BuddeBlog

Apps market outwits the mobile carriers portal market

During 2009 the carrier portal market (premium SMS market) declined by around 25%, as users enjoyed the freedom of choosing their own content using the new smart phones, namely the iPhone. A similar decline is expected in 2010. This development was foreshadowed by BuddeComm during most of the 2000s. It is extraordinary that the operators were able to stand in the way of innovation and competition in this market for so long. The good news however is that the loss in the portal market has been – at least for the content and service providers – more than compensated by the growth in the smart phone ‘apps’ market.

Over the last decade the operators developed approximately 100 different services for their portal users: in contrast iPhone applications recently toppled the 100,000 mark. Google’s entry into the market with its Android system will hasten the demise of the portals even further.

Within the next two years the smart phone ‘apps’ market will have eclipsed the PSMS mobile carriers portal market.

This then begs the question if, in the longer term, there is still room for ‘portal’ based services?

BuddeComm believes the mobile carriers are fighting a losing battle. They had ten years to develop a business model that would suit both users and content providers, and because of their greed they failed miserably. Now that the mobile broadband market has finally been broken open, they are no longer in control of the situation.

The ‘final solution’ to this process will be a structural separation between infrastructure and services, which at this stage will initially most certainly be driven by Apple, Google and maybe a few others. This will open the market up even further to a whole new range of content and services providers, many of whom have been knocking on the doors of the operators for more than a decade. However, this is not expected to happen until 2012-2015 when LTE networks will become available over new spectrum allocations.

Very few of the current independent content providers using the portals of the operators will be sorry to see their demise, despite the fact that this will also mean that they will have to change their own business models. Currently they are still trapped in the portals as this provides them with the option to bill for their services.

Once proper independent wholesale services become available, the carriers will be competing on a retail level with organisations which are highly specialised in their content/services offering, so there is little chance that they will win that battle.

The carriers’ more natural role would be to provide a range of ICT-based value-added infrastructure services which these wholesale customers can use.

Billing is the main value-added wholesale service they have to offer, but this will need to be more competitive with fees closer to those charged by credit card companies. There is still very little competition in the e-pay market. Pay Pal is the only major alternative large-scale service that has become available over the last 25 years, after one of the very first micropayment systems from the credit card companies in the early 1980s in Biarritz, France. During these last 24 years or so, dozens of promises, trials and pilots have been offered by MasterCard, Visa and their affiliated bank partners, and it is astonishing that after all those years they have failed to develop a satisfactory micropayment system.

There are many different and costly operating systems in use, and each application needs to be supported on all of them. This of course is highly inefficient and will work against the survival of the carrier portals.

Following the iPhone phenomenon the carriers are now trying to jump on board and provide their own AppStore for the devices they support, but it is very doubtful that they will have any chance of success in competition with the AppStores of Apple, Google and others.

Paul Budde