walled gardens

[Dave Farber <dave () farber net>]

> Date: Mon, 01 Sep 2003 14:01:09 -0700
> From: "Robert J. Berger" <rberger () ibd com>
>
> The carriers keep trying to build walled gardens and keep getting "told" by
> their customers that they want to communicate with everyone, not just people
> on the carrier's network. Its the lesson of the "end-to-end" network and
> Metcalfe's Law (the value of the network increases at the square of the
> number of end nodes) - RJB
>
>
> Digital Imaging
> The Camera Phone's Dirty Little Secret
> Penelope Patsuris, 08.26.03, 7:00 AM ET
> http://www.forbes.com/2003/08/26/cx_pp_0826cameraphone.html
>
> NEW YORK - The camera phone has a dirty little secret: Most of the time,
> users can't exchange pictures the way that they do on TV commercials.
>
> Despite the fact that 10 million camera phones are expected to ship by the
> end of this year, the communiqués featured on TV are actually only possible
> between people who use the same carrier.
>
> And even then, the process doesn't quite work as advertised. Quite a few
> keypad clicks are required to see the photo sent. "The thing that people
> want, where you send a picture and it pops up on someone else's screen,
> doesn't exist yet," says IDC analyst Keith Waryas.
>
> That's a bummer for users who expect to share the moment in the moment. But
> it's a bigger problem for carriers such as Sprint (nyse: PCS - news - people
> ); Verizon (nyse: VZ - news - people ); AT&T Wireless (nyse: AWE - news -
> people ), Cingular, a joint venture between BellSouth (nyse: BLS - news -
> people ) and SBC (nyse: SBC - news - people ); as well as T-Mobile, which is
> owned by Deutsche Telekom (nyse: DT - news - people ). Yet so far spokesmen
> for these outfits say that industry members are only in "informal talks." No
> standards organization has been formed.
>
> The voice market has become a commodity, so carriers must sell data services
> such as picture messaging to boost margins. Worse, all of these carriers
> have spent billions to upgrade their networks so that they can transmit
> data--investments that need to be recouped quickly. And the inability of
> customers to zap pictures phone to phone regardless of the network they use
> is significantly hampering their usage of the data networks that the
> carriers hope will be cash cows.
>
> "Wireless outfits look out a few years and they think that wireless data
> will be used by business," says Argus Research analyst Kevin Calabrese. "But
> in the near term it's about what they can get consumers to use now.
> Interoperability would be a huge help in getting consumers to accept the
> technology."
>
> Due to the lack of it, most camera-phone users e-mail photos to a friend's
> email or to the carrier Web sites where customers can retrieve their
> pictures. Others just wait until they're home to upload their photos to
> their PCs and e-mail it from there. Camera phone users are billed for
> network use whether they send a picture to a phone or an email address. The
> rub: Recipients are only charged for network usage if they get a picture via
> phone, not if they use the Web. In other words, carriers are missing fully
> half of their market opportunity.
>
> "You don't actually have to buy a data plan to have a camera phone," says
> IDC's Keith Waryas. He in fact has a camera phone but no data plan. "I have
> a camera with me all the time and the carrier doesn't make a dime."
>
> One would expect that carriers would be racing towards interoperability to
> boost sales, but so far there has mostly been foot-dragging. "Carriers look
> at applications like this as a means of getting and keeping customers. They
> want customer to feel like they'll lose something if they switch providers."
> says Waryas. The Enderle Group's Rob Enderle adds that carriers see
> establishing standards as enabling the competition.
>
> This hesitation comes despite the fact that the wireless phone industry just
> witnessed a remarkable demonstration of the power of interoperability to
> drive data usage. For years the short-messaging services (SMS) that
> cell-phone providers introduced in the late 90s suffered from the same
> inability to work across carriers.
>
> "We initiated SMS interoperability last fall on a Thursday without any
> public announcement," says a Verizon spokesman, "By Friday the number of
> text messages traveling on our network had tripled," he says. A formal
> announcement was made the following week. For the industry as a whole, the
> number of SMS messages sent in 2002 doubled over 2001 according to IDC.
>
> "That told us was that people were already trying to send messages to
> friends on different carriers," says the spokesman. The same thing is
> probably happening now with picture messaging, adding up to a lot of lost
> sales.
>
> Says Rob Enderle: "'I'm not getting the sense that this is a big priority
> for them," says Rob Enderle, "But if they really want people pushing
> pictures over the phone and use all of those data packets, they have to
> cooperate."

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