Carriers’ Dysfunctional Relationship With Apps

Carriers in several countries are providing the data consumed by the new Facebook app for feature phones for free for 90 days, while Microsoft today is investigating a third-party app on its phone that could download up to a reported 50 GB per day on Windows 7 (s msft) handsets in the U.S. Together, these stories are about different apps on different platforms, but they both expose the love-hate relationship carriers often have with applications.

Facebook’s new offering for feature phones is an easy example of the reason carriers love apps, and even need them. The GSM Association’s Mobile App Briefing site said Thursday that Dialog in Sri Lanka, Life in the Ukraine, Play in Poland, StarHub in Singapore, STC in Saudi Arabia, Three in Hong Kong, Tunisiana in Tunisia, Viva in the Dominican Republic, and Vodafone in Romania will all offer free data access for the Facebook app for the first 90 days.

For Facebook, this is a plus, as it gets its app freely available and usable on handsets other than smartphones. For the operators, Facebook is one of those killer apps that get people to sign up for data plans. It’s like giving cigarettes to soldiers in their rations — once you have Facebook on your phone, you won’t want to give it up, even if it’s an expensive habit. Now operators can convince more people to sign up for data plans on lower-end phones, expanding the lucrative plans across more of their subscriber base.

The Microsoft example is a bit more complicated for data-loving carriers. Reports had surfaced that Windows Phone 7 handsets were downloading more data than they should, even when the handsets weren’t actively in use. On a PC this isn’t a problem, as most people don’t pay for their broadband by the byte, but on phones, that’s close to what people do when they purchase a set bucket of bytes. For people on the 200 MB AT&T (s t) plan for example, every byte counts — much less the 50 GBs one subscriber allegedly saw. Even on a high-end plan, that’s a $15,005 data bill.

From a carrier perspective, issues like this are a pain. Because the operators have little control over which apps that people can download, when pissed off customers complain about unexpected data use, a carrier can either waive the bill, never knowing what the original problem was (or if it will repeat itself) or risk upsetting its customer. This is where apps and the app stores can wreak havoc on mobile operators. One can argue that the restrictive pricing plans play a huge role in this, but that’s a separate story and issue.

Operators need app stores to get people to sign up for lucrative data plans and boost the average revenue per user, especially as the value of voice declines, and many markets approach saturation for basic cell phone service. But the success of apps comes in part because there are so many options out there for consumers, and people can find whatever they want beyond the carrier-walled gardens. This opens the consumer to higher data usage as well as potential risks that ultimately they will call their carrier about, because the carrier is their point of entry into the whole system and owns the customer relationship.

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