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After the deluge: who should pay for the true cost of mobile apps?

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Category: Business models



The deluge of mobile apps is good news for everyone except the operators that have to provide the capacity and coverage to meet subscriber expectations. One approach to funding network investment is sharing the bill with app developers.

Mobile data traffic continues to grow at a startling rate, fuelled by the massive popularity of services such as Facebook and a torrent of new apps. IDC predicts the number of downloads will increase from 10.9 billion this year 2010 to nearly 77 billion by 2014, pointing out that developers have churned out more than 300,000 apps in just over three years.

According to Scott Ellison, vice president, mobile and wireless research at IDC, “the extension of mobile apps to every aspect of our personal and business lives will be one of the hallmarks of the new decade with enormous opportunities for virtually every business sector.”

The latest international communications market report from Ofcom, the UK’s communications regulator, found that almost one quarter of mobile users in Japan had downloaded applications to their phone (the figure for the UK and the US was 17%). It also revealed that 29% of internet users in the UK go online through their mobile, second only to Japan where the figure was 43%.

And it is not only smartphones that are being used to download mobile apps. Gartner reckons almost 50 million mobile tablets will be sold this year, and will quadruple by 2014.

The W3C (World Wide Web Consortium) has even established a set of guidelines for developers to keep in mind in an attempt to make mobile applications easier to use. Advice includes minimising network traffic, keeping user needs in mind, optimising response times and keeping the apps flexible.

But despite the seemingly unstoppable upward trajectory of mobile apps, there are clouds on the horizon in the shape of mobile operators suggesting that providers of data-hungry services will either have to help fund infrastructure investment or pay more for network access. One of the main ‘offenders’ is Facebook, which was the most popular free app on the iPhone during 2010, according to Rewind, Apple’s annual list of best-selling apps.

Many smartphone and tablet users have been caught out by fair usage policies that have seen them exceed their allowance without even realising it. In their defence, operators claim that unlimited data is unsustainable at a time when 10% of customers are consuming 70% of network capacity. France Telecom-Orange CEO Stephane Richard admitted at the recent ‘Le Web’ conference that the company would have to abandon unlimited data offerings.

Yet in the middle of all this talk of scarce network resources, 3 has introduced an ‘all you can eat’ data tariff. Most observers see this as a calculated gamble to boost customer numbers by the UK’s smallest mobile operator, particularly since its rivals might be quite pleased if their most data-hungry customers migrated to 3. The company says an upgrade of its network will enable it to handle the inevitable extra traffic and adds that it expects to see more people using mobiles than PCs to access the internet within five years.

In Sweden this year, Telenor and 3 Sweden amended their new tiered pricing plans after a rival, Tele2, maintained an unlimited service. However, James Barford, an analyst with Enders Analysis believes 3’s move is unlikely to encourage other UK operators to abandon their tiered pricing plans.

Another vision of mobile data management was unveiled by Allot Communications and Openet during a recent webinar. The companies demonstrated a new product that makes it possible for operators to monitor everything their customers do online and potentially charge them extra for using specific services. This would open up the possibility of an operator providing free access to its own mobile video service while charging customers for access to other services, for example. This falls into the discussion of net neutrality….and that’s whole nest of vipers.

Stewart Baines is a writer with Futurity Media



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