Walled gardens to come a-tumblin' down?

Chinks appear in traditional U.S. cellular model

Industry analysis by expert Joanie Wexler, plus links to the day's wireless news headlines

The traditional U.S. cellular business model has long elevated mobile network operators to the status of the country’s exclusive cell-phone sales channel. However, that model is starting to crack.

Historically, U.S. carriers have subsidized the cost of handheld devices that work only on their own voice and/or data networks in return for a subscriber’s signature on a lengthy contract. The result has been that mobile phones have been locked to a given operator’s network, branded by that operator, and customized with the carrier’s user interface. The carrier has often disabled features built into the phone by the manufacturer and restricted access to mobile services and content other than its own offerings.

Some industry developments show signs that this model is starting to crumble. One was Nokia’s decision last year to open up its own U.S. retail stores and sell its handsets under its own brand rather that relying solely on the operator channel. Last month, the company also launched a Web-based mobile content, gaming, music and social networking portal, called Ovi, which bypasses the operators’ portals.

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The traditional U.S. cellular business model has long elevated mobile network operators to the status of the country’s exclusive cell-phone sales channel. However, that model is starting to crack.

Historically, U.S. carriers have subsidized the cost of handheld devices that work only on their own voice and/or data networks in return for a subscriber’s signature on a lengthy contract. The result has been that mobile phones have been locked to a given operator’s network, branded by that operator, and customized with the carrier’s user interface. The carrier has often disabled features built into the phone by the manufacturer and restricted access to mobile services and content other than its own offerings.

Some industry developments show signs that this model is starting to crumble. One was Nokia’s decision last year to open up its own U.S. retail stores and sell its handsets under its own brand rather that relying solely on the operator channel. Last month, the company also launched a Web-based mobile content, gaming, music and social networking portal, called Ovi, which bypasses the operators’ portals.

Another indicator of changing times is the stated intent of Xohm, the Sprint Nextel WiMAX venture, to do away with device subsidies, required contracts and proprietary data services on its WiMAX network. Its plan is to allow customers to buy handsets at retail stores, activate their devices, connect to the network and select a daily, weekly, or monthly service plan over the air. Contracts would be for those interested in getting a discount on rates, Sprint Nextel CTO and Xohm head Barry West has stated publicly.

The open-access condition of forthcoming services to be delivered in part of the 700MHz band (to be auctioned off in January) follows the “unlocked” trend, too. Admittedly, Verizon Wireless is challenging the FCC 700MHz rules in federal appeals court as unconstitutional. And at press time, FCC chairman Kevin Martin was rumored to be caving into Verizon’s pressure and fighting for revisions. Stay tuned for how that plays out.

Read more about wireless & mobile in Network World's Wireless & Mobile section.

Joanie Wexler is an independent networking technology writer/editor in Silicon Valley.