|Europe I 2007
|Thriving or surviving with convergence
|Managing Director of 3 Italia and co-CEO, H3G Italy
|3 Italia/H3G Italy
Vincenzo Novari is the Managing Director of 3 Italia, a Mobile Media Company controlled by the Hutchison Whampoa Group, and the first operator in the world to launch Digital Mobile TV using DVB-H technology. Mr Novari is also the Co-CEO of H3G, which provides 3G services in Europe using the 3 Italia brand. Mr Novari also serves as the Vice-Chairman of Asstec, the Italian Telecom Industry Association. Mr Novari previously served as the CEO of Andala, later renamed H3G, and as Managing Director of Omnitel 2000 S.p.A. Vincenzo Novari started his career working in the commercial goods sector for companies such as Johnson Wax, L’Oreal and Danone. Mr Novari, a keynote speaker at the ITU World 2003 event, earned his degree in Economics from the University of Genoa.
High-speed mobile broadband connectivity is becoming increasingly common. The advances in technology during the past few years, the development of high-speed networks and the availability of increasingly sophisticated mobile terminal devices have all helped bring broadband to mobile telephony and make truly converged services for voice, data and video possible. Many see mobile broadband, costing no more than fixed, providing access to free international calling to PCs or other mobile phone users, mobile TV, Internet surfing and mobile eCommerce.
In a book that for many people has become the bible of mobile Internet, Howard Rheingold created the name ‘smart mobs’ to describe high-tech communities that, using mobile technologies, draw people together to organise and participate in playful and creative ‘smart’ events – not in front of PC screens but as they move about in their social environment. The prophetic message of Rheingold’s book was already implicit in its subtitle, announcing “the next social revolution”. He was referring to the liberation of man from the ‘bondage’ of wired communications, and predicted the growth of mobile Internet connectivity as a logical extension of the mobile revolution that overtook the telephony world. After three years, those smart-mobs now have at their disposal more powerful tools for reaching their targets and for leading a lifestyle that has been rapidly evolving from an elitist choice into a popular mass movement. The processing power of third generation terminals normally exceeds 1.5GHz. An historical comparison shows us how far we have come – the first PC to exceed 1GHz, the Pentium 3 in 2001, was already 750 times faster than the computers onboard the Apollo 11 that controlled the flight systems during the first manned mission to the Moon. Hard disk storage has passed from 10MB to 100GB. ‘Rendering’ software to adapt Internet pages to 2.5 inch displays didn’t exist a few years ago. Moreover, the ease of the browsing has improved several times, thanks to the reduction of latency times. The capacity and performance of the UMTS network have increased from two to five times with the arrival of the HSDPA, making the offer of ‘all you can eat’ promotions easier. The big step forward in technology has meant a big step forward towards convergence – the merging of networks that, thanks to the Internet Protocol and the digital revolution, manage to share content, data, languages and services. Convergence has many new forms, such as the so-called ‘usage convergence’, by means of which networks digitally communicate among themselves to bring users a wide variety of services by way of a single terminal; the terminal itself carries out the final interface procedures necessary to connect the user to the services brought by the network. This common user interface insulates the user from the technology; users have little or no awareness of which network they are connected to or of the origin of the data and content they access. What is important is the availability of services they bring, the content they provide and the ease with which any sort of content can be accessed by a variety of fixed or mobile terminals. Today, the mobile terminal that at the beginning of the 1990s handled only voice traffic and text messages, is now a ‘smartphone’ – a telephone, TV set, radio, digital camera, video camera, modem, fax, game console, personal computer, agenda, music files player, all at the same time. We have passed rapidly from single-play voice services to the double-play voice and data, to triple-play voice with data and video. We already speak of quadruple-play, which combines fixed and mobile services as well and, in a few years, users will take multi-play products and technologies for granted. There will soon be little need to have a computer to access the Internet, or a TV set for video, or even a radio to listen to one’s favourite radio station. In short, thanks to the exponential progress of technology, a mobile lifestyle – much richer than the voice-only service we have become accustomed to – is spreading like wildfire. The much reviled 3G, third generation, high-speed mobile service has already conquered more than 100 million customers around the world. Looking at all this from the telecom industry’s point of view, the situation has been described as a wrestling tournament where telecom companies, broadcasters and Internet companies challenge each other and where incumbents may have the strength to cast antagonists out of the ring, forcing them to get a bit thinner and become faster. Then, too, many see Skype as a brick ready to fall on the head of ex-incumbents; we all eagerly read the article ‘How Internet killed phone business’ in a recent issue of The Economist. Some industry analysts believe that the lower the percentage of voice traffic in the ex-incumbent operators’ turnovers and margins, the better are their perspectives. There are merchant banks announcing the downgrading of the shares of ex-monopolists, from neutral to underweight, explaining that their main appeal, abundant free-cash flow, is on the decline. In addition, broadcasters are buying out Internet companies and telecom companies specialised in broadband coverage, and telecom companies investing in cinema. All this seems to indicate that convergence is now a fact, that the era of convergence has come, after ten years of talk convergence has finally started. The present economic situation in Italy makes us understand that fixed-mobile convergence is facing an uphill path, a context in which the response of the market is still to be tested, and is being constrained by rules that must, of course, protect investment and fair competition. Still, there are those who prefer to speak of a substitution scenario instead of a convergent one, and point to the average revenues per user, ARPU, in eight European countries, which clearly indicate that although fixed line usage (67 per cent) still beats the mobile usage (33 per cent), mobile ARPU is superior to that for fixed-line services (€28 against €22). Mobile terminals are gaining ground in voice services today. In 2001, only 17 per cent of all calls were made from a mobile terminal; today, mobile telephony accounts for 33 per cent of voice calls and by 2010 the percentage of mobile calls is expected to reach 52 per cent. We should also note that although fixed-line broadband accounted for €56 of monthly ARPU in 2005, it is expected to fall to €45 by 2010, while in the same period mobile broadband, which generated €5 per month in 2005, should grow to €9 by 2010. I am convinced that the age of convergence is entering its most interesting phase – after the phase of voice-data convergence, born from digital revolution, and the fixed-mobile convergence phase, which is still incubating in the wait for a solution to the anti-trust regulations – that of convergence between the media and the producers and users of content. This will become a testing ground for Riepl’s law, formulated in 1913 by Wolfgang Riepl, editor-in-chief of the Nürnberger Zeitung newspaper, who declared: “New media do not replace existing media. Media progress is cumulative, not substitutive. New media are constantly added, but the old ones remain.” Nearly a century has passed, but Riepl’s Law still holds true – the Internet has not replaced TV or newspapers, it has simply joined them. The Internet, television and personal communications services are merging and, nowadays, all can even be accessed using a single mobile terminal that can be carried anywhere; this gives rise to a confusing mixture of business models. Google, for instance, believes that videos, songs, blogs and other online contents produced by users will exceed the quantity of material professionally made, and that in the future of telephony there will be free calls for users who agree to receive commercial advertisements. Other operators think that next year will be the right time to offer broadband on mobile devices at a price equivalent to the one paid for fixed-line broadband; with the help of Internet’s world elite – Skype, Sling Media, Yahoo!, Nokia, Google, eBay, Microsoft, Orb, Sony Ericsson and the like – this may be possible. Among the possible services, there will be free international calls to personal computers or other mobile phone users, mobile TV, remote access to multimedia content stored on one’s computer, use of instant messaging services, Internet surfing, and participation in eBay’s auctions through a mobile phone. All this will be possible thanks to technological evolution and might be made available to subscribers at a flat rate. Research by the Berg Insight institute has come to the same conclusion. Their results indicate that the key to the development of mobile connection will be the upgrade from UMTS to HSDPA. With the services of 3.5G, generation 3.5, telephones and portable PCs will, by 2007, be able to connect at 3.6Mbps with a cost and latency time equal to current fixed-line ADSL, asymmetric digital subscriber line, broadband service. HSDPA gives the operators a way to meet the growing demand for mobile broadband, and to meet their goal of reaching 50 million users in Europe with 3.5G wireless technology. Despite all this, it is difficult to make forecasts of profitability in such a changeable context. Is there a market? It would seem so; in Italy, the market for multimedia content is now valued at €1 billion and, significantly, has grown by 50 per cent for the third year in a row. It is still too soon to judge, too soon to understand how convergence can be turned into growth and development in a changing marketplace. The notion of convergence that is most meaningful to us in this context is the one coming from the consumers. We must analyse the convergence of technologies, not from the point of view of the resource suppliers, but as the people and organizations that will make use of converged services see them. After all, when Johann Gutenberg invented the new printing system, he simply ‘converged’ existing technologies already being used for other purposes – metallurgy, the press, ink chemistry and paper making. His invention is still in use today; the advances in technology over the centuries have only improved it. Convergence exists; today, the challenge is to become convergent and mobile.