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Javier Zamora, Professor at IESE Business School, University of Navarra

Perpetuum mobile'!

Since presentation of the iPhone in February 2007, the mobile industry has undergone a real revolution. The mobile is no longer what it was then. Today it is synonymous with the Internet. The fight is now over which companies will control entrance to the Internet.

Tue, 25 Feb 2014 12:52:00 +0000 Published in El Periódico de Catalunya

If the famous Austrian climber Heinrich Harrer had spent the Seven Years in Tibet from 2007 to 2014, he would return to Barcelona just in time for the Mobile World Congress (MWC) and to discover that another revolution had occurred during his absence: that of the mobile industry.

When he left in February 2007, it was the second time that Barcelona had hosted the world's largest event on mobile communication. At that time, telecommunications operators clearly led the industry. On the one hand, they were the only ones that had a direct relationship with customers, through telephone bills. On the other hand, they decided which phones customers could use on their networks. These phones were subsidized by the operators in exchange for a minimum 18-month contract.

Of the multitude of phone manufacturers at the time, Nokia was the undisputed leader. Meanwhile, BlackBerry, in the niche of smartphones for companies, was creating addiction among managers halfway around the world. The fact is that 2007 was a major milestone for mobile telephony, with 3 billion phones in the world, equivalent to half the world's population that year. The rate of penetration was exponential. However, the vast majority of these handsets were phones in the average and leave range, which were used almost exclusively for voice calls and SMS. Smartphones constituted a small fraction of the market. Some of these could connect to the Internet, but the user experience was not very satisfactory because at the time, mobile browsers could not display the same subject of web pages as when accessed from a PC.

However, a month before that second Mobile World Congress in Barcelona, on February 9, 2007, 9,500 kilometers away, something happened that would change the future of this international congress and, therefore, of the mobile industry. Steve Jobs, Apple's CEO, presented to the world from San Francisco a handset that, in his own words, was going to "reinvent the telephone": the iPhone. The challenge launched by Apple called into question the status quo of the mobile industry at the time. Apple announced a phone that would be available in the American market in June 2007, at a price significantly higher than any mobile offered and subsidized by operators, and with features comparable - in terms of battery, camera and communications speed - to the smartphones available at the time.

In fact, when in January 2007 after the iPhone advertisement , CNBC asked then Microsoft CEO Steve Ballmer about the iPhone, his response was that "a $500 phone, with a mandatory data plan and no keyboard, could not be useful for email and therefore lacked business appeal."

Where did the analysis fail? Fundamentally, that the iPhone was not a phone for making calls, but a device that was also an iPod and a web browser.
Three years later, in May 2010, Nokia was still leading the US smartphone market with 44% share, followed by BlackBerry with almost 20%. But Apple had, in three years, achieved 15% market share. However, the most surprising thing was not that, but that Apple's iPhones were generating 40% of mobile internet traffic (internet browsing and apps), compared to 24% generated by Nokia's smartphones.
 

Last year, 15% of the world's Internet traffic was carried over mobile networks,
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The 'post-PC era

The iPhone thus marked a turning point in Internet access, initiating what is known as the post-PC era, which was consolidated in 2011, when for the first time more smartphones and tablets were sold than desktops and laptops. In May 2012, 10% of the world's internet traffic was flowing over mobile networks. A year later, in 2013, that percentage had risen to 15%. Many of these smartphones and tablets, when they enter homes and offices today, connect via wifi, but even so, internet access via browsers or apps is now mostly done through these mobile devices.

The post-PC era has radically changed an industry where the cell phone is no longer a phone for calls and SMS, but a pocket computer with permanent internet connection. MWC is a reflection of the change in the industry, where internet giants like Google, who were not considered part of the industry in 2007, dominate the show with Android.

In 2010, the then CEO of Google, Eric Smidt, announced in Barcelona that the new rule for Google and many companies would be mobile frst. In other words, all products and services should be designed and developed with mobile capabilities in mind. First the mobile app is developed and then a version is adapted as a website. Just the opposite of what happened with many companies, which first designed the website and then adapted it to the mobile application. Google's bet was clear. If Internet access was through mobile, Google had to bet big if it wanted to maintain its relevance. The 2010 MWC concluded by awarding Steve Jobs, in absentia, the award person of the year award for having started the mobile revolution three years earlier.

Since then, changes in the industry have accelerated. The protagonists of 2007 such as Nokia and BlackBerry are barely shadows of the companies they once were. Nokia's mobile division was bought last September by Microsoft, which has just unveiled a new CEO, Satya Nadella, with the challenge main goal of leading the company in the post-PC era. But where Microsoft no longer enjoys the position of absolute leadership is in the PC market. In recent years, the MWC slogans reflect this ongoing transformation: 2011 "Leading the Transformation"; 2012 "Redefining Mobile" and 2013 "The New Mobile Horizon". This year's edition has the theme "Creating What's Next." Significantly, Mark Zuckerberg, CEO of Facebook, will be the keynote speaker at MWC 2014.

And if we had to tell Heinrich Harrer what has happened during his seven years in Tibet without MWC, we would have to talk about the fact that mobile is not what it was in 2007; that today mobile and Internet are synonyms; and that now the fight is about which companies will control the Internet entrance : Apple, Google, Facebook, or maybe a new company that some young person is creating now in some garage around the world. Be that as it may: Perpetuum mobile!