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One interesting aspect of Figure 15.1 is what happens when an operator successfully climbs in the value chain but keeps the bit-pipe role. Someone who is both an ISP and a bit -pipe can decide to give the ISP access away for free to those who use the network, in order to bring an ISP-only competitor out of business. The same reasoning applies to the operator who gets into the service provider role (for example, by getting a top-class service network). The operator who offers both wireless access (bit-pipe) and services can dramatically reduce the price of the wireless access and charge for the attractive services, or maybe the opposite will happen (charging for services is sometimes difficult). Some operators are expected to clearly separate the service/ISP part from the network access provider part (and in some cases, even make them separate companies). The service/ISP part can then buy air time (wireless access) from any operator. In a country where there are several networks, it is a significant advantage for the service provider to be independent of the bearer being used. Everyone in a family should be able to share photographs, chat, or
play games togetheróeven if the underlying bearer is different.
The service providerís role will be very interesting, because it is the place where most of the interesting services are served (but probably the hardest part for which to charge). The advent of the layered 3G architecture opens new opportunities for companies such as Yahoo! and America Online (AOL) that are traditional ISPs and content providers. These kinds of companies could start offering mobile services via a service network, as well. This situation would provide an easy migration for many desktop PC users who are unfamiliar with the mobile Internet, where the same e-mail address could be used as well as other applications. The concept of serving similar content to both fixed-Internet (including broadband) users and wireless users but with different formatting is very appealing.
There is no straight answer to what the optimal choice of business model is within the mobile Internet. This situation largely depends on the market and on the competition. While operators and other service providers are struggling to find the right way to approach this emerging market, applications developers are in an easier position. Regardless of who offers services to the subscriber, be it Vodaphone, AOL, or someone else, they still need applications and good content. The applications developer who can develop products that generate traffic the users are willing to pay for or that become a deciding factor in choosing subscriptions will experience the nicer aspects of the supply-and-demand principle. That said, we do not mean that all operators are prepared to pay for the application.
To Charge or Not to Charge?
The first issue surrounding making money from the applications is how the agreement with the operator will look. Some operators offer revenue sharing while others see it as such a privilege to be on their portal that they will not pay a dime to the majority of the application developers. Although some might hesitate to share revenue on traffic volume, the charging capabilities that the service network introduces give a new degree of freedom. By using Jalda (www.jalda.com), the user can be charged on a per-session or even per-click basis, which limits the need for operator involvement. Charging is a very tricky issue, and many heated discussions are expected between large operators and software companies/content providers. The operator argues that the developer should appreciate (read: pay for) the value of being exposed to millions of mobile users. The developer, on the other hand, claims that the operator should understand the competitive advantage of being able to offer this great application. Some developers even have an existing customer base on the fixed Internet that now will use the operatorís networks. Discussions involving who should pay
whom can sometimes end in an ego competition where each party sees the result as a measure of how important they are. By setting a clear strategy in advance by investigating the operatorís policy and evaluating a number of possible business cases, you can mostly avoid this situation.
The question of how much to charge for a service is even harder. Japanese I-mode users have found some services appealing enough to start charging for them. This situation all comes down to how badly the user wants the service and whether it is available elsewhere. The most common way of introducing a new service is to start offering it for free and then add a charge for premium services. One example is to offer a Yellow Pages directory service and later charge for the premium service where positioning is included. In Sweden, the operator Telia offers this kind of service where users can get information about the closest pharmacy, gas station, restaurant, and so on and charges for this service. The operator here has a significant advantage because it already has a billing relationship with the user and can easily add another charge to the phone bill. This solution is also very convenient and secure for the user, who does not have to give away any personal information or credit card numbers in order to make the charging work. The user perception is important here, because people tend to trust the things that they are used to seeing working. When you introduce a new security mechanism, the users not only have to be convinced logically that it worksóbut more importantly, they need to get a warm, fuzzy feeling that things are under control. The developer can benefit from this situation by working with operators and by leveraging the operatorís charging infrastructure.