Non-neutral mobile business models are probably not big money-spinners
News just in: Facebook is about to acquire Pryte, a Finnish outfit developing technology so that mobile users can buy data access on a per site basis when they don’t have a data plan. This is another strand in Facebook’s avowed aim of bringing connectivity (and Facebook) to everyone on the planet. Using the system users will (if it works) be able to download an app which then gives them access to a specific site at a comparatively knock-down price. In many territories it might be the only affordable way for most people to get online. So how could anyone quibble with it?
Quite easily. The scheme is arguably non-neutral. It limits the user’s browsing abilities by shielding the wide open Internet, and it may give an unfair, discriminatory leg-up to Facebook (say) where it’s trying to enter new markets against other social networking sites.
As such it neatly illustrates one of the dilemmas facing neutrality advocates. Taken to an extreme, something like Pryte should probably be opposed because it MIGHT enable all the major sites to wield these data access apps. Users could then buy and update them when and as needed thus creating a pick and mix personalised Internet for those who wanted it. Some sites, say Amazon or e-Bay, might find it worthwhile to offer apps to their potential users for free, subsidising users’ visits (but of course charging more margin to make up the difference).
Welcome to the commercialised Internet dystopia of the future. Gone is its cost-free market discovery (you’d have to pay Google or Facebook for that privilege), gone is the innovative start-up competing on equal terms with the incumbent. Gone, gone, and even forgotten,
But if Facebook develops Pryte that won’t be the use case. Getting individuals in developing markets online for the first time will be the use case and a successful challenge to that will turn network neutrality into the clear villain.
Will the dystopia I described above come about as net neutrality gets nibbled away? Certainly there are plenty of people who would welcome it, but , in the end, probably not.
Why not? Simply because there are so many other factors and actors out there to prevent it happening - not the least of which is WiFi and other alternative access networks and business models. Mobile operators, even acting in concert, no longer have the ability to shore up the commercial dystopia I described - there will always be another, cheaper way to get online. And then there is a huge army of Internet enthusiasts determined to hold on to what they value.
It’s no doubt with this partly in mind that Dean Bubley of Disruptive Analysis, has produced a remarkable analyst report: ‘Non-Neutral Mobile Broadband Business Models’.
Like most of us I’ve seen hundreds of technology reports over the years. Too often, a technology or service and its market space is defined, the analyst goes on to list all its advantages and then projects growth prospects (perhaps offering one or two scenarios). He or she then carefully lists all the companies interviewed for the report. Those companies will be high on the marketing list for buying it, natch. It’s all understood and above-board.
Problem is it’s a bit of an echo chamber. Everyone is bought in. Everyone inflates the hype balloon.
As is his wont, Dean eschews this approach (the clue is in the company title, Disruptive Analysis) and always sets out to find the flaws not the dollar signs.
In this report he looks at over 25 forms of "non-neutral" mobile broadband & Internet business models, such as "sponsored data", "zero-rated" apps and differential network QoS or "fast lanes" and his objective is to work out whether they would actually work in the terms the operator desires them to.
As to whether they are a good or bad thing in policy terms, that can be put to one side since in the end his prognosis is that, even taken together and implemented, they would neither be a revenue saviour for mobile telcos (as they are often represented by vendors and telco lobbyists), nor represent the end of the Internet as we know it, as feared by Internet activists. And if they don’t do one, they can’t possibly do the other.
Dean writes in his blog: “Is [the development of non-neutral business models] actually worth the effort & cost of new equipment, software - and lawyers and lobbyists?
"The answer: It may be worthwhile, but only just. Models like sponsored data, QoS-enhanced services and application-based charging might account for just 6% of overall mobile Internet/broadband revenues in 5 years' time. The much-ballyhooed two-sided business models might yield just 2% of overall mobile data revenues. “
The more you look at all the non-neutral attempts (and as journalists we’ve been exposed to a lot of them over the past five or six years) the less they seem likely to succeed - from personalisation to mobile QoS.
So has all the sound and fury directed toward protecting some degree of neutrality on the mobile Internet really been a waste of time and breath, since nobody was going to come and take it anyway?
I think not. If I have a slight criticism it’s that Dean has pronounced non-neutral models commercially unexciting by looking only at today’s 'we can just about get this past the legislator/regulator' end of the line-up which by definition are going to be marginal.
In the absence of at least the threat of a net neutrality law we'd by now almost certainly have some simple (back of the envelope) and highly profitable models like the old 'WhatsApp Surcharge’ invented a few years back by KPN. Nothing innovative there, but potentially a real money-spinner. What about a mobile Netflix (come on Reed you know you really want to) special video service with joint telco marketing/profit sharing?
These are now clearly models that can never fly (can they?) but they or schemes like them might well have been entrenched by now if the clamour for net neutrality wasn’t as loud as it’s been.