I have belatedly succumbed to the various requests for a ‘prediction’!
I don’t like making predictions .. And certainly this is no year to be making them! .. But if I were to make one .. This would be it ..
Despite the recession, OpenGardens strategies(smart pipes/efficient bitpipes) will be profitable and will proliferate.. and grow to be the dominant model ..
In fact, it is not a prediction .. It is already a fact ..
By OpenGardens .. I mean more than the On deck/Off deck dichotomy - I mean the philosophy that the intelligence resides in the edge of the network – but also that the network itself has a business model based on the unique capabilities of the network. In other words, we are seeing two forces at work: Value is being abstracted to higher levels of the stack / edge of the network and at the same time, the networks will find profitable niches in areas which they can uniquely do. In this world of OpenGardens, there is no Pipe – because there is no ‘unpipe’ i.e. in a world of connectivity/creation – one business model does not cannibalise the other and they both co-exist
This may seem a complex idea to explain .. but it is not ..
Consider this ..
Fiercewireless predicts that efficient bit pipes will become fashionable - in other words – the Operators will legitimise the strategies that made money for them last year (Mobile Broadband/HSDPA) by accepting the idea of efficient bitpipes – something that they have historically shied away from
As credit restrictions bite, and investments in new value-added services come under increasingly harsh scrutiny, operators will be forced to revise their views on the value of becoming an efficient data pipe. This position, something that operators have strived to move away from, will become much more attractive given the guaranteed margins that are obtainable from this business model.
This shift will be helped by the growing trend towards the democratisation of mobile data–pushing it out to the mass market with innovative bundling that will attract a new market of mobile data consumers outside of today’s business and smartphone users.
This year will see the further decline of the walled garden approach, with some operators openly declaring to focus on doing one thing only–transporting bits, but being the most effective at doing so.
Now consider the other side of the coin.
We are seeing the success of the iPhone Appstore model (Mobile Web Megatrends event – Making money from Appstores – Singapore – April 27 and 28 ) but going forward we are likely to see firms acquiring successful applications rather than building their own . We are also likely to see a big push towards Micropayments from iPhone, MySpace, Facebok and other Web players
These two developments (i.e. efficient bitpipes and appstores) are two sides of the same coin.
They arise because the application is decoupled from the network.
It is worth understanding this. And if you have been long enough in this industry as I have – you will have heard of 18 month deployment cycles for telecoms applications (which used to be spoken of not so long ago)
What does this mean for the Network Operators?
One of the holiest cows for Mobile network operators will be affected.
Long have analysts bandied about the notion that Telco billing was sacrosanct. With the iPhone this was no longer the case – with every user of the iPhone needing an iTunes account which makes the iPhone more disruptive in it’s effect on the value chain – The iPhone is extraordinary not because of it’s UI but because it’s the tail wagging the dog ..
But this should not be a cause for concern since many more business models are being opened up for Telecoms Operators – for instance with devices like Amazon Kindle and other devices which are connected to the network(but are not phones). The search for the IMS/NGN application: A multimedia version of Kindle (Amazon book reader)
Also, as the network evolves, LTE will broaden the air pipe dramatically while cutting
cost per bit. Therefore, users will be able to enjoy bandwidth hungry content/applications more easily and more importantly – more economically.
For example, mobile video will take off along with other bandwidth hungry applications. We will see many Rich voice applications(next generation voice applications) and we will see a mix of downloaded and streamed applications. I will be covering these topics in greater detail but to conclude I disagree with the Stanford Bernstein Research analyst Craig Moffett who downgraded Telecom stocks
I think the future for Telecoms and the industry as a whole is very bright but it is not based on the past models and at the moment (2008/2009) we are transitioning from one model (closed) to another model (open). Since the fundamentals for the industry are sound (the Economist sounds an optimistic note with the prediction that – from the world’s poorest countries to the very richest, the demand for mobile phones will not be derailed by tougher economic times. ) i.e. customers will keep buying our services(network data and applications)- I don’t expect that the recession will change anything
So, to conclude – in the OpenGardens world as I see it, we are seeing the emeregece of two seperate business models which are are two sides of the same coin. Value is being abstracted to higher levels of the stack / edge of the network through the appstore model and at the same time, the networks will find profitable niches in areas which they can uniquely do(smart pipes/efficient bitpipes). One business model does not cannibalise the other and they both co-exist