Carriers' future uncertain in "Wild West" of mobile web

ISPs must develop strong applications and content to remain relevant, panelists say

Carriers and ISPs will soon face a do-or-die moment for their mobile Internet revenue streams, as increased competition and open networks take away their ability to tightly control what users download and how they experience the wireless Web.

Carriers and ISPs will soon face a do-or-die moment for their mobile Internet revenue streams, as increased competition and open networks take away their ability to tightly control what users download and how they experience the wireless Web, said panelists at a Mass Network Communications Council breakfast Thursday morning.

"The genie is out of the bottle," said George Grey, the CEO of photo-sharing application developer SnapMyLife, about the open mobile Web. "While 90% of the phones being sold today are extremely limited, the iPhone and Google's Android platform are a sign of things to come."

Steve Krom, AT&T's vice president of mobility for the New England region, acknowledged at the MassNetComms panel that many carriers simply do not yet know how much they will profit from advertising revenues generated by an open mobile Internet.

"We're at the early stages of understanding what are going to be successful business models," Krom said.

But many panelists said it would become critical for carriers and ISPs to develop their own unique brand of content and applications that would drive advertising revenue. The problem, they said, is that carriers won't only be competing with each other but with other tech companies such as Google and Apple for advertising and service dollars.

"On my iPhone, I don't pay AT&T for the content I'm consuming," Grey noted. "I use iTunes and I pay Apple."

Rich Miner, Google's group manager of mobile platforms, told the panel that he foresees a dim future for ISPs if they can't manage to expand their revenue base beyond guaranteeing access to the Internet. Miner said ISPs and carriers could take a cue from IBM, which has in the past opened up its software patents to developers and has remained a profitable company.

"The iPhone is an example of a trend and it isn't great news for the carriers," he said. "With a lot of these new devices, it doesn't seem that the carrier is participating in the Web. That speaks to the changing world where carriers have to figure out how to make money through content."

Sarah Fay, the CEO of advertising agency Aegis Marketing North America, said while she was optimistic that carriers and other tech companies could make money off of mobile advertising, it would take a lot of time to convince companies to invest heavily in mobile Web advertising after some of the negative experiences companies had trying to advertise online during the dot-com bubble. The trick with mobile advertising, she emphasized, will be to make it directly relevant to the location of the mobile device. For instance, a mobile device that happens to pass through a certain area could display ads for stores that are having sales nearby.

But even more important than making the ads relevant for mobile device users, she said, would be ensuring that the ads are not overly annoying or intrusive.

"Does anyone remember how they felt the first time they encountered a pop-up ad? Well, we can't do that," she said. "In mobile spaces, we really need to focus on what industry best practices are. There is a lot of work to be done on the carrier side, but the good news is there are lots of opportunities for innovation."

The bottom line, agreed the panelists, is that the wireless Web is going to be a fixture of the data services market in the United States for the foreseeable future and that carriers will have much less control over how their customers use those services than they have had in the past.

"We're seeing certain demographics of customers now that are using the iPhone as their primary Internet devices," said Krom. "We're still in the early stages of how this market is going to evolve, but the good news is that it's not just about Google or AT&T making money, but how the industry as a whole can evolve the whole food chain to make money."

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