Mobile operators stranglehold on content is crumbling

Paul Budde (no charge0)
Friday, 05 October 2007 09:20

Mobile operators stranglehold on content is crumbling

Capped price deals are making mobile data access affordable

New mobile phone plans offering capped prices and data access are providing consumers with the very thing Australia's mobile operators are reluctant to give them - an affordable means to receive email and browse the internet from their handset, a leading independent researcher has reported.

In its annual study, 2007 Australia Mobile Data and Content - The long wait for 4G - to be launched at an industry roundtable next week* - telecoms consultancy BuddeComm says operators will increasingly face an uphill battle to protect their lucrative voice and proprietary short message services, which together account for more than 90 percent of total mobile revenues.

'After 10 years of hampering the growth in the mobile data market through business models based on exclusive content, open-ended charging and prices nobody could afford, the cards have fallen and the mobile network operators have lost the battle,' the study has found.

Intense competition has forced the mobile companies to offer capped pricing plans with data access. But while operators have been quick to promote the new packages, they have been shy to tell consumers what they can do, such as access email and the internet, for fear of cannibalising their existing revenue streams.

But younger users - particularly the 25-35 age group - see the opportunities of accessing data without running up enormous mobile bills. And these capped price plans are offering many customers sufficient access to check and send emails and browse online.

However, according to the BuddeComm study, the main mobile players are in danger of missing new revenue streams as data traffic quickly grows and users search for content directly from the internet. Capped-price plans with data access are in one sense helping fuel the rapid growth of independent, or 'off deck', services.

In such instances online content giants - such as Google, Amazon, YouTube and MSN - are planning to make services available to mobile users through mini browsing facilities on their websites.

The study says network operators have failed to use their 10-year lead time to build a solid customer base around a suite of affordable value-added mobile services. This might reduce some operators to using their billing services to provide value-added network services to the new content kings, the study found.

'The question is, will they be willing to operate such services along the lines of other financial services and only charge a few percent in banking fees?'

The heat is likely to be turned up further on operators, too, if alternative wireless broadband technologies, such as WiMAX, take off at the expense of their preferred 3G HSPA (high-speed packet access). WiMAX would establish open networks allowing customers to freely access a wide variety of independent (off-deck) services.

'As soon as the internet-based broadband applications are unleashed, SMS will be the first to go, in favour of email. That alone will wipe well over $1 billion from the balance sheets of mobile operators,' the study says.

BuddeComm believes an environment with competing wireless technologies, such as 3G HSPA and WiMAX, offers the best chance of encouraging innovative, affordable mobile data services. OPEL, a joint venture between Optus and Elders, is building a regional network comprising 1361 WiMAX sites and will give an early indication of its viability.

At the moment, the bulk of mobile content downloaded is limited to premium SMS services such as ringtones and wallpapers; and, to a lesser degree, music. For business, mobile email is the runaway application due to new smart phones, like the Blackberry.

Beyond these main services, there is not a great deal. Many mobile content providers have walked away in frustration and mobile marketing is expected to decline in the absence of real business opportunities, a situation largely created by protective operators.

So what will mobile data services look like once wireless broadband has become established in the next few years?

According to the BuddeComm study, content that kills time will be popular, assuming they are not overpriced. 'If you can kill a few minutes of boredom with some video content, a cartoon that makes you laugh, or a quick game, and it only costs a few cents, we can plainly see a big market for that,' the study states.

Social networking and personal communications using email and blogs will play a significant role.

Video services, even under capped price plans, are likely to remain largely unaffordable. Operators, though, are looking at Premium Rate Services, such as adult entertainment, and advertising-sponsored services as viable video models.

The study also finds that once true mobile data services become available, the machine-to-machine market will boom. In fact BuddeComm predicts it will become dominant, easily outstripping human subscribers.

The machine-to-machine market includes telemetry, location-based services and RFID (radio frequency identification). Telemetry includes remotely operating security and fire alarms, vending machines, parking meters and utilities telemetering. Some examples of location-based services are roadside assistance, navigation, traffic updates and concierge services helping direct people to places.

RFID tags are more than a fancy barcode but embed objects, such as a good or container, with descriptive information read from a distance. RFID tags can store and deliver enormous amounts of information about goods, production, storage and shipping.

But these tags may be only a part of the bigger picture, loosely called 'the Internet of Things'. 'Innovations like RFID tags herald the dawn of a high-tech future in which 'users' of networks will be counted in the billions and where humans may become the minority as generators and receivers of this traffic,' BuddeComm reports.

'Instead, most of the traffic will flow between inanimate objects, thereby creating a much wider and more complex 'Internet of Things'. By embedding short-range mobile transceivers into gadgets and everyday items, the Internet of Things stimulates entirely new forms of communication.'

*The State of the Industry Roundtables with Paul Budde will be held in Sydney and Melbourne on the 26 September and 27 September respectively. The Roundtable, looking at the Australian Telco Market moving into 2008, costs $425 pp excl GST.

Cost of this report is $795 (excl GST) for a PDF with a single user licence. Prices available on request for multi user licence and hardcopy.

For detailed information, table of contents and pricing see:www.budde.com.au/publications/annual/australia/australia-mobile-data-and-content-markets.html

About BuddeCommBuddeComm is an independent global telecommunications research and consultancy company, specialising in new media, with 45 researchers spread across 15 countries. The company publishes more than 100 research reports each year analysing global communications markets, trends and business opportunities.