Arm-wrestle for control begins
Knott-Craig fears that if Microsoft’s operating system becomes the de facto standard for newfangled cellular handsets capable of receiving broadcast video and other multimedia content, the US company will be able to control interaction with consumers and leave operators such as Vodacom as little more than owners of a platform over which services are delivered.
Knott-Craig says new technology will allow phone companies and broadcasters to enter each other’s markets and lead to a fight between them and Microsoft over who has control over what customers do with their phones.
"He who has the most leverage with the consumer will win the game."
He says telecom operators are little more than "big pipes" over which content will be delivered to consumers.
It will become critical for operators to diversify into content provision.
The stakes are high. There are an estimated 1,7bn cellphone users worldwide. That means more people own a cellphone than own a PC.
And, on average, consumers replace their cellular handsets every 18 months, whereas the upgrade cycle for PCs is much longer.
Understandably, Microsoft sees a vast market waiting to be tapped.
To get a firmer footing in the mobile device market, Microsoft CEO Steve Ballmer has been trying his best to win friends and influence people.
He usually doesn’t speak at non-Microsoft events, but last week took to the stage at the 3GSM World Congress, an industry confab held in Barcelona, Spain, to proclaim that he wanted to be best pals with the operators and device manufacturers.
"We come as friends," he told his audience. "We see the opportunity to change the world together in a positive way."
Industry players are wary. Device manufacturers fear that Microsoft will turn the cellphone into another PC, a commodity device with razor-thin margins.
In the PC market, it’s the software vendors – mainly Microsoft – that profit most, not the hardware makers.
Apart from the Ballmer charm offensive, Microsoft announced an array of new products and partnerships at 3GSM.
One of the biggest deals is a joint venture with the UK’s BT Group and Virgin Mobile to provide mobile TV services.
Similarly, Vodacom is already piloting TV over its third-generation cellular network, though not with Microsoft.
Knott-Craig says that within next 12 months, broadcasters and telecom companies will have to decide whether they will work together or slug it out.
He declines to say whether Vodacom is in talks with broadcasters. "First there is the fighting, then there is the negotiation," he says.
Vodacom, with 17,6m subscribers in SA, will be in a strong position to negotiate. The company has more than twice as many customers as there are TV households in SA.
Still, the jury is out on what type of partnerships might emerge, Knott-Craig says.
What is clear is that Knott-Craig won’t be rushing to invite Microsoft to the table.
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