by Bernard Golden

Open Source Goes Mobile

Nov 16, 20066 mins

I had the privilege of participating in last week’s inaugural “Open Source in Mobile” conference in Amsterdam. I chaired the first day’s sessions (essentially, was emcee of the day’s events) as well as speaking on “Open Source Business Models.” Speakers ran the gamut from handset manufacturers (well-known brands, e.g., Motorola and Nokia), so-called ODMs (the companies that build handsets to be sold under someone else’s brand), service providers/carriers like Vodaphone, and software providers (TrollTech, MontaVista, etc.) that deliver open source to run the phones.

A constant theme at the conference was the burgeoning role of open source in mobile phones, particularly “smart phones” (those with extended functionality like music players, document viewers, etc.). What was interesting to me was that most of the discussion about open source (Linux, really) seemed to be focused on the flexibility and cost reduction opportunities it provided for equipment and service providers. There was, interestingly, no mention of a desire to avoid dependency upon Microsoft’s offering; to me this seemed strange because Microsoft has a habit of entering markets — even hardware markets — when they’re big enough, and causing real pain to their partners who depend upon Microsoft for their software platform: can you say Zune? As I said, this was not mentioned even once, which to my mind indicates a blind spot, as I could easily see Microsoft deciding to enter the smart phone market when it gets large enough.

Left out of most of the discussions was any mention of end user use of open source software on the phones. Here in the States, most people get their phones from a service provider via a tied contract, and the service providers have a vested interest in precluding users from doing anything with the phone that doesn’t conform with the service provider offerings. In essence, the phones are a black box that end users can’t customize. The handset manufactuers acquiesce in this arrangement because they have no independent route to market, unlike other countries where a users buys a handset and then gets service wherever he or she wants; the phones are flexible via use of a SIM card that contains carrier-specific information.

In my presentation, I focused on what that bundled/limited offering approach forfeits: the innovation of end users and new businesses. I used the analogy of the failure of walled garden Internet offerings like AOL that were superseded by Web 1.0 companies like Yahoo and Google. As I noted, even the Web 1.0 companies have found they have to reach out to other startups to succeed with Web 2.0 offerings; Google’s purchase of YouTube is instructive — with all the money in the world and buildings stuffed full of extremely smart people, Google was out-innovated by two guys with a vision of the potential of video sharing. The lesson to keep in mind: more smart people work outside your company than inside, and to be successful in a rapidly changing world, you must be flexible enough to incorporate the innovations of the rest of the world.

I’d have to say that the response to this message was tepid. The wireless carriers and handset manufacturers are doing quite well, thank you, and don’t really welcome messages telling them to rethink the way they go to market.

However, my presentation was the perfect tee-up for the next presenter. A Taiwanese ODM called FIC is readying a Linux-based phone that will be completely open to end user customization. The phone, called OpenMoko, represents a complete assault on the existing bundled business model of the wireless industry. FIC plans to sell the phone through their existing channels and allow end users to purchase the phone directly.

There was a lot of skepticism about the phone from the audience, particularly around whether FIC could really get distribution for the phone, as well as how users would get service for a non-bundled handset. (By the way, this phone differs from the TrollTech Greenphone I blogged about here, in that the TrollTech phone is designed to allow software developers to create a working prototype that can be demonstrated to handset manufacturers and carriers to encourage them to extend their bundled offering to the software demo’d on the Greenphone). On the latter point, I exchanged some email with the OpenMoko presenter, and he noted that you can get hold of a carrier-specific SIM card separately from a phone; I did some research, and it is possible to purchase one and get service for it, but it’s definitely not as easy as stopping by the cell phone store!

Another objection to the OpenMoko offering was its legal status. At least in the States, mobile phones have to comply with legal requirements for frequency, power, 911 capability, and so on. That certification is based on a carrier/handset bundle, and therefore a handset that does not conform to this approach would not be legal. I queried this point directly to the OpenMoko presenter, and he said that legal requirements are complied with via segregating that functionality into non-end user modifiable portions of the phone. I think it remains to be seen if this is really the case, although the potential for phones to accept SIM cards would seem to at least hold the potential for a broken bundle arrangement. 

The OpenMoko initiative represents a classic disruptive entrant into a stable market. It has none of the advantages of the incumbents and suffers from many handicaps in trying to get its offering accepted. However, this is always the case, and markets inevitably get disrupted. The wireless industry is also facing challenges; notably, it is suffering from declining margins as ARPU (the esoteric term referring to Average Revenue Per User) drops in the face of price wars and new market entrants called MVNOs (Mobile Virtual Network Operators). I believe another disruptive force is just appearing in the form of dual mode cell/WiFi phones — when you’re in range of a WiFi access point your call goes over the Internet, otherwise it goes via cell. The dual-mode phones will certainly affect the mobile carrier market, and will inevitably begin to call the industry’s current business arrangements into question. In particular, WiFi-enabled phones will cause handset manufacturers to rethink using carriers as their sole path to end users.

The Open Source in Mobile Conference was a real success, enabling lots of different types of participants, all with an interest in open source, to interact. The conference organizer has already announced next year’s conference, so it shares the feeling that the conference did well. Next year’s conference will undoubtedly illustrate the rapid evolution of this market — the worrying financial trends in established markets, the need to cut costs as a result, and the potential for mobile devices to become much more than untethered talking machines but instead become easily-transported computing platforms ripe for end user and business innovation. I can’t wait.