The Metaverse – Repeated history?

Telcos will try to break the inevitable cycle

• Telecom operators are once again trying to avoid becoming commodity bit pipes and this time they are trying their hand at virtual and augmented reality (VR & AR) as a way to monetise 5G.
• This is not a new strategy and every time so far, the operators have badly failed to really capitalise on the connectivity that they have enabled.
• With 3G it was Nokia & BlackBerry who earned all of the profits and with 4G it was Apple, Google, Facebook, Tencent, Alibaba et al that benefitted.
• With 5G just beginning to be rolled out more widely, the big question is what will it be used for and who is going to benefit?
• The problem for 5G is that RFM research has clearly demonstrated that for almost all of the uses for the mobile network that exist today, 4G is more than ample (see here).
• This has meant that, to date, the biggest use case for 5G has been bragging rights which has driven rollout as operators vie with each other to roll it out first.
• The main benefits of 5G are cheaper packets and lower latency and the vast majority of use cases today (including autonomous driving) are far more latency tolerant than one would initially think.
• This means that even now, no one really knows what to use it for.
• However, everyone is now beginning to turn their thoughts and their investments towards what comes after the smartphone and the lead contender at the moment is what is referred to as “The Metaverse”.
• The Metaverse is the virtual world that is enabled by AR and VR and once the technology is good enough, AR, in particular, has the potential to replace the smartphone as the place where users live their digital lives.
• The Metaverse is a good use case for 5G because the synchronisation between the real world and the virtual world is very latency intolerant meaning that it will work much better on 5G than it does on 4G.
• Given that AR is years away from offering a decent experience, the field is wide open and mobile operators are determined that they will not be left behind yet again.
• China Mobile. NTT DoCoMo, SK Telecom, Verizon, and so on are all investing hard to create an environment where their users will spend their digital lives, and should they be successful, the rewards will be very significant.
• However, mobile operators have a dreadful track record in this department, and based on history, I think it unlikely that they will be successful here.
• I also think that Apple is unlikely to succeed here because of the legacy smartphone business that it has.
• It was this legacy that prevented Nokia from making it in smartphones and there is a good possibility that the same thing will also happen to Apple.
• Apple has no choice but to invest heavily in AR because if it gets this shift wrong, its smartphone business is likely to emulate the fate of Nokia, Sony Ericsson, Motorola, et al.
• I suspect that the trick to winning this will be finding ways to keep users engaged and loyal while the technology and the virtual world itself are perfected.
• In this regard, I rank Facebook with Oculus Quest 2 as the leader as it is by far the market leader in VR.
• While the Oculus Quest 2 is far from being the perfect product, it is good enough to be a lot of fun for gaming and it is bringing new users into its ecosystem.
• This gives Facebook a head start when mass adoption begins although it still has to master the very difficult AR technology where it is currently far from being the leader.
• The field is wide open and the opportunity is vast but the operators will have to do something very different this time in order to avoid a repeat of their incessant packet-pushing history.