Should Mobile Operators Be Media Mavens?
By Mike Masnick, Tue Nov 16 02:30:00 GMT 2004

As 3G services launch, and the operators try to jumpstart usage, they're trying to morph into content providers. Can they become media players?


With Vodafone's well publicized 3G launch, a lot of people are exploring the business model implications for 3G providers. One of the biggest issues is revenue generation. Operators spent a lot of money on 3G spectrum licenses, and as launches are already coming later than expected, the operators are hungry to find ways to recoup the initial expenditure. Unfortunately, that's leading to some questionable choices. Companies like 3 UK have already shown the folly of relying too much on a single feature (video calling) to sell 3G services, but Vodafone and other operators are clearly looking to go down the next most obvious path: becoming content providers.

The reasoning is fairly simple. Providing good content for mobile phones is seen as a way to jumpstart 3G data usage. If it works, it gets people excited about moving up to 3G offerings and using them as much as possible. At the same time, the operators figure they can charge money for content. It seems so easy. They just have to put a price on it, and sell it and suddenly their ARPU rises. As analysts predict a squeeze on ARPU for mobile operators, it's hard to resist.

There are just a few problems. First, mobile operators know very little about being in the media business -- and it's not as simple as it may seem. As long-standing media companies have been discovering over the past five years, technology is creating a fundamental shift in the way people experience content -- whether by making it much more interactive or by figuring out ways around paying. However, the mobile operators who are betting on content seem to assume that the same factors won't apply in the mobile world, and that it can be kept in a pre-Internet mentality. That doesn't work because the very customers they're targeting are quite used to an Internet world where the rules concerning content are changing very rapidly.

This is already seen in the way that Vodafone has set up its data pricing, letting subscribers surf its own portal for free, but adding fees to all other content -- basically blocking off most providers from having any real way of getting to customers without first partnering with Vodafone. This is the classic walled garden approach that the Internet world realized didn't work years ago -- but the mobile industry wants to keeps trying. What customers see are weak attempts to move other broadcast media to the mobile device, when they already know there are better options out there. That's not particularly compelling.

Perhaps more importantly, however, is that very few people view mobile phones as media consumption devices. The compelling uses of mobile devices tend to be focused on how they help people to communicate. The killer apps for mobile devices have always involved communication: voice, text messaging and email. Mobile devices as a broadcast delivery mechanism have yet to catch on. Not only is the business model of providing content discouraging use, it's focusing on the wrong type of application. Mobile operators are going to keep trying to come up with ways to stimulate 3G data usage, but becoming media players requires a very different understanding of the media business -- and even then it might not matter to subscribers who are looking to communicate, not consume.