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« 1.4 Billion Cell Phones Waiting to Be Entertained | Main | It's a Palm, But Can You Tell? »

July 17, 2003

Rafer Explains the Death of Cell Pricing

Fortune interviews Scott Rafer (WiFinder), who knells doom for cell carriers' pricing models, but not cell itself: The crux of Scott's remarks are: [Rafer] faults the carriers, especially in Europe, for a hubristic presumption they can control their destiny. He says their "immature business planning processes" aren't prepared for a disruptive technology, because they've never really seen one in their industry.

I just had a long conversation along these lines with a fellow tech journalist at lunch today: the carriers believe that they control the vertical market, they control the horizontal distribution, and that market forces don't apply to them because who will challenge them? As the interviewer, David Kirkpatrick notes earlier in the article that on a conference call for a summit in January 2002 he asked cell carrier execs why they weren't talking about Wi-Fi. The general reaction: Wi-Fi would be important, but not for a long time, and didn't represent a major threat to incumbent carriers.

Wi-Fi's quasi-grassroots success stems from people wanting to own their own destiny. Two Wi-Fi radios are worthwhile, three a useful network, a few million and it's a revolution.

Rafer also points out that the carriers could have lunch eaten by those who seize on the potential: "Microsoft and Intel and Sony and others have realized they can't predict the outcome. So when they see a disruptive technology coming they bet on all sides of it, just like a venture capitalist. They know they have to continue to dominate, and whatever money they lose by betting wrong is lost in the profits from eventually winning." [via TechDirt]


It isn't only Wi-Fi that will eat up the carriers' lunch. Recently I had the opportunity to speak to my brother via Apple's iChat. Fantastic. Goodbye, long distance bills.

I think it is very nieve to believe that Wi-Fi is going to kill cellular. Wi-Fi in its present form doesn't scale technically whereas cellular by its very nature and design, does. Also Wi-Fi has serious power consumption issues and no QoS in the MAC, and 'voice' is the driver right now.

Also European cellular is one hell of a lot better designed and implemented that US cellular. 126 country GSM/GPRS standard, cross carrier SMS, number portability, (CPP)Caller Party Pays etc.

Cheers Nigel

Over time I expect the edge to continue getting smarter, and cheaper, so that eventually you'll either have one device, or a core radio device and a bunch of form factors that talk to it.

The smart, agile, device will be able to utilise whatever networks are available, and cellular should win that portion of the business for which it is ideal, and so will Wi-Fi, and whatever is next. The degree of overlap between the two is not great as several commentators have observed. There is room for both.

Current thinking is dominated by the "Device per Network" model which will expire over time as devices become capable of using more networks. And more networks become capable, both the already extensive (and expensive) oligopoly proprietary operators and the anarchic open network operators.

This move has begun with Wi-Fi/3G combos already appearing and handsets are getting scarily capable, running DooM etc.

Thus I think the most innovative services will win, these are unlikely to be developed by the cellular carriers, but services that run over their *and* WiFi (Internet) will clearly have the largest potential markets. The paradigm of the "Walled Garden" is best understood via the story, "The Selfish Giant."

My bold prediction is that cellular, with its closed and proprietary *billing* capability, will win the transaction business and critical voice, the "good enough" business will go to the more chaotic Wi-Fi (and open successors) environment.

As has been mentioned elsewhere, a bet both ways is difficult to lose.

PS. "My own garden is my own garden," said the Giant; "any one can understand that, and I will allow nobody to play in it but myself." But does the Giant know the best games? Not in my experience.

Why oh why oh why do WiFi advocates always handwave the billing issue?

Hello? There will be *no* WiFi based sevices without a convenient billing story. No billing, no WiFi wonderland. Period.

More importantly I cannot think of a single WiFi specific service (something that only makes sense in a WiFi scenerio).

WiFi is a nice convenient appliance. Nothing more.

It seems that billing has always been the bugbear of the telco industry--too often the marketing plans outpace their ability to bill for the services dreamed up. Fortunately, companies like Portal Software (PRSF) and Amdocs (DOX) provide "real-time" billing support for just about any unit of measurement and granularity that marketing desires. When it comes to telco Wi-Fi strategy, it seems that they are already starting to lean on these next generation billers--Portal has been tapped by Boingo, T-mobile, BT Hotzone, and Connexion by Boeing. To me the real problem in Wi-Fi, has been stood on its head. It's not "how to bill for it," its "will they pay for it at all?" Fortunately, there are lots of interesting metrics that can played with if usage is metered--even if now money is collected. For instance, Portal also did the "biling" for Hotmail, even before they rolled out their premium for-pay services. I imagine the metrics help with the core valuation of the services.