In recent days (well actually months) I have spent many hours thinking about the impact of non-proprietary business models in the Telco business. Obviously the announcement of Google’s operating system Android a year back fueled mine and many others thought on this topic even though other solutions existed before. The release of the “Google phone”, G1 last week further intensified my thinking around this topic. I will not dwell deep into the somewhat spectacular features that the phone exhibits but it seems as if iPhone got a bit of a competitor here.
The interesting question is how this will affect the telco industry as a whole. Will it be possible to use a walled garden approach for operators if the open source model gains momentum or will customers inevitably vote with their feet and move to an environment where they can choose more freely which features they want in their phone?
Last year there was a massive outrage among content providers from Sweden when Telia Sonera, the primary operator in Sweden, launched their Surf Open initiative which basically stripped web pages from ads and replaced these with ads chosen and provided by Telia Sonera. If you were on a Telia plan you were in practice forced to use their solution to access web content. The role of the operator in this case was both that of a supplier of the “pipes” and which content that flowed in those pipes. This is a trend that can be seen among many operators; they want to earn more money by not only providing connectivity but also content.
In an open environment the Telia Sonera example would have been impossible. The browser that you use to access the web could be provided by whomever, the choice would not be limited to browsers approved by the operator but we could choose quite freely to find a browser that suit our specific need as long it adheres to common standards. Would we want our ISP to choose how we access the internet from our PC (AOL anyone)? The walled garden model might work just fine when there are no common standards and the one operator have a huge user base that it can leverage to make content providers develop for their specific standards. However, in a world where we, as users of information, are used to access all information when and how we want, the model might not work. Or better said, will not work.
One of the reasons that the walled garden model have survived in telco is due to the significant power that the operators have in the value chain where they essentially are the only way that manufacturers can get new handsets onto the market. Manufacturers create handsets and operators add the services that they think can differentiate them on the end user market. This gives the operators tremendous powers, both over manufacturers and the retail businesses and it has also been an efficient way of providing mobile telephony to billions of people. However, moving into a new era, where internet access will be as important to access as voice telephony, the model might not work as well.
If customers get used to install their own apps, access the internet as if they were at their home PC and replace basic applications as the contact list with something that is more fit for their own personal purpose and this opportunity is readily at hand, will they ever accept the walled garden of incumbent operators? I guess only time (and possibly Google) will tell.