FCC wireless ruling may kill smartphone deals, create app partnerships

Jessica Scarpati
16 Sep 2009

If the FCC's wireless inquiry kills operators' exclusive agreements with smartphone manufacturers, wireless operators will have to partner with third-party application developers to build revenue and keep subscribers on their 3G and 4G networks.

Telecom carriers like AT&T have used exclusivity with Apple's iPhone, for example, to lock new and existing customers into multi-year contracts and pay extra fees for unlimited data.

"If I were any of these carriers, I'd be getting really, really cozy with application developers and developing some application I could put some exclusivity on through copyright," said Mike Jude, a wireless analyst at Frost & Sullivan. (See related article: FCC regulation or not, wireless business model will change).

The Federal Communications Commission (FCC) recently issued a notice of inquiry (NOI) into mobile wireless competition, announcing it would conduct its own investigation, which gives interested parties a chance to offer comments.

The 14-page inquiry is wide ranging, covering everything from wireless roaming charges to investments in rural markets. But it is the relationship among wireless operators, device makers and third-party developers that is drawing particular attention.

In July, the agency sent letters to Apple, AT&T and Google asking why Google's Voice App messaging service has not been approved for use on the iPhone, which led telecom conspiracy theorists to speculate whether AT&T and other incumbent carriers were trying to prevent over-the-top (OTT) players from taking business away from them.

No matter what the FCC decides, wireless operators must innovate
It is unclear what steps the FCC will take after the comment period ends, but analysts suggest operators prepare for change. Building a next-generation network will no longer be enough to lure customers and boost revenue, Jude said. "All of a sudden, a pipe is a pipe is a pipe. You need to give the consumer a reason for choosing your pipe," he said. "Get something really, really creative and charge a higher margin."

Although partnering with third-party developers will be key, Jude said that carriers have their own resources that can turn applications and application stores into money makers. Of course, he added, the biggest asset mobile carriers have is a relationship with customers, which is something a third-party may not have.


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