As you know, it is no secret to look to Europe and Asia to understand the future of new wireless services. As I mentioned in the past, having a hit wireless app can be a big play, but the chances of making it happen are far and few between, especially since business success hinges on relationships with the carriers. Look at what happened in China recently for what a change in mobile carrier policies can do to its partners. China Mobile recently made some changes in how their customers subscribed to wireless value-added services changing per-message fees to monthly fees and making its partners offer the first month of service for free. Granted, this was done to make sure that customer satisfaction is improved for its user base, but this one change gave many public wireless service plays a beating in the market. According to an article in China Daily, several analysts outlined the near-term impact of the changes.
"We believe service providers would likely see significant revenue volatility over the next one to two quarters," JP Morgan analyst Dick Wei wrote in a research note.
"We expect roughly a 10 percent to 20 percent revenue impact across the second quarter of 2006 to the third quarter of 2006."
Piper Jaffray analyst Safa Rashtchy also expected "major impact" on wireless service providers.
"We believe the total impact of these services will be severe and could reduce revenues by 20 percent-30 percent in 2007, with potentially much more near-term impact," Piper Jaffray wrote.
While there is always a tradeoff of how to get your wireless app in front of millions of users with the revenue share and loss of control to the carrier, I just hope that the wireless walled gardens will crumble to give many of us the freedom and opportunity to use new applications like Google Maps on our devices. Whle this carrier policy shift was meant for the good of the customer, it still shows us how vulnerable a wireless service provider can be to its carrier partner. As I have seen in other situations, the wireless carriers could have just as easily changed the percentage on the revenue share leaving its partners with less of the pie. The allure of creating a hit wireless app is compelling but reliance on the carriers can make life extremely difficult. If you go it alone you will have more control but there will still be significant barriers to market your app to potential users, get them to download it on their phone, and finally to actually have it work on their device. We are still far away from making open access a reality, but when it happens, there will truly be tremendous growth in the use of new wireless services.