps across
maintaining control
multiple BlackBerry devices

Q Focus on high-end consumer

Implement service offering to Continue focus on enterprise
Strategy

Q Q
market but make iPhone
leverage worldwide install base smartphone but increase
enterprise-ready
consumer appeal
Q Compete in both high-end and
Q Use apps to drive hardware
low-end markets worldwide Q Abb big-name app partners
sales

Q Strong brand recognition Q User interface of both hardware

Strengths

especially in emerging markets and software is innovative Q Enterprise-focused security and

Q End-to-end selection of phones
Q Acquired many service
providers
functionality
Q Excellent name recognition
Q Operator-friendly approach to
Q Developer support for App application deployment
Store

Q Carrier partners have growing Q No lower-end devices

Q iPhone appeals to a mall niche
nesses

concerns about competitive

Weak-

market Q Fewer in-house consumer-

Nokia services
focused services, lags Apple in
Q Some developers are frustrated
Q Behind on touch-screen consumer-friendly user
with Apple‘s closed platform
phones interface

Source: Detecon Analysis

Fig 4: Strategic assessment of key OEM players in emerging mobile Internet ecosystems.

As device manufacturers increasingly look towards application ecosystems to extend their

device functionality, they encounter difficulty differentiating themselves from competitors who
are offering similar apps. App marketplaces will become the standard instead of a
competitive edge as consumers expect to have access to multiple services while application
developers extend their successful apps across device platforms. OEMs could choose to
compete for offering exclusive branded services, or they could continue to compete on
innovative device and operating system design. Carriers will be able to choose whether they
want to enter the application marketplace competition or work to form successful
partnerships which will allow carriers to focus on other areas.

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 Mobile Internet Ecosystems and Carrier Strategies

1.2 Internet Players

The increasing importance of software and software-based services on mobile devices has
not escaped the notice of key traditional software and Internet players. Companies such as
Yahoo!, Google and Microsoft recognize the ubiquity of the mobile device and they know that
their next billion users in emerging markets will likely access software and Internet services
from a mobile device. Initially these Internet players sought to extend their services to the
mobile device, leveraging their familiar brand names to convert PC-based users to mobile
users. Given their impressive lead in key Internet services such as search, IM and email, the
Internet players sought to tap into a large potential market. Recently the Internet players
have expanded their efforts to embed their brands more deeply into the mobile user
experience while building out service ecosystems based on their software platforms. The
Internet players hope to leverage their brand strength and software expertise to position their
software and services as the key platform at the center of an ecosystem which firmly
includes the mobile device.

900
Google
800 Microsoft
Yahoo
Millions of unique users per month

700 Worldwide

600

500

400 815

300 587
540 564
484
200 385
255 257 227
100
90 93
0 4
Site Visitors E-Mail Users IM Users
Source: comScore

Fig 5: Unique users per month of key Internet services worldwide in Dec. 2007.
The three large Internet players dominate key services worldwide.

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 Mobile Internet Ecosystems and Carrier Strategies

Yahoo!

While many analysts have focused on merger rumors, Yahoo! has quietly developed a
technically advanced suite of mobile services which it hopes to develop into a large mobile
ecosystem. Yahoo!’s Go application allows users to access most Yahoo! services in a
customizable interface on their mobile device. Available on 330 devices worldwide and often
pre-installed for consumers, Go allows users to check email, use Yahoo! search, access
Yahoo! content and use both Yahoo! and third party branded widgets from within a Yahoo!-
branded app. Yahoo! has even added voice-based search, which could one day prove useful
for hands-free service navigation.

Yahoo! hopes to extend the reach of Go through Blueprint, Yahoo!’s mobile development
platform. Blueprint is a software development language which allows developers to build
apps which integrate with Yahoo! apps on Java, Windows Mobile and Symbian devices.
Yahoo!’s strategy is to make it easy for developers to build services which can reach a large
mobile market through a Yahoo!-focused platform. Yahoo! has also developed widgets which
remember changes and customizations across mobile and PC screens. With the January
2009 launch of preinstalled Yahoo! widgets in Samsung televisions, Yahoo! may soon be
able to offer third parties the chance to develop services for three screens at once using one
Yahoo! platform. This would allow Yahoo! to build out a service ecosystem based on its
software platform and robust partnerships with carriers and OEMs. Of the three key Internet
players, Yahoo!’s strategy relies most on developing strong partners and is perhaps the least
threatening to carriers in terms of competing for branding on the mobile device. However
Yahoo!’s lack of deep mobile device-level integration may prove to be a weakness against
the other key Internet Players in the long run. Yahoo! would likely need to partner with device
manufacturers to overcome such a weakness in the long run.

Google

Until recently Google had the least-extensive mobile offerings of any of the big Internet
players, with a few stand-alone apps that allowed users to access basic Google services like
maps and email. However Google’s launch of the Android mobile operating system has
changed Google’s positioning dramatically. Android is an open-source application platform
which Google is working to launch with a variety of carrier and OEM partners. Like Apple’s
App Store, Google has built in an Android Market which allows users to buy, download and
rate applications through an over-the-air marketplace. Unlike Apple, Google chose to split
Android Market revenues as a 70% - 30% split between app developers and carriers,
claiming no app revenue for itself. Android itself feels much like an Internet browser and it
encourages regular use of mobile Internet services. So far there has been only one major
Android device launch, although many releases are scheduled in 2009. The first Android
phone, HTC’s G1, launched in the US and UK in late 2008 and expected to ship 1 million
phones by the year’s end. The G-1 also integrates closely with a user’s Google Mail and
contacts, which has caused some critics to say it is too Google-centric. However this
integration was specific to the G-1 and is not built in to Android, so it may not frighten
potential partners in the long run.

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 Mobile Internet Ecosystems and Carrier Strategies

Google’s Android strategy is an attempt to get as many mobile users as possible using
Google services and search over the mobile Internet. Google has chosen to be open-source
and to use an operator-friendly app revenue split in order to ensure Android is adopted as
widely as possible, which would encourage developers to join its platform. Google has also
stepped up its development efforts to make its other properties available in mobile form.
Google’s recently-released iPhone app allows users to access all their Google services from
email to chat to Orkut, YouTube and Google Earth. Google has introduced voice-based
search functionality as well, although the technology is clearly in early stages of
development. The result is an impressive array of mobile services ready to be integrated into
the mobile device, but Google will need to continue to work with partners on successful
product launches in order to help ensure the success of the Android platform.

Microsoft

The third key Internet player in the mobile space is Microsoft. Microsoft has sought to extend
its services to the mobile platform for many years, especially through its Windows Mobile
operating system. Windows Mobile rarely excites critics, but it has maintained a 10-15%
market share in smartphone operating systems for some time and it easily integrates
Exchange email and other Microsoft services in to the user interface. Microsoft also has the
Windows Live Mobile software suite, a Yahoo! Go competitor which allows users to access
key Microsoft services such as Hotmail, Windows Messenger, Live Search and Spaces.
Windows Live Mobile is available on over 800 mobile devices worldwide and Microsoft has
formed pre-installation partnerships with many key carriers and OEMs such as Nokia.
Starting with Windows Mobile operating system version 6.5, Microsoft will require Windows
Live Mobile services to be preinstalled along with the operating system. Finally, Microsoft
has announced it will have an over-the-air marketplace, called Skymarket, which will
compete with Apple’s App Store and Google’s Android Market in 2009.

Microsoft is not usually perceived as driving innovation in the mobile space, but it has many
of the same offerings and services as other Internet players along with its impressive
customer base in key services like email, chat and office productivity tools. Microsoft also
has extensive carrier relationships, and it has found ways to monetize its Windows Live
Mobile offering while sharing revenues with partners. These strengths have helped Microsoft
maintain a prominent position in mobile services, but Microsoft is losing the battle to be seen
as a mobile service market leader to rivals such as Apple and Google.

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 Mobile Internet Ecosystems and Carrier Strategies

Q Yahoo! Go application suite Q Windows Live for Mobile Q Android operating system
Products

Yahoo! oneConnect widget application suit Search and advertising

Key

Q Q
platform Q Windows Mobile operating
system

Q Focus on consumers Q Convert enterprise users to Q Focus on consumer first and

Strategy

Q Connect PC, TV and mobile personal users then enterprise second

through widgets Q Convert PC users to mobile Q Drive mobile internet use in
Q Cross-sell large content library users, especially in email and order to drive search and
IM advertising
Strengths

Q Large library of premium Q Many Hotmail / Messenger Q Strong brand recognition as

content and services users innovative and open
Q Mobile services are technically Q Existing carrier partnerships Q Clear lead in monetizing search
advanced compared to others often with monetization model and advertisement
Q Strong brand recognition

Q Lack of monetization model for Q Many mobile services are less Q No major install based of
nesses
Weak-

many mobile services, ads innovative than competition mobile applications beyond
proving challenging Q Not perceived as consumer- Android
Q No mobile OS or device friendly or easy to Q Android is dependent on OEMs
strategy to compete at the handset level

Source: Detecon Analysis

Fig 6: Strategic assessment of key Internet players.

Overall the Internet players have stepped up their mobile development efforts recently as
mobile device penetration has continued to grow worldwide and as software has become
increasingly important for differentiating mobile devices and mobile Internet services.
Currently the key Internet players are all trying to make their services available through as
many handsets and operators as possible. However the Internet players are also interested
in becoming a key mobile device platform. Internet players seek to accomplish this by
channeling both first- and third-party apps through their software platform like Yahoo!, or by
building service ecosystems through their mobile operating systems and application
marketplaces like Google and Microsoft. As Internet players begin to take a more prominent
role in the mobile environment, other players will need to consider the costs, benefits and
threats represented by the Internet software companies.

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 Mobile Internet Ecosystems and Carrier Strategies

2 Carrier Responses

2.1 Current Initiatives

Phone Design

As carriers note the success of emerging mobile Internet ecosystems, they are considering a
variety of responses. Many Tier-1 carriers began initiatives to create their own branded
phones. Although they have not made official announcements, large carriers such as
Vodafone, AT&T and others are believed to be working with OEMs to create their own
phones. The carriers give input into device design and then they heavily customize the
software to give it a carrier-specific look and feel which could be used to tightly integrate their
own services. The phones would become de facto exclusive devices for the carriers which
could be used to gain market share within their markets.

Number of Major Mobile Markets Serviced

Microsoft 100+

Nokia 100+

Yahoo 100+

Apple 70+

Vodafone 21

T-Mobile 10

Avg. Carrier 1

Source: Telegeography, Detecon Analysis

Fig 7: Relative scale of many major mobile players.

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 Mobile Internet Ecosystems and Carrier Strategies

Carriers which are creating their own phones are placing a big investment in the hopes of
receiving a substantial payoff. Carriers have learned how unique devices such as the iPhone
can be used to gain market share, build brand strength and drive consumption of additional
value added services even in saturated markets. If carriers could create such a device they
could enjoy substantial growth. However such a move requires considerable investment and
carriers may be at a disadvantage in terms of handset design knowledge when compared to
OEMs. Most carriers lack the scale and potential market reach that OEMs enjoy, and carriers
run the risk that successful phones or ideas would soon be imitated by OEMs and sold to
competitors. Some carriers see phone design as a strategic move which could counter the
increasing strength of OEMs and Internet companies by controlling the device and services
offered. Other carriers are concerned about the risks or simply do not have the scale
necessary to design their own phones.

Mobile Marketplaces

Many carriers are also considering launching or expanding their own mobile marketplaces
for services such as applications. Carriers have long had storefronts for distribution of
content like ringtones and wallpapers. As carriers have watched the success of the App
Store as a method of delivering additional, feature-rich over-the-air services, carriers have
considered the strategic importance of owning a robust mobile storefront. Carriers hope to
build their own ecosystem for allowing developers to build apps and services which could be
distributed to customers through the carrier storefront. Developers would potentially have
access to all the carrier’s customers, while customers would have access to a greater variety
of apps and services delivered under carrier brand and control. The key question is how
carriers could differentiate themselves against OEMs or software players, especially if the
carriers’ marketplaces are competing directly with other marketplaces that come bundled
with device operating systems.

News
Social Networking Weather
Photography Other
Finance 1%
Business 3% 2% Games
Sports 3% 2%
3% 23%
Navigation 0%
3% 0%
Music
3%
Travel 4%

Healthcare & Fitness 4%

11% Entertainment
4%
Reference
5%
Lifestyle
5% 10%
Book 5% Utilities
7%
Productivity Education

Source: Edible Apple

Fig 8: iPhone apps by type. App stores can provide a large range of
services to consumers through one marketplace.

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 Mobile Internet Ecosystems and Carrier Strategies

Carriers hope that building out their mobile marketplaces for handling apps will allow them to
compete to own the mobile ecosystems in their markets. Larger carriers could attract
developers with their scale, carriers may be able to tailor the marketplace with apps and
services targeted at their specific markets and customers might link innovative services with
the carrier brand instead of the device. Again this strategy has many potential risks for
carriers. Developers prefer marketplaces which make it easy for developers to develop apps
and which have large potential customer bases. Carriers may be competing with software-
savvy companies which have experience developing APIs for external partners, so carriers
will need to ensure their app platform is easy to use. Carriers will be competing with both
OEMs and Internet players for developers, and smaller carriers may not have the scale and
market reach of large OEMs or Internet players who can reach customers worldwide.
Marketplaces may not provide much revenue, because of competition from players like
Google which does not take revenue from the Android Market. Finally, carrier markets will
have to be easy-to-use and filled with rich apps in order to compete with other marketplaces
in the eyes of customers.

Value-Added Service Platforms

The development of mobile Internet ecosystems has provided further incentive for carriers to
develop new value-added service platforms. The increased use of mobile Internet and
mobile Internet services has caused renewed interest in mobile advertising and location-
based services in particular. Some carriers are considering the roles they can play as
providers of mobile advertising and location-based services platforms. Carriers hope that
they can serve as enablers for mobile Internet service providers who are providing services
through mobile Internet ecosystems. For example, a mobile Internet service developer who
writes an application for a new device might need a partner to deliver mobile advertising or
location-based services for his mobile Internet service in a particular market. Carriers which
could offer such services would make a logical choice for a service partner, and in doing so
carriers would be able to share in a larger portion of application revenues.

The challenge for carriers in developing such value-added service platforms is the threat of
competition. Many of the current mobile Internet ecosystem players are aware of the
powerful selling proposition of “one-stop shopping” and they are working to develop such
value-added service platforms for their ecosystems as well. For example, Google provides
location-based services to mobile Internet service providers, while Yahoo! offers mobile
Internet advertising services. Carriers will once again face challenges in differentiating
themselves from other players and providing easy-to-use service platforms for potential
partners. Some competitors such as Google and Yahoo! may be able to scale their platforms
significantly, which could be a challenge for smaller carriers which are considering investing
in such value-added service platforms.

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 Mobile Internet Ecosystems and Carrier Strategies

Strategic Partnering

Some carriers are considering the emerging mobile Internet ecosystems and deciding to
form strategic partnerships instead of launching competing services or platforms. In addition
to traditional device strategy, carriers are increasingly asked to formulate a software and
mobile Internet service strategy which will drive growth in the coming years. Carriers are
looking for partnerships that provide not only devices but interesting services, new revenue
models and valuable user information which carriers can use to better serve and monetize
their customers in the future. Increasingly partnership negotiations include not only device or
software issues but also joint marketing agreements, mobile advertising issues, revenue
sharing and information sharing agreements. Carriers are weighing the benefits, costs and
strategic considerations of partnering with various mobile Internet players and negotiating
deals which will best serve the carriers’ needs in the future.

Carriers are choosing to form strategic mobile Internet partnerships for a variety of reasons.
Some carriers prefer to partner so they can concentrate their resources on other strategic
initiatives. Other carriers feel that mobile Internet services are not yet a strategic imperative
in their markets, so they are happy to add partners, services and revenue streams without
considering larger strategic initiatives. Strategic partnerships allow carriers to offer the latest
innovative services without the need to invest in the knowledge and infrastructure required to
build new services. However some carriers see risks in relying too heavily on strategic
partnerships. They are concerned that if carriers do not offer more robust mobile Internet
services and ecosystems, carriers will eventually be reduced to the role of a bit pipe in the
mobile Internet opportunity. Some carriers are also concerned that if all carriers in a market
are competing for the same strategic partnerships, it will be difficult to differentiate carriers
and carriers will lose some leverage when negotiating partnerships. These concerns are
more relevant for some carriers than others, and carriers will need to consider their specific
situation before choosing the appropriate strategy.

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 Mobile Internet Ecosystems and Carrier Strategies

2.2 Looking Forward

Choose a Strategy

New mobile Internet ecosystems are building around a variety of devices, mobile operating
systems, mobile applications and mobile Internet services. Key players are changing the
game through new methods of delivering mobile games, music, search, widgets and Internet
applications. For carriers to take advantage of mobile Internet service opportunities, they will
need to articulate a clear strategy of the roles they wish to play in emerging mobile Internet
ecosystems. Successful strategies will be different for each carrier and depend on the
carrier’s unique strengths and market positioning. Carriers can start by assessing their
market opportunities and comparing their competitive strengths and weaknesses against
other potential players in their markets. Once carriers have determined the roles they wish to
play, they can assess potential partners who could fill possible gaps.

Build a Knowledge Base

One key success factor for carriers interested in the mobile Internet ecosystem opportunity
will be their ability to add to their existing knowledge base and capabilities. Carriers should
not necessarily be afraid to embrace new opportunities like mobile Internet services, mobile
advertising and handset design. At the same time, carriers should be wary when entering a
new market against other players who may have years of experience and lessons learned
about the design, usability and business models of such handsets and services. Carriers
which are interested in such new opportunities should consider training their key decision
makers on the latest innovations or hiring qualified experts to help them make informed
decisions. Depending on how carriers choose to proceed, they may then be able to
outsource certain implementation, development or design functions. Carriers should feel
confident that they have the knowledge base and capabilities to understand new mobile
Internet ecosystem opportunities and to execute their strategy effectively.

Enjoy the Ride

Recently the long-awaited mobile Internet boom has finally started to take shape. Driven by
innovative mobile devices and services, consumers have begun purchasing data plans and
consuming mobile Internet-based value-added services, even as economic conditions have
weakened. The recent strong results of Apple and RIM in the face of an economic downturn
are a promising sign for smartphones and advanced mobile Internet services. No matter
which role carriers choose to play in the emerging mobile Internet ecosystems, they will reap
benefits as consumers and businesses demand more data plans and Internet-based value
added services. Mobile Internet services and ecosystems will develop differently and evolve
at different speeds in different markets, but the overall development of mobile Internet
service ecosystems is positive for all carriers. Carriers face key questions about what they
should do in light of mobile Internet ecosystem competition, how they can differentiate
themselves and whether they should form new strategic partnerships. Carriers should
assess their position, formulate a strategy and implement their plan to take advantage of
mobile Internet ecosystem opportunities.

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 Mobile Internet Ecosystems and Carrier Strategies

3 Author

Brenden Lane is a Senior Consultant in the Strategy and Innovation Group at Detecon, Inc.
His area of expertise includes innovative products, services and business models with a
focus on mobile Internet services and devices. Brenden has worked with world-class
carriers, Internet software providers and key players from other industries in the area of
mobile Internet services. Brenden is a founding member of Detecon’s Mobile Internet
Strategies Center of Excellence. He studied computer science and management science at
Stanford University.

Brenden can be reached at +1 415 904 7904 or brenden.lane@detecon.com

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 Mobile Internet Ecosystems and Carrier Strategies

4 The Company

Detecon International GmbH

Detecon International is a leading worldwide company for integrated management and

technology consulting founded in 2002 from the merger of consulting firms DETECON and
Diebold. Based on its comprehensive expertise in information and communication
technology (ICT), Detecon provides consulting services to customers from all key industries.
The company's focus is on the development of new business models, optimization of
existing strategies and increase of corporate efficiency through strategy, organization and
process improvements. This combined with Detecon's exceptional technological expertise
enables us to provide consulting services along our customers' entire value-added chain..
The industry know-how of our consultants and the knowledge we have gained from
successful management and ICT projects in over 100 countries forms the foundation of our
services. Detecon is a subsidiary of T-Systems, the business customers brand of Deutsche
Telekom.

Integrated Management and Technology Competence

We possess an excellent capability to translate our technological expertise and

comprehensive industry and procedural knowledge into concrete strategies and solutions.
From analysis to design and implementation, we use integrated, systematic and customer-
oriented consulting approaches. These entail, among other things, the evaluation of core
competencies, modular design of services, value-oriented client management and the
development of efficient structures in order to be able to distinguish oneself on the market
with innovative products. All of this makes companies in the global era more flexible and
faster – at lower costs.

Detecon offers both horizontal services that are oriented towards all industries and can entail
architecture, marketing or purchasing strategies, for example, as well as vertical consulting
services that presuppose extensive industry knowledge. Detecon's particular strength in the
ICT industry is documented by numerous domestic and international projects for
telecommunications providers, mobile operators and regulatory authorities that focused on
the development of networks and markets, evaluation of technologies and standards or
support during the merger and acquisition process.

Detecon, Inc. Detecon Inc.

128 Spear Street, 4th floor 12007 Sunrise Valley Drive, Suite 105
San Francisco, CA 94105 Reston, VA 2019120191
USA USA
Fon: +1 415-904-7900 Fon: +1-703-476-4800
Fax: +1 415-904-7998 Fax: +1-703-476-2577

E-Mail: info-usa@detecon.com E-Mail: info-usa@detecon.com

Opinion Paper 17 Detecon International GmbH