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.

How it Works

Armed with a mobile phone, a team of 4-6 motorcyclists ride to different, pre-designate parts of the city. They take pictures of the current traffic conditions and MMS that image to the central office. That image is then geolocated and given a score of “slow”, “moving” or “free”. Anyone who has signed up for SMS or email alerts is then sent a message with the traffic update.

Challenges

I asked Simon, one of the people putting the service into action, what some of their challenges are. His reply:

“Collecting information in this way, although not that technical (lots of people have said why not use stationary webcams it would be technically superior), is turning out to be more difficult than we expected. Finding people who can grasp the concept behind the service, ride well through the crazy Lagos traffic, and are reliable has been tricky, added to that we’ve had lots of issues around harassment and even arrests from the police (many police officers apparently believe you need special police permission to take photos of traffic) and just recently the weather has been in our way as the rainy season has just started in Lagos making operations more difficult and a few phones have been dropped in puddles! “

The business side

eNowNow doesn’t see much value in charging premium SMS rates for their services. They believe margins are low, and they don’t think the uptake would be high enough amongst their target market to make it work. Instead, they have plans to subsidize the service with revenues from licensing traffic information to Sat Nav providers and logistics companies.

“In Nigeria the networks will take anything between 40 and 75% of a premium SMS’s cost to a subscriber for themselves (pull or push) leaving you a tiny margin for profitability and driving the industry standard (and therefore what the networks will allow you) per SMS cost higher. Most people think that traffic only affects those in cars and they can therefore afford to pay for a service, but most of Lagos’ population aren’t in that bracket and those on public transport still have choices about which buses they take, which routes and what time they leave work.”

Thoughts and ideas

Maybe it’s because I’m a motorcycle fan, or maybe it’s because I have a deeply ingrained detestation for being stuck in traffic in Africa’s mega cities, but this application hits the sweet spot for me. I’ve been wanting just this type of thing in Nairobi for a long time…

One additional idea, to make this even more dynamic, and spread it over the whole city is to create a way for ordinary drivers to text into the system when they come across a new or growing traffic problem. I imagine that Lagos has areas with traffic that is not on the pre-designated points that eNowNow operates in currently.

This is a classic locally grown tech initiative, and I hope that they can pull it off. If so, it can definitely be replicated in other major metro markets across the continent.

Notes from the Opening Remarks

It’s time to reinvent the industry. The personalization market is dying – the days of big money in ring tones and wallpaper is over. The economic crisis is tough and the regulatory market is not benign. So, why be optimistic?

1. Applications. Apple’s iPhone has changed the customers view of what an application is. The fact that a farting application can make $800,000 sends a certain signal. The question is how does this model change things once it moves beyond the early adopters?

2. Mobile social networking has become the epicenter of innovation. New business models and money making opportunities are being thrown off by this new market.

Operators, especially in places like the US, are trying to control what content shows up on the network. The government regulators and the operators policies are out of control, in fact there are some cases where the industry is suiting on the behalf of the customer. This will cause a downsizing in the US market for the next couple years from the content providers.

Keys to succeeding in the mobile social networking space:

• Alternate billing solutions. You have to have your virtual currencies tradeable on the social networking platforms. All payment methods must be accepted, from SMS payments to credit cards.
• Content. You have to have something there for people to use, read, play with. Quiz applications are the big thing right now (brings up example of a quiz app being #3 on iPhone apps right now).
• Discoverability. The main problem from users perspective has been trying to find the applications and content that they want. This is an issue for both the content providers and the operators to solve.

Role of the operator is changing, it specifically has a large impact in billing. They need to take a significant cut in the amount they charge for this service – 50% is just ridiculous, it must change as it’s not sustainable or excusable.

“Apple’s app store is the big shadow hanging over all of us, except of course that they’re never here…”