Are Carriers Killing Mobile Innovation?

Mobile might be the next frontier according to corporate leaders like Google CEO Eric Schmidt, but the market needs innovation to push the mobile web, and mobile services to the next level. At the Wireless Innovations conference in Redwood City on Wednesday, it was clear that many worry about the chokehold of carriers on the wireless ecosystem, which they say is cutting off innovation’s air supply.

On a morning panel, a few executives explained how innovation in mobile is getting shortchanged through the closed carrier-controlled business model. Salil Dalvi, Vice President of wireless platforms at NBC Universal, pointed out that the only platform that is open (and doesn’t need carrier involvement) right now is SMS, and even there you often need a third party aggregator to help out.

Until there is more openness in the market, there won’t be an explosion of innovation. I haven’t seen significant signs on that happening in the near term.

Sony’s Vice President of Programming for Mobile Entertainment, Bill Sanders, compared the attitude of carriers toward cellular-based mobile video, for example, to a gym membership — they hope you never show up because it costs them money if you do. “It’s a very odd way to go about it. Make something that’s entertaining but not quite.”

Sanders also said mobile broadcast services are an old media way of thinking: “Are we really going to move back to the day where everyone turns on the Ed Sullivan show on Sunday night? I don’t think so,” he said.

Some of the panelists were seeing signs that the carrier-controlled model was opening up, through Internet-style data plans and Sprint’s upcoming WiMAX network. But it looks like it’ll take a whole lot longer before any real progress is made.

Data from DowJones’ VentureSource presented at the conference showed that investment in wireless startups went down slightly in the first quarter of 2007 with $700 million invested in 55 deals. If that trend remains for the year, that would bring annual wireless investment down from 2006, though up from the years 2003 to 2005. The figures aren’t so bad for the quarter, but if wireless is such a booming sector, you would think there would be a growth in investment too.

Or is it that smart money is finally coming to terms with the futility of living in carrier-controlled ecosystems?