Why have mobile operators failed to innovate for so long?

I breathed a sigh of relief when Matthew Key, CEO of Telefónica’s new Digital division admitted that mobile operators’ failure to innovate has seen them becoming “commoditised” and – perhaps mostly tellingly – “irrelevant”.

Speaking at the Wired 2011 event in London, Key said the entire “ecosystem” for mobile has changed, with the catalyst for the shift being the launch of the first iPhone.

Operators have sat back as manufacturers like BlackBerry have created instant messaging apps, meaning for years users have managed to bypass using their tariffs (other than data usage) and communicate with their friends for free.

As Key said himself, the operators have become “commoditised”. Rarely do they add value to their users, meaning they are seen by many as a pure necessity to get by, like electricity providers, water companies and – dare I say it – council tax.

When customers choose their mobile provider, are they currently making their decision over the added value that operator might provide, or are they thinking about price? I bet you my unlimited data allowance it is the latter.

Why have manufacturers had to lead the mobile innovation charge for so long, when it is the operators that have the customer data?

Operators know almost everything about their customers: their age, location, the apps they download, the sites they visit and more.

This kind of data is powerful indeed, but shouldn’t just be used to inform direct marketing campaigns, it should be used to shape the products and services of the future. Operators should be using this data – in a responsible way – to innovate and add value to the entire mobile ecosystem.

Telefónica’s new Digital division was designed to combat the company’s growing “irrelevance” to customers as they use their 3G and WiFi services to use apps such as Skype, WhatsApp, Google Voice and SimplyTap that don’t require any interaction with the operator other than using its signal.

The unit’s first output includes O2 Priority Moments, its location based deals service and the trial of O2 Connect, which will allow users to make calls over the internet.

Telefónica Digital is also looking to partner and invest start-ups and technology companies as it looks to grow the amount of new and innovative products and services it can offer its customers and the entire mobile ecosystem.

Perhaps Telefónica is not the only operator making strides to innovate, but if that is the case, every other operator is being unreasonably quiet about it.

Yes, Everything Everywhere and Vodafone are working with O2 to create a mobile commerce platform in the UK and both companies are making moves to improve their loyalty offerings – but this still feels several years behind that of innovations elsewhere in the world.

As WiFi becomes more readily available (and, in some locations, without cost), mobile operators cannot afford to sit back any longer and let the manufacturers and other companies in the mobile space do the innovation and new product development for them. Apps and services are being developed on an almost daily basis that allows users to make calls and send text messages – the main service operators provide – without cost.

Mobile operators have the power to be seen as pacesetters, that consumers desire, not just the utilities companies that they are currently perceived as. They must begin to lead the charge when it comes to innovation now or they risk becoming irrelevant altogether.