Mobile carriers fear ‘big dumb pipe’ debacle

The mobile Internet may finally be poised to take off, and could carry with it the third-generation wireless networks that so far have failed to live up to the early hype. The next question will be who benefits. Wireless carriers? Internet service providers? Third-party application providers?

A combination of evolving wireless technology and so-called Web 2.0 services such as social networking and user-generated content could be enough to get mobile Internet services moving, said Philippe Chauffard, executive director – network for Europe, the Middle East, Africa and Latin America at international consulting firm Accenture.

Representatives of carriers and others with an interest in mobile Internet development joined Chauffard in a panel discussion on the future of wireless at Accenture’s annual Global Convergence Forum in Rome this week.

“We’ve talked about it for more than a decade, and there have been a number of not-so-successful attempts,” Chauffard said. “We’ve never had the true power of the Internet coming over the air until now.” 

Chauffard argued that social networking sites like MySpace and Facebook are better suited to mobile use than to sitting at a desk.

In an interview, he said mobile versions of such services might be the second-largest driver of mobile Internet services in the next few years, after enhanced instant messaging services. Also popular, he expects, will be mobile video and location-based services that help people find what they’re looking for wherever they are.

If the carriers are to do well out of mobile Internet services, Chauffard said, they need to improve customer service, provide innovative offerings and price it all at an acceptable cost. He suggested that most consumers will be willing to pay a modest premium for mobility on top of what they now pay for fixed broadband services like DSL. To make such pricing economical, he added, carriers will need to run “very lean and mean” businesses.

Modern networks built entirely on Internet Protocol (IP) will help, he noted, which may give newcomers a slight advantage over incumbent carriers with existing investments in older technology.

The panelists also acknowledged a risk facing wireless carriers: They could invest money in building high-capacity networks, only to see other reap the benefits from offering services over their “big dumb pipes.”

To avoid that, suggested Tom Wheeler, managing director of private equity firm Core Capital Partners in Washington, D.C., carriers need to take advantage of the fact that they know more about their subscribers than anyone else does, and either sell that information to third-party content and service providers to help them target advertising at mobile customers, or possibly transmit advertising to handsets to be cached there and delivered at opportune times. 

Later, journalists visiting Accenture’s Innovation Center for Broadband outside Rome saw a mobile television service developed by the consulting firm and offered by two carriers, which has the ability to cache advertisements and insert them in content.

Panelist Mike Roudi, vice-president of wireless at Time-Warner Cable in the U.S., said usability is more important than the underlying technology.  Time-Warner recently spent $2.5 billion (U.S.) acquiring wireless spectrum. Roudi said the company sees it as a way of extending its three existing product lines – video, Internet access and voice over Internet Protocol (VOIP) – into the mobile arena. And he said Time-Warner wants to offer customers a seamless package of fixed and wireless services.

But Wheeler questioned whether bundling is the answer. “We’ve seen multiple instances in the past when the bundling was the big deal, and it hasn’t delivered,” he said, though he acknowledged that past bundling has essentially been just a common bill for multiple services, whereas carriers are now talking about real integration in the network.

Stefane Parisse, head of strategy at mobile carrier Vodafone Italy, said it’s not the bundle that counts, but the seamless integration of services.

“It’s transitioning between services without the customer having to make conscious changes,” agreed Hugh Bradlow, chief technology officer at Australian carrier Telstra.

Carriers won’t be able to do it singlehandedly, though. “We have learned that we cannot build new services by ourselves as we were used to in the past,” Parisse said. Instead, Chauffard suggested, partnerships and multi-company “ecosystems” will be the name of the game. But if the various players can get all these issues right, he said,

“The stars are aligning for this thing to really take off this time.”

Comment: info@itbusiness.ca

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