Telefonica Driving Innovation

The rise of the open mobile web presents new opportunities for carriers to regain greater influence in the industry after the launch of the iPhone reshaped the market but they need to innovate. Traditionally, carriers have been unable to compete with Silicon Valley based companies due to their inability to advance new technologies and attract mobile developers. The failure of WAC and the closing of carriers sponsored app stores such as Verizon’s recent app store closing are typical of operator efforts to play a significant role in the application economy.  One company that is bucking the trend is Telefonica and its Telefonica Digital business division. Since its launch in September 2011, the operator has made significant moves to drive innovation and create a more open mobile ecosystem:

• ·         In February 2012 Telefonica Digital partnered with Mozilla, to bring to market the Open Web Device, a smartphone that runs an operating system based on HTML5.
• ·         In May 2012 the company launched TU ME, an Internet based all-in-one communications app that runs over the top of carrier networks.
• ·         October 2012 Telefonica Digital bought TokBox, a service that lets developers integrate group video chat into their web applications.
• ·         September 2012 Telefonica Digital cuts a deal with Aurasma to integrate its augmented reality platform into its media services.
• ·         November 2012 Telefonica Digital made a strategic investment in Everything.me, a technology platform that is improving the mobile experience by creating a new approach to mobile search.

Any one of these moves is somewhat uncharacteristic of wireless operators but all these bets on unproven technology show Telefonica’s ability to really innovate instead of just giving it lip service. Each of these technologies also has the potential to significantly disrupt the current ecosystems, but together and with backing from the deep pockets of a global wireless operator business, Telefonica is well positioned to drive change in the market.

• ·         Everything.me has the ability to change how users discover and use applications and content on their mobile phone. The app searches the web and presents results in the form of icons or apps. The application is also able to search the open web as well as multiple app stores.
• ·         TokBox is the first to market with a platform that leverages the new WebRTC standard providing developers the ability to integrate video chat and conferencing capabilities into their websites. The company helped pioneer WebRTC technology that enables video calling from within a mobile web browser or web app with no plugins.
• ·         Aurasma is a computer vision based augmented reality platform that can create an augmented reality experience anchored to an object that the platform is able to recognize. This technology is much more advanced than browser or location based augmented reality technologies such as Layer or Wikitude.
• ·         TU ME is an OTT messaging app that competes directly with SMS messaging, a significant source of revenues for carriers like Telefonica. By bringing to market this type of IP based messaging service, Telefonica shows its ability to get in front of new technology participating and shaping the market instead of protecting aging yet profitable services.

With consolidation in the industry gaining momentum and large players acquiring innovative and successful companies, the opportunities to invest in these technologies and provide scale will help bring them into the mainstream. The problem arises when large companies acquire innovative teams; risk adverse executives tend to squash the innovation that they acquired. By separating Telefonica Digital physically and potentially spinning the unit off into its own entity will help negate these risks. 

If Telefonica is successful in supporting and advancing innovative teams and technologies, they will be in a strong position to affect significant influence on the industry and drive adoption of the open web. This is particularly true in Latin America where they already have a strong presence, economies are growing quickly and markets are not dominated by one or two mobile operating systems. This trend could lead to much more innovation in the mobile web originating in countries like Brazil where more opportunities will exist to experiment with new technologies and business models.