Will power mobile users in the coming generation use one smart device that combines the functions of phone, music and video player, portable office and so on – like an Intel-style Ultra-Mobile PC – or purchase several different products optimized for one of the functions, but always featuring a wireless radio (a view Nokia has preferred, at least in the consumer sector)? Either way, the convergence of the traditional cellphone with other miniature consumer electronics products is already well underway, and the companies that can leverage a strong brand across both sectors have a headstart. Apple is trying to leap across the portable/mobile divide with the iPhone, while Nokia has made various attempts at crossing in the opposite direction into specialized media gadgets (as with the NGage games player). Most of these initiatives had, so far, had limited success or remain unproven, but one company sits in the perfect position to exploit the new multi-function mobile market, and that is Sony. The giant is making strong use of its Walkman and Cybershot CE brands in its Sony Ericsson handset venture, and now is working with British Telecom to turn its PlayStation Portable (PSP) gaming device into a phone.
The two companies have signed a four-year contract to develop a range of extra features for the PSP, adding wireless broadband communications, including video calls, voice calls and messaging. These will initially rely on Wi-Fi, though WiMAX is on the cards for future releases, and especially if BT acquires a coveted WiMAX license in upcoming 2.5GHz auctions.
The first step is to integrate BT’s existing broadband video and VoIP into the device, sending the traffic over the carrier’s next generation 21st Century network. In the coming months, additional features will be launched to enable calls and messages to PCs, fixed lines and mobiles, the companies said.
Sony is already working with other service providers on similar initiatives around Europe and this highlights the new balance between device manufacturers and operators that is emerging around the high end media handset. Network makers know that they can appeal to a new customer base – notably non-traditional mobile providers such as DSL/cable operators or media giants – by offering the widest range of innovative consumer devices, not just traditional phones.
Nortel is a good example of a WiMAX infrastructure vendor that, despite the potential weakness of having no handset activities of its own, is advanced in creating a network of device partners from Korea, Taiwan and other innovation bases. The Canadian vendor knows that winning large new customers is more likely to be leveraged by such partnerships than by providing a slightly faster or cheaper base station than a rival. This is an awareness that has been driven home painfully at Nortel – it was very clear that the main reason it was left out of the Sprint Nextel WiMAX contract was that the operator was keen to work with suppliers that could create devices as well as networks, hence choosing Nokia, a company with less experience in WiMAX (at least prior to the Siemens JV) , and less track record with Sprint, than Nortel.
So with operators putting creative devices at the heart of their purchasing decisions, a trend clearly highlighted by Sprint’s roadmaps for ‘4G’, network vendors, and even those handset makers that have a range still restricted to conventional models, badly need CE partners with strong products and brands.
None comes stronger than Sony, and the Japanese giant is in a powerful position to name its terms for partnering with providers and network suppliers (the Ericsson element of the handset venture is rarely seen as a competitive conflict to this, especially with Ericsson steering clear of WiMAX. In the early days of the technology, when device and base station sales are still closely tied, this may be a greater problem for the other company well placed to bridge the handset/CE divide, Samsung, as it will aim to use its strength at the client end to leverage greater influence on network contracts. Clearly this is a trend that will dilute over time as devices proliferate for WiMAX, at which point Samsung may be more aggressive in using its weight to make strong alliances with infrastructure players.)
The CE players also have much to learn from their new allies. Sony is tapping into some of the advanced R&D that BT has carried out into VoIP and video over IP in the process of developing its all-IP 21CN. Such expertise will be important in turning products like the PSP and Sony Ericsson smartphones from being single-function, well-branded objects of desire into real IP workhorses, ushering in a new set of user behaviors, and a new relationship between device makers and operators.
The Sony PSP is the second best selling handheld console after Nintendo’s products and has sold 8m units in Europe and 24m worldwide.