How Facebook could really nail the mobile operators

I participated in an array of superb briefings last week at Mobile World Congress. The issue of the ‘data crunch’ was never far from the conversation.

One company I met on Sunday morning prior to MWC was apoplectic with rage about Facebook, Google and Apple. I won’t go into detail about the company’s identity except to say they’re a highly influential service provider to the mobile industry.

This company’s perspective was very similar to that of the France Telecom and Telecom Italia Chief Executives (detailed in this post). The collective view amongst many in the mobile operator space is that these ‘b@starding companies‘ (direct quote) ‘are screwing up the network for everyone and not paying a cent toward the network upkeep‘.

It was a fascinating discussion. I listened for a little while before asking this series of questions (I admit to teeing the guy up for the final one):

Q: Do you think it’s unfair that Facebook, Google, Apple and so on are not paying for the use of the mobile network infrastructure?

A: It’s insufferable. It’s ridiculous. It’s outrageous. (I’m paraphrasing his exact words. He used a few F-bombs too — highly entertaining.)

My next question:

Q: But the consumers themselves accessing Google, Facebook and whatnot, they’ve paid their mobile operators for the privilege, right?

A: Yes, but it’s highly irresponsible of these companies to keep on introducing new services that are causing [the industry] to have to spend more and more money maintaining quality of service. (Paraphrasing again)

My final question:

Q: Ok, so how would the industry react if, for example, Facebook simply switched off mobile access for every one of it’s 650 million users and charged the mobile operator £3 per month for the privilege of delivering Facebook content to the consumer?

A: [Silence for a few seconds, followed by a look of horror]

Heh. What happens when Facebook decides to tell the market that it can no longer afford to maintain it’s hugely expensive bandwidth and server infrastructure without the mobile operators coughing up. That could become a rather sticky conversation. Unlikely. But at least the example made this chap — previously apoplectic with rage — sit back and take stock.

I don’t think many people in the marketplace have thought things through when they argue that mobile operators are victims in the ‘data crunch’. It’s laughable that these giants are demanding the biggies like Google and Youtube cough-up when the consumers accessing these services have already paid to do so.

If the model is broken, fix it. Simply doing a T-Mobile and deciding that ‘unlimited’ means 500mb of data per month is silly. And offering ‘unlimited’ 250mb plans is ridiculous. It’s a guaranteed way to ensure consumers think twice about doing anything on their handsets in fear of bill shock.

It’s not about the race to zero. For some reason, the mobile marketplace is consumed with this race to zero. To be the cheapest. To offer the cheapest rubbish because that’s the only thing people will pay for.

Nonsense.

Innovate. Truly innovate. And we’ll see some excitement and delight spreading across the market from consumer to operator.

You can see some of the ideas I’d like to see from operators in terms of innovation here.

Meanwhile, it’s not just me speculating about Facebook. The industry analysts Ovum have been doing so too. I’ll be publishing a post from them on that subject in just a moment.

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  • http://shkspr.mobi/ TerenceEden

    An interesting idea of reversing the attack on network neutrality. We’re all up in arms because operators are trying to double dip (getting customers to pay and services to pay). What would happen if Google said “Sorry ISP X, if you want your customers to access us, pony up.” A mass exodus of customers? Loss of goodwill for Google.
    Interesting…

  • http://www.mobileindustryreview.com Ewan

    I’d really like to see what would happen in such a scenario.

    I think if it was Google, consumer sentiment might be rather negative.

    But you can guarantee if it was Apple, consumer sentiment would be 100%
    behind them. Indeed I think folk would be picketing outside mobile operator
    HQs within minutes.

  • http://twitter.com/disruptivedean Dean Bubley

    Great post, echoes what I’ve been saying it for a while. I also heard some jealousy at MWC from “dumb” providers complaining about the “clever” kids outsmarting their services strategy. Almost all the problems about mobile data congestion stem from poor pricing and marketing strategies by the operators – especially their sale of 3G dongles as direct replacements for fixed broadband. Arguably, this is an example of mis-selling that is dangerously close to the definition of fraud.

    It’s quite easy to turn the tables and say that the operators are “using Facebook’s data centres for free”, or “using Google’s R&D for free”. If you look at the Cable TV industry, in some instances the cable companies are *paying* for content, not being paid because (advertising-backed) TV channels are “using their pipes”. The same may become true in telecoms.

  • http://www.futureplatforms.com DominicTravers

    I currently pay £15pcm for a connection that comes with 600 bundled minutes and 1000 sms. The internet is a “free” add on, it is “unlimited” (though I have nailed 3GB fair use). Even if I really tried the quality of service on my network is so poor I doubt I could use much more than 1GB.
    This is typical of what consumers can buy as a tariff in the UK.
    Many times before I have said that the C level executives of all the European Operators are stupid, often in stronger language than this. They simply don’t understand that the customers who want a good mobile internet service are willing to pay for it. If I was offered some decent QOS and coverage I would happily pay double my monthly fees and accept a sensible limit of 5-10GB. The only reason I don’t use 3UK all the time is that they simply don’t cover my house, (in the middle of Hove, 5 mins from the station!) which is pathetic.
    My internal optimist hopes that at some point soon, the creaky old codgers on the board of Everything Everywhere will realise that they are in a position to absolutely rinse the competition and provide a high level extensive coverage quality data service and charge me accordingly.
    Soon would be good!

  • Scott Hughes

    A great article and a lovely concept. I would like see a video of this though

    A: [Silence for a few seconds, followed by a look of horror]

  • http://www.mobileindustryreview.com Ewan

    Sadly I didn’t film that one Scott! I would have loved to have got it on
    camera!

  • http://twitter.com/Gabeuk Gabriel Brown

    I’ve met and know individuals in operators who have expressed similar opinions (sorry, can’t name them either!). But it is as well to be aware that operators have people who’s remit is to agitate on these issues, without necessarily expecting to get a quick result, or without their long-term goal be fully visible. I suspect in many cases the intent is to get the issue alive so as to keep regulators, over-the-top players, and so on, “honest”.

    There are many more operator people who are focused on growing the data subscriber base. They love facebook and free content and apps. This is driving users to data. Fantastic. In markets without strong local content/media/developer sectors, this is even more the case.

    Reality is the market is more sophisticated, balanced, and pragmatic, than is sometimes portrayed.

  • http://twitter.com/Gabeuk Gabriel Brown

    Hi Dominic — I have come to the view that 900 MHz re-farming to 3G and 800 MHz for LTE is what will make a step-change in UK network coverage.

    O2 has just starting 900 MHz refarming in London, I believe. VOD is also on that trajectory.

  • http://twitter.com/Gabeuk Gabriel Brown

    Interesting scenario to think about. Don’t think it’s in anyone’s interest to pursue this vigorously right now though. Everyone’s doing quite well at the moment.

  • http://twitter.com/Gabeuk Gabriel Brown

    Interesting scenario to think about. Don’t think it’s in anyone’s interest to pursue this vigorously right now though. Everyone’s doing quite well at the moment.

  • http://www.futureplatforms.com DominicTravers

    I hope so too, a substantial part of this problem is that MNOs just tack some internet on to peoples contract as an after thought and moan like spoilt children when their customers actually use it. I am keeping an eye on O2′s substantial network upgrade in the south, and will doubtless fire up a Giff Gaff SIM when the new Nokia Siemens boxes are up and running.

  • Mike42

    Great post Ewan. The guy you cite completely misses the wide-open opportunity before him – for the service and the carrier to *co-operate* to delight the customer. To work toward a customer experience where the amount of data on offer is clearly prescribed, and the user is helped to understand and control their usage of what is (when mobile) a scarce resource. Remembering all along that the scarcest resource in mobile is not spectrum, or dollars: it’s mAh. If you only have 1300 of them per day and you are chewing through 50 per minute, you need help. But currently *no-one* is helping the customer corral and meter them out judiciously.

    The whining MNO exec you met has not joined the dots between data Erlangs, mAh and cost. But these are *hard-coded* dependencies/relationships and *will not change* in the foreseeable future. Until we invent a technology that either a) breaks Shannon’s Law or b) provides basically unlimited energy in a tiny package that is.

  • http://www.mobileindustryreview.com Ewan

    Very interesting perspective Mike!

  • Jay

    Oh the outrage of someone providing free content so customers want to use your paid service!

  • http://www.mobileindustryreview.com Ewan

    Aye!

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