Microsoft improves CSF to target 'Telco 2.0' value chain

Microsoft is determined to place its technologies at the heart of Telco 2.0, where telecoms operators and web services collide. Its latest initiative, in a three-year effort that has seen variable results, is the Connected Services Accelerator Program, which looks to bring together converged operators and well-targeted web applications developers. While one objective is to strengthen Windows Mobile as a key operating system in the emerging mobile internet devices sector, Microsoft well knows that, with the maturing of Linux-based systems, it needs to derive its power from the service provider framework, rather than relying too heavily on the client OS.

Step forward Connected Services Framework (CSF), launched in 2005 to stake Microsoft's claim to a place in the operator market. CSF is positioned as a more short term, pragmatic solution than full-blown IMS (IP Multimedia Subsystem), for allowing services to interact and be delivered to multiple devices and networks. The software sits on the servers, above the network level, with applications giving calls to CSF, which shares services between them and in turn gives calls to the Microsoft .Net Framework and then down into the network layers, (perhaps even using IMS). Two years later came its offshoot Connected Services Sandbox, which aims to bring Web 2.0 development techniques, such as mash-ups - rapid creation of new services by mixing and matching existing modules using simple tools - to the telecoms world.

The response to the sandbox initiative has been disappointing, with only 162 mash-ups registered, so Microsoft is now upping the ante again with the launch of its Connected Services Accelerator Program, in which it has the valuable asset of a major telco partner. While British Telecom was the key operator lending early support to CSF, in this more applications-driven phase, this role is being taken by Singapore Telecom. The aim of the Program is to help developers and service providers to collaborate more easily to create, test and provision new offerings rapidly. It also aims to achieve more visible and tangible proof of the CSF concept, in a bid to lure more operators, strengthen other Microsoft technologies like Windows Mobile and .Net, and bring the vast .Net developer community more firmly into the mobile internet world.

The new program is more vertically oriented than previous initiatives, but still has the Sandbox at its core. This is not just about promoting Microsoft products, but giving it a position at the hub where everyone else's technologies intersect, and therefore the sort of influence and indispensability it has achieved in the PC-based enterprise. But not to the same degree in the mobile enterprise, as this moves towards Linux and non-Wintel mobile internet devices; and certainly not, despite some major thrusts in IPTV and other areas, in the converged and mobile carrier sector.

The opportunity for Microsoft lies in the broadening of that sector beyond traditional voice-oriented telecoms models and established telcos, and towards mobile web services, drawing in new types of service provider, as well as developers and service delivery platforms that have their roots in Microsoft's corporate world. The Windows giant needs to take advantage of these trends, and push its tried and tested methods and software into the telco world as that changes, and before the mobile and telecoms platform specialists fully get their act together with roll-outs around IMS and other systems that have a cellular industry pedigree.

So it will come up with a series of initiatives to push CSF into the telco mainstream, harnessing the support of a few tier one carriers like SingTel, but more importantly focused on new-style mobile web service providers: the sort that other PC/internet players like Google are looking to foster by encouraging broader web access, new networks and spectrum, and a challenge to the traditional telcos and their walled-gardens.

 

In fact, the new program is the second push into telco services this year by Microsoft, which was involved last month in a project with the TM (telecoms management) Forum and Telefonica, snappily named the "˜Building Marketplaces with Managed Syndicated Services Catalyst Project'. Managed Syndication provides a framework for multiple providers to build complex services by contributing their own specalized components, which can then be "˜mashed' together. The Telefonica initiative is specifically focused on "˜well enabled' service providers and telecoms management, while the new Accelerator Program is geared to individual verticals.

Examples of such applications, for which it hopes to attract top flight developers, include, according to Microsoft, collection of patient data in healthcare, telemetry and fleet management; real time financial services, equipment and property management; and utilities management.

SingTel will make infrastructure and resources available to participants for development and testing purposes and programmer partners will be invited to enter their business applications in the GSMA Innovator Awards in November, in the Most Innovative Vertical Application category. The program aims to pull in small but innovative developers and give them the resources to gain profile among large and medium carriers. To qualify, developers and ISVs must have annual revenues not exceeding $20m and must not be owned by a publicly traded company or subsidiary, or a mobile operator.

Martha Bejar, corporate VP for the communications sector at Microsoft, said in a statement: "Our mission for the industry is to drive the transition to Telco 2.0, a new era of communications where service providers are delivering hundreds, if not thousands, of new services. Building on our investments in the Sandbox development environment, the Connected Services Accelerator Program aims to build a truly global marketplace for service creation that, working with operators, will lead to the commercialization of a new wave of innovative services."

Of course, Microsoft's agenda is multilayered. As well as aiming to dominate the server platform for converged services provision, it also covets a leading role in the mobile internet device via Windows Mobile, and can also be a service provider in its own right. These goals bring it into conflict with Nokia, which in some respects has become more ally than foe in the past year, and which could easily collaborate with Microsoft in CSF, especially now its IMS activities are at arm's length in Nokia Siemens. But Nokia also has its sights set on dominating the mobile internet device and its software platform, from operating system to user interface; and on evolving into a web services provider too.

It knows that maintaining attractive margins for device makers will require a shift of the revenue mix towards value added services such as music offerings. Nokia is pushing hard into this area with its Ovi portal and related services such as NGage gaming and MusicStore, and according to new research from Strategy Analytics, now ranks alongside RIM and Apple as the device makers with the strongest position in mobile value added services. Wireless director Chris Ambrosio commented: "We estimate Nokia generated less than 1% of global revenue from its Ovi services sub-brand during 2007. Sales may be tiny, but they are growing", and should reach 5% of turnover by 2012, as well as the knock-on effect of multimedia services driving uptake of high end, high margin smartphones. Last week, Nokia struck a deal with Buongiorno, the world's largest mobile content provider.

 

The mobile internet user base is more interested in a wide range of services, often branded and delivered by third party internet players and content owners, rather than a narrow range of offerings from the operator itself. All the elements in the new value chain are fighting for their position, and to gain a decent share of revenue, margin and brand awareness, and Microsoft has one of the most complicated tasks to carve out its own role in the mobile web ecosystem. It sees its opportunity in the trend for mobile operators to become "˜service enablers', in order to avoid the "˜bitpipe' trap while also steering away from the risk of trying to be content providers themselves.

Observers like Analysys Mason believe the service enabler role holds far better revenue potential than being a content portal, as users move to unrestricted mobile web access. "Mobile operators are best placed to become service enablers in the content value chain by exploiting their unique assets, which focus on transmission, billing and consumer insight," said Mike Grant of Analysys. "These assets are essential to the success of content providers in the mobile media and entertainment market, and the 'service enabler' revenue streams (including traffic, billing and advertising revenue) appear to be the most sustainable for mobile network operators in the long term."

In other words, to retain their own influence, operators need to partner with internet firms and share revenues, and so will have to "˜expose' different parts of their networks to third party service providers and monetize access to them. This is the difficult technical and commercial transition where Microsoft hopes it can help operators via CSF and Sandbox, while chasing two other related goals that will make it powerful across the mobile chain: 1) ensuring it also has a place as a content and services partner in its own right; and 2) enhancing Windows Mobile so that, for all the political momentum behind open systems and Linux, the OS is recognized as a premier platform for new breed mobile web services (a goal shared with Nokia for Symbian/Series 60).

For instance, Microsoft said last week that it was heavily focused on improving music support in future versions of Windows Mobile. "One thing that Apple has leveraged on is the music scenario, and I think that that is something the operators and ourselves are partnering on, just to make sure that consumers can use live music in the best way," Andy Lees, senior VP of Microsoft's Mobile Communications Business, told Reuters. In the first quarter this year, Microsoft shipped 4.3m units of Windows Mobile, up 1.9m units a year earlier, while Apple sold a total of 1.7m iPhones in the same period, according to IDC.

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