I just came across this excellent analysis of the US mobile industry but Damian Roskill on MediaThinking blog, which is not just for those who may be obsessed with it. It compares the mobile phone business to AOL in 1992.
Right now, they control the customer (that’s definitely the way it feels) with long term contracts, hefty fees for early termination while also having the final decision what phones, content and applications will be allowed on their network.
But at some point, just as with AOL, the great unbundling of access, hardware and software will have to occur. To a certain extent, it’s already happening now. I hear all the time about people buying the latest cool phone in another country and bringing it back here to the US for use on the local networks.
Damian then elaborates on the trends and issues that will force this unbundling, which focus around empending battle between networks and phone manufacturers, the internet and other applications and cost, and the appearance of other networks.
AOL continued to dominate for years after being pronounced dead for, in my opinion, one simple reason: it was too much of a pain to move your email address. Mobile phones aren’t that different right now – it’s still a pain to move your number (I know, I just did it). But it is also important to note that you CAN move your number. That said, this is a transition that is going to take years to play out.
But it will happen - because an open garden tends to beat a closed one.
One argument that is often advanced in favor of walled garden approaches in telecom and media (as well as for the the use of intellectual property rights as a blunt instrument to try to fend off the collapse of old media business models) is that these strategies are simply an exercise of corporate management’s fiduciary duty to maximize shareholder value. It seems to me, however, that the real duty of management should be to focus on the long-term viability and health of the business based on an objective of maximizing the value to all stakeholders, especially the customers. The failure to focus on maximizing value to the customer ultimately leads to the failure of the business and the destruction of value for everyone. It would seem to me that if a carrier took an alternative route that focused on value to the customer and then effectively explained its strategy to the market and provided some demonstration of its ability to execute that strategy, it might actually be able to maintain shareholder value over the near-term while maximizing its chances of long-term success. Sounds simple enough, doesn’t it ; )