Monday Note

That’s the cry of anguish heard in the executive suites of cellular carriers, poor things. Why the sorrow?

Nuances removed, it boils down to this:
. ISP (Internet Service Providers) don’t sell content, they bill at a flat rate regardless of what you download, music, e-mail, video. ISP don’t decide which computer you can and cannot connect to the network.
. Cellular carriers charge a different price for voice, SMS, data; they play all sorts of games to sell content. In addition, they lose their customers in an impenetrable jungle of agreements and billing plans. Cellular carriers decide (this is much less true in Europe) which computer, pardon, phone you can connect to their network.
Yes, but why the anguish? Because Google and Apple are two reasons why the future of cell carriers is to become ISP — of the wireless kind. Flat rate, no content games, no control over devices. All this “converging”, to use a fashionable word, towards smaller profits.

A Silicon Valley wag suggests we build seven statues to Steve Jobs: for the orignal Apple II, the Mac, Pixar, coming back and reviving Apple, iPod/iTunes, Apple stores and the last (latest, we hope) one for the iPhone. Steve’s feat here isn’t so much the phone as it is showing how to break the control US carriers still exert on what paying customers can connect to their network and what the phones are allowed to do. For example, in order to maximize profits, Verizon forced Motorola to remove one Bluetooth feature, file transfers.

The result? No way to transfer music from your laptop to your Verizon phone, use the network and pay us. Another (more fortunate) result is Verizon and Moto lose a class action lawsuit.

With the iPhone, Steve wrestles control from the carriers and dictates how things work. And, an unheard feat, he gets a piece of the carrier’s revenue. To be fair, knowing our Steve, dictate is the right verb here. We’ll see in a few days how Apple decides the future of third-party applications on the iPhone. We also remember how tightly Apple controls iTunes content – much to the chagrin of the previous generation of extortionists. In any event, Apple shows how carriers can lose their grip.
Next, Google. They bid for open spectrum, spectrum where you decide what you connect. And they show an operating system for smartphones, Android. The result within a year? Tens of different Android-based phones, hundreds of applications. Smartphones become cheaper and richer at the same time. The result is pressure on carriers to offer flat-rate plans, something they do already, sort of, reluctantly, with dissuasive rates.

Google reveals a striking statistic: the iPhone performs 50 times more search traffic than the next brand, a number initially viewed as a mistake. But no, the numbers are correct and show the iPhone is the first real Internet smartphone. Others, many, are ready to follow. With their help, cell carriers won’t be able to avoid their future: wireless providers of Internet connections.Voice is but one of many types of Internet data. Cellular carriers have no choice but to embrace that fact. Wired ISP already did.

- JLG

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