Francisco Kattan

Insights on the Mobile Ecosystem

Will Operators Miss the Boat with Payments Too?

I just read that Apple is rumored to be developing a digital payment platorm and this prompted me to post this article about another possible missed opportunity for mobile operators I’ve been thinking about.

For the longest time mobile operators have closely guarded important assets such as their customers’ location, messaging, and billing relationship.   As revenue growth from consumers is slowing, the talk in the industry is that operators should leverage these assets to generate revenue from third parties who value them.  For example, an application developer could incorporate location information to differentiate his application from the 1000’s of other apps in the app stores.   Another application could use text messaging for notifications, and a game developer could charge users on the operator’s bill to upgrade to a new level.

This all makes sense and would enable operators to avoid the same commoditization fate that the internet service providers already suffered.   The problem is that operators are not moving fast enough and these capabilities are now becoming available outside of the operator domain:

Location.  Any stationary radio source is a good source of location information:

  • Cell ID:  Google has built a huge database matching Cell ID to location.   Any application running on a device with access to Cell ID can querty its location from Google.   Most smart phones and java devices support this capability.
  • GPS:   Most smart phones support GPS now, but it’s limited to outdoor applications.
  • Wifi:  Companies such as Skyhook have built a database of Wifi hotspots (including your own home).   They drive every street sniffing all Wifi routers and storing their location in a database.

Messaging.  An increasing amount of messages now are going “over the top.”   Using the popular Facebook mobile application consumers now communicate with their friends and avoid paying text messaging fees.  Twitter is another example.   Consumers can also use email to send pictures instead of paying for MMS messages.

Payments.  With messaging and location becoming more commoditized, many operators are still banking on their ability to monetize the billing relationship with their customers.   A great idea, but operators need to move fast as this window of opportunity will also close:

  • Just two weeks ago Paypal announced that it will open APIs to its payments platform (afer TechCrunch published a leaked a confidential document)
  • Earlier Amazon had made its move (with it’s Flexible Payments Service).
  • Google launched Google Checkout
  • Apple already has a billing relationship with iTunes (used by the iPhone App Store) and is now rumored to be extending it to developers
  • Facebook is working on its Pay with Facebook platform

What are your thoughts?

Will operators move fast enough to monetize some of their unique assets?  or will they suffer the same fate as the internet service providers?

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Written by Francisco Kattan

August 6, 2009 at 12:58 am

4 Responses

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  1. Interesting blog. I’m a journalist and would like to talk to you about this offline. Please reach me at the email provided.

    Paula Bernier

    September 12, 2009 at 2:14 pm

  2. […] Rather than trying to regain control of location, operators should learn from this experience and move fast to monetize other assets before they too become commoditized.   Examples of these include payments and subscriber profile.   See also my post “Will Operators miss the Boat with Payments Too?“ […]

  3. A great example here is how folks with the kindle device can send and receive books without a wireless contract and also send/recieve email avoiding the need to maintain a carrier contract. What i still dont understand is will this feature on Kindle only work with a certain pre-established carrier technology, i.e CDMA from Verizon Vs UMTS from AT&T OR is technology agnostic with a backend server managing the communication integration?

    Naga

    March 18, 2010 at 10:37 pm

  4. Hello Naga. You bring up two issues:

    1) How Kindle works without requiring a carrier contract for the users. In the Kindle case, Amazon pays the carrier to deliver the ebooks to the consumers, so no need to have a contract with consumers. The cost of the data transport is bundled into the price of the ebook. It is a great model for the operators who would otherwise have to transport the content on a flat data consumer contract.

    2) Radio Technology. The Kindle works on GSM networks with whom Amazon has contracts. Initially there was a CDMA version that worked on the Sprint network in the US, but this was replaced with the international GSM version.

    franciscokattan

    March 18, 2010 at 11:07 pm


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