"The carriers are much more confident of their role in the value chain," Franklin said. "There are no longer any doubts about who is going to own the customer. One of the most strategic assets to have in this business is to be able to land a charge on the customer's bill. As long as carriers hold on to that asset by putting the proper business systems in place, they'll be indispensable to the content business."
If any carrier has chosen to go it alone, it's Sprint. From day one, Vision was a completely self-managed, self-distributed content portal. While Sprint went with aggregator Mforma to supply a core set of games and applications, most of its content deals are negotiated directly with content providers, publishers and, in many cases, the end developers themselves. Not only did it set up its own billing and management platform, it's handling the testing and quality control over its own network.
Sprint's competitors took entirely different routes. AT&T Wireless modeled its open portal after that of its Japanese investor NTT DoCoMo, which launched the most successful wireless data service in the world, i-mode. Sprint's fellow CDMA operator Verizon Wireless whole-heartedly adopted Qualcomm's BREW solution, allowing it to devote only a fraction of the resources to its content platform compared to Sprint. Sprint's go-it-alone approach, however, paid dividends. While its competitors are recording 4% of their revenues on data, Sprint's Java-based service is pulling in double that figure.
"We're committed to our model of working directly with out content providers," said Jeff Hallock, vice president of product marketing and strategy. "We're well-positioned to work with providers and aggregators on our own. It allows us to control the quality of the content, and we can be very flexible."
Despite Sprint's success so far, it doesn't pretend to be infallible. It may generate the most revenues off of wireless data, but it's also spending considerably more maintaining its consumer offering. On the business side, Sprint already is contracting with partners like IBM for business services, and it relies on Handango to supply the core set of business applications its enterprise customers use in their smartphones. While Hallock said that Sprint will continue to keep a very close grip on its portal, it's still open to the content value and timeliness that other aggregators and third-party providers can provide. Hallock said Sprint is even considering allowing its users to access out-of-portal services, as long as Sprint can exert some quality control over the products.
"It's important to us to provide the best content possible," Hallock said. "We at Sprint are not in the business of originating content, but we do have the experience to understand what content will be of value to our customers."
Other carriers have also been slowly opening their networks, while Verizon relies on BREW for much of its core application content residing on its Get It Now portal, it has sought out outside content and distribution deals with major media companies for both its 1X offering and its new consumer broadband service Vcast, which launched this month. Cingular is one of the few carriers that has explored uninhibited access to third-party content, striking promotional deals for short message services (SMS) and even allowing premium SMS downloads over its network, giving it a share of the revenue from ringtone or screensaver without the burden of managing its distribution. But the future of the one truly open portal in the ., AT&T Wireless's mMode, is now in question after its merger with Cingular. Carriers may be ready to open up, but there seem to be limits to how far they'll go.
"If you look at carrier numbers, 90% of all data revenues are being generated through carrier-based services. Everything else is really a rounding error," said Chris Ruff, vice president of product marketing for UIEvolution, a developer of content and application middleware. "We're still in a very closed environment. We're moving toward more open models. But don't expect it to go all the way. [Carriers] will stop somewhere right in the middle."
Carriers and content providers aren't the only ones that have a stake in pushing mobile data. Vendors know that unless data becomes big, the 3G mobile technology they've spent years and billions of dollars developing won't have a market. And at least two vendors have felt the need to stimulate the data market.
Three years ago, Qualcomm launched BREW for CDMA carriers, and last year Nokia launched Preminet. Both are turnkey solutions, designed to handle the complexities of distributing applications from initial program development all the way to final customer billing. All of the applications over their platforms are built from the same toolkits, tested on the same platform and distributed through the same portal - basically wireless content in a box, just waiting for the enterprising wireless carrier to open it.
The package doesn't come cheap, though. Both Nokia and Qualcomm get their 20% cut from any transaction, and when the percentages of the content developer, third-party distributors and even the platform managers get factored in, the carrier finds its portion shrinking. Moreover, the same solution and the same catalogs go to every carrier on the platform. While carriers can seek outside content partnerships, much of the core content on their networks remains the same as their competitors. With carriers focused on differentiation, that would seem to spell a quick death for these kinds of turnkey solutions, especially among the Tier I providers that have set their sights and future profit margins on wireless data. Tier II and Tier III providers that want a mobile data presence may welcome the service as a quick conduit to multimedia, but the proposition for the major carriers seems iffy.
But both Qualcomm and Nokia say they're prepared to tackle those carriers' concerns. Both companies are breaking their platforms into components allowing carriers to deploy parts of the platform and also integrate BREW and Preminet content with other third-party content, whether it comes from third-party aggregators or from the carriers themselves. Qualcomm' planned launch of it's MediaFLO is following a similar model. While Qualcomm plans to stream a base set of channels to all of its customers over its own dedicated spectrum, it plans to sell a carrier version of the technology, allowing operators to integrate outside content into the same interface. Similarly with BREW, Qualcomm is opening the platform, providing the same core catalog of applications but allowing those applications to interoperate and communicate with non-BREW applications and features.
"We're not in the content business," said Gina Lombardi, senior vice president of marketing and product management for Qualcomm Internet services. "We're promoting ecosystems. ... BREW was a very early get-to-market strategy for carriers, but now we think BREW can be very helpful to carriers with more sophisticated data strategies. We just integrated WAP browsers with BREW, and we're integrating more solutions into the platform every day."
Though Nokia's Preminet doesn't yet have the customer base that BREW does, it shares a similar strategy, except targeted at Symbian and Java devices. It's offering its content catalog up as a stand-alone offering, basically presenting the combined efforts of its entire Series 60 and Series 40 developers forum in one swoop. While the turnkey solution - which provides everything from the phone client to a customizable portal - may appeal to smaller carriers, the sheer volume of work produced by Forum Nokia members is bound to appeal to even the largest of carriers, said Stein Thygesen, director of Nokia's platform solutions group.
"Tier II and Tier III operators were our original target audiences for Preminet, but we've found many of the large providers want the same content, even if they already have delivery platforms in place," Thygesen said. "Preminet has many discreet elements that can fit into any carrier's service."
Though it's unlikely that carriers will abandon the turnkey providers anytime soon, they're looking outside those providers' catalogs for something more. And carriers certainly aren't lacking for choices. It seems everyone has a game, a ringtone catalog or video clip library to offer to any carrier willing to snatch it up. The trouble is choosing which one.
One thing that can be said about the mobile content industry today is that it's extremely schizophrenic. The market is quickly becoming crowded with different distributors. There are the big turn-key solutions providers like Qualcomm's BREW and Nokia's Preminet that bring in the developers, perform testing and quality control, manage the servers and even provide the portals. There are the aggregators that gather together a spectrum of content and present it as one offering to their carrier customers. There are content publishers that focus on specific applications like ringtones or games and handle the complex intellectual property negotiations, presenting whole catalogs of music or entertainment to carriers. There are the media empires, such as Disney, that are developing their own content management and distribution networks. And then there are the individual content developers, many of whom are going straight to the carrier to sell their applications.
To make matters more complex, companies often mix and match their roles. Disney has formed its own publishing company to bring in content from sources outside its wide umbrella of entertainment properties. Nokia's Preminet isn't just taking content from its own substantial developers base, it's bringing other content aggregators like Handango into its catalog. InfoSpace is not a major publisher of ringtones and other applications, it provides a content delivery platform and portal services to many of its carrier customers.
"What needs to happen here is a meeting of the minds," said Ranjan Mishra, principle at . Kearney's communications and media practice. "Everyone is still too ambitious. Everyone is trying to do too much on their own."
Mishra pointed to Apple's development of iTunes as the perfect example of a content play with all of the pieces falling into place. By working with record labels, distributors, platform providers and digital rights management software developers Apple managed to create a digital music distribution platform that is not only extremely popular but sparks a tremendous sense of loyalty from its customers, despite the fact that there are cheaper alternatives on the market. Consequently, sales of its core music product, the iPod have soared. While Apple does get a cut of any sales off its online music portal, it's the wealth that is distributed among several players that makes iTunes work, Mishra said.
"What Apple did was not a technology innovation - digital music had been around for years," Mishra said. "What they did was a service innovation. They did a good job putting iTunes together. Whomever comes up with a similar service innovation in the wireless will have the advantage."
Including too many players in the value chain, though, also has its disadvantages. The more middlemen in between the content developer and the end-user, the more complicated the delivery of that content becomes. An application has to be tested for each platform it traverses and hooked into each billing system. Moreover, the more middlemen, the more the limited data dollar is divided up.
"From a revenue sharing perspective, all of these different players are getting squeezed," said Linda Barabee, senior wireless analyst at the Yankee Group. "The big question is how do you create an attractive yet profitable content ecosystem?"
That's a question no one can seem to answer. The wireless industry has struggled with it for years. And even though the industry for the first time seems amenable to the idea of creating an ecosystem - an important first step - no one seems quite sure how to implement it ("If I knew the answer to that, I certainly wouldn't be telling you, or anyone else for that matter," . Kearney's Mishra said.)
Though the exact answer may not be apparent, the industry does seem to be taking steps toward building that ecosystem. The individual players now seem more willing to focus on their core expertise. Carriers seem more willing to leave content up to the content creators. Instead of fighting with the big media giants, carriers appear ready to work with them. The vendors are optimizing their turnkey platforms so they can become components of otherwise grander portals instead of replacing carrier's portals entirely. And content providers are backing away from their proprietary content distribution platforms, realizing that their intrinsic value comes from their ability to distribute and aggregate applications and multimedia from disparate sources.
"In the beginning our business was our platform, and we happened to have a catalog of content," said Mark Levy, vice president of content and publishing for InfoSpace. "Now on the top level, we consider ourselves a publisher and producer of mobile content. Our platform is still an integral part of our business, but we're not requiring you to buy the platform to get the content."
Inertia, however, is a hard thing to overcome. Though everyone appears to be embracing the idea of an ecosystem, there is still a lot the industry has to overcome before content distribution becomes as hunky dory and streamlined as it sounds. Disney recently decided to set out on its own, forming its own wireless mobile virtual network operator to distribute ESPN and other entertainment content under the vast Disney umbrella. That move would cut carriers and other content middlemen out of the value chain entirely, making carriers what they fear most, another dumb pipe through which somebody else's content is fed. And despite carriers' new willingness to work directly with the media giants, they'll be hard pressed to give up too much control of their portals.
"We have a different culture here in the .," said Clint Patterson, vice president of marketing for Handango. "The carrier has always had much greater control over the customer. There will be some folks that resist the idea of an open network. We just have such a legacy of walled gardens here."
Ultimately if there is a fight, the carriers do have a ringer in their corner. The fight for content is really a fight over the billing, Qpass's Franklin said. Any carrier or content provider that can establish a recurring billing relationship with a customer has won a large part of the battle. But while an outside provider found it was possible to establish those relationships with customers independent of the carrier, the control over the bill is an enormous advantage for the wireless carrier. A Disney or a Time Warner can market and campaign all they want, but unless the user has an easy way to get to their content and an easy way to pay for it, they're at the disadvantage.
No Killer App
{At least not yet}
When the Yankee Group polled wireless users about what application they'd be willing to spend an additional $5 to $10 per month on, they received heavily varied results. Though no clear application emerged as dominant, at least 75% of the respondents said that they would be willing to spend that extra 5 to 10 bucks.
