Commentary

Being A Dumb Pipe Isn't So Dumb

pipe

A new report from Nielsen sounds an alarmist note, suggesting wireless operators have only a brief window of time to establish themselves as more than "dumb pipes."

It seems the carriers are listening. The study was released just prior to a group of two dozen wireless operators including Verizon Wireless, Vodafone and NTT DoCoMo announced forming an alliance to create a common open platform for developing applications.

Commissioned by telecom equipment provider Tellabs, the report warns that in the next six months, "media organizations such as the BBC, application developers such as Facebook and service providers such as Google, will be viewed as the most appropriate providers [of personalized mobile services] instead of mobile carriers."

Why would it take another six months? Consumers already understand that the BBC is better at providing news, Facebook, social networking, and Google, search, via mobile than the carriers. The announcement about the study admits as much when it says, "the research shows that users now more readily identify with third-party brands such as Google than with their mobile carriers."

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With good reason. Because they're better at delivering the content or services they specialize in than the carriers. But the report urges operators to create their own competing applications and services to avoid letting the Internet interlopers walk away with all the revenue-like they have on the wired Web.

Of course, catching up to the major Internet players may entail using some of Tellabs networking products, which it thoughtfully pushes at the end of the press release. Ugh. What's so terrible about being just a 'dumb pipe,' anyway? It turns out handling the surge in mobile data traffic from smartphones has proven challenging enough for carriers like AT&T.

And now with Google launching its own phone and taking a crack at being a dumb pipe itself, the carriers would best serve consumers by focusing on their main job of providing fast, reliable service.

And it's not like they aren't benefiting from the growth of the mobile Web and applications. AT&T mobile data revenue in the fourth quarter, for instance, increased 26.3% from a year ago. Verizon Wireless' increased almost 46%. At 20 cents a pop, text-messaging alone is a lucrative business for the operators.

All the more reason they should leave higher-level data services to others. Frank Barbieri, CEO of mobile video provider Transpera, earlier this month told audience members at the OnMedia NYC conference that carriers were "flamboyantly, notoriously bad" at developing operating systems and app stores. Carriers may not appreciate that assessment but at least he didn't propose a phony six-month deadline for operators to turn themselves into content producers.

3 comments about "Being A Dumb Pipe Isn't So Dumb".
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  1. Barry Dennis from netweb/Omni, February 15, 2010 at 3:05 p.m.

    What's so hard to understand?
    Mobile will only be part of the Pipeline serving the Convergence Marketplace, an important one to be sure. The FCC is starting to get the message that Convergence will require much larger amounts of spectrum to be available for not just Voice but much expanded Data, Video and Cloud products being developed in the "disruptive technology" departments at Apple, Microsoft,Samsung, Google (especially Google) and others.
    The Pipeline's (Cable, Telco, Satellite, Wireless )have their own technical challenges, their own opportunities. The FCC (witha big push from the FTC ) will hopefully get past the lobbying, the politics, the death threats from Cable, Telco and others, and realize that forced separation of Content from the delivery Broadband Pipeline is the only way to insure more choices through competitive access at reasonable rates. Less just continues the decline of U.S. Internet pre-eminence (we've dropped to fifteenth in the world).
    Competing Pipelines would be a great thing.
    Mobile, in it's re-named format AAA (AnyThing, AnyTime, AnyWhere) may well be the "last mile," and that may be good or not-so-good, depending on the industry's ability to gain control of the much expanded spectrum they need.

  2. J Levinger from Nextcode, February 15, 2010 at 3:38 p.m.

    For far too long, the carriers worries about being a dumb pipe has caused them to be a dumb cork. They generally want to have control and the assurance that they can monitize whatever traffic goes across their networks. Their slow moving conservative nature makes them ill suited to innovate or be the source of any of the content and related services that consumers want to use on the networks. For years, at least in the US they tried to restrict the delivery of free content using the logic that "it is using our bandwidth." Their belief was if they could restrict the delivery of content and applications, somehow that would retain the value of it and it could be charged for unlike the internet. Well those days have changed and the competitive landscape thanks to firms like Apple and Google has tilted toward who can provide the best platform for using applications and what is available for free or very low cost. Don't fear, the carriers will still make tons of money.

  3. Martin Vendel from New Media Strategy, February 15, 2010 at 4:06 p.m.

    Being a dumb pipe is really what the operators do best and what they get the majority of their earnings from. Content as such has proven to be far beyond what operators should focus on. However, just encouraging content consumption through the mobile may put the operators into a situation where the additional revenues may not justify further investments. The operators have to help content providers to maximise the value created for the end user and not just wasting traffic on services with limited perceived value. Read more about the role of the operator on http://wp.me/prQHu-4Z.

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