How Mobile Carriers Can Navigate the Open-Access World

Operators are exploring a virtual land devoid of walled gardens. This land includes vast tracts of spectrum and a bounty of third-party applications that subscribers can download as they please. But with this open-access, free-for-all environment come critical questions for service providers, such as how to leverage the customer experience to their benefit, and how to make the most out of a world where non-carrier applications are the norm.

While the idea of open access — a model in which subscribers can download or otherwise access any application they wish — is not new, the news here is that we’re actually seeing it come to fruition, thanks to true-Internet devices like the iPhone and the Samsung Instinct, the coming 4G rollouts and, most concretely, Apple Inc.’sApp Store, which lets users browse and download more than 500 applications for the iPhone directly from iTunes.

That is expected to drive worldwide mobile data service revenue this year to exceed $200 billion for the first time, according to a report from Informa Telecoms & Media’s Informa plc World Cellular Data Metrics edition. And, according to Informa, non-SMS data contributed $17.48 billion of revenue in the first quarter, accounting for 35.6 percent of total data revenue, pointing to a shift in demand for enhanced apps beyond text messaging. That means mobile operators will generate approximately one-fifth of their revenue from data services.

"Growth drivers for the increase in data revenues include the acceleration in deployment of advanced technologies, an increasingly competitive market, and of course, growing consumer demand for mobile data services driven by popular data-optimized devices such as Apple's iPhone," said Informa Principal Analyst Nick Jotischky in a brief.

What does that mean for carriers?

“Mobile operators are evolving their positioning in the face of the applications explosion,” said John Tremblay, co-founder of Azuki Systems. “What is their role when the user decides how and where to access applications, in a way that’s beyond the carrier’s control? Are they re-marketers? Do they simply package content?”

He added that there are no easy answers, and that the business model options range from revenue-share models to advertising-supported approaches to building a premium content business around three-screen strategies, fixed-mobile convergence and bundled service plans. That said, controlling the user experience could be the key for mobile carriers to hang onto their value props.

“If the carrier is selling an unlimited data plan for an extra $10 per month, the ARPU is nice, but the real benefit is stickiness right now, with the walled garden,” said Tremblay of Azuki, which provides content management and enablement services for operators and content partners. “To make open-access apps sticky, the operator can do that by making them discoverable and personalized.”

For instance, if a person is a big Lacross fan, he or she shouldn’t have to scroll through all the other sports apps to arrive there. The carrier could provide widgets, search functionality and other interface aids to craft an experience specific to the user.

“There are a ton of people doing applications, and if you have too many it becomes clouded, and things get buried,” said Tremblay. “For carriers, managing and enforcing policy is only a part of the issue. Pragmatically, they need to roll out their high-value apps, and do it in a way that the customer can break down the content and navigate it in a snackable way.”

Some carriers are getting the message. Sprint-Nextel Corp. in July launched Sprint Web, for intuitive mobile Web browsing. A home page delivers content based on the customer's past usage, so someone who often visits sports-related content will see links to sports news, sports videos, etc. Sprint Web also includes direct access to Google searches of the open Internet.

The added benefit here is that it presents a way to avoid oversubscription, particularly when it comes to video. Instead of everyone streaming everything just to get to the one small piece they would like to reach, intuitive and easy-to-use navigation lets them leapfrog to the content they want — a proverbial win-win.

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