Research Notes

The mobile operators role in the future value chain

The convergence between IT, Tele and Media will mean that the mobile operator’s role must be redefined in the future mobile value chain

During the coming years, the mobile industry will undergo large changes that will result in a mobile value chain that is much longer and far more complex than today. The changes in the value chain will especially be due to the convergence between IT, the media industry and the telecommunications sector and the future value chain will therefore be a combination of the current value chain and the existing Internet value chain.

For the mobile operators, the changes in the value chain will mean that their role will change as the borders between the telecommunications sector and the Internet sector disappear and as content is delivered on multiple different platforms. Today the mobile operators are the hub of the mobile value chain, but the development in technology and services will lead to the mobile operator’s position in the value chain slowly but surely changing significantly.

All over the world, mobile operators are using different types of investments in technology and content to try to prevent their market position being moved and for many mobile operators it is a nightmare scenario, if other players in the value chain take over their position. For example, financial institutions have the possibility to bill mobile customers and are therefore potential competitors to the mobile operators. That kind of development will mean that the mobile operators end up by being simple bit-pipes, in the same way that Internet providers are today.

The structural changes on the mobile market will also influence the way that the mobile market works in relation to mobile services. Many mobile operators have used a walled-garden strategy to be able to differentiate themselves through unique services offerings and to avoid ending as simple bit-pipes. All this has led to a very un-dynamic market. The mobile operators have had the total responsibility for purchase, marketing, sales and delivery of mobile services.

The alternative to the walled-garden market is an open-garden market, where it is the market forces that drive the market and where the operators let a number of tasks be handled by other players.

With an open-garden strategy, the mobile operators will only have to concentrate about delivering and billing mobile services through the service platform environments. They can let all content providers have access to their billing system and let the market forces decide which mobile services will survive. The mobile operators still play a central role in an open-garden environment, by binding their customers together with content aggregators and application developers via their billing system, but it is no longer the mobile operators that decide which mobile services the users have the possibility to purchase.

In Europe there are currently two trends on the mobile services market. For the more simple services, the market is moving from a walled-garden to an open-garden strategy. For the more advanced services, the mobile operators have invested in unique service platform environments, to thereby retain the possibility of offering unique mobile services to their customers. But over time we will see mobile operators also using an open-garden approach to the more advanced services by letting other players use their own service platform environments to market, distribute and sell mobile services to end-users.

In Strand Consult’s report- ”How to get success in the 3. Generation VAS market” – we have thoroughly analysed the mobile value chain with special focus on defining the value chain regarding delivery of mobile services. It will not necessarily be all the players in the value chain that will contribute with delivering a certain mobile service; that will depend on the mobile service being delivered. Some players and organisations will have multiple roles in the value chain. Fusions between companies operating in the media industry, IT industry and telecommunication industry will result in companies that do business across almost the whole value chain.

the 3. Generation Value Added Service Market

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