Friday, May 09, 2008

Your flat-rate data plan is a sub-prime mortgage crisis waiting to happen

Here's a few highlights from the off portal vs on portal panel at MeM today.

Panel members:
jens begemann cop jamster
ray anderson ceo bango
russell buckley admob
paul meyes acme mobile
andrew bud, mef /mblox

Your flat-rate data plan is a sub-prime mortgage crisis waiting to happen.
Andrew Bud suggested that there is an inherent flaw in the mobile internet business model for operators. While they can offer unlimited voice and realistically expect there to be an upper limit on use, or unlimited text and assess their maximum exposure with some accuracy, the same is not true of data. If they sell you all-you-can-eat flat-rate data there is only an upwards spiral with no limit in the costs they will face to satisfy your never-ending demand for more and more data. And this, at the same time as the pressure on price pushes it ever downwards. Effectively the man selling you a flat-rate deal today is writing cheques that can't be cashed into the future.

Two responses from me:
1. The more people use data, the more operators can monetise the services they can offer to content providers: such as LBS, ID, payment mechanisms. If they offer that stuff for free, yes they'll be in trouble.
2. There is an assumption in Andrew's assertion that the cost of carrying data can't fall as fast as our desire and ability to consume it. While I appreciate that we are seeing something of this in the ISPs response to BBC I-player, Youtube and other bandwidth consuming services, isn't it possible that this is just a technology-playing-catch-up hic-cup.
The cost of delivering data has consistenly fallen in the past - why shouldn't it into the future?
The crisis Andrew predicts is also one predicated by who controls the pipes and their own particular business models. If their model was more driven by deriving value from connecting people with people and people with content the picture looks different. (Consider my white paper, communities of purpose are the business units of the 21st century by way of further exploration of that?)
Depending on the economics, far from leading lemming-like to content providers being billed for having their content delivered by the pipe owner (Andrew's prediction), a pipe owner with a a more networked-world business plan would simply welcome each and every additional node.

Q: When operators will switch to open: Services will migrate to the edge of the network. Numbers mean off portal will win and is already winning.
All operators can do is impede this. They cannot stop it.
Operators have to provide services which are useful to content providers and sell that instead (eg the lbs, payment and id stuff we referenced above).
Operators providing content is about growing revenue - but often by losing money. Services which enable off portal activity are about margin. As soon as the operators care more about margin than growth the switch will be instant.

Ray Anderson: 75% in the UK is already off portal, 25%. In the US it's already 50-50, in Japan it's all going off portal. The battle is already won.

Russell Buckley: The winners in mobile are not from old media or the internet, but from the likes of mobile-first businesses such as itsmy and pepperonity. Mobile is a different environment. We have seen huge growth of off portal driven by countries that surprise.
Half our users come from the US. They have adopted the mobile internet like you wouldn't believe.
Serbia has highest per capita consumption of mobile web pages. They are leapfrogging the pc generation. Where this is succeeding they all have flat rate data pricing which grows off portal revenue for all.

Ray Anderson: "Its the internet, stupid, you can't fight about it."
The opertors will win by providing services which connect you anywhere you go. they can offer services by taking payments, knowing id and location, they need a way of getting this to content providers efficiently.
The operator home page won't last very long just as it didn't on the internet.

Russell Buckley: If operators are to offer third party data services to admob etc they need to get on with it. We will find other ways. We already have teams of phds working on solving the issue.

Andrew Bud: If they sit on their backsides long enough and force the content community to work around them they will themselves destroy the future of their own business model

The rate of change is so rapid it's difficult for one person to keep up to speed. Let's pool our thoughts, share our reactions and, who knows, even reach some shared conclusions worth arriving at?