Been giving some thought recently to how the proliferation of packet-based mobile networks coupled with increasing levels of capability on mobile phones has resulted in the balance of power shifting from telco networks to end-user devices. This is certainly not the end-point though, but merely a stepping-stone towards the future, where, one day, an end-user will not be able to tell where an application actually resides – whether it is on the user’s device, on the telco network, or in an Internet cloud will be irrelevant and incidental.

“From networks to phones to…“

As an illustration of this change, consider the following broad view of the past 15 years of evolution in the telecommunications world: in the 90’s the ‘intelligence’ on first generation mobile phones was very limited (weak CPU power, mono-displays, limited storage, no multimedia capabilities), and the ‘basic communications applications‘ (short text messaging, internet browsing, voicemail, etc) were provided by standardised industry solutions, where the platforms for these apps were hosted “in the network” i.e. the telecommunications service provider hosted SMSC’s, MMSC’s, WAP gateways on their premises.

During this time, phones were just ‘phones’ and ‘applications intelligence’ was fully controlled by telecommunications network operators. Then, during 2002 – 2007 the Internet arrived on mobile phones and with the advent of packet data networks, usage started to grow, showing a consistently increasing exponential curve as the network effect took hold. But what many of us missed was that during this phase, ‘applications intelligence’ was shifting from the network to the devices, i.e. as phones became ‘smarter’, end-user applications were moving off the telecommunications network and onto the devices themselves. It is now quite common for end-users to have hundreds, if not thousands of applications installed on their phones, covering a multitude of different uses. These applications make full use of the rich-media user interfaces of modern smartphones, leveraging fast CPU’s, expansive memory and rich multimedia.

“There’s an App for that….“

The biggest impetus and industry driver for this trend came with the release of the iPhone and iTunes App store in 2007 – a well-known story and one can review the stats and numbers behind this, but the fact is that the operator community underestimated this potential of a slick UI and open apps development environment, and soon multiple device manufacturers were scrambling to leverage on this success with their own offerings (Nokia Ovi, RIM/Blackberry Store, Samsung bada, HTC, even Google Android Market etc). With this shift, the basic ‘enabler apps’ of SMS, MMS and Browsing are still important for coverage of the mass market of handsets out there, but text messaging & media sharing on smartphones are now mostly served by social networking Internet equivalents. Even with this offloading of p2p messaging traffic, there is still strong evidence of SMS & MMS messaging growth across the world’s GSM networks, as the use cases for these application enablers are still valid.

In parallel we’ve also seen strong momentum in the “Web 2.0” apps development space, with websites like www.programmableweb.com offering thousands of open API’s for web development communities to plug into and immediately create mash-up application propositions. But the biggest difference between web 2.0 apps and Appstore/client apps, is that end-users seem more willing to pay for quality, UI-rich client apps that can be downloaded and owned (this appears to be the tangible difference between client apps and ‘cloud’ apps at the moment).

“Challenges..“

So the challenge for network operators at the moment stretches across multiple dimensions:

• Protection of the revenue streams still coming from legacy application VAS equipment investment
• Modernising these platforms and architectures to simplify maintenance and achieve some scale of consolidation and opex reduction
• Not giving away too much subscriber value to Internet players, but at the same time providing a quality IP network experience for these apps to run, whilst also managing the increasing network signalling/polling loads created by smartphones
• Looking for ways to enhance, simplify and augment their subscribers’ applications user experiences and interactions with App Stores, possibly by becoming the ‘mobile shopping mall’ for these application stores, and using existing telco assets (trusted billing/charging environments & identity security) to add value
• Taking some of the most successful high-end smartphone application concepts and expanding their reach to the mass market of lower-spec handsets, as an example consider how a telecomms network operator might successfully offer an ‘Augmented Reality’ app, that is designed to run on a smartphone with a camera, to a user on a legacy handset? This is where operators can differentiate with partnerships with local developers for applications specific to their subscribers and locations.

With much of the applications functionality of today and the near future looking to reside at the network’s edge (i.e. as client apps on devices), the important question facing telecommunications network operators today is how to capitalise on and monetise their subscriber’s willingness to pay for these quality applications provided from entities OUTSIDE of their telecomms environment.

There IS an answer.