Siemens' Xingtone Investment Helps Crumble Garden Walls
By Mike Masnick, Wed Jun 09 23:15:00 GMT 2004

Siemens has invested in Xingtone, adding more legitimacy to a model that involves routing around carriers' garden walls. As much as they may want to block outsiders, some trends are unstoppable.

There's been a lot of talk lately about the "walled gardens" that many wireless carriers believe they need in order to get money from content. While some analysts have mistakenly suggested that carriers keep up the walls to protect their business models, this misses the point. The walls can't be kept up, because users don't want them up.

While carriers have been able to make some money off of ringtone and other application sales, they seem blinded to the possibility that this is an economic situation that can't last. They've set themselves up in a position where others will quickly come in and crash their market. While they may like to believe that the trend lines will continue forever in their favor, history has a way of showing they're wrong. Closed systems only attract open systems, and those open systems bring down closed systems quickly.

So far, the carriers and the recording industry have been so thrilled with the money they're making off of ringtone sales that they've pretty much put their head in the sand when it comes to potential competition from the outside. Part of this is because they've been able to gain more "ownership" of the customer lately. Services provided by the carriers get a lot more attention than those provided by the handset manufacturers -- and carriers are looking for any advantage to gain more ownership over the end user. However, the handset makers aren't sitting still.

Siemens' venture capital arm today announced an investment in Xingtone -- the company which offers an application that lets users make their own ringtones (from music they already own). The simple fact is that people want this software, and as much as those who benefit from the existing system dislike it, they will be forced to play along. While the carriers may not like it, the pull by the handset makers to take some customer ownership back from the carriers helps guarantee an ongoing push towards more open systems. Each time one side tries to put up barriers, the other has incentive to provide users an open system, and watch them gravitate towards it.

The most ironic part, however, is that this shouldn't be seen as a negative for the existing carriers (or, even, the recording industry). By opening things up, they make their services (and content) more attractive and more usable, which opens up new opportunities to benefit. They may not be as easy and direct as selling ringtones, but just getting more people to use their mobile phones in advanced ways (and getting more people to listen to sample more music) should be viewed as an opportunity more than a threat.