Mobile operators in danger of becoming ‘dumb pipes’

Pro

Mobile networks operators (MNOs) are in danger of crippling their own revenue streams if they do not start emphasising shared value with content creators and other third parties.

According to mobile analyst firm Juniper Research’s recent Mobile Content Strategies & Business Models: Scenarios & Forecasts 2008-2013 report, mobile content revenues are predicted to hit $52 billion by 2013, from $23 billion in 2008.
However, only by becoming ‘smart pipe’ service providers can MNOs ensure they get a healthy slice of the market, warns Juniper.

MNOs make their money by taking a significant percentage of the revenues generated by content providers when they use their networks. However, this is unsustainable because it results in high prices for end users, and consumers being deterred from accessing mobile content on a wider scale.

The new report examines the three main scenarios facing the operators and the sector as a whole – the ‘dumb pipe’, ‘smart pipe’ and ‘on-portal’ routes.

“One single scenario will not win out, since different business and revenue models have to co-exist in the mobile content market,” said Andrew Kitson, the report’s author.

“Players will adopt multiple approaches that best fit their markets. Crucially, if MNOs are to benefit financially, they need to move away from their dumb pipe roots to the smart pipe model, though they will clash with the content providers which already dominate the smart pipe.”

The report predicts that under the smart pipe model, MNOs will not see their share of the overall mobile content market rise appreciably, but revenue will rise in value by 125% over the 2008 to 2013 period.

Meanwhile under the on-portal scenario, content providers will see their share of the market rise from 54% in 2008 to 68% by 2013, providing they can secure more attractive terms from MNOs.

Kitson hopes that various players can find a compromise and concluded that if MNOs can change their focus from the traditional average revenue-per-user mindset, to instead concentrating on value creation and support for their partners, they can swiftly make the change to a more beneficial scenario for everyone.

Read More: Infrastructure