A couple of years ago, well-known wireless industry execs stood up in front of packed halls at the major trade shows and boasted that they would soon become wireless Internet service providers. Today, becoming an ISP is exactly what many wireless operators hope to avoid.
That's because the connotation of "ISP" has changed to reflect the experiences of some ISPs in the wireline world. In many cases, the power of ISPs has been usurped by value-added services sites such as Yahoo!. "When you talk about ISP, you're saying dumb pipe. That's not really the paradigm wireless carriers are going after," says Brad Witteman, product manager at Phone.com's carrier application group.
Wireless operators are taking cues from their wireline cousins. "Wireless operators have been watching the wireline guys within the U.S. particularly and seeing how they've waged this battle," says Mark Taguchi, director of strategic marketing at Software.com, which recently merged with Phone.com.
One lesson learned is that the operators themselves must quickly offer value-added services if they hope to earn revenue beyond basic usage of their networks. But many believe that wireless operators can't possibly do it all - build and operate a wireless network, while constantly developing new Internet-based applications on Internet time.
A good starting point is for wireless operators to realize their limitations. "The first thing they should do is to actually decide what services they really want to get into," says Kevin McCracken, senior manager for wireless Internet marketing and business development at Nortel Networks. "Everyone is scared of being intermediate and becoming a dumb pipe. For some operators, they should decide that's the best strategy for a particular service."
It might make sense for some carriers to target the consumer marketplace by teaming with a company like Yahoo! that has already developed content and services, rather than try to recreate that environment themselves, McCracken says. Some, however, see such partnerships as grave mistakes. "The AOL [America Online] business model of being a consumer-facing retail organization and the wireless carrier's business model are in conflict. They both want to own the customer," says Kent Hellebust, senior vice president of wireless services at InfoSpace. InfoSpace offers Web services to wireless operators on a hosted basis, allowing the operators to self-brand their portals. "We can take their minds off of constantly innovating new Web services," Hellebust says.
It's likely that many carriers will end up handling some services in-house while farming others out. "They have to balance between losing their brand and getting the best-of-breed services," says Jacob Christfort, vice president and chief technology officer at OracleMobile. "It's a question of core competencies." OracleMobile also offers hosted services that allow wireless operators to build their own portals. "We don't produce the content. We produce the garden that the operator can put any content into," Christfort says. He believes it's important not to restrict the sites or information end users can access. "If they do not give people freedom, they will lose customers to competitors," he says.
Nortel is using Internet Protocol expertise it has developed in its landline IP business to create what it calls a captive portal for wireless carriers. This essentially allows operators to handle their portals in-house, but still leverage strong existing Web brands by enabling users to visit other sites. The offering allows users to customize their own portals, but instead of offering customers free rein to use any existing portal or, in contrast, limiting their choices, the operator can place its home logo in the corner of every screen so that customers can reach their site at all times. "So their home site is always one click away," McCracken says. He has spoken with major operators in the U.S. and found that some of them feel strongly against outsourcing and displaying other companies' strong branding, while other operators feel they don't have the expertise to build and maintain these Internet services themselves.
Time to market
One factor that may guide wireless operators in their decisions about build vs. outsource is speed to market. "You may want to come up on an ASP [application service provider] and then deploy into your network," Phone.com's Witteman says. Operators can reach the market quicker with solutions that have already been developed by an outside company. In time though, the operator may decide to pull some functions in-house.
Certain applications might make sense for some operators to outsource permanently, however. For example, voice enablement is an expensive and complicated capability that smaller operators in particular might do better to keep on an outsourced basis, Witteman says.
Other applications might be better kept in-house. Wireless operators may want to develop applications that allow large corporate companies to securely access intranet-based information, for example. While a corporate virtual private network solution may seem like a pure transport application, the operator can charge for it and portray the offering as the value-add that it is, McCracken says.