The Engadget Interview: Sky Dayton, Helio CEO

Ok, so CTIA, the big wireless industry trade show that Ryan and I went to earlier this month, didn't exactly knock our socks off, but we were lucky enough to sit down with Sky Dayton, the serial entrepreneur behind EarthLink and Boingo. Dayton's latest venture is Helio, a youth-oriented (yeah, we know...) MVNO that's all set to launch this spring.

Thanks so much for taking some time to speak with us; I'm sure it's been a busy week for you here at CTIA. Could you tell us about Helio? I know you're getting ready to launch soon.

Helio is a new mobile brand designed for young, passionate consumers that have really been missing out on cool stuff; not just in terms of technology, but in terms of services -- some of which are available elsewhere in other countries like Korea, and some of which we’re just inventing and that are totally new. We don’t have the word “wireless” or “mobile” in our name -- it’s just Helio. That's because for young, passionate consumers today, it’s just as much about fashion and lifestyle as it is technology, and saying the word "wireless" is a little bit redundant. Of course it’s wireless. We never had a concept that there was a wire.

What we’re doing is starting with a technological lead with a platform from Korea, from SK Telecom, probably the most advanced wireless market in the world and bringing a basis of innovation here. Then we’re taking that and creating some interesting stuff with that.

How is the launch looking?

It’s good; we’re launching in the spring and everything’s on track. It’s been a very fast ramp. We weren’t even a company until about a year ago. I’ve been hiring I think one and half people every business day. We’re up to about 230 employees now, plus about 70 engineers from Korea, and we’re based in Westwood, right across from UCLA. We've got a great building with a big Helio logo on the top of it; I could go on, but we got this flame, a 16 foot flame made up of thousands of LEDs; really kind of cool.

How is Helio going to attract customers? To be successful, at least in the long run, you'll have to get at least a few million subscribers, so what is Helio going to do to convince people to sign up? At this point you can't count on first-time wireless subscribers – you're really going to have convince people to leave Verizon, or Sprint, or whatever carrier they have now.

We’ve created this experience for a very specific group of people. Broadly we talk about young consumers in this country; people who are 18 to 34. We vary specifically within that. Who are the people that really care about wireless? I mean, again, not just for the technological aspect, but people for whom their lives revolve around this device in their hand; their phone is the one thing that they can’t live without. That group is a very specific sub-segment, and when we market and distribute we’re doing it in a way that’s really authentic for that group, which means that you’re going to see us in places that you’d expect to see us, but you’re also going to see us in places in terms of retail that you wouldn’t expect to see mobile; you know, fashion locations, music-type locations. You’re also going to see us do things on the web that are pretty unique, because frankly, that’s where people are today. You start with an innovative product and then figure out how to distribute it in an innovative way.

But going beyond that, how do you convince someone to switch? Is it going to be aggressive pricing, is it going to be more advanced features on the handsets? Every carrier would say that they have savvy marketing, so what specifically is it going to be that attracts consumers besides marketing? Will Helio be competitively priced compared to the major carriers?

You’re going to sign up for Helio not because you want to save a bunch of money, but because we offer something that’s really different.

What specifically is that something different that you're going to offer?

A couple things; let's start with the handsets. We have exclusive, unique handsets that have never been in this country before, and the services that run on those handsets are also unique to Helio. One of the best examples of that is MySpace. There’s a social phenomenon in Korea called Cyworld. 30% of Koreans use Cyworld, and 90% of Koreans in their teens and early twenties use Cyworld. And they’ve done it for years and they’ve taken it mobile; Mobile Cyworld is just a huge thing in Korea. We looked at it in this country. Well, okay, social networking is happening, MySpace, etc., but nobody’s taken that mobile. That’s really where people really want to interact with that stuff, is when they’re out in the world, right? They don’t want to be blogging about what they did last night; they want to be blogging about what they’re doing right now. They want to be taking pictures and uploading. Helio is the only place where you can get the full MySpace mobile experience on a device.

Is that an exclusive contract?

There’s exclusivity as part of it.

For a period of time?

Yes. There's also another set of things that I can’t really talk about yet, but that are services that are just really cool. I mean it will be like, “Wow, that’s great, that’s what I want!” Those things are the main event for Helio; they’re not some kind of side-attraction, or something we’re doing on the side while we’re also targeting soccer moms and business people and grandparents and everyone else.

Are you going to offer anything to users who aren't picking a carrier because of the services, but just want unfettered access to the internet and want a powerful handset that gives them full access to the features they're looking for, like WiFi and Bluetooth that's not crippled? Are you going to go after those power users?

I kind of draw a line and say, “All right, there’s cool technology and we can get a device and just tackle the technology.” Okay, so that’s on one side of the line. On the other side of the line is really cool technology that enables you to actually do something. We’re not going to integrate technology just for the sake of technology, like putting a ten megapixel camera on a phone. We could do that -- we know where to get ‘em, you know -- but it’s a little bit of a freak show as a handset, right? I mean it’s not a very good phone, it’s huge and it’s not really a very good camera. If you want ten megapixels, go get a D50, you know; that’s a great camera. So we really – and this is important to understand Helio -- we look at how people use mobile and then we use technology to enable them to do something. It just so happens that we have a technological foundation that is a strategic advantage for us, in terms of both handsets and in terms of back-end systems. The Cyworld platform, for example, is what we’re using to power MySpace on Helio.

Are all Helio handsets going to have the same user interface?

Yes.

Are are you going to encourage people to develop applications for the phones?

Totally, I mean you can develop in WIPI Java or WIPI C. WIPI Java’s just a very easy incarnation of Java and is very similar to BREW. We have a lot of Brew developers that have developed stuff in WIPI C for us. They say it’s very easy.

How many handsets do you expect to have in your portfolio by the end of the year?

We haven’t announced it publicly, but we will have a good selection. We are rolling out our initial two handsets, and we’ve got a number of others in the works right now. You’ll see us come out and consistently hit, not only with new handsets, but with new services -- bang, bang, bang -- as we go through the year and into 2007.

Should we expect to see a QWERTY phone from Helio? What sort of spectrum of handsets are we looking at?

Without hearing the specifics, we’re going to stay focused on the high-end; even our entry-level phone is like a BMW 3 Series. We are going to introduce interesting form factors and stuff that’s different.

Will you carry any smartphones? Does having a common platform for all your phones preclude Helio from offering a device with a smartphone OS like Symbian or Windows Mobile?

Nothing that we’ve really announced, I mean we’re kind of quiet about that stuff. What’s important again is, what are people actually doing with it and how do we enable that? So I think what we wanted to start with was a UI is consistent from device to device; no MVNO’s ever achieved that. Frankly, few carriers have achieved that, and we have. That’s not easy, believe me, but it’s a good start for us.

How do you view Amp'd, the other new MVNO that seems to be going after the same youth demographic. How does Helio position itself with respect to Amp'd?

You know, I think there are a lot of interesting things happening in the MVNO space. It’s a sign of the segmentation that’s inevitably going to happen. One brand being all things to all people -- that’s okay as a generalist thing, but there are people with very specific needs and interests. In order to really be different you need a technical capability and you need a lot of capital.

This is not an inexpensive business; it’s not a couple guys in a garage doing a web startup. I mean I've started lots of companies and this is a half a billion dollar startup to do it properly. Even though you’re not building a network, the handsets are expensive, the systems are expensive, and marketing and distribution are expensive. That’s going to naturally limit the field, and without talking about any one competitor specifically, we’re doing almost everything except building a network. So for the carriers that we work with they see us as, “Great, they’re actually going to add a lot of value,” and not just come in and compete on price.

At what point does the MVNO market become oversaturated? Sprint just announced that they’re going to limit the number of MVNOs they support because there’s just too many.

I’m really happy that that’s happening because I’ve been through this before, and when there’s too much capital flowing into a space with bad ideas, it just pees in the sandbox for everybody. We need healthy competitors and competitors that are legitimate. When you actually look at the number of MVNOs that are going to get off the ground, it’s actually relatively limited at this point, but there are a huge set of business plans out there that are not going to get funded, and I think that’s a positive for the industry. There should be a high hurdle.

On some level as an MVNO you’re at the mercy of the carrier whose network you're using. How does that complicate the future of the business, not just for Helio, but for MVNOs in general?

A typical MVNO, unlike Helio, is really dependent on the network provider for a lot of the core stuff. Maybe they use an MVNE to do some billing and stuff like that, but when they want to roll out a new service or get a new handset they have to go to the carrier and get in line. With Helio we brought over one of the most advanced billing systems in the world from Korea. We brought over one of the advanced, if not the most advanced content-management systems. That allows us to make decisions. Of course, we still have to work with our carrier partners for the things that touch the network, but give us a lot of freedom to be creative.

There hasn’t been a high-end premium MVNO with the ability to scale. Actually let me say that differently: there haven’t really been post-paid MVNOs until recently. This is a new thing. It’s really important again that the MVNO that’s utilizing a carrier’s infrastructure really do something that’s fundamentally different, and coming and competing on price, you’re totally right-on. That’s flying in the face of the carrier whose infrastructure you’re using, and that just doesn’t make sense. So you've got to come and you've got to bring something that’s really different.

What do you think that the traditional carriers aren't doing to address the needs of the customer base? Is it just that they're not offering services like the kind Helio is promising?

You just walk into a typical company-owned cellular store and look at the posters on the wall. You know: soccer moms, grandparents, kids, business people, everybody, with one brand appealing to everyone. With something that is this personal, that is this close to you, that is the one thing you can’t leave home without, you don’t want a generalist brand, and when I say ‘you’ I’m talking about this young consumer segment. They want something for them, and that’s what we designed Helio for. That manifests in lots of different ways, from the handsets, to the services, to the way it’s marketed and the language we use.

How is music going to fit into what you're doing; that seems to be the one thing that the carriers have seriously bungled over the past year, with the disastrous launch of the ROKR and its 100-song cap and Sprint and Verizon offering two or three dollar downloads. What is Helio going to do differently?

There are some endemic problems with music that you’re all too familiar with, and when we do something we will only do it if it’s better than the alternatives. We will not do something that’s a marginal experience. The iPod is a great experience and what I focus on is “What’s really different here?” We’re organized around a central theme, which is communication and connection. And the thing that our customer wants to connect to is their friends and to their world.

Everything we do is organized around that concept, and even when it comes to media. So for example, with video it’s not just about consumption, it’s about discovery and sharing. Sitting and watching reruns of Desperate Housewives in a doctor’s office -- that’s all interesting, but that’s not the main point of this device. This device is about communication -- two-way communication -- so we see content, whether it’s ultimately video or music or a game or a ringtone or anything, as particles of communication to be discovered and shared between people. And that will play out, as you will see, in a number of things that we’re doing.

Thanks very much for your time!