The Walls are Closing In

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September 22, 2011

The Walls are Closing In

On the face of it Google’s ‘earthquake’ announcement earlier this month to buy Motorola Mobility has clear implications for device manufacturers (Apples and Berries spring to mind).  The shockwaves should be resonating in the operator community too as this is another big game changer for them.

This vertical integration means that Google holds two ends of the value chain, from content to device; so where does this leave the operator?   While Google’s acquisition is a significant gamble, it clearly demonstrates a strategic vision on where they think their value should be. – The same cannot necessarily be said of operators.

As more of this vertical integration takes place, there is increased pressure on the operators to find “their thing” or face a regulated future as a dumb pipe and/or a retail outlet for subsidized devices.

Operators are dealing with game-changing innovation (read: revenue leakage??) on all sides – except inside.  Everyone one seems to be comfortable making money off their pipes except them … some examples….

  • OTT content providers (Netflix, Hulu, Google, Apple, etc..) are pumping traffic and collecting subscriptions and ad-based revenues (you can throw theCDN providers in here too)
  • OTT app providers like Skype (VoIP) and WhatsApp are eating into operator’s legacy revenues  (voice and texting)
  • Handset vendors like Blackberry and recently Samsung are launching their own OTT-rival apps for better vertical integration
  • Cloud-based models (SaaS) will further attempt to portray operators as dumb pipes while relying fundamentally on those same pipes to deliver more and more traffic.
  • Cloud Storage models such as Apple, Google and others see subscribers storing everything they own in the cloud and accessing it achieved via the ISP network – again more revenues to the OTT guys, more traffic for operators.

Mobile operators need to INNOVATE now!  They need to be asking themselves now – what is our value?  What are we providing the subscriber?  Without delivering real value, operators will sink into the ‘dumb pipe service ‘differentiated on price which will see the quality erode as the price point gets pushed lower and lower and the pipe gets dumber and yes, bigger (at the operator’s expense of course).

Operators still hold some good cards. It’s time to start playing them.  They need to take a good look in the mirror and decide how can they productize, monetize and personalize the opportunities flowing across their pipes.  The opportunities are there and some operators taking innovative steps with personalized service plans and value-based charging; just not enough.

While the mobile device, content and app builders are all in innovation overdrive, the same can’t be said for mobile operators.  In short we can see companies within the mobile Internet ecosystem that are demonstrating clear vision as to where they want to go and the value they are going to deliver.  When will we see the same decisive clarity from mobile operators?

Operators are facing some huge challenges, but it may be time to shut down all the garbage smashers on the detention level and get a new plan.

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