Pocket battleships v pipes in the air: mobile players vie for $600bn prize

After a decade of promises, the mobile internet has arrived. So too have the giants of online business, which see the coming of reliable internet on the move as a lucrative mass consumer market that cannot be left to the mobile phone operators. The mobile industry is worth £300bn a year and with more than half the world's population now owning a mobile phone, that figure will only grow.

How to tap into that cashflow will be on the minds of executives from across the world when they gather for the industry's largest annual trade show today in Barcelona, which promises to be dominated by the plans of the likes of Google and Microsoft to enter the mobile market.

The industry's dominant handset supplier, Nokia, also seems to have turned against the mobile phone networks, launching its own online and music services direct to customers.

For the mobile phone networks, the stakes are high: can they stop the online firms, the software companies and the consumer device manufacturers turning them into nothing more than "big dumb pipes in the air" (a phrase used often by industry insiders)? In the era of the mobile internet, what is the networks' purpose other than to provide connectivity at a flat rate?

If you buy something from Amazon on your broadband-enabled PC, the retailer does not have to give your internet service provider a cut of the sale. So why should Vodafone or Orange or T-Mobile get a cut of anything done over the mobile internet?

"It is going to be one of the most interesting congresses for me for a long time," according to Mike Reid, director of the investment group 3i, who has watched the mobile industry for years. "If you look at the experience that we have on the mobile today, it is dominated by what the mobile operator wants you to do and see. What we have talked about until today is the mobile internet, where we are going to go is the internet on your mobile - the same internet," he says.

The launch last year of Apple's iPhone proved that people will use the internet on a mobile phone. But Apple will only ever make up a small proportion of a market that is running at more than 1bn mobile handsets a year.

Far more important is the arrival of Google in mobile. Last year the online technology firm unveiled Android, an entire mobile phone software system which is open to all comers. It will reveal an updated version of its software developers kit this week and handsets from the likes of HTC, LG and Samsung using the new technology will start appearing towards the end of the year.

The reason a range of so-called Gphones coming on to the market is important is because Google's aim is to open up the market - to make it as easy to develop an online application for a mobile phone as it is to develop them for a computer linked to the internet.

For many mobile networks, Android is the thin edge of a wedge that will force them to release their grip on what consumers can do with their mobile phones. And when consumers can do what they want on their phones, they will want to do it whenever they feel like it with unlimited access.

As a result, the operator will end up receiving nothing more than a monthly flat fee for calls, texts and internet access.

Google denies it is out to "get" the mobile phone companies. Several - including T-Mobile, China Mobile, O2's owner, Telefónica, and the US-based Sprint - are members of its alliance. "Just because it's open and anyone can put applications out on the handset does not mean that there are not opportunities for the carriers to share in the revenue streams created by those applications if they do the billing or provide infrastructure to get those applications going," said Rich Miner, Google's manager for mobile platforms.

The arrival of the iPhone also proved that software is becoming the defining factor in mobile telephony. For years, handset manufacturers such as Nokia argued endlessly about how many buttons to put on a phone and what they should do, but with a touch-screen phone it does not matter.

A company can produce a million copies of the same device and with the right software and a host of willing developers its touch screen can offer consumers a myriad of variations of applications.

Samsung - part of Google's alliance - and LG will be announcing a range of new phones at the show. Among the 11 from Samsung are several iPhone-like touch-screen devices using its Croix user interface, which is more stylish than the iPhone.

The importance of mobile software is something which Microsoft has been shouting about for some time. "Apple has validated the belief we had five years ago that software really matters," according to Scott Horn, general manager of Microsoft's mobile communications business group. "Apple entering a market has been a good thing for the industry because it really has highlighted that software lets you do more with your phone."

Microsoft has focused on the business and "high-end" smartphone market, with forecasts for 20 million shipments this year.

The arrival of the iPhone and mass market internet-enabled devices from the likes of Nokia have spurred its move into the mainstream of consumers. At this week's show Microsoft will announce that it wants a much larger slice of the market.

Refusenik

"Our goal is to put a smartphone in every person's pocket," Horn said.

Last night Microsoft announced that it had signed up Sony Ericsson to make phones using its Windows Mobile operating system with the first phone expected to ship by the end of the year. Sony Ericsson is the fourth of the five leading handset manufacturers to sign up with Microsoft.

It leaves Nokia - which licenses some technology from it but does not use Windows Mobile - as the only refusenik. The Finnish manufacturer, which makes 4 out of 10 mobile phones sold around the world, shocked the mobile phone operators last year by unveiling its own suite of mobile services under the Ovi banner.

Details about its "comes with music" service are expected at the show today and so far only Universal Music has signed up, but towards the end of this year Nokia will start delivering a phone that gives a customer unlimited access to all the music they want for a year. Once the year is over, they get to keep it. The mobile operators and their music offerings will be bypassed.

To see off the threat from Nokia, one of Vodafone's music partners, Omnifone, is rumoured to be announcing a new version of its MusicStation unlimited music service in Barcelona. Its new product is expected to hit the shops in the first half of this year.

But the operators face a tough fight for the mobile internet and the next generation of services. At last year's meeting, Vodafone's chief executive, Arun Sarin, warned the mobile phone industry that if it did not get a move on and develop fast internet services, the online corporations, such as Microsoft and Google, would "eat the mobile industry's lunch".

Well, this year, they're very much at the table. And they're ravenous.

Source : http://www.guardian.co.uk/