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Why Mobile Operators Can’t Make Services That You Like

Last month I had a surreal experience as I sat in the Global Messaging Congress in London, listening to mobile operators talk about mobile phone services from their perspective. It’s a crazy world really, one where the providers of the infrastructure also mercilessly try to hold onto and strangle every drop of profit from any service that sits on their network.

We’re all born in a small “company town“, where the mobile operators are the landlord and the bank, the grocery store and the mafia.

Interestingly enough, there is a completely different industry built on a much more open standard that separates infrastructure from content, transactions and use. That is, the internet. So, as we get closer to a world where there is less of a difference between the mobile and web worlds, then we see what happens when a strangling monopoly won’t give in to an open system. The open system bypasses it.

Some examples

Multimedia
It starts getting humorous when you start looking at value-added services like location, video or images. I sat there and listened to the mobile operators talk about how “MMS will never be the equivalent of SMS” – their cash cow. Of course, not with them running it.

However, 2 days later we see this headline from YouTube, “just since last Friday, when the iPhone 3GS came out, uploads increased by 400% a day.” What? Yes, that’s a staggering number and it’s due to the fact that no operator is running it, they’re just selling the underlying data structure.

Messaging
Twitter is a great service that allows personal networks to form and SMS messaging to take place on an ever extending one-to-many and many-to-many basis. It also works on the web, in fact, that’s one of it’s great strengths – the ability to treat any channel as native. When I look at Twitter, which is 3 years old now, I have to wonder why we still don’t see a Twitter-clone offered up by any of the operators working in the 192 countries that Twitter isn’t in. For goodness sake, the only major cost for Twitter is the “to-many” part of it, and that’s virtually free to an operator on their own network.

Location based services
When the mobile operators of the world wanted to control their location services, in the early 2000s they kept their prices too high for large and small consumer-facing organizations to buy their services. So, the web went around them… The entrepreneurs saw an advantage to going out and getting the number off of every mobile phone tower and doing basic triangulation from them and WiFi signals. Voila, the operator is bypassed and now makes no revenue off of a service that it could have provided for a lower fee.

Operators can’t build real consumer services

I’ve heard a a number of comments from within the industry like this:

“we’ve had the ability to do such-and-such (insert your favorite third-party service here) for a long time, there’s nothing special about YouTube/Twitter/Apple doing this.”

This is a true statement (most of the time), so why are there millions clamoring for these other services and not the ones that the operators offer?

The release of increasingly more user-friendly phones, coupled with services that bypass the traditional restrictions placed upon everyone by the operators, has created a way for the internet players to replicate or make irrelevant many of these same services offered by the operators. This will continue to be the pattern too, as the two industries collide.

What the operators should do is open up their basic infrastructure for third-parties to build consumer-facing applications on. Take a smaller cut on each application or service, and create a true ecosystem that supports more developers and companies trying to figure out ways to make more money off of your framework.

11 Comments

  1. Mbugua Njihia

    July 29, 2009 at 2:19 am

    Spot on Erik….spot on. After meetings with a couple of operators in the region…i had to laugh when i read this

  2. Hash, great post and having worked with operators i can say you are spot on. I think operators need to realise that they cant offer the same services to everyone, they also need to realise the value chain is changing and should embrace it rather then fight it or try to control more touch points with the customer.

    Wrote about this and my exp at a mobile operator conference:
    http://www.startupafrica.com/2008/10/changing-consumer-behaviors-with-mobile-broadband/

  3. So true. I like this topic which you have so well quoted here.

  4. What everyone else said. Operators may need to totally revise their approach to their business models as their subscribers increasingly come from lower and lower down the income stream. the old ARPU metric may not apply anymore

  5. Niti, I agree. What I’m confused about is the (lack of) speed with which they change when faced with changing patterns. I do understand the need for them to want to keep the status quo as it does return higher margins – it’s just myopic and a short-term strategy.

  6. Great post and I agree, these companies are like ostriches with their heads stuck in the sand… also very similar to the music industry.

  7. You nailed it. Love the “company town” metaphor. If it weren’t for the alternative experience of the intertubes we’d probably all still be drinking the kool-aid.

  8. Operators are behaving this freely because the end users do not understand their rights in as far as using a service is concerned. How many of us read the EULAs before signing the dotted line? This is where the operators have the last laugh to the banks, as we wait for a service that was never be!

  9. Very well done. You’ve articulated, very well, the issue I’m having in trying to develop a web- and sms-based communications platform for the African market. The telecoms I’ve approached seem to miss the point. While I’m trying to lower the user bar as low as possible, they are focused on building in premium services and monetizing every little aspect of it. I appreciate your insights.

  10. Hash,

    re: myopic and short term, sadly, are such an apt choice of words, its a conundrum really. perhaps this question can be reframed somewhere for all of us to have a conversation thread discussing it, just like your google premium sms one. rather than this post per se, why not frame the essential questions to be debated, along with some referential material, and we hold forth. Who knows, perhaps some operator types might even drop by? ;p

    on a similar note, is this interesting blog post, where the writers discuss the unforseen ways people are using mPesa, not even deliberate workarounds, which mean loss of revenue for safaricom. perhaps the answers lie in the “call me back” sms supported by advertising rather than trying to squeeze the last penny out of the average African mobile subscriber
    http://www.valuablebits.com/?p=403

  11. The bottom line: mobile operators need to introduce compelling value-added mobile services fast to avoid other companies taking their users and revenue.Otherwise they will end up being simple data-pipes

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