How App and Device Providers are Changing the Mobile Business

By Gary Kim April 26, 2012

In documents revealed during the Oracle v. Google trial, Google mentioned to T-Mobile in 2006 that it wanted to subsidize part of the cost of an unlimited data package, potentially allowing consumers to pay just $10 a month for unlimited data.

Google would do so by investing commission it earned from T-Mobile for referring Android buyers to its online store. Of course, Google also assumed typical consumption of about 5 MBytes a month. That might have made some sense in 2006 – less so today.

The plan never was adopted, but the idea illustrates the ways app and device suppliers are changing the mobile business.

There’s more today on whom telcos and cable companies are competing with, such as Google and Apple. It’s a catchy headline, but is it a reality?

In many cases, the answer is yes. So far, that has largely meant competition in new lines of business such as advertising, shopping and payments. There is some competition in the “voice as an app” arena, as Skype is a “competitor” for voice service.

Some would say service providers are moving to develop new services ranging from mobile advertising to new messaging technologies to counter competing and often free services from Apple and Google. Google Wallet and Isis, for instance, are direct competitors.

But the other potential way application and device suppliers can change the service provider business is by creating new expectations about value, and shifting power within the overall ecosystem.

Google’s potential plan would have changed retail pricing points. And that is an example of the way application and device suppliers are changing the communications business: not so much by becoming full-fledged competitors, but by changing the communications experience.

Apple has had a mixed impact. On the one hand, it created an iconic device that, for the first time, creates an emotional bond with “communications service.” A user’s emotional bond with an iPhone is more akin to choices about shoes, clothing, fragrances, hobbies and other consumption choices that are “sticky” because the choices reflect a user’s identity.

That is a plus to the extent that it drives sales of smartphones and mobile data connections.

On the other hand, by universal acknowledgement, Apple has changed the locus of “power” within the mobile ecosystem. To the extent that it is now the “device” that consumers want, mobile service providers are suppliers of “connectivity” only to support those choices. In the past, carriers could dictate what devices were available.

That isn’t to say other possibilities couldn’t materialize. Google’s experiments with access have been aimed at spurring wider access availability, not a desire to “become a service provider.” On the other hand, apps can increasingly substitute services. Google Voice is one example.

Essentially, contestants in the communications and entertainment ecosystem are finding they increasingly must compete not only with other competitors within a portion of the ecosystem, but with partners in the rest of the ecosystem.

That’s the sense in which there is validity to assessing how much, and where, telcos and cable companies might actually find themselves competing with traditional partners in the value chain.

There are growing examples of at least potential conflict between participants in different parts of the Internet ecosystem.

Google says it is launching a line of consumer devices, and already owns Motorola Mobility. So the app provider is in the device part of the ecosystem.

There perhaps is a latent possibility that Apple could wind up in additional roles, though. Some have speculated the corporation could launch its own mobile service, not so much to grab voice revenues but to complement its device and application experience in new ways. Others think Apple would be foolish to do so.

The point is that such a move would not be entirely unthinkable. In the telecom portion of the ecosystem, there’s similar movement into applications, even over-the-top applications. In the near term, the bigger issue is application and device suppliers changing the context of the mobile business.

Edited by Braden Becker

Contributing Editor

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