the end of the wireless data beginning
april 30, 2008
By Tom Wheeler
April produced a veritable shower of conflicting data points about non-voice wireless services. The mobile Web “is limited at best and dying at worst,” Russell Beattie, the former Yahoo wireless guru, proclaimed, as he shuttered Mowser — his start-up designed to help Web sites go mobile. Then, BusinessWeek weighed in that, “service providers are losing their grip on the industry” as consumers bypass on-deck portals to buy mobile content elsewhere. The carriers got the last word, however, with record wireless data revenues for the first quarter.
The mobile data business is at the end of its beginning. The confluence of faster networks and smarter devices has certainly helped this along. But the key to the new era is the growing appreciation that the mobile data business is different from its wired analog counterpart. Together, these realities foretell the demise of the wireless data model that we’ve known for the last decade.
At the recent Billboard Live! event preceding the CTIA show, I moderated a session featuring a carrier and a content company addressing why mobile content (beyond SMS and ringtones) has been more promise than performance. It was then that I realized terms like “mobile data” — or even “mobile content” — were too broad to describe the non-voice space.
The current wireless data space was defined by the carriers’ terror at being commoditized, like their wireline brethren, into a dumb pipe carrying someone else’s profits. It is becoming clear, however, that the mobility and personalization afforded by wireless has created non-voice opportunities that wireline carriers never possessed. Instead of defining what carriers would not become (i.e., the dumb pipe), there is an opportunity for wireless carriers to leverage the power of mobility and portability to become integrated information companies with sizable and growing non-voice revenues.
The success of this new vision begins with dumping the homogeneity of “wireless data.” Voice and wireline data transport may be homogeneous services, but wireless data is not. There are at least three kinds of wireless data services: user-generated content, Web content, and carrier-specific content. The first and last on this list uniquely belong to carriers. That uniqueness makes the middle item (which heretofore was the great defining fear) ancillary, rather than controlling.
User-generated content (UGC) is all the rage today, thanks to the rocketing success of social networks. However, the original UGC was the text message — a simple service that provides the bulk of today’s wireless data revenue. The awaiting opportunity is to incorporate UGC pictures, video, and other postings to capture on the move UGC. Such personal, portable content is a quantum leap from being tied to a desktop, and best of all for carriers, since they control the mobile camera’s APIs, such a service is uniquely a carrier service.
Web content, on the other hand, will utilize the carrier’s “pipe” function. While previously, carriers feared being “only a pipe,” it is becoming clear that the delivery of a subscriber to an off-deck experience does not diminish the carrier’s capability to monetize its network with carrier-controlled UGC and carriers’ own unique content. What we’re talking about here, by the way, is not some kind of crippled browser/transcoder, but the real Web browser experience. The iPhone illustrated the power of a real browser to stimulate usage. Then, when AT&T enabled the iPhone to bypass the cellular network with WiFi, it showed that the future wasn’t about maintaining a stranglehold on each bit of data.
Which brings us to the current content paradigm of putting everything “on deck” behind some vague icon. Shoot it. On deck may have been adequate for Jamdat Bowling and other early generation wireless applications, but its continuation as the principal means of discovery and delivery limits the opportunities of wireless carriers and those who would help them create an ever-growing revenue stream.
It is the third leg on the content stool — carrier-specific content — that remains the most underdeveloped opportunity for wireless carriers. This is the television network model. For instance, when TV viewers want to watch Lost, they turn on ABC, and that network makes a nice return from being the monopoly provider of the program. The model extends to wireless, where unique content material for each carrier is the logical next step. Not only will this further help break the “commodization” fear, since carriers can differentiate on content, but also, as the integrated telecommunications companies like AT&T and Verizon begin their “three screen strategy,” they will have unique content to repurpose for mobility.
Powerful networks and mobile devices have redefined the wireless user experience. The original carrier fear of commoditization is being vanquished by the uniqueness and power of the wireless experience. With a nod to Mr. Churchill’s historic use of the phrase, it is the end of the beginning.
Tom Wheeler is a Managing Director at Core Capital Partners, a venture capital firm specializing in early stage technology-based companies. He has been CEO of both the Cellular Telecommunications & Internet Association (CTIA) and National Cable Television Association (NCTA).