Monday, February 14, 2011

Dumb providers of dumb pipes

The Financial Times reports that European mobile phone operators plan to hold a meeting next week in hopes of charging content providers for delivering data traffic. As the paper so dryly put it:
told the Financial Times that there could be “no free lunch” for the content providers.

Franco Bernab√®, chairman of the GSMA, the mobile operators’ representative body, told the Financial Times that there could be “no free lunch” for the content providers.

Mr Bernab√®, who is also chief executive of Telecom Italia, Italy’s leading telecoms company, highlighted how fixed-line and mobile operators were spending billions of euros upgrading their networks to cope with the rapid growth in internet video traffic.

He complained that content providers were “heavily using our networks but just don’t contribute to the development of our networks”.
I understand that operators resent the failure of their walled gardens and are in denial about being consigned as commodity providers of dumb pipes.

If it’s too expensive to provide network access, why don’t they charge more? OTOH, if they start reaming people for data access, who in the heck do they think is going to pay to use their networks?

Perhaps in some of the countries a cozy duopoly holding two-thirds of the market hopes to forestall competition by striking a common position against content providers and consumers.

However, in most countries there is usually one desperate challenger seeking market share who will do what they can do to gain a foothold. There are also operators hoping their LTE networks will provide new traffic and revenues, as well as Wi-Fi and other substitutes available.

Finally, there’s this little matter of the mobile Internet — as the iPhone proved, it’s the whole reason people buy smartphones in the first place. So if people can’t get access to the free Internet, why would people want a smartphone? Goodbye free Internet, say goodbye to ARPU.

In short, this plan of the operators is a dumb idea. I wonder how quickly it will take for the operators, content providers, regulators, consumer advocates or the business press to figure this out.

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