Just about everyone I talk to is very excited about mobile Internet. In 2006, the Japanese government proudly announced that more people used the Internet through their mobile phones than through their computers. Online services are all talking about their "mobile strategy" and VCs are flocking to fund the latest "mobile startup".

I don't think there is anything wrong with mobile or with some of the great new mobile applications and devices, but we have to be careful to remember that most mobile networks that actually work are built on infrastructure that is operated by a small number of mobile operators who use a lot of regulated and closed technology.

The reason that we have vibrant startup driven innovation is because the Internet is open by nature. Anyone can participate without asking permission and anyone can compete with anyone else at every layer of the stack. This DNA of open and free competition (except for the occasional semi-monopoly) is what allows startups like Google to come in and displace incumbents. If it weren't for the Internet, I'm positive that the telcos would have determined that it was the most efficient that THEY design and operate the "online directories".

We can criticize Google for becoming large and dominant in the market, but a huge percentage of the money that Google makes goes back into distributing money to startup companies and even non-profits like Mozilla. Google acquires many companies and buys equipment from vendors that mostly create open platforms.

The money that the mobile operators make mostly goes to boated and expensive internal R&D and paying for equipment from a small number of vendors that make the telecom equipment.

In 2006 in Japan, mobile advertising was only $330M vs Content (Ringtones, Song-tones, Games) at $2.2B and Commerce at $4.7B. (http://www.johotsusintokei.soumu.go.jp/whitepaper/eng/WP2007/2007-index.html) Although all of us are experimenting with advertising and advertising is increasing on mobile, the overwhelming percentage of money spent on mobile devices goes to paying for and the collection of payments for a small number of not so innovative products from a small number of providers.

I don't really blame the carriers. In most countries they are struggling to operate with the burden of a huge auction purchased spectrum license on their books. In most countries, they are heavily regulated. The fact that they are typically a small group of government licensed businesses make them an easy target for regulation that also increases costs and lowers competition.

For example, there is a move on the part of the Japanese government to provide content filtering to "protect youth" from "bad content". The Net is trying to fight this sort of filtering system that would regulate content on the Internet. In the mean time, the government quickly forced mobile carriers to implement a content filter for minors which is now in place in Japan. A mobile Internet is much easier for governments to regulate and control and make "safe" against the bad guys as well as small annoying startups and disrupters.

People point to the hacked iPhone as an example of how "we're making mobile open." I do applaud it and I think it's great that we can now run our own apps on the iPhone. However, what do you get at the carrier level? Yay, you now can chose Vodaphone or Sprint instead of AT&T. This doesn't solve the basic problem that at the carrier level, we're still closed.

In the short term, MVNOs like e-mobile will help drive prices down, but they are still built on an architecture that isn't really open to competition and the prices will only go down so far. What we need in the long run is open spectrum and alternatives to 3G.

In Japan, services like Mixi have announced that their web usage is decreasing, their mobile usage is increasing and that more of their users are using their services from mobile and than the web. I don't think mobile monetizes as well (for the company) as the web. I think that if we move over to mobile too quickly we're risking moving our game to a platform where the DNA is not what we're used to on the Internet and most importantly, putting money in the pockets of people who do not redistribute it to startups, but instead feed giant vendor ecologies instead.

Maybe those smart companies in the mobile space like Vodaphone and Nokia who see the future should create a fund to invest in open innovation on mobile. We definitely could make the argument that in the long run, a healthy ecology on mobile is better for at least the strong companies involved in the ecology, just like the Internet increase the telecom economy as a whole. It reminds me of the big oil states investing in alternative energy. If this could happen, this could be a good thing and I'd be happy to help. ;-)

23 Comments

I read a lot of comments about telcos and about the internet. I worked for many years in the development of regulation of telcos and mobile companies. This is one of the best, clearest and most succinct set of comments I've ever read analyzing the relationship and tensions between the two network environments, as well as explaining the dilemmas confronting those whose work involves developing business models for the new economy and regulatory policy for electronic communications networks and services.

From a programmer point of view, lacking of a unified and open applcation platform hurts the mobile internet/innovations as well. (J2ME, WAP, ... just don't work) One man shop (or small studios) just can't afford the cost of testing their new applications/ideas on all the mobile devices in the market. Don't mention trying to solve the issues/bugs between all different devices.

Things might be better in Japan because carriers control the spec of mobile devices, but I do hope that the mobile platform fragmentation will come an end in the near future.

Well said. I'm a VOD shareholder, and here in the UK the non-voice aspect of their ARPUs is tiny. This is all the more shocking when you consider that handset penetration is close to or at 100% - much larger than the penetration of PCs. To me, this indicates that a lot of people who should know better are experiencing cognitive disconnect about the "mobile Internet." WAP was a tragedy on just about every level you can name, and almost eight years later the user experience of mobile services is (for those that can afford it) still barely worth the trouble.

But perhaps this says more about the level of ignorance about what made the Internet what it is. I think our post is the best angle on the analysis of why mobile services appear stillborn.

Joi - Have you come across Vodafone's mobile app developer community platform, Betavine? Sounds like just what you're talking about:

http://www.betavine.net/

hopefully wimax + open access + the big google would change this...

Excellent post, I totally agree with you.

Mobile web has the advantage of ubiquity, but is not the best in usability. So I think it will keep being a "last minute" tool.

@Luke Razzell

"Sounds like just what you're talking about"

Er, no. That's exactly what Joi is NOT talking about in fact. Read his post again - it sounds like you might need to read it several times.

Joi Ito your wrong, all due respect. You spend too much time on your laptop and pcs on your planes and hotels and do no real work. Us real workers spend our working time on actual pc's to work (programming mostly and everything else) and then our mobile devices "in my case phone/internet mobile device" for leisure time (toilet and train and all the rest of my research/socializing). I use my laptop for movies..... Yes I am an American programmer in Japan, specifically Nagoya. I've worked for all the "start-ups" in America - Intel, HP, Apple and some others. I was programming in Campbell when I was 13 years old which is in time and space was right next to Cupertino when Apple was just starting abet I was on the PC side of it.

In Japan we are on the brink of mobile evolution where almost everyone else on the planet is falling behind and will soon follow. The hardships you state only open a door which I easily walk through. I'd almost call it FUD which you spread sir .

Currently we are working on mobile technology with video, photography, and social with plenty of money backing us ( not that we need it because our product is simple and ingenious) . It just take brains that the internet pyramid money schemes don't have and we do.

Thank you for your time.

Steve: Yes, open door to a closed Internet I think.

I think the true root of this problem is part government, part carrier. Governments have somewhat assisted in created a sector where over-regulation and lacking of initiatives to create more market diversity as in all the developed nations at least, communications become more and more privatised in the past few decades. Then again, nearly all these nations only started with one company building the majority of the infrastructure, since 70 years ago only one could. Really, this is not something we could have avoided so easily. I don't think in the previous century as one company rolled out copper/mobile towers as society became massively adopting the telephone to an entire nation anyone was paying too much attention to future concerns of competition and openess.

Just how did Generation X survive without the mobile phone?

steve, also in Japan, I can see more and more people using smartphones (e-mobile) and eee-pc-likes in the street/train/toilet (i guess ;) )... Seems to me that they use web-based services and applications much more than the services proposed by their phone company, except for games, so far.

The carriers have a lot of money but still, any 100% free and amateur web mashup google-maps is way better than stuff like KDDI-navi... how comes?

Moreover, what annoys me with proprietary software is that the information is controlled by the carrier and made for the masses. It's usually crap (I'm thinking of tourism or food information).

Soon the carriers will have a real competition with the open internet, and I wonder if they can keep their advantage.

regards

Interesting to read this here.. I was just having a similar conversation with somene who styles themself as some sort of blue skies researcher at RIM, and who couldn't think his way out of a paper bag. I'll be a lot more frank with you than I was with him.

So here's the thing: there's a perception out in the world that the carriers are interested in being AOL, selling overpriced centrally controlled content by leveraging their status as the carrier. This is mostly driven by analysts who look at the current business and see AOL as the most similar model. This is deceptive because it's a view of a snapshot, not of a process.

Which is why it's wrong.

At least from the network's point of view, the function of the current content model is to give the users something to do with our expensive 3G networks until there are enough apps and enough content out there that the users will be able to slurp up the bandwidth with whatever they choose.

Don't get me wrong - the content unit is profitable - it pays for its keep and then some, but it's a tiny fraction of the network revenue, and it adds a layer of complexity at an organizational level that makes it dangerous. It forces all these network companies to also be content companies, and we both know they're *not any good at that*. The bit you're missing from the picture is, *they know they're no good at it too*.

They want to be bulk carriers. They have the last mile locked down in the same way the phone companies do, with the BTS network and the spectrum. It's the business they know and in which they have little competition. Why would they stake large amounts of attention, focus or capital getting into a space where the barrier to entry is nil, and historically nimble imaginative startups displace incumbents all the time?

Don't get me wrong. As any large org, they have their stupidities and their blind spots, but they're stupid and blind about things that networks are stupid and blind about. They know they're just seeding the channel on the content front.

And you're right in that the money they generate goes into large vendor ecologies.. but then, so does AT&Ts, Comcast's, BT's and so on.

Once there is enough content out there that users are consuming all the bandwidth they can sell without any content, the content teams will shrivel up or automate entirely, becoming stubs or ghosts. There's no long term play there for them. As people come to see their phones for what they are - just nodes on the internet with voice attached, they'll come to have expectations like they have of their home computers, but for that, the phones have to be like their home computers, which really means, the content available to their home computers has to be available on their phones. The sites and services they use, or inheritors and descendents of those services, have to be easily findable and mobile optimised.

Me.. well, i have google set as my phone homepage, and i use it primarily for google maps, wikipedia, blogging, gmail and fring. Can't play WOW on it yet, and can't bittorrent to it (though really, not sure I want to, given the limitations of it as a media device), but that's what we, inside the content divisions, see happening.

It's true that Betavine can't address the problem of the giant vendor economies, nor the way obsessive ARPU tracking still rules corporate decision making amonst the Operators, but Vodafone IS taking a very real step towards supporting infrastructure that is not operated by itself and is not a closed technology.

It genuinely is an open innovation platform, and is taking a stab at addressing the horrendous fragmentation issues across devices and platforms by providing a central (technology agnostic) resource hub and some nice tools for early alpha and beta testing.

Full disclosure - I've been working with them on this initiative for the past year, but I do think it's fair to defend it as an excellent and brave first step for an operator to be making towards throwing the doors wide open and moving away from the usual proprietary-think. I genuinely hope that this initiative will make a real contribution towards the development of a healthier ecology on mobile.

I agree with ninjacodemonkey - most operators are pretty aware of what they are bad at (such as content), and are struggling to find a new business model at the emerging long tail of what's going in mobile when you run a billion pound business built on voice. But just imagine if they could find a better way to solve the distribution and discovery barriers that currently slow down innovation....let's cheer them on a bit.

You mention that Nokia or Vodaphone should create a fund to invest in open mobile innovation, but I'm thinking this has already been done by Apple and RIM.

i am somewhat concerned about the effect of the radiation. i mean with all the radio, tv and wireless waves that surround us evry day, is there no elevated risk of cancer or other anormalities?

I have the same sentiments about feeding clunky expensive vendors.

Even with the companies that supposedly "get it" (Nokia and Vodafone), every move made under the guise of "openness" is just to lock applications and contents into their platform. Sure, they are engaging the developer community, but only for their platform. Sure, they participate in standard bodies, to standardize what they've already implemented.

The positive trend, though, is the increasing number of operators with flat-rate data plans without locking you into their stupid portal/deck. Japan's silly content filtering bill is very unfortunate, as it was a hasty decision made by clueless politicians.

can stop laughing about the dog bowl....

Joi -

My view of the "mobile internet" is the very simple set of web sites which adhere to minimalist design and function and support the activities necessary for mobility. Thus the page which gives me real time information about the bus location, the mobile version of the Socialtext wiki, the mobile Twitter client, etc are the key ones.

I keep a list at http://www.monkey.org/~emv/m which I bookmark in my blackberry.

Note than none of these have or need any vendor or carrier buy-in short of having the minimally functional web browser on the mobile phone or device.

I have not seen anything that makes me believe there is enough of a market yet for advertiser-supported content in the minimalist mobile browser space, between the small screen, slow bandwidth, and small user base. This means you have the ideal case where it's a cost to develop these and the dev platform is very simple and there's room for innovation due to user need, not advertiser need.

Thanks, good review. I was just having a similar conversation with somene who styles themself as some sort of blue skies researcher at RIM, and who couldn't think his way out of a paper bag.

without a doubt mobile internet is great!

Access to a plethora of services and content on the Internet via a mobile phone seems to be the new buzzword in the technology driven world. The article analyses the growth and potential of the mobile internet as well as its differences with the growth story of the wired Internet. It points out that while the Internet is designed to be open, the mobile infrastructure is closely held by a few large telecommunication operators. This makes it easier to regulate and control which conversely stifles innovation and development. Thus while the mobile internet may be the next big thing, it needs to break free of control of government and the service providers to really rival the Internet in growth.

Mobile internet in Shanghai is about 100 RMB each month... i went to japan and spent $100 in two weeks.

I am interested to know more about satellite or radio-wave internet services.

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