The press coverage, discussion and hype around iPhone was extensive, even before the iPhone officially launched in Europe. But the initial deals with O2 UK, Orange France, and T-Mobile Germany had only modest success during 2007 and early 2008 in converting that into sales.

While Apple secured an initial pr boost -- but one which Apple could have secured with shorter exclusive periods -- over the medium term Apple is completely dependent on a single operator to deliver a good network, customer service and brand experience that matches Apple's brand promise. If an operator fails, then Apple and iPhone suffers.

Long term exclusive operator deals may make more sense in the US. There, no single handset will work on all mobile networks so there is less to lose with an exclusive deal. The GSM/3GPP iPhone is compatible with either AT&T or T-Mobile but won't work on Sprint, Alltel or Verizon's networks. AT&T has certainly performed well for Apple in pushing iPhone. By contrast, going non-exclusive in Europe leads to vastly greater reach than any single operator could possible match as all operators use the same mobile standard and so all can offer the same handset.

In 2008, when Apple launched the iPhone into a swathe of new countries, Apple changed strategy and supplied multiple operators. Apple will have the data to compare the new batch with the exclusive deals from 2007.

Those operators sitting on exclusive multi-year iPhone deals must make sure they up their game if they wish to renew. Apple may decide it no longer needs their help and is strong enough to switch. Poor customer service, poor sign-up processes, patchy network performance, arbitrary restrictions on speeds, and so forth will destroy their case to be a partner to the Apple brand with its promise of quality and simplicity.

We7 (which I first blogged about back in May ’07) is another venture into digital by one-time Genesis front man Peter Gabriel. His previous dally-with-digital was OD2 which now provides the backbone of Nokia’s digital music strategy, including Comes With Music. We7 provides an interesting twist on ad-supported, splicing a short audio ad at the start of free streamed and downloaded songs. Though there are still gaps in catalogue (particularly for downloads) there is a lot of content on here (including the majors) and lots more being added. We7 uses IP filtering to help target advertising and the filtering worked when tested with a couple of regional VPNs (Netherlands and US). In fact the filtering worked a bit too well: not only did all non-internationally licensed content not play, it disappeared entirely, even from search results. One other small issue is that there seems to be a lot of unsold ad inventory as I just got ‘We7’ audio inserts instead of ads.

But those minor quibbles aside, We7’s new look, feel and content are a good mix. What I like most about We7 is the heavy focus on discovery. The editorial on the site is high quality (I rediscovered Mazzy Star on a brief look through a feature) and the experience is immersive, giving the user a strong mix of information and content. The ability to click-to-buy is always just one click away but not so invasive as to infringe on the main experience.

Though We7 gets a lot less press than Spiral Frog or Qtrax, they’re currently the best programmed and positioned of the ad supported download services. The key step forward that We7 have made is understanding that service comes before business model i.e. they've realized they to focus on being a great music experience first rather than simply being ad-supported as an ends in its own right. All they need now is to convince the majors to get more content to them for free download and more advertisers on board...

On the radio, I heard this reported as being a result of the current downturn in the UK (in the third quarter the UK experienced negative growth). But VirginMedia's reasoning is not the result of a change in consumer spending.

The problem VirginMedia face is that they have been carrying billions in debt generated during the rapid expansion of cable networks in the UK during the 90s.

Over the last few years, the level of market competition that VirginMedia has faced has limited VirginMedia's ability to generate significant enough revenues to retrieve their position. The vaunted multi-play that has been at the core of VirginMedia's strategy has resulted in a war on multiple fronts: in TV against Freeview and Sky; broadband versus Carphone Warehouse, BT, Orange, Sky, Tiscali; and home phone against Carphone, BT, and numerous others.

VirginMedia's announcement was a hangover from last time's problems, combined now with the greater difficulty in raising capital and sustaining existing debts caused by the credit crunch. Effects of changes in consumer spending will take longer to come through. There may be more pain to come.

Read related research on the economic downturn from us. More will follow soon.

They reported very fast mobile broadband growth, built upon aggressive pricing by other operators in European markets. Vodafone -- not aiming to be the cheapest priced -- reported an 84% increase in mobile PC connectivity devices and reckons about half of those are consumer buys. Given the early stage of the consumer mobile broadband market, that's an impressive result. Data-related revenues will be harder to secure: they rose by just 27%.

In the UK alone, Vodafone reported >500k mobile PC devices. This would place Vodafone among the leading ISPs if compared with home broadband, and with growth levels that only Sky could approach (but not match).

Note to non-European readers, pricing for mobile broadband is as low as 10ukp for one months' use on a pre-pay SIM, or 5ukp if an add-on to an existing contract plan. This isn't in every country, but in some where low prices exist, the market is moving extremely quickly.

There will be much more mobile broadband adoption to come as data spreads into emerging markets. Both Vodafone, and all of the operators I heard speak at last weeks' FT Telecoms conference, were sure this would happen very soon. Most, thought the opportunity is even greater than in Europe.

Vodafone's CEO: "In emerging markets: The Internet will be mobile."

Given the strength of some of the early mobile broadband take-up and of the arrival of numerous laptop-mobile subsidy sale models in retail, I think that's too narrow a statement, should read:

Ian: "The Internet will be mobile."

By that I mean that everyone, retailers, PC makers, home broadband providers, website owners, everyone... will have to adjust to the arrival of mobile/cellular in their businesses. Increasing numbers of consumers will go online using laptop PCs on relatively slow mobile broadband connections -- including very small netbooks -- leading to website design tweaks. Where and when people go online will change. Operators, retailers and device makers will have to embrace mobile industry pricing and packaging with subsidies and tight contract lock-ins. Additionally, and in parallel, phone handset Internet access is on the rise too.

I see any attempt to write about fixed and mobile Internet in isolation, or home broadband and mobile broadband on their own, as doomed to failure. Strategies must embrace both.

There is now one Internet, although with a few different flavours.

Exciting times.

Key Takeaways:

Increasingly, consumers will not pay a premium for mobile content they can access for free online through a more convenient PC/laptop experience. As a consequence, mobile paying audiences will represent a limited share of the overall mobile content audience.

Mobile content will thus increasingly transition to use of ad-funded revenue models.

However, due to numerous niche audiences of core users of mobile video, TV, music, and games, mobile content revenues will grow to €5.4 billion by 2013. Despite having significantly tempered forecast on specific content categories, these forecasts are based on assumptions made about consumers’ potential spending before the financial crisis during the third quarter of 2008. When moving into the consumer economy, discretionary spending could be hit, thus having some downward impact on non-core telecom spending. As the global economic crisis continues, Nokia’s head of gaming Jaakko Kaidesoja just said he expected that the overall gaming market is likely not to grow in 2009. In an interview to Reuters, he however stated that some segments would grow--including pre-loaded games, emerging markets,and iPhone, not to mention N-Gage (naturally).

With mobile content revenues only partly compensating for the decline in short message service (SMS) revenues (decreasing by €5.3 billion from 2007 to 2013), mobile operators have no choice but to increasingly focus on mobile data access, mobile broadband and new communication revenues.

Operators should also enable creation of an open ecosystem in which they become trusted enablers rather than pure digital retailers.

If you are a Jupiter client you can read the report here, you can also schedule an inquiry call with your client services manager should you wish to discuss it further.

If you are press and would like more information you can email PRESSEUROPE AT JUPITERRESEARCH DOT COM

If you are neither a client nor press but would like more information on the report then please email Kevin Savage: KSAVAGE AT JUPITERRESEARCH DOT COM

Updated on Nov 8th: I will be on paternity leave until end November, so I will reconnect early December

France:
- 9,9M so-called mobile broadband customers out of an installed base of 24,5M subscribers
- data arpu growing by 18% yoy (vs Q3 2007) to 79 euros on a rolling annual basis. Non-voice represents 21,4% of total revenues. 53 percent of data revenues are now generated by non-SMS revenues. That is a significant metric to bear in mind, even though the majority might be driven by data access revenues and business customers
- 216,000 3G iPhones were sold during the quarter vs 150,000 Edge iPhone in 8 months. Just curious to know the overlap between the two segments.

UK: data ARPU growing by +11% to 82 euros / year / sub with 2,88M so-called mobile broadband subs.

Spain: data ARPU growing only from 38 to 39 euros / sub / year...Non voice representing only 13,1% of total revenues

As stated below, Spain is the main European market impacted by the crisis: "except for Spain and a few emerging markets, as of today no sign of a significant impact of the economic slowdown on other Group activities".

On a global perspective, Orange counts now 117,000,000 mobile subscribers.

The pricing is a 100 GBP upfront fee. Regular readers will recall this is exactly how I suggested the future of music subscriptions should be back in the summer. In the new digital world of Comes With Music and Play Now plus, 10 Euros/GBP/dollars a month for temporary downloads is a dead-end business model. New entrants like Spotify will either have to get new licenses or recognize that their ad-supported tiers are their future. As for Napster and Rhapsody, well they need more than a makeover to survive in the new digital world order.

One thing to be clear about though, this is not a tool to fight piracy. A hundred pounds up front might work for younger demographics if there’s a device involved (i.e. the 5310 or, say, an iPod Nano bundle) but is not going to hit the mark for a music service. For this price point it’s going to be hitting older, higher spending music aficionados. Indeed the focus on catalogue aims it even more squarely at older consumers.

So don’t get distracted by all the current caveats, this is as big a deal in its own way as Comes With Music or MySpace Music. Datz itself may never be a market leading service but it’s laid the licensing groundwork for the rest of the market.

Whereas as online dominates the European and American digital music markets, mobile is the key force in Japan with a whopping 91 percent of all digital revenues. The scale of the market is emphasized by the dynamic growth of the OTA sector which is now more than three times bigger than Europe’s. Japan’s OTA market has numerous success stories and milestones such as UMG artist GreeeeN recorded the first million-selling OTA track in the world with "Aiuta." Also in July 2007, the single "Flavor of Life" by EMI artist Utada Hikaru sold more than seven million copies in Japan across all digital formats, including Internet downloads, mobile over the air (OTA), true tones, and video.

The success of OTA, though, contrasts sharply with the relative underperformance of the PC digital music market which lags the US and European markets by a number of years.

While the extent of the economic crisis is debateable, regardless there will be direct effects on digital businesses, operators, startups, device makers etc. irrespective of whether the world's economies formally enter a recession or not:-

Consumer perceptions have likely been shaken by the extensive coverage of the credit crunch, housing market, stock markets, banks etc. These perceptions will effect consumer behaviour. Just as in a boom, perceptions can accelerate the rise, in a slowdown negative attitudes can turn a controlled dive into a tailspin. We'll be able to spot how consumer activity has changed when the latest Forrester consumer survey data comes back in a few weeks time.

In countries where the housing market is locked up with negative equity, or sharp price falls, that make moving logistically difficult there may be a retention benefit for fixed operators. Moving home is a key decision point in life when consumers are forced to reconsider what services they take. If people move less, this decision point won't come up.

Broadband and TV is an essential part of life now which will limit churn due to a slump. I strongly believe that home broadband, and even pay TV, will be resistant to a slow down. Few consumers will wish to end home broadband access if they have time on their hands and need to job hunt, or have renewed impetus to use the Internet to bargain hunt for cheap deals on utilities or retail. Similarly, consumers with more time, will have more time for entertainment, although I do see consumers becoming more likely to switch down to cheaper packages with the same operator, especially where they pay for premium channels.

If access to capital is difficult for any appreciable length of time, then operators' new network spend will likely be deferred. Fibre roll outs will take many years, rather than a few years. Current DSL and cable will dominate for longer. The result is that current home broadband networks will have to last. Product managers must become more creative with packaging and adding new features cheaply. In mobile, the much heralded WiMAX networks may never launch in Europe: WiMAX has, perhaps, a small window of opportunity after which cellular mobile broadband will be ubiquitous. If they miss that window, WiMAX will be in trouble.

(Some) Consumer product pricing will be less suicidal. This is perhaps a little controversial. In the boom, we've seen repeated examples of over-aggressive pricing, which was not profitable or sustainable in the medium term. In a slow down, few operators will be prepared to take such a cavalier approach to revenue and profits. Recent examples of such suicidal pricing include the mobile broadband offers in Austria and the UK.

Consumer prices for broadband and mobile will remain under pressure. Despite the above note about an end to suicidal pricing, operators will have to focus on value and price in a softer economic environment. Ideally, operators should pursue both approaches: tactically adding more features/texts/minutes/speed/data volume to some packages to add value and defend prices; while tailoring no frills but low price packages to other segments. Both the home broadband and mobile telephony market are mature or fast maturing, this would have happened to an extent regardless of the wider economy, but the crunch will accelerate such moves.

Unprofitable products will be killed if the slowdown continues. We will see a weeding out of free, advertising-supported, and even some paid services that are not delivering financially. This opens opportunities for competitors with a better business model to clean up. I see a lot of the online video services at risk here, as well as some telecom operator IPTV services and cable provider free video on demand services, but there are many others too.

Operators will have the option to buy Internet assets much more cheaply. Given the above, I suspect many start-up investors will be keen for an exit at a much lower price than they would have required six months ago. Operators, for the most part, are generating very significant quantities of cash. Should they choose, they will be able to select from a wide menu what they wish to take on to support their long term strategies. Many of these options will be poor buys, but there will a few bargains mixed in.

There are many other likely effects. If you're a client please send us an inquiry and I'm happy to chat further and point you to the relevant upcoming reports on the impact of the economic slow down on your area.

Whether you are a client or not, please join the discussion with me on twitter.

If you click on the pic or on the link here, you will be able to access the various Orange brand campaigns by countries.

I already posted a comment last July on the UK campaign "together we can do more".

I quite like this new campaign just rolled out in France. It is (as it should be) a very interesting traduction of Orange's strategy. The vision behind it is well synthetized in the CEO's new book. Indeed, in the meantime, I have read Didier Lombard's book: "Le Village Numérique mondial. La deuxième vie des réseaux" (published by Edile Jacob). Not sure if it has been translated in English yet but anyway the title would be more or less: "The global digital village / the second life of networks".

There are plenty of anecdots. Excellent food for thought as well.

Anyway, it made me think of additonal issues:

- after a range of acquisitions (from Amena in Spain to the recent rebranding of One in Austria), it is the right time to have a global brand campaign. Orange has roughly 115M customers under the Orange brand vs a total of 170M.

- Few global operators have launched such worldwide ad campaigns to the execption of Vodafone with the "make the most of now" tagline. I think we will see more of those (T-Mobile, Telefonica?) moving forward since operators do not only compete with each other but also with the likes of Nokia (one of the most valuable brands worldwide) and with Internet giants who drive huge worldwide audiences.

- Consumers (and in particular digital natives) increasingly produce content (so called UGC) and interact via social networking tools. They engage with various brands and communities. The launch of Orange Photo, the announcement that a service would aggregate all its social networking partners into a single destination (Orange World) are part of this larger trend (interestingly all those services as well as T-Mobile MyFaves or Vodafone my communities are provided by a white-label provider named Newbay). It reflects the fight on the social adress book between various stakeholders. It could work well if operators learn to work the way Internet players do, federating community of developpers and providing APIs and SDKs.

Updated: Didier Lombard was in SF to sign his book (the second life of networks) a few months ago. Thanks Stéphane for the tip. It actually reminds me of his quote that FT was not building "freeways for Californian cars" (meaning networks to be leveraged by the likes of Google, with a shift of revenue/value from Europe to the US).