Telefónica and the irrelevance of mobile operators

Last week the head of Telefónica's new Digital unit, Matthew Key, said mobile operators are becoming irrelevant.

Strong words indeed, given that until a few weeks ago Key was CEO of European mobile operations for Telefónica, and had been in the vanguard for promoting operators' achievements.

However, he now seems to have undergone a "Road to Damascus" moment, claiming that operators have become commoditised, failed to innovate and have left the door wide open for handset vendors to grab the marketing limelight.

While this might appear somewhat harsh given the huge investments and technical hurdles the operators have overcome to make 2G and then 3G an everyday necessity, Key's remarks do have relevance.

Look at Research In Motion's success with mobile instant messaging (IM). If you avert your eyes from last week's catastrophic BlackBerry service outage, operators let this company set the IM benchmark, gaining significant services revenues that could easily have been captured by operators if they had taken the initiative.

But perhaps Apple's iPhone was the real hammer-blow for operators. This device, and the smartphones that have followed, have boosted operators' mobile data revenues beyond their wildest dreams, but has also pushed them to the very edge of falling into the "bit pipe" abyss.

Speaking at the Wired 2011 event in London, Key admitted as much and conceded that the launch of Apple's iPhone had changed the entire ecosystem for mobile operators. While the Telefónica exec has plans for his Digital division to provide consumers with more perceptible value, these efforts seem on the very periphery of where the company, and other operators, are inextricably heading.

As an example, the recent launch by Telefónica O2 of location-based services and allowing users to make free calls using Wi-Fi doesn't sound hugely original or providing a meaningful boost to profitability.

Also, the recently announced UK partnership between Everything Everywhere, O2 and Vodafone to create a common m-commerce platform holds strong potential to add value. But this initiative again seems way behind the innovation curve with Google and the financial services industry setting the competitive pace.

While fixed-line service providers have accepted their role as utilities, albeit that some continue to fight against the inevitable, mobile operators have the opportunity to add unique value to the consumer. These companies have comprehensive knowledge of our lifestyle which could, if used intelligently and with respect to privacy, provide them with the vital differentiation.

Perhaps, with Matthew Key making plain his thoughts on the European mobile industry, it might spur other operator execs to pull the wool away from their eyes.--Paul

P.S. For an in-depth look at what is happening with Near Field Communications and mobile payments in Europe, please check out this article.