Going Mobile in Barcelona

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Expect to hear lots of noise at Mobile World Congress about fixing the problem. European carrier Orange, for instance, a unit of France Telecom (FTE), aims to dramatically improve handset user interfaces so that mobile phones are used more often as gateways to services, not just for text messages and voice calls. That's essential because the iPhone has raised the bar for the entire industry. Orange offers the iPhone in France, but "not everyone can afford an iPhone, and more and more they come into our stores and ask us what else we have that can offer a similar experience," says Yves Maitre, vice-president of devices at Orange.

Nokia "Comes With Music"

Apple isn't the only company chilling operators. Beginning later this year, higher-end Nokia phones will come with a built-in "Comes With Music" service that will offer unlimited song downloads for a year. Nokia has signed up Universal Music to provide the song catalog, including top contemporary musicians such as Amy Winehouse and Kanye West, and says it's in negotiations with other music majors.

This is a direct shot at operators, most of which now offer pay-as-you-go music downloads. None has so far made a dent in Apple's iTunes business—and Nokia's new service throws another wrench in the works. To demonstrate how serious it is about music, Nokia announced on Feb. 7 that it's forming an in-house artists' advisory council led by musician and songwriter Dave Stewart of Eurythmics fame. The purpose of the council, Nokia says, is to ensure that "artists' point of view is represented in creating new content business paradigms."

Mobile TV and Web 2.0

Another topic sure to be at the top of the Mobile World Congress agenda is mobile TV, or the broadcasting of digital video signals directly to handsets. So far, the heavily hyped technology has been a disappointment, thanks to standards wars, immature technology, and big regulatory holdups. But bit by bit, pieces are starting to fall into place. Just days before the Barcelona conference, Orange said it had won rights to broadcast top soccer matches via mobile, a first in France. "I expect the likes of HBO, Sky, and Turner to try and do deals with operators to get their content preinstalled on new devices," says Ben Wood from British mobile consultancy CCS Insight.

Mobile operators also are likely to announce more partnerships with Web 2.0 companies, such as Facebook or Google's (GOOG) YouTube unit. Although they'd prefer to own and operate as many of their own services as possible, many carriers are now realizing that consumers want to use handsets to peruse familiar Web sites they visit from their PCs. "If you are an operator and you are not holding hands with the Web giants, you are nowhere," says Wood.

Search and Advertise

Of course, with all this great content, one enduring challenge is how users will find it. That highlights another big topic on this year's agenda: mobile search. The new gorilla in the room is Google, whose ambitions in the mobile arena were made clear last year when it revealed plans to sponsor the creation of a new search-friendly operating system for mobile phones.

Google has attracted hundreds of developers to its open-source software scheme. If it flies, the company's Android system could siphon off search traffic and revenue from carriers—putting it in Google's pockets. In response, carriers are hedging their bets. Some are involved in the Android project. But many others may join forces with Linux groups to form an industry consortium with the heft to battle Android.

At stake isn't just control over the software that runs inside phones, but also the growing market for advertising on handsets. There will be a lot of buzz but very little mobile advertising revenue in 2008. But the potential is enormous, which is why Google is so interested in getting into the business. Operators are reluctant to hand this market over, so expect an increase in tensions.

The setting for the 2008 Mobile World Congress is the same, and many of the characters remain unchanged. But Apple and Google have busted their way into the Barcelona party this year. After the empty glasses and leftovers have been cleared away, what will be left behind is an industry facing a dramatically different future.

Schenker is a BusinessWeek correspondent in Paris.