Mobile Internet: Ovum looks into which business models will prevail

23 Oct 2008

In a newly-published report on growing revenues from mobile Internet, Ovum focused on mobile broadband and fast mobile Internet access via laptop and a USB modem -or dongle, as they are known- which is at the core of mobile operator strategies right now as operators seek to drive revenue growth from flat-rate (or nearly flat-rate) access packages.

Ovum believes that the fate of the Internet Service Providers (ISP) which took this approach for the Internet model several years earlier has triggered early warning signals for mobile operators, which are very aware that they need to find new revenue sources to future-proof their businesses once access becomes commoditized.

Michele Mackenzie, service manager and practice leader at Ovum, said 'Operators don't have to be dumb pipes, unless they are stupid'. The big question is whether or not mobile operators will end up being commodity mobile broadband ISPs, the dreaded 'dumb pipes' scenario. 'The short answer is that they do not have to and there are ways to avoid this,' said Mackenzie.

According to Ovum, mobile operators have unique resources to draw on that fixed broadband ISPs of the time did not, namely in-depth information about their customers and unique network-based assets to leverage, such as location. Operators are in a position to be intelligent facilitators, or 'smart pipes' as it is often called, meaning they can act as a platform and channel in the value chain for supporting third-party content and other services while still maintaining a position as a core provider of anywhere broadband access and key communications services.

Where it gets a lot more challenging is around content services, which have in Ovum's view proved a misplaced holy grail for most operators. They need to take a long, hard look at how they support content services going forward. It is not a case of turning their back on content services like mobile TV, but being smarter about the approach taken.

'One of the challenges that operators face is that a lot of content which is paid for today will become ad supported going forward - or at least some components of it will', said Eden Zoller, principal analyst of consumer practice at Ovum. For example, the business model for mobile TV can be a premium paid-for model or an ad-supported model - or, stretching this even further, a free user-generated model. 'With regard to advertising-supported services, we envisage that many of today's paid-for content services will become ad supported.'

'However, we do not believe that the mobile Internet model will go the same way as the fixed model and become wholly ad supported. There will continue to be a mix of paid-for and ad-supported content over mobile,' said Zoller.

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