Apple's new iMessage application, which bypasses carrier SMS services in favour of data, raises questions about police ability to intercept messages, according to James Espie, product manager for applications at Vodafone.
iMessage is a new application in iOS 5 that will allow iPhone or iPad users to message each other over data networks rather than using their carrier-based SMS service.
As companies such as Apple and Skype increasingly take on functions that were traditionally the domain of telcos, they were not taking on the same regulatory obligations as telcos, Espie said at the Planet of the Apps conference in Sydney today.
"What we're seeing as carriers is that the over-the-top players are obviously just changing the playing field. Where previously it was the realm of a small number of players and regulation was designed to capture the activity of those players, now you've got a whole bunch of other people doing quite similar things, but then the regulation is not designed to cover that," he said.
"On our networks, we're obliged to [provide] an intercept capability for the police and what have you," he added. "[For] Skype, that's pure [internet protocol] so there's no intercept there."
The Department of the Attorney-General indicated that the current Telecommunications Act did include some internet communications monitoring provisions.
"Interception warrants permit the lawful interception of communications passing over the Australian telecommunications network, including internet communications," the department said.
The Australian Federal Police told ZDNet Australia that the High Tech Crimes Operations division was designed specifically to deal with emerging technologies.
"The AFP's High Tech Crime Operations (HTCO) portfolio provides a highly technical investigative capability for the AFP by anticipating and identifying emerging technology challenges for law enforcement and to develop response strategies for these challenges through engaging with domestic and foreign law enforcement agencies, government, industry, academia and the public. The AFP's HTCO function has a strong focus on research, development, education, awareness, prevention."
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In addition to causing headaches for law enforcement, apps that take on traditional telco roles were also causing companies problems for revenue, Espie said, with the function of content selling moving from telcos to the manufacturer or operating system developer.
"You can't sell [smartphone owners] any content, and that puts a massive hole in your ability to drive any revenue from those customers," he said, adding that Apple didn't seem to be concerned about it.
"'Thank you for your network but actually your old pricing paradigm now has a big hole in it'," he said.
As the transactions in apps tend to be fairly low in price, the only apps that could be successful are the ones that sell on a global scale, he said. This would limit what telcos in Australia could do.
"In the US, the carriers are talking about doing their own stores, but each of the US carriers has a user base that is larger than the entire Australian population, so that's not something we can play in," he said.
As more functions move from the network operator to companies like Apple or Skype, telcos are increasingly limited in how they can differentiate themselves from their competitors, he said.
"The network carriage facility is our primary function, but if you're looking for competitive advantage that's not really going to cover it — unless you're Telstra and then you can say 'our network is better than yours'," he said.
A major point of difference lies in customer service, he said, and that the development of apps around customer service would aid in this differentiation.
Updated at 3:29pm 27 October 2011: Added detail on Apple policy