Digital transformation: are we there yet?

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Martin Morgan, VP Marketing at Openet, reflects on what a recent survey tells us about the telecoms industry’s progress towards digital transformation.

Digital transformation is throwing a spanner in the works for telecoms service providers. There has never been more pressure on operators to change and evolve into agile, flexible, providers that can meet increasing consumer demand for more data, more content and more services. Most service providers have started on their digital transformation projects for this very reason – but there is still a long way to go and a lot to play for.

In its annual industry survey Telecoms.com Intelligence revealed that digital services revenue could reach $462 billion in 2022, up from an anticipated $294 billion in 2019. Yet despite this huge revenue opportunity, operators are still some time off from monetizing new digital services, with the survey revealing that in 2022 the majority of operators will only be halfway along the digital transformation “journey”. With this clear gap in digital transformation progress and future revenues, how can service providers evolve in a way that will allow them to plug into digital services of the future?

Understanding the opportunity

Digital transformation is everywhere, and today, it permeates every aspect of telco operations with many service providers placing efforts on tackling it. The good news is that many service providers have already embarked on their digital transformation projects, and are already starting to benefit from the new revenues generated by digital services. But progress remains slow. According to telecoms.com, the majority of service providers will only consider themselves a third of the way into their digital transformation journey by 2019. That’s not very far ahead at all, and considering the work that still needs to be done to ensure service providers can capitalize on new revenue opportunities, it’s evident that a change is required to speed things up.

It is critical that service providers seize the opportunity to change now. The speed at which the industry is evolving means transformation is no longer a ‘nice to have’ option, but rather one of survival. As shown by the telecoms.com Intelligence survey, the future of service provider revenues lies in digital services, with enterprise IoT, smart home and consumer IoT anticipated to be the biggest revenue earners in the coming few years. Unlocking the potential of these new digital services will only happen if service providers can succeed in their digital transformation efforts.

As with most things, digital transformation is easier said than done. With service providers citing insufficient business cases, general inertia, over-reliance on legacy systems and CapEx constraints as the top 4 obstacles to digital transformation, it’s clear to see that service providers’ challenges are varied and multi-faceted.

Making OSS/BSS the solution, not the problem

The telecoms industry is filled with dos and don’ts when it comes to digital transformation, with different experts voicing different opinions about where operators should start. Unfortunately, no one has yet come up with a definitive answer, but industry associations such as TM Forum are placing a huge emphasis on the importance of upgrading legacy OSS/BSS if organisations are to become ‘digital-ready’. OSS/BSS is critical to enabling fast time to market and gives service providers the ability to try out new business models, at a much faster pace and lower cost than existing systems. This is a crucial element of digitization – service providers simply cannot afford to go at their current pace if they are to manage increasing mobile data and subscriber demand for an enhanced user experience.

Much like the concept of digital transformation, upgrading legacy OSS/BSS is no easy feat. According to telecoms.com, almost 60% of service providers are only 40% along their BSS/OSS transformation journey. When it comes to refreshing OSS/BSS a lot of work is yet to be done. With many of these systems dating back to the 1980s, it is no surprise that they have become ill-fit for purpose. So when it comes to upgrades and transformation, which methods should service providers adopt?

When asked which approach they favoured, the majority of service providers agreed that a ‘big bang’ approach – whereby legacy systems are swapped out for digital systems in one large project – is the worst approach to OSS/BSS transformation. This is unsurprising given that McKinsey, Forbes and telecoms.com all report that the failure rate of large scale transformation projects is at approximately 70%.

Instead, service providers favour a more pragmatic approach. In joint second place was the greenfield and add-on systems approaches, which both received scores of 3.44 out of 5. A greenfield approach allows service providers to add new digital systems to support new lines of business such as IoT or second brands, while an add-on systems approach enables service providers to add on new digital systems as an overlay to existing legacy systems. This then allows service providers to phase out their legacy systems gradually.

The most popular approach to legacy system upgrades was the phased systems method, whereby service providers take a step-by-step approach to replacing legacy solutions with digital solutions. While there will never be a one-size fits all approach to transformation, it’s clear that pragmatism wins here. These approaches minimize disruption and also allow service providers to reduce and maximize the cost spent on transformation. With service provider margins increasingly slim, the prospect of financial cost savings and minimal disruption is a welcome sign.

Continuous transformation

While many service providers today have a clear understanding of digital transformation’s ultimate goal, the reality is that digital transformation is a continuous journey. Service providers will never be finished with it – it will continuously require new thinking, new advances, change and adaptation. Service providers thinking of digital transformation as a finite journey will struggle to measure their organisation’s success as they focus their aims on an unachievable digital transformation utopia.

Digital transformation represents major upheaval – and even inconvenience – but without it, service providers won’t be able to keep up with the pace of change. They must transform to survive, and that starts within their organisations – with their culture, their processes and their existing network infrastructure. But adopting the right approach is key and service providers need not make digital transformation scarier than it already is by embarking on large-scale, lengthy transformation projects that reap few rewards. It is only through the adoption of a tactical, pragmatic and step-by-step approach to transformation that service providers will be able to evolve and, ultimately, start monetizing the multi-billion digital services revenue opportunity.

 

openet-martin-morgan-BWMartin Morgan is the VP Marketing at Openet. With 25 years’  experience in mobile communications software, Martin has worked in mobile billing software since the early days of the industry. In that time he’s spoken at over 50 telecoms conferences worldwide and had a similar number of articles published in the telecoms trade press and served on trade association and company boards. At Openet Martin is responsible for marketing thought leadership and market interaction.

France and Germany give OTTs early Xmas gift in digital tax saga

Europe ambitious plans to hold the internet giants accountable to fair and reasonable taxation have been temporarily scuppered after resistance from several nations, most notably France and Germany.

While Silicon Valley is still not in the clear, the internet giants will be breathing a deep sigh of relief as their hard-working lobbyists are given another couple of months to influence the plans. France and Germany seem to be the main opponents of the aggressive tax assault, drawing up their own suggestions at the G20 Summit which would allow many of the biggest players to continue to dodge the tax man.

The initial plan was relatively simple; hold the internet players accountable to fair and reasonable conditions by implementing a 3% tax on digital revenues realised in EU member states. This would have placed all the current tax dodgers on the block. The Franco-German joint declaration was supposed to be a compromise, answering the initial opposition, but it seems this watered-down version is not going far enough.

While the Franco-German version of the digital tax certainly is much diluted compared to the initial proposals, it has still been resisted by other players who are protecting their own interests. It seems the ‘all for one and one for all’ theoretical attitude of the European Union does not translate directly into Irish or Norwegian.

“Following a thorough analysis of all technical issues, the presidency put forward a compromise text containing the elements that have the most support from member states,” a statement from The European Council reads. “However, at this stage a number of delegations cannot accept the text for political reasons as a matter of principle, while a few others are not satisfied yet with some specific points in the text. That text did not gain the necessary support and was not discussed in detail.”

Unfortunately for the European Union, this is the issue with any material changes made to rules and regulations. A collection of 27 member states certainly creates influence on the global and political stage, though it only takes one detractor to spoil any plans.

Looking at the suggested middle ground, a Franco-German joint declaration made a point which will please some more than others. The objection here is down to the wording of the proposal with France and Germany believing advertising revenues should be targeted, pushing Facebook and Google into the line of fire, as opposed to digital revenues as a generic term.

In France and Germany, some of the world’s largest internet-based businesses would gain a reprieve. Should the new rules target digital advertising revenues specifically, while subscription services, hardware and online marketplaces would escape. The likes of Amazon, Apple and Spotify would be free to continue practising their suspect taxation strategies.

The pattern of affairs here is something which should be pleasing for the internet giants, or at least most of them. What started as an assault on the internet players is starting to look like a very different battle nowadays, leaning much more towards Google and Facebook specifically.

These two might feel a bit victimised, but the ways things are heading it looks like a deal which is accepted by every member state would not be the victory the Brussels bureaucrats originally envisioned. With bureaucrats under pressure to produce a plan, accepted by all member states by March 2019, a lighter touch approach will be needed. We suspect such a plan will be put together, championed as a revolutionary position, though the internet players will be given enough wiggle room to ensure there is no meaningful victory.

What will help internet players sleep at night is the knowledge they only need to get one member state on side to veto the battle plan. Rev up the lobby machine!

Europe is missing the tech trick

Technology is constantly being billed as the saviour of sluggish economies, but as the industry continues to grow Europe appears to be struggling to evolve.

The claim comes in the form of Atomico’s latest report, The State of European Tech. The venture capitalist firm has been producing the report for a number of years now, though with the 5G bonanza creeping closer and closer, the importance of this edition is perhaps compounded. Companies and governments need to have a technology-first mentality to realise the potential, though it appears Europe is slow off the mark.

The research itself is very in-depth, and we would encourage those with a bit of spare time to have a proper investigation, as we are only going to focus on a couple of key data points. The two images below set the scene for us quite effectively:

Graph One

Graph Two

As you can see, growth in the technology industry is outpacing traditional industries, though economies on the whole around Europe are still heavily dependent on more traditional segments. This might not necessarily be the worst landscape, though as you can see from the image below, the reliance is being placed on the industries which are slumping at best, and declining at worst. Unfortunately, the telcos are some of the worst hit, owing to the disruption poured all over the industry by the OTTs in recent years.

Graph Three

There will of course be numerous reasons for the failure to capitalise on the opportunities which are being laid out in front of us, the skills gap is one, digital divide another and perhaps government policy should shoulder some of the blame, though the situation isn’t as bad as some would think. There are shoots of potential emerging across the continent.

Starting on the investment side, Atomico points to the depth of investments being made across the continent in technology businesses. So far in 2018, $23 billion has been invested in Europe’s technology ecosystem, a $5 billion boost compared to 2013.

Looking at the workforce, Atomico claims there are now 5.7 million professional developers in Europe, up by 200,000 on 2017. What might surprise some is this number easily surpasses the 4.4m in the US, a number that stayed flat year on year. With the US the historical leader of the technology world, but facing a challenge from China, the workforce is certainly there for Europe to make a dent in this increasingly profitable bonanza.

Both of these facts will perhaps create more opportunity than is evident on the surface. Being heavily reliant on traditional industries is not a perfect position, though should there be an ambitious attitude the burgeoning technology world can of course enhance these businesses. This does depend on what most would consider risk-adverse managers, business leaders and policy makers spreading their wings, but the potential for disruption, evolution and growth is certainly there.

T-Mobile’s Tele2 acquisition is not a sign of changing attitudes from Europe – Lawyer

While some might view European Commission’s decision for T-Mobile Netherlands acquisition of Tele2’s Dutch business as a softening approach to consolidation, White & Case, one of the law firms working on the deal, warned you shouldn’t get too excited.

With the European Commission historically taking an aggressive view against any acquisition which would take a market from four to three operators, T-Mobile Netherlands acquisition of Tele2 Netherlands looked doomed to failure. However, the European Commission has always stated there is no magic number, and each case would be considered on its own merit. Despite this stance, many believed the Commission secretly held the number four as sacred.

“Looking in the rear-view mirror, you could see that the tone seemed to have gotten harsher in terms of the Commission’s approach to four to three operators,” said Mark Powell, one of White & Case’s Partners who co-led the legal team on the deal.

Unfortunately for the European Commission’s claim of impartiality on market consolidation, the evidence has been stacked against it. In Austria, Ireland and Germany, consolidation was approved though there were increasingly stricter MVNO remedies placed on the deal. In Denmark, Telenor and TeliaSonera ditched their own deal just as the European Commission was set to block it. It did have to intervene in the UK with Three and O2, while in Italy consolidation was approved under the condition spectrum was released to create a fourth player, resulting in Iliad’s entry. As time progressed, the attitude towards consolidation seemed to become more vehemently opposed.

With this in mind, the approval of the deal in the Netherlands might have come as a surprise.

“Things are very different in this case,” said Powell. “If the Commission was prepared to look at the very specific conditions, we felt we would have a favourable decision.”

However, what telcos around Europe should bear in mind is the Netherlands is a unique market. This should not be taken as changing attitudes of the European Commission, or a new era where a free-for-all consolidation battle begins. So what were the favourable conditions in the Netherlands?

Firstly, the combined market share of the newly merged business would only be 25%, keeping it in third place. Tele2’s Dutch business was a relatively minor player, only controlling around 5% market share, but is also a pureplay 4G telco. The Commission did not have to worry about 2G or 3G. Another consideration is the aggressive MVNO segment in the country, perhaps compensating for any reduction in competition.

“You could say common sense prevailed, but the fact pattern was recognised by the Commission, so they should be credited for standing by what they say when they said they would look at specific cases and make a decision accordingly,” said Powell.

Another underlying point for the successful merger was the attitude of the regulator. The Dutch regulator was generally receptive to the idea of consolidation, which was perhaps taken into consideration by the Commission. In many of the cases which have gone against consolidation, the regulator has been against the deal. This was certainly the case in the UK Three/O2 merger, where the UK watchdog was publicly hostile to consolidation, as Powell put it.

The final point which Powell believes contributed to the success was the fact the case was heard verbally in court over the course of a single day. These are scenarios which are very fact intensive, resulting in a lot of paper. Simple sending opinions and evidence back and forth creates a mountain of information, perhaps confusing and convoluting opinions. By hearing the case verbally, the court was able to consider and crystallise a decision more effectively.

“At the end of the day, this confirms that if you think you have a strong case, then there is,” said Powell.

This is what should be taken away from this deal. This is not a changing of policy from the European Commission, but conveniently proving it will consider market consolidation in the right circumstances. There isn’t another market in Europe which mirrors the conditions here, but there are markets which could be successful in the same way T-Mobile Netherlands has been here in acquiring Tele2 Netherlands.

Interestingly enough, 5G did not factor into the equation much here. The Dutch 5G auction has not taken place yet, therefore the European Commission was taking into consideration the evidence which was put in front of it. Whether market consolidation is necessary in the 5G world still remains a valid question, and this decision should not be viewed as evidence for either side.

5G will require huge investment by the telcos, significantly more than previous generations, though how to ensure these investments are made in a timely fashion is an interesting question. Should consolidation be preventing to encourage competition and the fear of another eating a telcos lunch, or should it be allowed to ensure scale of customers and confidence in ROI? The debate rages on with pros and cons on either side.

While Powell warned against believing this is a sign the European Commission is softening its approach to market consolidation, it is evidence it can stick to its word that there is no magic number to make competition work.

Orange plans banking profitability by 2023

With many commentators expressing doubt over Orange’s banking venture, it might come as somewhat of a surprise the team are planning to be profitable by 2023.

After launching the financial business last year, the company is collecting customers increasingly quickly and is currently in the planning stages of its pan-European assault. Spain is next on the list, but it is the profitability and larger revenue growth contributions to the Orange Group business which are capturing attention.

“The entry of Orange into the non-telco services, should be viewed as defensive and pre-emptive actions,” Ramon Fernandez, Executive Director of Finance, Performance and Europe at Orange told Telecoms.com. “It’s a key lever to stimulate growth beyond what the mature telco business can offer.”

This is seemingly how Orange is viewing the banking services. With profitability and growth in the traditional telco segments constantly eroding, any operator which wants to seek bumper returns will have to search elsewhere. In the Orange business, this has taken the form of cyber security solutions, entertainment, the enterprise cloud segment and finally, banking.

Mobile finance might seem like a significant step away from the traditional telco business, though there are common factors which all each to function and grow. This isn’t just a case of grabbing entirely new revenues, the convergence strategy is winning through again.

As it stands, the banking product in France currently has 200,000 customers, though ambitions are to have two million by 2026. Of those customers, 60% are opening accounts in the stores across France. This is a significant opportunity for Orange, as while there are certainly cross-selling benefits from telco to finance and vice-versa, the finance business does not exist without the retail footprint across the country. Fernandez described this as the ‘phygital’ world, which gives Orange an advantage over other digital challenger banks, of which there are quite a few in France.

That said, the retail footprint isn’t the only benefit. Brand awareness is now up to 45% thanks to the strong position of the Orange business in France, though the data which the banking team can lean on is critical. With services being launched in the loans and credit world, telco customer billing data can be used to understand the risk profile of customers. Identifying the right customers, with an acceptable level of risk, is key for the business and this is where the telco business can really drive benefits as well.

The important factor from a marketing perspective, which Fernandez and Paul de Leusse, the bank’s CEO, have been keen to emphasise is this is not being sold as a traditional bank; they aren’t selling a traditional banking relationship, they are selling the way to use a banking application on the phone. Orange doesn’t want to innovate on products, this is viewed as dangerous, but instead focus on user experience. AI is being pushed heavily, with digital interactions being preferred. This will mean not all customers relevant, but those who are demonstrate a desire for AI-interactions. de Leusse claims 45% of current customers prefer this route, and with a median age of 42, it isn’t just the digital natives who are adopting.

For the moment, the team are still in aggressive customer acquisition mode, this will continue through year two before a few years of stabilizing OPEX. Scalability is obviously critical here, and is set to start making an impact as the team has already negotiated a reduction in manufacturing costs for cards this month. This will make a notable impact on the launch of the Spanish finance business which will launch early next year with Romania to follow quickly afterwards.

This is where profitability will come from. By 2023, the team plan to break even, projecting revenues of €500 million with four million customers spread through seven countries. Only five of these countries will have a fully-functioning bank, though Orange Money services will plug the gaps elsewhere. While many telcos would shirk at the prospect of going into finance, Orange is approaching it as a convergence opportunity. The simplest way to look at this is regimented loyalty.

In years gone, telcos used to use the complicated process of switching providers as a means to enforce loyalty. With regulators now tackling this frustrating part of customer engagement, new ideas are needed. Convergence is one of those, as while there are pricing benefits to the customer, tying as many services as possible into one provider makes leaving a nightmare. If you were to take all of Orange’s services now, upon leaving you would have to search for providers for mobile, broadband, banking, entertainment and security. Having all of your bills in one place is nice when you’re happy, but leaving is a disaster; it is essentially enforced loyalty.

This might sound negative, and it is slightly nefarious, but this should not detract from an interesting and ambitious move from Orange. Telcos are searching for new revenues to compensate from the OTT assault, and this is proving to be a successful venture.

Telcos are missing the AI trick

We’ve spoken about this before, but our bugbear has been renewed at The Great Telco Debate; telcos have too narrow a view on artificial intelligence (AI).

AI is the buzzword of 2018, and perhaps this is one which is justified. In years gone we’ve seen the likes of digital transformation and virtualization become so over used they becomes tedious to discuss, but the scale, breadth and depth of AI mean each time it is mentioned it is almost an entirely new conversation.

That is, until you talk to a telco about it.

For many telcos, AI seems to directly translate into another phrase; network optimisation. Now there is nothing wrong with trying to create a lean, mean, analytical machine, all the best companies do it, but with such a narrow focus on a single area of the AI bonanza, you have to question what the long-term consequence will be.

A couple of weeks back we had the chance to attend the Telco Data Analytics and AI conference in London where Tractia Research Director Aditya Kaul suggested roughly 60% of all AI R&D investments at the telcos was heading towards network optimisation. This is a significant proportion, and you have to wonder whether tricks are being missed.

That is certainly the case for Google’s Mike Blanche. Network optimisation is clearly an obvious contender for AI research funds, as the network swallows up such a considerable amount of CAPEX and OPEX, but there is low hanging fruit which can have a more immediate (and positive) impact on the business. Skipping over this fruit will necessarily not have a detrimental impact on the business, but why miss out on easy wins which can add value?

Charlie Muirhead of CognitionX also echoed this point, stating there is so much more to AI than just network optimization, while Marisa Viveros of IBM reeled off the work which her team is engaged in. The point is, there is more to AI than network optimisation, but not much if you generally speak to telcos.

Going back to the Telco Data Analytics and AI conference, at the time we asked BT’s Pratik Bose, who was appearing on a panel session, whether he thought the intensive focus on network optimisation is a dangerous game to play. His response was simple; sort out the network and that leaves a lot of free time and cash to explore more interesting AI applications. This is a perfectly reasonable idea, but you have to wonder when that time comes will the telcos be playing catch-up to others who have been more adventurous with their AI research.

Chris Lewis of Lewis Insight made a couple of fair points at The Great Telco Debate. Firstly, concentrating all the AI efforts on one aspect of the value chain will mean new opportunities and applications will be missed. The telcos are searching for diversification and additional revenues streams, and considering the role connectivity is going to play in every aspect of our lives from here forward, the telcos could be a useful partner to various members of the ecosystem. But not if research is being laser focused on a single segment.

But why is this? Telcos are of course less adventurous than the webscale players, though this is partly due to the business model and pressure from investors who have bought into a certain type of business model, but another point (made again by Lewis) is from a leadership perspective. A lot of the CEOs throughout the telco world are business managers. Compare this to the Silicon Valley fliers who have technologists in-charge, and you start to see why AI is playing the role it currently is. If you have an accountant in charge of the business, that person is naturally going to be more risk adverse, leaning towards technologies which create operational efficiencies.

Bouke Hoving, EVP of Networks & IT at KPN, pointed towards the digital transformation journey his business went through recently, and part of the reason it was such a success is the digital-first, engaging and adventurous mission was led by the CEO. The culture of a business is led from the boardroom, and the strategy reflects the nature of its CEO. Perhaps this is why BT went down the audaciously flashy and risky route of sport content and Kevin Bacon (Gavin Patterson was a marketer), and why T-Mobile US has such a colourful approach to telecommunications (John Legere is John Legere).

Of course, it is worth restating there is nothing wrong with making a business more efficient. However, in this case it is a dangerous road to take. Such initiatives will only make a business more profitable, improving what is already there. This should be an objective for the telcos, though a bigger concern should be securing new revenues. The telco industry is massive, but it is not growing. For all the money which is being spent on improving and enhancing connectivity, others in the ecosystem are claiming the vast majority of the newly created value. This is not something which the telcos can allow to continue.

Telecoms.com Annual Industry Survey 2018

Welcome to the 2018 edition of the Telecoms.com Intelligence Annual Industry Survey report. The findings from our signature survey continue to provide insights and foresight into the dynamic telecoms industry.

Once again well over 1,000 industry professionals from a broad array of backgrounds responded to the survey with their first-hand experience as well as their perspective views on the current status and future trends of the industry. As our customary practice, the report started with an overall industry landscape before we delved into six key areas pertinent to today’s telecoms industry: NFV, 5G, IoT, Digital Transformation, Security, and Test & Monitoring.

A few key findings from the survey:

  • 75% felt positive about the telecoms industry’s business outlook for 2019
  • 79% believed NFV is critical to their companies overall strategy
  • 61% believed emerging technologies and services are critical to telecom’s long-term success
  • 75% saw digital transformation as very important

Fill in the short form below to download your free copy now.

By downloading a copy of this report the information which you provide will be shared with the sponsor(s) for informative purposes and your mutual interest in the subject matter or similar subject matter (including initial follow-up regarding the content of this report).

Apple finds the water is warming up in App Store legal battle

Apple has found itself in court once again, but Qualcomm is no-where to be seen. Instead, a few of its loyal iLifers are challenging the firm over whether the App Store is an illegal monopoly.

The case itself dates back to 2012 and will aim to understand whether Apple is operating an unjustified monopoly through the App Store. Right now the case is in front of the Supreme Court, where the nine judges will decide whether or not to allow the antitrust case to be heard by a District Court. The permission from five of the nine judges are needed for the case to proceed, and currently, it looks like only Chief Justice John Roberts is siding with the iGiant.

For Apple, this case could be a disaster. Permission to take the case to one of the District Courts, likely to be in one of the thirty states where the Attorney General is backing the iPhone users’ antitrust claims, and the door could be opened. Essentially anyone who has purchased an app from the App Store could claim grievances against Apple.

The case itself is relatively simple on the surface. As the App Store is the only place to download apps without breaking rules, should the 30% commission charged by Apple be viewed as the company unjustly profiting from a monopoly? One could argue prices are inflated due to the commission received by Apple, though its own counter-argument is based on legal precedent which dictates only those who have a direct billing relationship with a company can sue the firm.

In the Supreme Court’s 1977 decision in Illinois Brick Co. v. Illinois, the court stated only consumers who are direct purchasers of a product can bring a lawsuit seeking damages available for violations of federal antitrust laws. As customer purchase apps from developers, who in turn pay Apple the commission, Apple has argued there is no legal basis for iPhone users to sue the company, with the developers being the only ones who could make such claims. Chief Justice Roberts believes this argument, though spectators of the case have stated five of the judges are leaning the other direction. This could well develop into a very serious headache before too long.

On the other side of the aisle, the iPhone users, led by chief plaintiff Robert Pepper, argue prices would be lower if there were greater choices of app stores. This is a perfectly logical conclusion, though the developers might not like it. As it stands they have a captive audience with all iPhone users in one marketplace. Yes, they do have to pay Apple a premium, but this might well be a pill worth swallowing compared to the complications of working with multiple partners and a disaggregated audience.

As with many lawsuits in the digital economy, this is the first time such arguments are being considered by the courts. Precedent will be set which is what makes this case particularly interesting. Should the courts side with the iPhone users, the doors could be opened for lawsuits against other eCommerce giants such as Amazon or Facebook. Anyone who takes a commission based on a percentage could be viewed as falsely inflating prices in the pursuit of profit, or so the argument would be.

Apple has argued opening this door could stifle the growth of the burgeoning eCommerce sector, which is a negative consequence of course, but not an adequate reason for the case to be dismissed. Just because there is significant consequence does not mean unjust activities should be allowed to continue.

The App Store has started to generate some considerable income for Apple. On the financial side of things, over the last three months the services division, which include the App Store, produced revenues of $9.9 billion, up 17% year-on-year. With smartphone growth slowing globally, and the iPhone not proving the success some might have hoped in emerging markets, the services segment will become ever more important to the iChief.

A decision on whether the case can be heard by one of the District Courts will be made in the near future, though there will be quite a few eye balls on this one. The splash could be quite considerable for Apple, though the ripples through the rest of the digital ecosystem will be just as concerning.