There are no more killer applications. SMS, ringtones and, to a lesser extent, graphics and gaming have made huge contributions to mobile data revenues, yet since their introduction nothing has made a similar impact despite 10- to 20-fold improvements in wireless downloads speeds.
Although increased data service adoption and organic subscriber growth will drive mobile data in the short-term, these revenues will fail to offset the decline in voice over the longer term.
The main reason is that most non-voice spend by consumers is being used on basic data services such as text messaging, ringtones, gaming and image downloads. To increase data revenues significantly operators need to focus on growing the other piece of the pie - i.e. mobile video, Web surfing and sophisticated services and applications that go beyond merely communication and phone personalization.
The spotlight so far has been on capturing a portion of transactions between subscribers and content providers through the use of aggregation strategies, focusing on popular content and creating walled gardens. In most markets, this has resulted in a disappointing mobile Internet experience with the typical operator portal being effectively just a storefront for content.
Scale or fail
The biggest issue for operators in expanding mobile data applications is the inability to scale necessary components of their offering.
Introducing new applications such as location-based services, mobile commerce, push email, IM - indeed, enabling an entire range of content and services analogous to what is available on the Internet - becomes problematic for several reasons.
First, operators do not have the resources and expertise necessary to address demand from the majority of market segments. A good analogy would be ISPs with their portal sites during the early days of broadband.
Second, walled-garden environments require higher staffing levels to manage licensing deals, revenue sharing arrangements and other elements of content aggregation - all leading to delays in service launches, reduced margins and limited choice.
In addition, proprietary platforms raise barriers of entry for developers, greatly reducing choice and ultimately degrading the end-user experience.
Operators need to create a platform to encourage growth of applications and services by simplifying the developer environment. The first step is to decrease complexity and the steps necessary in rendering and converting existing Web sites to a mobile format. Using open standards and, ultimately, an all-IP architecture will help.
Clearly, all-IP networks address frustrations with walled gardens and the limitations they create. Platforms such as mobile WiMAX have been touted for the broadband speeds they will deliver, but the strongest case for implementation comes from the flatter architecture and open environment it will enable. Operators will need to live up to the 'mobile Internet' promise, while balancing potential cannibalization from the creation of a higher performance dumb pipe.
Carriers also need to lower flat-rate data plans, or offer tiered plans that differentiate between data-card users, who should be charged high tariffs, and consumer app-oriented users accessing the Web via their handsets, who impact network capacity far less and should be charged at a lower rate. Increased scale will drive greater developer interest, resulting in more choice which, in turn, will increase scale and drive a virtuous circle from which healthy revenue growth can continue.
By embracing a platform that encourages the invisible hand of market forces to develop new and innovative services, operators can focus on improving the user experience for their subscribers. Ultimately, content and brands such as CNN and ESPN will not be the differentiator, user experience will. User-friendly data and a robust mobile Internet coupled with a greater focus on delivering flawless voice will not only help increase revenues, but decrease churn and lead to improved differentiation from competitors.
Charles Moon is Yankee Group's program manager for Asia-Pacific research - [email protected]