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How carriers can innovate in the superphone era

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There has never been a more difficult time to be a mobile carrier: Voice revenues are shrinking, networks are approaching capacity and the rising cost of handset subsidies is eating into profits. And while U.S. consumption of mobile data is up 89 percent, according to recent figures from Nielsen, the price of data has dropped 46 percent per megabyte over the past year. Oh, and the constant threat of becoming dumb pipes looms larger than ever.

For most consumers, though, carriers still play crucial roles beyond simply connecting us to the network: They deliver our messages, store important information like contacts and voicemails and primarily determine which apps are on the handsets we buy. But in order to stay relevant, carriers will need to embrace new services and business models. Here are a few ways that they can better leverage their position.

Innovative messaging services

As Ewan MacLeod of Mobile Industry Review wrote last week, voicemail is “an irrelevant afterthought” for far too many carriers. Security is nearly nonexistent, as evidenced by the recent hacking scandals. Meanwhile, basic voicemail services limit consumers to storing a handful of voicemails at a time, and they often force users to re-save those messages every month.

Operators should look to third-party services like Hullomail, which integrates messaging options (such as sending voicemails to an email address), and social networks, which enable users to share messages with their friends through a single interface. And they should provide vastly increased storage for those of us who want to hold on to voicemails from loved ones for years. Verizon Wireless provides a few of these features through its $3-a-month Visual Voicemail, but the service is inferior compared to some third-party offerings and is utterly unmarketed by the carrier.

A piece of the app pie

Apple and Google have built entire app ecosystems without the help of their carrier partners, but there is still room for operators who can provide value. As my colleague Ryan Kim noted earlier this week, Exent is launching a Netflix-style gaming service that provides unlimited access to dozens of Android games. The company plans to partner with unnamed network operators to offer the service under the carriers’ brands, providing carriers with a new revenue stream and giving Exent highly valuable distribution channels. (Sprint followed a similar strategy several years ago with its Game Lobby, a mobile gaming community provided by a third-party company. The effort was fairly successful even before mobile gaming took off.)

Carriers and their partners could help solve discoverability problems by showcasing applications, embedding free versions on the phone and taking a cut on the premium version. Operators also could create branded Android stores that cull only the best and most popular titles, eliminating the hassle of Android Market’s overstuffed warehouse. That’s what Verizon Wireless is trying to do with its VCAST App Store, but the carrier has yet to explain why users should shop at its new distribution channel as opposed to Android Market.

Collaborating on the mobile wallet

This week the carrier-led mobile payment initiative Isis took a big step toward its goal of creating a unified payment platform by locking up agreements with Visa, MasterCard and American Express alongside its original partner, Discover. The move follows a similar strategy from Sprint to integrate with existing credit card accounts, and it is much wiser than Isis’ original plan to create a mobile platform that would have competed with the credit card companies.

That newfound collaboration could be the key to carriers’ success, because consumers don’t want to create entirely new accounts that have carriers play the role of financier. And as I’ve said before, applications that bring value to transactions will be crucial for mobile payments to thrive. If carriers can help provide that value, they will be elbowing their way into the revenue stream.

Carriers have historically failed to create viable businesses beyond simply charging users for voice and data, and they seem incapable of developing new business models. But there’s still enormous opportunity for any operator who can break free of those old models and create innovative new ones.

Question of the week

How can carriers better monetize the exploding market for mobile data?