Convergence Isn't Just About The Device
By Mike Masnick, Mon Oct 18 22:15:00 GMT 2004

Through all the talk about convergence within mobile devices the focus is on all the features that will converge. It's important to remember that business models are converging as well -- and not everyone will survive.

Convergence is always a fun topic to talk about, because you always wonder what features will converge next and whether or not people really want those features converged. Putting cameras on phones has worked out well so far, but what about putting music players on phones? Just today reports are out wondering if mobile phones will "kill" the iPod, for example.

Of course, the answers to such questions are never as simple as the analysts make them out to be. While convergence saves people from having to deal with multiple devices, it introduces some other "costs." The old saying is that converged devices do many things, but none of them well. Converged devices are often seen cutting corners in order to cram all those features into a device that's still a decent size. At the same time, all those features take up battery power and computing power -- both of which can hit the wallet.

However, an even bigger, but less discussed issue, is how convergence impacts business models. It's not just the devices that are converging, but all of the various business models associated with the various devices, applications and services that are also converging -- and that can lead to some serious conflicts between a number of different players. The first question, as always, is going to be "who owns the customer?" While this battle has existed for a while between handset makers and mobile operators, it gets more complex when other players, such as music services or VoIP providers are included.

While the carriers always hoping to control things with their walled garden mentality, it's not always that easy. The deal between Apple and Motorola to include iTunes on phones goes completely around the carriers, and plenty of others are also looking to do the same. What this shows is that the battle lines are quietly being drawn by whoever is doing the convergence.

Part of the problem is that the fees consumers expect to pay also shrinks with convergence. If they're paying fees for mobile phone service and a separate email device, such as a Blackberry, they're going to expect the converged device and service to only cost a little more than either one separately. While it's not surprising that the device costs get squeezed (there's only one device, after all), the shrinking service fees are a problem for service providers who are going to get squeezed as well. What this may mean is that some providers will avoid, at all costs, introducing certain converged devices in any reasonable fashion. Witness the crippled introductions of converged VoIP into cellular offerings. These seem designed more to make subscribers not want to use the services than to really embrace them.

Another option, is that providers will simply squeeze out the player who isn't involved in doing the convergence. What this means will be a rotating game of musical chairs, where everyone will be trying to do partnerships with everyone else to avoid being the odd man out, having their business models squeezed. Then, there are some who think the final solution will be a sort of compromise solution, where all the service providers get their piece of the pie, but it comes in the form of the personal mobile gateway from a company like IXI. This way, everyone has a single gateway device, and can choose the components they want, to design their own converged device -- and all the different service providers can offer their own plans. In other words, this is the solution that keeps all the providers happy, but just makes the customers unhappy, since they now have to carry around many different devices -- and pay more to everyone.