Carriers must be open to compete, analyst says

Road to Open: For Connected Planet’s December cover story, wireless editor Kevin Fitchard and I took an in-depth look at what open means — in theory and practice — in the wireless world. In our reporting, we spoke with a number of developers and industry experts with first-hand perspective on working in an open world. In the weeks leading up to the issue, we’ll share their thoughts and insights. As always, we welcome your comments below. vzw-odi.png

The move to openness is underway, led by Google’s (NASDAQ:GOOG) Android platform and, surprisingly, even the initiatives of carriers such as Verizon Wireless (NYSE:VZ, NYSE:VOD). It is still early days in the movement and hard for many developers to tell exactly what open will mean for them, but for carriers, embracing open could be their best shot at avoiding disintermediation, said Chetan Sharma, president of Chetan Sharma Consulting.

Concrete examples of what has changed as a result of an emphasis on open is the revenue share split and the speed by which apps get to market, Sharma said. The industry standard used to be 30% to 50% going to developers and now the common practice is a 70/30 split. If an app gets enough volume, it will likely evolve to an 80/20 spit, he said. It can also be a matter of days versus the six to 12 months it used to take to get an app to market, Sharma said, but outside of these factors, openness is in the eye of the developer.

“If the application only requires access to a location or graphics API, then for practical purposes [Apple] is open enough; you really don’t need anything else,” Sharma said. “If you require access to the address book, access to the native voice APIs or anything else, that might not be open at that given point. … Holistically, even two or three years ago, basic GPS was locked down on most devices. If it was open, it was only available to a certain set of developers the carrier chose. More things are open now, but are they as open as they can? Certainly not.”

While carriers have been forced to become more open, they are also no longer the app channel of choice for most consumers. Especially for smartphones, where the most revenue lies, carriers are no longer a destination, they are only a connection, Sharma said. As such, genuine openness is their best chance of playing in the app ecosystem. If they can mimic what successful app stores have done and attract the same developers, as well as provide more access to user information than competing app stores can, they have the best chance of surviving — or even leading — the app store movement, he said.

“Every carrier or OEM platform will tout their openness,” Sharma said. “The attractiveness of the platform is a combination of what is open, as well as the ease of development and reach the platform offers. Verizon has huge reach but a lot of fragmentation. If someone is trying to build an app for a carrier ecosystem, they have to figure out what devices to support. I might get access to the address book, but it requires I build for a lot more devices. If you build for the iPhone, you have access to 50 million devices, but you might not have all the access you need. But the cost to develop is much, much lower. There are those trade-offs that developers have to grapple with as to what their strategy is short and long term and the need to get to market and so forth.”

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