The first panel at Connect 2006, entitled Industry Overview: The Experts’ Perspective, was interesting as the mix of speakers resulted in some genuine controversy.
Bob Schechter moderated and kicked off a round of panelist introductions with the question “What is the killer app?” Kari Lahtinen, Business Development Manager at Finnish operator Elisa said IPTV and elaborated by explaining Elisa’s efforts to deliver a triple play bundle. Philip Kelley from the CTO’s office at Alcatel Mobile Communications Group said Mobile TV. Matthias Fischer, Technology Manager at Vodafone Group R&D in Germany suggested there was no one killer application and no simple value chain, but rather a complex value web. If Kari and Philip assumed a walled garden business model, Matthias obviously expected a more complex business environment – a partially walled garden (my words not his).
Andrew Budd, Chairman of MBlox and Vice Chairman of the Mobile Entertainment Forum had the best answer – there are millions of pieces of content and millions of niche applications. Mobile operators don’t have the marketing expertise or the ability to scale such a marketing effort. Voice telephony was one application. SMS is one application. As individual applications, they easily scale to millions of subscribers. Content involves millions of individual brands – Tom Cruise is a brand – Madonna is a brand. Marketing this content doesn’t scale. Similarly, the millions of niche (or mainstream) applications that have emerged on the web, require millions of separate marketing efforts – this doesn’t scale either. Thus Andrew argues that operators should focus on providing access and billing services and otherwise stay out of the way. Take lower gross margins but achieve higher net margins. In support of this approach, he showed a graph with data points for EU mobile operators that related the percentage of content fees they pass through to content providers with their success in non-SMS data revenues.
The most interesting question from the audience was from Dean Bubley of Disruptive Wireless who pushed Andrew on whether there was even a compelling reason to expect mobile operators to retain a position in billing services for mobile content. Dean's position was that the Internet model would prevail. Andrew's counter was that mobile premium billing provides the business model that garage-shop startups need to make money from day one (versus the Internet where costs are near zero but revenue can be similarly near zero). No resolution, but it's a more interesting discussion than the pure focus on bundles services in walled gardens!