Next in Tech | Ep. 261: Mobile World Congress Review

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Eric Hanselman: Welcome to Next in Tech, an S&P Global Podcast where the world of emerging tech lives. I'm your host, Eric Hanselman, Chief Analyst for Industry Research at S&P Global. And today, we're going to be looking at Mobile World Congress. There are a number of us who were there just back from Barcelona. And I want to get the takes from the analyst team as to what they saw was different this year and what was top of mind in terms of what was taking place in the Ferro Grand Via there in Barcelona. With me to discuss it are Raul Castañon and Rich Karpinski, and welcome back to the podcast to you both. 
 

Raul Castañon-Martinez: Thank you. Happy to be here. 
 

Rich Karpinski: Thanks, Eric. 
 

Eric Hanselman: With 100,000 of our closest friends, although, I guess, to start off with, maybe not quite 100,000 of our closest friends, there were some travel problems because of the recent conflict going on, which seemed to color things a little bit. But I guess let's maybe start off with what was interesting and where were things headed. There was certainly a lot of AI, a lot of what was taking place with the network operators. This is -- for those who don't know, the Mobile World Congress is really the telecom world's gathering place every year. And the thing that's been interesting about it is that it has expanded dramatically to touch all manner of different aspects of technology. And so really, it's now a little bit of everything that's under the roof of the FIA, all what, 7-plus halls that are all taking place. So what we thought? So Raul, what was your take? And what do you find interesting there? 
 

Raul Castañon-Martinez: Yes. So I've been fortunate enough to be there already. I think it's going to be like 10 years. And the way it has evolved and the way it is now, I feel, has changed significantly. I remember back in my early days; there was a strong focus on mobile devices. That's where they announced the new devices or the players. What I see different now this year is a strong emphasis on how mobile network operators are shifting their business model. Now I'm aware that this is a conversation that has been going on for a long time, and I know both of you are well aware of that. What I see different though is that I see maybe more practicality in terms of the discussions and also examples of where this is happening. I do think we are in the midst of a transition from the so-called long pipe to talking more about connectivity as a business. 
 

Eric Hanselman: It is something where if we think about the evolution for the operators, this has been something where they've always wanted to be able to take the latest and greatest technology, be the service provider of interest or certainly the ones that are able to go deliver it, but they've faced a set of challenges in terms of being able to leverage this. And it seems like AI is that next stage and some of the chances for where this is headed certainly may create some opportunities. But it is to the point that you raised, something where they're going to have to be able to take that opportunity and run with it in order to turn these into a real opportunity. 
 

Raul Castañon-Martinez: Yes, I agree. And I could probably emphasize that the focus is moving also from my perspective from consumer to enterprise, which was, in my mind, always aspirational, but really always remained as mobile network operators usually remained as just the pipe and selling devices. I do see now more conversations regarding the business model to deliver connectivity and address specific enterprise pain points. 
 

Eric Hanselman: Well, it's something where if you think about the opportunities in the enterprise side, there are certainly a lot of things that we could pull into that would add significant value from a network perspective. It's a lot of the things you've been talking about in your research in terms of network-delivered services that can actually start to make a difference not only in areas of overall functionality, but also as a foundation of trust and to be able to leverage maybe some of the core infrastructure capability that the operators, telecom operators have. 
 

Raul Castañon-Martinez: Yes, absolutely right. So I think that looking at the bigger picture, we did see network APIs become central part of the conversation 2 years ago, not so much this year in terms of presence in the keynotes. However, there were a lot of backroom conversations going on. So that's still an ongoing topic of discussion. I still see some hesitation with some network operators in terms of diving fully with the network API initiatives. But the leaders, the leading operators, Telefonica, Vodafone, and Deutsche Telekom, they are fully invested in it as well as vendors, Ericsson4B. So I feel that's slowly coming together. And what I have seen so far is a strong focus on the enterprise use cases. Now interestingly, and to your point, the -- it's basically about leveraging network capabilities and being more, I think, refined in the business cases and pricing models, like we said before, going beyond just providing connectivity and selling devices to more sophisticated solutions to enterprise pain points. And parallel to that, I was also looking at what I refer to as trusted communications, which interestingly is also leveraging network level capabilities. And this could be to protect consumers and brands from robocols, ish mission, basically creating a more secure environment for the use of mobile communications. This is also at the network level. I could point to a couple of examples. vendors like First Orion and iConnect, now part of ENS, -- they were there. They had a large poo. And what I find really interesting in the case of First Orion, for example, it's actually a company that started out with an over-the-top application, mainly focused on consumers, and it has evolved over the years to become a network level solution where their clients are the network operators. So I think it illustrates how these problems are being addressed at the network level with a focus on enterprises that want to help brands protect their reputation and their customers. 
 

Eric Hanselman: And a lot of this is basically leveraging the tight identity connection that the operators have got and being able to be that foundation addressed. We see whether or not -- where we can take that in terms of capabilities. And especially when we look at capabilities around AI, more trust is certainly good. We saw an awful lot going on in that front. But Rich, what were you seeing from the AI side? As seems to be the fashion, there was no shortage of AI in everything, in all different respects. But one of the things that I saw was that at least there seems to be a maturing of an understanding of what are practical use cases and where that's headed. What were you seeing out there? 
 

Rich Karpinski: Yes. There's always a danger of AI washing at any event like this. And I think you do have to separate out what's real and what's on the slides. I think it was a good reality check, I think, for the telecom sector, the event. There was a lot of energy around AI. If you look back a year or 2 ago, it's fairly simple. Gen AI was all Gen AI. It was copilots, it was chatbots, et cetera, sitting alongside operators to give them some level of assistance. And this is pretty similar to what we've seen in other industries like manufacturing as well, where that's where the starting point was. The conversations, I think, around AI at the show moving 2 directions: AI for telco infrastructure in support of telco infrastructure, so automating the network with Agentic AI workflows, moving on to that next level of AI. Again, this is nothing really brand new in terms of automation. I go back quite a ways in the telecom sector as well. I was talking to Bell Labs many decades ago about machine learning within these networks and expert systems. So a continuum, but we're at a point now with Agentic and the latest applications of AI where the time has come for it to be -- for the network to be very similar to what we see in the cloud world with the ability to very dynamically cost effectively put circuits and put connectivity up and down on demand in response to enterprise requirements in real time and with insights back into the network about capacity and the ability to do that in a telco affordable fashion as well, so matching costs all around. That level of optimization is really, I think, the goal of operators these days. And again, it matches what the AI industry at large needs in terms of networking support for AI. Hyperscalers are definitely as they have done in cloud and on edge and on data center threatening or very capable of going over the top around and alongside telcos when it comes to networks, whether it's between data centers, whether it's to the cloud, whether it's via dark fiber or some other kind of connection. But there very much is a role. And those more automated networks and the ability to be part of that AI ecosystem also gives the CSP universe an ability to have -- provide infrastructure for AI. So you've got AI for telco infrastructure and then you've got their ability to deliver infrastructure. So networks, localized GPU as a service, AI factories was one of the buzzwords at the show. And some of the core attributes of operators, which is they work within regions. They've got sovereignty ability to deliver sovereign networks that are not crossing boundaries. They're closer to where AI data or AI endpoints are generating massive amounts of data. So if they can do some local processing, it can cut down on connectivity and cloud storage -- you can do inferencing out at the edge where the decision-making needs to be real time. So there's some real opportunities for the telco industry to play within the AI ecosystem. There are also great dangers for them to be routed around by everybody from cloud providers to the enterprises themselves delivering and managing their own infrastructure. So it's a very common tail for operators. They want to be a tech co, which was the buzz even a few more years ago, right? But there are some real opportunities, and we saw some interesting news and conversations with Red Hat and with Microsoft and with AWS and others along with their telco partners, Red Hat and Telenor delivering AI factories in Europe. And this is not just against slideware. There are going to be some opportunities to deliver these. It's going to be the execution and the ability to really serve enterprise customers as Raul started this conversation. in ways that they need to be served, that's going to tell the difference and see if there's an actual business here for the operators. 
 

Eric Hanselman: We do get into this process of asking what's different this time? Because as you've said, this is a cycle that we get new technologies, we get interest and why is this going to be different. And maybe, in fact, some of the partnership pieces, what we see with some of the tech giants that are out there, the hyperscalers that, in fact, are maybe starting to work a little more in partnership with some of these capabilities. So this won't be something along the lines of over-the-top services that got offered in the past. And that's the bigger challenge, right? 
 

Rich Karpinski: Yes. I think less -- hard lessons learned, right? They were certainly -- operators, telcos were certainly -- did not win the OTT video game, but they do deliver infrastructure, local infrastructure, CDN infrastructure, other infrastructure that's part of the delivery system of OTT, maybe that's not -- you don't get to buy Paramount when you are in that role, but you do get to maybe serve up some streams and capture some revenue. Again, you may -- telcos may not be NVIDIA. They may not be unicorns, but there is real revenue to be captured. And the key areas, they are connectivity plus focused. So connectivity plus access to GPUs as a sovereign service, connectivity plus smart network APIs that can deliver the things that Raul was talking about as far as fraud or identity protection, those sorts of things. There are value-added services. And they have evolved enough, I believe, especially the larger operators that are globally focused to be legitimate peers to their unicorn AI partners and to be just part of that ecosystem, right? Part of the check boxes of who an enterprise you're going to speak to you just have to have a good story to tell. And if there are alternatives to you, you're going to have to strategize your way to have a competitive answer to that. There's nothing guaranteed for operators. But I do think did bear out that there are just some fundamental characteristics of the market such that there are billions of IoT devices that need to be connected, right? So that's going to be potentially a 5G connection that begins to bring data into your ecosystem. There's going to be some need for some local processing, and it may end up on the enterprise side, but it may end up on your network or adjacent to your network or you may be able to orchestrate that data in those applications in a way that contributes to that enterprise's success or the ecosystem's viability. It's not win all, but it's to be part of that ecosystem, that's the opportunity for telcos today. 
 

Eric Hanselman: Well, and some of the unique services, you're talking about anti-fraud and identity. I mean, Raul, this is something where if I think about -- what this real effective delivery of these services are really going to look like. You were talking about some of the ecosystem players who are actually starting to package some of these capabilities and provide them for the operators. Is that a long-term path? Is this something where those providers -- those partners -- are the ones that are actually starting to do some of the more innovative capabilities, and they integrate with the operators. Where do you see that partnership going? And what does that look like? 
 

Raul Castañon-Martinez: Yes. So interestingly, I think that the level of awareness with mobile network operators in terms of their capacity to play with more sophisticated offerings, I think they definitely know that. And I think it has -- it still is a source of frustration for them. So I do think that you are very accurately describing a very viable option, which is partnerships. both with emerging but also established players. For example, the CPaaS vendors have a role to play given 2 decades of experience with developer-focused solutions and then also emerging vendors, and I talked to a couple of them, Shop, which are still start-ups, but with a really deep understanding of the security problems and the need for anti-fraud solutions that leverage network capabilities. In other words, that can deliver what is technically a superior solution as to what just OTT can deliver. And I do want to emphasize what Rich was saying that so far, our OTT has won the battles across different areas. So we still have to see how this plays out. But yes, the opportunity is there, partner with the CPaaS vendors, with the technology vendors, with the emerging startups capabilities at the network level that are really effective in addressing these problems. 
 

Eric Hanselman: You make a really important point there, which is that there has to be application developer engagement in this as well. And that's a big piece that if you think about what that ecosystem is, we got to have somebody who's building the actual end use cases that are based on these services in order to make these particularly successful. And that's something we've seen in so many different angles in terms of where this fits. You've got to be sure -- you've got to be able to get to a point at which you can engage vendors. You talked about CPaaS the call platforms and service capabilities in a lot of the voice interaction kinds of things. There are lots of application providers that consume those services that's made that area successful. It's an area where, Rich, we've talked about what's happening. You mentioned IoT. This is another area where there certainly are opportunities where the network could be more than just connectivity, but you also have to engage in the application providers who are actually going to consume services if they're going to be network-based. And IoT is an area which has evolved really rapidly as well. 
 

Rich Karpinski: Yes. I think about Wednesday running around, I realized I had not only held a phone in my hand, but I also hadn’t really looked at one all week. And so the extent to which it's not only not a voice show, but also not even a smartphone show anymore, at least from my point of view, right? That's my level of interest. Obviously, there are folks looking at the latest devices, consumer devices. 
 

Eric Hanselman: There were no shortage of devices. never. The number of robots that were on the waving phones around. Though this year, I did only see one Formula 1 car. no shortage of robots. 
 

Rich Karpinski: Definitely, robots are more in my world. But if you notice the robots were all escorted by 3 or 4 people. So maybe they're not so intelligent to act autonomously. They're not going to take over the world quite yet without some human handlers. But yes, I mean, from an IoT perspective, and that's a lot where my practice starts is really what we've learned is far from where it ends, right? It's the data and at those endpoints that drives, which is one of the new buzzwords these days, physical AI. So as compared to digital AI, which is large frontier models and text-based and information-based, physical AI being all of these industrial and more physical processes and environments and all the data that comes off of those environments that then can be analyzed with these AI platforms and turn into insights that drive decision-makers among oil and gas processors or manufacturers or supply chain folks, right? So all of that data is sitting there ready to be harvested, and that's where IoT has come in. And it's been a challenging market. So if you want to look at a market with revenue attached, the IoT connectivity market is very low ARPU has always been very low ARPU. The IoT platform market really turned out after a flashy start to really be about plumbing, data networking, data aggregation, data basic, transforming plumbing -- so there's not a lot of revenue there. And so what's always been the case is, as we've all talked about through all of this is getting up the stack, sitting at the application or the platform or the application level, even beyond that, delivering some sort of outcome to an enterprise that you can monetize. And so at the show, there are some very strong IoT eSIM standards that work that's happening and starting to be globalized that's going to let companies more effectively manage very large fleets of IoT devices with some assurance they can do it over the long term. And in these industrial environments, when they put something into their operations, they want it to last for decades and not be touched. And so some of these standards are helping with that. And once you get more fleets of devices, larger fleets of devices connected, you can pull in more data, right? Then that IoT plumbing takes effect. And what you're then doing is you're passing it off in a multi-tier structure and architecture and you're handing it off to those AI platforms that can or cannot sit within the telco network, probably adjacent, and you can do all of that analysis and decision-making and then you begin to become part of some really important outcome solutions. And once you do that, you generate more data, you begin harvesting more data and those low ARPUs start winning because of pure volume and maybe you can attach some service revenue. Maybe it's a security service around all of those IoT endpoints or a management interface or something that you can start charging for that's just not the point-to-point connection but is added value on top of all that. So again, that's a path for them as telcos to make some incremental scaled income, which is what telcos are good at and to be part of that outcome value chain, which is where they've been striving to reach all the time. So I think there was some good news at Mobile World Congress around developments there. 
 

Eric Hanselman: It's all that challenge of ensuring that we get beyond Raul, the point that you raised is how do they get beyond being the purveyors of the dumb fight, not just connectivity, but the services on top of it. Well, there's a lot to see whether or not they can actually fire on all of this, but certainly a lot of great perspectives from the conference itself. Thank you both for all the insights. 
 

Rich Karpinski: Thanks, Eric. Thanks for having us. 
 

Raul Castañon-Martinez: Thank you. 
 

Eric Hanselman: And that is it for this episode of Next in Tech. Thanks to our audience for staying with us, and thanks to our production team, including Sophie Carr, Feranmi Adeoshun, and Kyra smith on our marketing and events teams. If you like this episode, please subscribe or like us. I hope you will join us for our next episode, because there is always something, Next in Tech!