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Are Carriers Killing Mobile Innovation?

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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?

6 Responses to “Are Carriers Killing Mobile Innovation?”

  1. Maybe they need to focus on the basics like not charging for incoming text messages. Why are we paying for incoming text messages when someone else has already paid for sending it? The rest of the world doesn’t pay for incoming messages. innovations like can work much better if wireless providers help push the evolution of text messaging.

  2. Alhouti

    Mobile Wimax is not going to be any less carrier-controlled than any other flavor of 3G and 4G. Sprint, Clearwire etc. wouldn’t be interested in it if it were.

  3. Martin Lawrence

    MNO’s policies in Europe are similarly restrictive. Though affordable flat data rates or bucket rates are progressing nicely in recent months, MNOs don’t remotely understand the concept of mobile ecosystems.

    I believe Japan – and maybe Korea – are the only nations where a wireless ecosystem is flourishing.

    Such policies are hurting both US and European wireless innovation potentials. And not helping the MNOs either. By clinging on to the controls, carriers wish to postpone being reduced to bitpipes. If anyone is moving things forward in Europe, it would be the Three’s Xseries, which goes so far as to include / implicitely tolerate VoIP. Interestingly Three is owned by Hutchinson Whampoa; proof that Asian companies understand mobile ecosystems.

  4. this article is right on. the internet in the US had the right ecosystem to allow for massive investment as no one owns or controls the Internet. unfortunately, the US wireless networks are a far cry from this setup.

    the state of affairs with mobile carriers in the US is disturbing. the wireless carriers exert their control over mobile technology companies similar to how russia deals with their oil companies. at any given time, they can tax or terminate a mobile technology provider. if there was a google, yahoo, or youtube company in the mobile world, the wireless carriers could enforce an onerous revenue sharing requirement in exchange for the right to “use” the wireless carriers network.
    let’s hope that technology companies rally and get support from washington to restrict this anticompetitive ecosystem. the US is already 2 years behind japan and europe and will slip further if the wireless carriers continue to provide friction to mobile adoption and innovation. case in point is paypal. they launched their paypal mobile payment system in may 2006, but were not able to work on the cingular network. this has crippled the paypal mobile roll-outs. i think that even google can not win this battle without government intervention. i am hoping that gigaom, techcrunch, the vc’s and silicon valley tech giants collectively rally to level the playing field for wireless rights and access.

  5. Anonymous

    Yes they are. I wish I could just pay $40/month for true Internet access, like I do with my computer.

    Could you imagine if there was a service tax for every website you visited. Or if certain applications were disabled because service providers didn’t approve or if it were competing with their offering?

    It’s ridiculous. The unfortunate part is that carriers even have the nerve to disable applications provided by the manufacturer.

    It’s really unbelievable, especially here in Canada. I keep hoping somebody will stand up to them. At first I thought it was going to be Apple, but they just made matters worse (and added with a pretty interface).

    I really hope Google steps up to the plate, when the time is right.