Cell Phone Networks Take Another Hit

In this age of open, digital and shared media, those who opt for control -- especially if that control gives them what’s deemed an unfair share -- will be attacked from many sides. Witness the music industry’s overpriced CDs of albums they’d already sold in vinyl. (And compare it to the success of iTunes, which has been attacked for being controlled, but has also relented and removed DRM and also is now playing with pricing.)

Today, many companies are developing -- and consumers are loving -- options to go “off-deck” and circumvent cellphone carriers, either by installing applications on their phones or by accessing the mobile Web. The cellphone carrier networks, the Sprints, AT&Ts and Verizons of the world, are demanding what one wag here at the AlwaysOn conference called a “rapacious” share of anything that runs through their system. Not only do subscribers, locked into costly contracts, have to pay for every new piece of service, and difficult-to-understand fees, but the carriers also demand that anyone who wants to provide a service to their subscribers -- anything from weather to movie listings to paid video -- give the cellphone carriers a share that can be as much as 70 percent. Plus the fees are often dictated by the carriers. These moneys were easily demanded in a day when the only way to reach cellphone subscribers was through the network, and the interface on the phones that the carriers controlled. The carriers also controlled the information about the use of the networks; some would say that they are protecting their users’ privacy. Fair enough.

But with the mobile Web, and applications for smartphones like the iPhone and Google’s Android system, it’s becoming easier and easier for content companies and their consumers to circumvent the network. Medialets chairman and CEO Eric Litman told me today about how his company is embedding code in Apple’s iPhone apps that allow his firm to measure all kinds of data on the phones’ usage, a lot of typical Web measurements, for example, like pageviews, unique visits, time on site and so on. The trick, he said, was that the Apple folks had not demanded anything from the code, and had struck a deal with AT&T that required the carrier to let apps through unblocked. The book “Planet Google” by New York Times columnist Randall Stross points out how Verizon kind of sort of bent to Google, which was bidding on new cellphone spectrum, demanding that cellphones be allowed to work on any network instead of being locked. (It’s not clear Verizon fully kept its promise to do so, Sross says, but that’s another story). At a panel I appeared on with partners Scribe Media last fall at Streaming Media West, the argument was over whether subscription video on cellphones could survive when people could go get what they wanted for free.

In another panel, on what business can learn from Obama’s use of social media, Larry Weber of Racepoint Group, Digital Influence Group, said media companies were structured so much like mafiosi that their hold was “hard to break.” But, he said, the era of unpaid media was coming. Don’t know if I agree with the characterization. But it is hard to see how business models based on control -- rather than enticement and service -- will win.

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