Microsoft Updates Its Telco 2.0 Strategy

The U.S. software giant made key announcements at the 3GSM World Congress in Barcelona last week regarding its strategy targeting the telecoms industry. Microsoft Communications Sector has partnered with leading European mobile phone distributors—including Europe's largest value-added services distributor, Dangaard Telecom, the leading independent retailer, Carphone Warehouse, and the Nordic retailer, ONOFF—to bring new service offerings using Microsoft's Hosted Messaging and Collaboration (HMC) solution. The partnerships signal the retailers' move into the "push" email market for small- and medium-sized (SME) enterprises and early-adopter consumers. Dangaard Telecom, Carphone Warehouse and ONOFF will deploy the Microsoft HMC solution to deliver mobile e-mail, packaged with a mobile device, enabling them to capitalise on the growing demand for value-added services, including email accessible on mobile devices, in the business segment. "The demand for mobile data services from small businesses is still relatively untapped, and we are seeing the emergence of an innovative new business model, based on our HMC solution, to take advantage of this," said Michael O'Hara, general manager at Microsoft Communications Sector. "Mobile phone retailers and distributors are constantly looking at ways to strengthen their established business models, and this provides them with an easy way to offer additional packaged services to their subscribers."

Microsoft also announced the launch of its Connected Services Sandbox competition in co-operation with BT, which is designed to promote the development of innovative converged solutions and enhance the creation and distribution of managed network mash-ups. Microsoft expects that the initiative will increase opportunities to merge traditional telecoms offerings, such as voice or text messaging, with Web 2.0 applications, such as mapping or search. The competition is targeted at developers who will be required to create managed network mash-ups addressing specific service requirements of multiple usage scenarios. The winners of each competition, managed by TopCoder, will receive prizes ranging from US$2,500-25,000. The initiative follows the launch of Microsoft Connected Services Sandbox in December last year, which was developed to bring together and leverage the assets of independent software vendors, developers, system integrators, network equipment providers and telecoms services providers. "Our idea is to allow operators to ramp up new services fast, with our Connected Services Sandbox designed to bootstrap these processes, enabling up to 30% reduction in time to the market," according to Andy L. Chu, group manager at Microsoft Communications Sector. "Five years into the game, we now move into the high-growth stage, with an open holistic approach, aimed to leverage our resources for our customers in terms of new content-based services and application, as well as cross-platform solutions". Microsoft Connected Services Sandbox is the integral part of the company's Telco 2.0 strategy, aimed at redefining the business models in the telecoms sectors in terms of new services, targeting specific customer segments, reducing churn and driving new revenues. "Microsoft's Telco 2.0 strategy is aimed at creating a bridge between operators and the expanding world of services that they can offer. By creating early visibility to services, we enable telcos to stay in charge of the value chain", said Michel C. Burger, chief technology officer at Microsoft Communications Sector.

Current developments follow Microsoft's partnerships with Vodafone, China Mobile and T-Mobile announced at the 3GSM show last year, in addition to the growing number of operators deploying Connected Services Framework to deliver exciting new services.

Outlook and Implications

Mobile Multimedia Services: One of Microsoft's highlights at the 3GSM show was Microsoft PlayReady technology, a new multimedia content access platform optimised to meet the needs of mobile operators and handset manufacturers for digital entertainment and commerce. Supporting multiple content types and flexible rights, Microsoft PlayReady enables operators to provide a range of new services tailored towards growing consumer interest in mobile digital media. Leading operators worldwide, including Telefónica, O2, Verizon Wireless, Bouygues Telecom and AT&T (formerly known as Cingular Wireless), have already indicated their plans to implement Microsoft PlayReady technology in efforts to deploy next-generation entertainment services, which represent important new revenue streams for telcos. The new DRM software, which was developed with the mobile software company, Packet Video, supports various content types, including Windows Media Audio (WMA), AAC/AAC+/HE-AAC, Windows Media Video (WMV) and H.264, which is designed to make it easier for consumers to move digital content (music, video, games, ring tones, images) between their devices. The software is fully backward compatible with Windows Media DRM 10, allowing Microsoft PlayReady-enabled devices to access content using Windows Media DRM in efforts to increase cross-platform interoperability while protecting content. Microsoft PlayReady software will be commercially available in the first half of 2007 for handset and device implementation, enabling a broad spectrum of business models for digital content services, such as subscription, rental, pay-per-view, preview and super-distribution. The move reflects the growing demand for wireless delivery of digital content to mobile handsets. Mobile operators view next-generation entertainment services as crucial for their future growth. Among new content-centric services—like mobile video and mobile TV—mobile music has already contributed significantly to the non-voice ARPU (average revenue per user) growth for some operators, like SFR, 3UK and Orange France, as it has rapidly gained attention from 3G consumers. According to the UMTS Forum, digital music volumes tripled in 2005, while worldwide music sales fell by 3%. The mobile delivery platform represented 40% of digital music sales, with Japan being the world's leading market for mobile music, with 94% of digital music sales enabled via mobile devices. The leading operator in Japan, NTT, last year deployed a rival multi-device media interactive software platform developed by Oregan Network. Oregan Mobile Content multi-platform software, which enables any device to be instantly connected via IP, is aimed at operator-driven devices, as well as retail consumer electronics and content distribution market. "Oregan places a strong emphasis on delivering entertainment to a multitude of devices and has worked successfully on enabling this model", according to Mark G. Perry, chief executive officer at Oregan, which is currently also in advanced discussions with two European telcos.

Windows Mobile 6 to Boost Microsoft's Smart Phone Market Share: Microsoft launched Windows Mobile 6, the latest version of its mobile software platform, at the 3GSM show in Barcelona, claiming that it would improve usability and add support for Microsoft Office applications, including Office Outlook, Office Word, Office Excel and Office PowerPoint, formerly available only on PCs, including viewing, navigating and editing. The move represents the importance of the mobile sector for the software giant as it attempts to integrate mobile technologies into its key products. Windows Mobile 6 enhances user experience by enabling clients to view emails in their original rich HTML format with live links to the internet and SharePoint sites, integrated under the Windows Live tag (see World: 13 February 2007: Microsoft Launches Windows Mobile 6). The first Windows Mobile 6-enabled devices will be available on the market by the second quarter of this year, with a number of leading operators and vendors already committed to shipping the product, including ASUS, the new AT&T, Chunghwa Telecom, CSL, Dopod International, E-Ten, HP, HTC, i-mate, Intermec, LGE, O2, Motorola, Palm, Pantech, Samsung, Sprint, Telefónica, Texas Instruments, Toshiba, Verizon Wireless and Vodafone. In Europe, Orange plans to deliver the SPV E650 smartphone from HTC, and in Japan, newcomer Softbank Mobile with 16 million mobile customers will offer new smartphones from Toshiba and HTC. In the United States, T-Mobile is planning to update its popular T-Mobile Dash with Windows Mobile 6. Microsoft expects that the new release of its mobile operating software will help it to gain a larger share of the enterprise market and move forward in the converged devices market against the smartphone leader, Symbian, which has a wide base of developers creating functional software including MS Office support. Symbian-powered devices represent more than 70% of the intelligent device market. In 2006, Symbian shipped 51.7 million Symbian smartphones, a 52% year-on-year (y/y) increase on 34.0 million in 2005. Windows Mobile 6.0 is currently targeted at high-end smartphone converged devices, while Symbian is currently taking the lead in the higher volume, mid-range market segments. Out of the total 51.7 million devices shipped in the fourth quarter, in 2006 alone, Symbian shipped 4.5 million smartphones at mid-range price points, an 86% share of the mid-range smartphone market.