On Sunday I went to the driving range and while Alexandros was working on my early retirement plan (aka. he making lots of money with golf and I am managing his career), I was reading an article on Businessweek about the new iPhone 3G contracts. The article made me think again.

It made me think about two presentations that I saw recently: One by Michael Crossey from Aepona at the Mobile Monday in Belfast and the other one by Peter Moeckel from T-Labs (the R&D think-tank of Deutsche Telekom) at the OSGi community event in Berlin. Both are saying the same thing: Mobile Phone Operators are struggling to maintain their value proposition in the food/value chain. More and more applications are totally provider-independent and just use the network as a bit-pipe. Even worse, customers actually have either no or a bad perception of the underlying network operator.

Lets take a look at the current situation. I have a mobile phone and I am willing to spend EUR 100,-/month for that luxury (e.g. like I am willing to pay a certain amount of money for the luxury to have a dish washer). Right now and in general, there are three parties I am spending this money with:
  • the device/platform provider
  • the network operator
  • (and to a much lesser extend) 3rd party application/service/content providers
Going to a Vodafone, O2 or T-Mobile shop is actually the wrong way around and is just a desperate attempt by the mobile phone operators to make sure that existing customers stay with them. People do not buy a "contract". They buy a and/or feel loyalty for a device (e.g. the iPhone) or a platform (e.g. Palm OS, Windows Mobile). Means normally you should go to an Apple-, Nokia- or HTC-Store. Most customers have an emotional relationship with the hardware and/or the operating system that runs on it, but not with the network operator (or at least not a positive one).

When the network operators realized that people do not buy contracts, but hardware, they approached the device manufactures and said "Hey Mr. Device-Manufacturer, give me 1M of your phones, make me a good price and I sell it for you". They then give away the device for a fraction of the prize to make people sign up for their contracts. The result is, that people buy devices and pay for these devices through contracts. Means today most of the money flows through the network operator, but a certain fraction of this money (my EUR 100,-/month) ends up in the pockets of the device manufacturer. Interesting enough, right now I am spending close to nothing on 3rd party (value-add) applications/services.

In the next 5 years all of this is going to change. The Mobile Phone Operators will get a lot of pressure from customers, politicians and competing technologies (e.g. WiMax) to drop their prices for voice and data services. At the same time the Mobile Phone Operators have created an acceptance in the market to spend a certain amount of money on/with the mobile phone (e.g. in my case EUR 100,-/month). In the end some customers will just to be happy to save money, but others will be willing to spend the saved money on something else.

The companies who have a good answer for the question, what this something else is, will win. Means the future of the mobile market is not in the network and/or the device. Instead the future is in mobile applications, services, solutions and content. And to enable such a market you need to provide a platform to connect the customers/consumers/users with the application/solution/content-providers. And this is what Apple is doing right now. They (and a lot of other poeple) realized that the future is in applications and content. Means they will create some applications themselves and will also provide a platform (aka. AppStore) to allow others to sell applications and content (against a fee).

Today I am spending a 100% of my monthly budget, buy paying my mobile phone bill. My prediction is that in 5 years from now this will drop to below 50% and that I will spend the remaining +50% on monthly subscriptions for applications, services and content. Becoming a platform- and/or application/content-provider in such a world will make you a winner.