wireless can be rich as croesus
March 25, 2008
By Tom Wheeler
If the goal of these occasional musings is to stir the pot, the feedback on the last two articles suggests mission accomplished. January’s piece asked why it continued to make sense for wireless carriers to build and operate duplicate networks. Then February added insult to injury by questioning the future of carriers’ huge retail footprint. Now I can admit that these were just a setup to emphasize, in contrast, the bright future of the third leg of the carrier business model: the relationship with subscribers.
As networks become ubiquitous and functionally equivalent they become commodities. As penetration reaches 100 percent retail outlets become service centers rather than sales centers. The only major component of the wireless carriers’ business that strengthens over time (and cannot be bypassed) is the monthly exchange with subscribers.
“We have your phone and are holding it hostage until you pay us,” is how my friend Eric Goldberg describes the carrier-consumer relationship. The description may be a bit stark, but it is the foundation for a great relationship and a powerful business proposition.
In the Philippines it is the basis for the annual transfer of $14 billion between mobile phones, principally by the unbanked. In this country over 25 million households don’t have a bank account, yet I bet the majority of them have a mobile phone. The mobile device banks the unbanked elsewhere in the world and can here, too.
In Korea the mobile phone bill is replacing the credit card bill, especially for small payments for online services. Last year Korean carriers collected $1.3 billion from their subscribers in behalf of other merchants (and kept a piece). Here in the U.S. a start up named GoMoBo enables wireless subscribers to place a take out order via SMS, but the charge goes onto a credit card. Revenue from a transaction they enabled is slipping through carrier fingers.
We all know the expression “Rich as Croesus.” This 6th century B.C. king of Lyndia (along the Ionian Coast of modern Turkey) built the economic model that could also define the 21st century wireless business. By replacing commodities such as salt or oxen with small round ingots Croesus primed the pump of commerce and created new markets. The famous wealth of Croesus came from how the easy-to-use coins grew the economy. It is the same opportunity wireless carriers have today: to create a new currency and enjoy the rewards.
But wait, there’s more! The future for wireless carriers doesn’t stop with mobile transfers and mobile payments. Opportunities abound to turn the relationship with the subscriber into revenue-producing services. Now that the FCC has ruled that data from non-voice Information Services is not Customer Proprietary Network Information (CPNI) whole new horizons beckon. For instance, knowing what searches a subscriber made allows the carrier to recommend other sites, just like Google. Add to that the consumer’s location during those searches and wireless carriers can out-Google Google.
The relationship with their subscribers is the carriers’ greatest asset. And the beauty of this relationship is that it is hard to disintermediate. At a time when the traditional network business is threatened with being simply a pipe this alone should attract management’s interest.
Twenty-seven centuries separate Croesus and the modern wireless industry. The story, however, is the same: the party that facilitates the flow of commerce reaps economic rewards.
Tom Wheeler is a Managing Director at Core Capital Partners, a venture capital firm specializing in early stage technology-based companies. He has been CEO of both the Cellular Telecommunications & Internet Association (CTIA) and National Cable Television Association (NCTA).