Mobile users want simpler tarrifs. No kidding?

A recent study by Volantis and YouGov found that nearly half of those surveyed would be more likely to sign up if operators offered a simpler contract. No surprise really. Anyone who has had to renegotiate their contract, which is basically all of us, have had to go through a mine field of confusion and arguably misleading information to find the right contract. Underlying it seems to be a rather cynical approach by many networks to find as many revenue streams as possible.
From a mobile marketing perspective, this may not appear to have an impact, but the potential is significant. If consumers get their way, then the likely effect is that mobile revenues will be further squeezed. As a result the mobile marketing channel will become a more significant source of revenue.
More worryingly from a mobile marketing perspective, is the fact that 33% of those with internet capable of phones do not actually use internet access at all. Of those who do, three minutes is the average surfing time. Considerably less then the fixed web. The fact that so many people choose not to use the mobile internet will inevitably be a barrier to the mobile marketing and advertising channels. Whilst SMS will remain king, for mobile marketing to come of age it will have to move beyond just 160 characters of text.
Whilst we will never see 100% mobile internet usage, Volantis believe that it is now reaching the tipping point: ubiquitous enough to be used for most advertising campaigns.

Operators to charge search engines?

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.

Will Google and Apple Force the Mobile Networks to Rethink Their Business Model?

For some years now, there has been a major division between the internet and mobile economies. The internet is largely free to user and the mobile isn’t. Google has made an art form of the free model, releasing all kinds of apps, including mobile ones at no cost. On the other hand, the networks charge for almost everything.

As one Orange executive once told me ‘We do not understand any customer unless there is a billing relationship’. In other words, unless the network is charging them for something they are not considered to be a customer. The iphone has moved the mobile smartphone market forwards, by offering a genuinely seemless mobile internet experience. Just like your PC the internet is just ‘there’, it’s always on.

As soon as that happens, adding all kinds of internetty applications – not just games, but maps, weather and so on, become standard. The evidence of the success is from the iphone Appstore and the results which show that Apple’s users access the internet considerably more than others. Whilst Apple’s entry into the phone market has been to produce a great handset and beautiful operating system, Google’s entry has been less glamorous, but potentially more significant.

Google started by building some excellent mobile applications – for example maps and email – and has now launched it’s own OS. And now everyone’s doing it! Expect 2009 to be the year of the smartphone and the year of the application store, Microsoft will be launching Bazaar this year. Low cost computer manufacturer Acer are launching their own smartphone and the inevitable application store.

The problem for mobile networks is that the offerings from these companies challenge their traditional billing relationship. Why pay for a call when you can use Skype (available for both iphone and Google phone)? Why use SMS when you can use instant messenger? Why send an MMS when you can email your pictures, or upload them to your Facebook? Why SMS to Twitter when you can send it for nothing with a Twitter app on your phone? Even location services, which were previously the (expensive) monopoly of the networks will be opened up with Google Latitude. Apart from the basic data cost (typically around £7.50-£15 per month), users can do pretty much everything on their smartphones without having to pay for them. The money in mobile will be in paid apps and mobile advertising. So the networks have a dilemma. Do they embrace the new free(ish) world of mobile or carry on regardless and make money while they can? Given their past form, I suspect it will be the latter.