May 3, 2011
By Tom Wheeler
Wireless carriers (in Europe they prefer to be called “operators,” a term that eschews the concept of carriage while emphasizing participation in a broader ecosystem) have been calling for the Internet companies to pay for access to their networks. This so-called “two-sided” revenue model has both the consumer and the content provider paying for use of the network. The operators argue that Google, et al, pay content delivery networks (CDNs) such as Akamai to facilitate the delivery of their content before it is handed off to the wireless network; thus, why shouldn’t they also pay for the wireless last mile?
The Internet companies, in response, point to the consumer as the appropriate party to pay the carriers. If the consumer wants the ability to receive ever-increasing amounts of data services they should pay for it, just like the consumer pays for more legroom on an airplane.
This is where the sign in the windows of London identifies the problem. Competition among networks for customers has put the consumer in the enviable position of being told they won’t have to pay for access to Internet services. “Free It” the advertisements of British network operator 3 proclaim to promote their unlimited data plan, for instance. The policies that created wireless network competition have trapped operators between holding market share and giving away capacity for ever-increasing data demands. So long as there is one carrier willing to offer its capacity at a low price (or for free), the other carriers must play along thus bringing those who run networks to loggerheads with those who use the networks.
While wireless operators are pinned down fighting other network competitors the folks from Silicon Valley have been operating behind the lines to gut the networks’ major asset. Knowledge of how the network is laid out and how consumers are using that infrastructure has been ripped off by Google and Apple. While the recent news media kerfuffle about Google and Apple devices storing and reporting user location information has been portrayed as a “bug” or a software “mistake” it is far from such an accident in reality. When Google pings its Android software 1,000 times a day with instructions to send information back to Google’s computers, it I hardly a “bug.” [Admittedly, “bug” was a description used by Apple, Google’s canned statement prattled about “a better consumer experience”].
One would think that the most important information a network operator has is information about the network itself and the behavior of its users. Google and Apple, however, got the network to rat itself out by collecting and transporting this information to be accessible by Apple’s and Google’s computers. The amazing thing is that the network operators allowed it to happen – but the fact that it did happen is prima facie evidence of how network operators are culpable for the decreasing importance of the networks themselves.
Perhaps it is understandable how a network operator could see the world differently from a consumer service provider. Nevertheless, the wireless world has moved from a network-facing business to a consumer-facing business. “I run a network” has been replaced by “I relate to consumers.” How services interface with subscribers in the differentiator – and there is still an opportunity for network operators to regain this lost ground.
Since Apple and Google have shown their true colors regarding consumer privacy, network operators could become the consumers’ privacy protector by not allowing such information to pass without consumer consent. It’s not that the use of information is bad – it’s whether I as a consumer have any control over the use of the information I create. A trusted wireless operator could become my information banker, securing my privacy and permitting withdrawals on my terms rather than Silicon Valley’s terms.
If wireless carriers are truly going to become “operators” participating in the broader ecosystem their focus needs to shift from running networks to managing the information created by the 21st Century’s digital networks. The Silicon Valley mafia hijacked that information, but they could quite possibly be in the process of blowing their escape with the goods by exposing what they were really up to.
Rather than a Quixotic search for the two-sided payment Holy Grail wireless companies can go for the gold of the 21st Century – a new paradigm for use of the information created by an all-IP network. The key to that shift is the information in the network itself. A company with a consumer-facing orientation would recognize it’s all about information, not infrastructure.
Tom Wheeler is Managing Director of Core Capital Partners, a venture capital firm specializing in early stage companies, including next generation wireless services. For almost a dozen years prior to joining Core Capital he was the president of the Cellular Telecommunications & Internet Association.