Smart pipes to boost content consumption

While the smart pipe – dumb pipe debate rages on in the mobile operator community, another analyst entered the fray this week, proposing a compromise between the two models as the only solution.

Industry monitor Juniper Research said Tuesday that it forecasts the global mobile content market will be worth $167bn by 2013, but this figure will have to be shared between the network operators, content providers and third parties such as content aggregators and billing companies.

At present, MNOs take a significant percentage of the revenues generated by content providers in order for them to use the networks in question. But Juniper notes that this has resulted in high prices for end users and has deterred consumers from accessing mobile content on a wider scale.

As a result, the analyst argues that the status quo is a disincentive for MNOs and content providers alike, with some content providers attempting to bypass the MNOs or exit the sector altogether.

Juniper analyst Andrew Kitson, claims that in order for the situation to change, it will be down to the MNOs to make the first move. Kitson suggests MNOs emphasise ‘shared value creation’ in order to avoid becoming dumb pipes in the future. Then by transforming their businesses into smart pipe service providers, the operators can significantly increase their income from mobile content, from a share of $23bn in 2008 to around $52bn by 2013.

However, under the smart pipe model, MNOs will not see their share of the overall mobile content market rise appreciably, but revenue will rise in value by 125 per cent over the 2008-2013 period.

This will change the dynamic of the market, with on portal content providers seeing their share of the market rise from 54 per cent in 2008 to 68 per cent by 2013, providing they can secure more attractive terms from MNOs.

Meanwhile, third parties such as aggregators and billing service providers will come under pressure from larger players, like operators, seeking to achieve horizontal integration and economies of scale.

“One single scenario will not win out since different business and revenue models have to co-exist in the mobile content market. Players will adopt multiple approaches that best fit their markets. Crucially, if MNOs are to benefit financially, they need to move away from their dumb pipe roots to the smart pipe model, though they will clash with the content providers which already dominate the smart pipe. A compromise needs to be found,” said Kitson.