A massive can of worms has been opened by the comments from Telefonica’s CEO about charging search engines for access to the mobile networks.
As we see more internet-y type acitvity through the mobile networks, we are heading for a major clash of business and culture between mobile operators and the internet. The basic problem is a simple one: the mobile business model is to charge for stuff, the internet business model is a free one.
I will qualify this a bit more. The problem for the mobile networks is that they have to run massive engineering operations. They need 1000s of base stations, switching networks and so on, all running 24hrs a day. Not only that, but they have to pay governments billions of pounds to buy a licence to run their network.
On the other hand, Mr Google does not to set up an infra structure to have their search engine. They do not have to buy a licence to run their search engine, nor for their PPC or anything else they do. Of course, Google in particular do have some infrastructure costs – millions of servers for starters, but the basic communication infrastructure, The Internet, already exists. And it’s essentially free. The free model of the internet goes back to its inception first with The Well and then the decision of Tim Berners Lee to give away they key software: http/html to the world. The internet was essentially established by hippies and anarchists (hoorah).
On the flip side, most telecoms companies are from a very non-hippy, non-anarchistic background: in the UK the first providers represented Cellent (by BT, newly privatised ex-nationalised industry), and Vodafone (ex-Racall, the communications company specialising in military comms in particular). ‘Free’ never entered into the thinking of these companies.
So now we are seeing a real clash of these cultures. The telecoms companies do not understand why things should simply be ‘free’. However, most of us are used to the free-ness of the internet, and it makes no sense that we should have to pay to use it, even through our mobiles. The operators began to address this well a few years ago. Introducing flat-rate data plans mirrored the traditional landline experience where you pay one charge and for that you get your internet access.
The problem for the operators now is that they will pretty much max out their data revenues in a few years. In other words, anyone who wants a flat rate data plan, probably has one by now, or will be getting one shortly. However, for operators, internet access (or data), is an expensive thing. The O2 CTO (parent company, Telefonica), pointed out a couple of months ago that downloading one YouTube video could use as much data as 500,000 text messages sent simultaneously. Arguably, they missed a trick some years ago when they set up the 3G networks. It seemed obvious that data, as in internet connections, would be big, yet it seems like the operators never really planned for it, or at least not for the size it would turn out to be.