Home > Uncategorized > “Dumb Pipes” Fear and the Mobile Entrepreneur

“Dumb Pipes” Fear and the Mobile Entrepreneur

February 19th, 2010 Leave a comment Go to comments

As noted by many at Mobile World Congress this week, the mobile operators are working feverishly to avoid becoming “dumb pipes”. My previous blog post on this topic isn’t likely to change the mobile operators’ view one iota, so how does a mobile entrepreneur best make their way in the reality of this landscape?  I think it depends on where you are in the development of your business.

(1) If you’ve already got a business selling something that involves the mobile operator creating, marketing, or merchandising anything, my advice is very simple: treat your business as a consulting business, and get paid on a cost-plus basis for the deployment, rather than on any revenue-share down the road. The mobile operators may be willing to pay for deployments, but it seems highly likely that there will only be limited end-user uptake of their various new content initiatives. Mobile operator app stores are one very good example. And, even if the mobile operator(s) you’re dealing with does happen to succeed against the odds, they will look to commoditize your solution, removing any ongoing equity value from your business.

(2) If you’re in the early stages of your entrepreneurial endeavor, my advice is: don’t make any plans based on the mobile operator being able to be more than a carrier. Outside of a few rare instances, they’ve shown that they can’t create, market, or merchandise anything other than the service of carrying bits (created by others) on a black-box basis (ie, no real knowledge/understanding of what’s in those bits). Simplistically, just use the mobile browser, or apps on just iPhone and Android (and BlackBerry if you’re targeting a professional/business use case) and ignore the other ~80% of handsets. Why? The other 80% of handsets represent less than half of the consumer buying power, are horrifically costly to develop for, and are the shrinking part of the pool. Skate to where the puck is going: Android and iPhone (and BlackBerry for professional/business users).

Tags:
  • Slingshot

    You seem quite focused on the Western world – I assume since that is where the money is today. But tomorrow (and tomorrow is around the corner) the number of high ARPU subscribers in the eastern world will surpass the west. high speed infrastructure build out is needed, and relevant devices as well. But there, the operators absolutely control all activity on the phones and they are taking notes on the western operators failure to become more than a “dumb pipe”. I believe entrepreneurs should be focusing their efforts there, and focusing on the operator revenue shares. in the short term it may hurt, since data ARPU is low, but it will grow fast!

  • admin

    @Slingshot. Yes, as an American observing things in Barcelona, I tend to be Western world focused.

    For sure, each geography can be vastly different in its mobile ecosystem. NTT DoCoMo in Japan clearly led the world by over half a decade when it came to empowering third party developers.

    A key issue in any entrepreneurial effort in the mobile sector is to understand the value chain in your geography. If there is an monopolist/oligopolist between you and the end customer, you need a very strong mechanism to prevent that monopolist/oligopolist from extracting all the profit out of the system.

    Be careful about the assumption that climbing data ARPU will benefit third parties. Much of this revenue will be transport revenue, which doesn’t generate any third party revenue share.