ICT Companies Clash as They Expand into New Fields

Although nothing stands still in the high-tech world of the telecommunications industry, moves by some of the particularly large and successful companies that fall within the umbrella description of Information Communications and Technology (ICT) or simply "technology" within the global market have changed over the last year or so. Giants in their sector such as Microsoft, Google, and Nokia have been maxing out the main opportunities for organic expansion and increasingly looking into new related fields to maintain their rate of growth. Microsoft dominates the operating system market with somewhere around 95% of the market (Marketshare, Onestat.com). Google, subsequent to the acquisition of DoubleClick, controls more than 80% of third-party website adverts (source: Brad Smith, Microsoft's general counsel) and handles around 77% of search requests (source: MarketShare). Nokia has met its target for a 40% share in the global mobile handset market (source: Nokia/Global Insight).

This combination of unassailable market share in their core business, effective cash generation, and acclimatisation to being high-growth businesses has led the newer companies such as Nokia and Google to do what Microsoft has been doing for many years and expand into a novel technology-related area—with the mobile industry being the main battleground.

From its roots in the desktop operating system market, Microsoft expanded into all areas of software. Areas of success include IP TV, where it now competes with the likes of Motorola, which has built up a significant portfolio of video products, particularly through acquisitions in the last couple of years (see World: 18 May 2007: Motorola Acquires Modulus Video and World: 13 March 2008: Motorola Invests in Tailored Advertising Insertion, Launches New Wi-Fi Products). Although suffering initial setbacks, its software-based solution is gaining momentum behind a number of major deployments (see Canada: 18 January 2008: MTS Allstream Taps Microsoft and Alcatel Lucent for IP TV Network Upgrades, United States: 8 November 2007: AT&T Pays More, Expects Less from U-Verse Deployment, and Germany: 22 March 2006: Deutsche Telekom Signs Microsoft for IP TV Deal). The opportunities emerging through broadband roll-out and convergence are bringing many companies into conflict as different business models face off in the video services (see World: 21 February 2008: Web TV: The Game Changer Gaining Traction).

Phones

One of the more elusive areas of success for Microsoft has been the push into mobile. In Smartphone operating systems Nokia has retained its dominance with the Symbian S60 operating system (see World: 23 October 2006: Microsoft Aims to Double Windows Mobile Devices). It largely has achieved success through deals with manufactures such as HTC, largely an original design manufacturer (one that sells re-branded handsets, e.g., as a T-Mobile handset). Recently, however, it has made deals with major handset vendors (see World: 11 February 2008: Microsoft, Sony Ericsson in Smartphone Alliance). Likely spurred on by the high-profile efforts of Apple, it has also signalled an expansion of its intentions in the mobile handset space by acquiring handset designer and vendor Danger. This acquisition adds a more mainstream, consumer-centric java-based Smartphone platform as well as a handset design capability that will more directly compete with the branded handset vendors (see World: 12 February 2008: Microsoft to Acquire Danger While Yahoo! Rejects its Bid as Insufficient).

Services

Overall, the bid for Yahoo! is the latest in Microsoft's concerted efforts to step up competition in the online services (and advertising) space (see World: 4 February 2008: Upheaval in the Mobile Data Market as Microsoft Bids for Yahoo!).This is particularly the case for mobile services. Unlike the desktop search and online services where Google dominates, the outcome of the battle for dominance of the mobile world is still fluid and will form a significant element of the reasoning for the bid by Microsoft. This is also likely a large part the reasoning behind the assertion by Yahoo! that it can wring more value out of Microsoft's acquisition attempts. It has gained significant carrier customers—who still largely control the gates to the mobile online world (see World: 8 April 2008: Yahoo! Rejects Microsoft Bid Again and Europe: 13 February 2008: T-Mobile Signs Search Deal with Yahoo!). A powerful presence in the mobile world could also be used to leverage improved share in the overall online services market.

Google has also been stepping up its efforts in the mobile space, unveiling plans for its own "open" mobile platform towards the end of 2007 (see World: 6 November 2007: Google Unveils "Software-Based" Mobile Phone Strategy). Although the industry maintains some wariness as to the final level of openness for the mobile platform, Google has gained a high profile for the efforts, which are mainly an attempt to ensure that its applications and services have a place in the mobile world. This will place Google in direct competition with Windows Mobile as well as tread on the toes of Nokia.

Google achieved a victory of sorts with the implementation of rules for the 700 MHz spectrum auction that ensured "open access". It was recently reported that, as suspected, Google was largely posturing to achieve this outcome, bidding up the spectrum to ensure open access was applied—a move that surely will not be appreciated by its mobile carrier clients (see United States: 21 March 2008: AT&T, Verizon Dominate 700 MHz Auction). These moves are essentially intended to ensure that customers can gain access to Google services without carriers' approval. Pushes by Microsoft and Google to enable the use of unused spectrum or "white spaces" also bring these technology companies into a certain level of conflict with the interests of the carriers (see United States: 18 January 2008: FCC Plans Second Phase of White Space Device-Testing from 24 January).

Nokia has also sought to leverage its position in the hardware market to move into online, mobile services—to some success and also a degree of consternation from the carriers that have sought to maintain control or at least dominate the value chain for value-added services (see World: 30 August 2007: Nokia Boosts Platforms for Music and Games, World: 11 February 2008: T-Mobile Wary of Nokia's Entry into Mobile Data Services Market and World: 12 February 2008: Nokia Signs Deal with Google, Orange). The acquisition of NAVTEQ was a major buy into mapping and enhancements to location-based services. The recent acquisition of Trolltech was also billed as an opportunity for Nokia to accelerate its cross-platform software strategy for mobile devices and desktop applications, and develop its internet services business (see World: 2 October 2007: Nokia Bets Big Offering of US$8.1 bil. for Navigation Company NAVTEQ and World: 28 January 2008: Nokia to Pay US$153 mil. for Norwegian Software Firm, Trolltech).

Outlook and Implications

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