Is mobile Internet really such a good thing?

[David Farber <dave () farber net>]

________________________________________
From: Joichi Ito [jito () neoteny com]
Sent: Friday, May 23, 2008 7:20 AM
To: David Farber
Subject: Is mobile Internet really such a good thing?

Just blogged this:

http://joi.ito.com/weblog/2008/05/23/is-mobile-inter.html


Is mobile Internet really such a good thing?


Just about everyone I talk to is very excited about mobile Internet.
In 2006, the Japanese government proudly announced that more people
used the Internet through their mobile phones than through their
computers. Online services are all talking about their "mobile
strategy" and VCs are flocking to fund the latest "mobile startup".

I don't think there is anything wrong with mobile or with some of the
great new mobile applications and devices, but we have to be careful
to remember that most mobile networks that actually work are built on
infrastructure that is operated by a small number of mobile operators
who use a lot of regulated and closed technology.

The reason that we have vibrant startup driven innovation is because
the Internet is open by nature. Anyone can participate without asking
permission and anyone can compete with anyone else at every layer of
the stack. This DNA of open and free competition (except for the
occasional semi-monopoly) is what allows startups like Google to come
in and displace incumbents. If it weren't for the Internet, I'm
positive that the telcos would have determined that it was the most
efficient that THEY design and operate the "online directories".

We can criticize Google for becoming large and dominant in the market,
but a huge percentage of the money that Google makes goes back into
distributing money to startup companies and even non-profits like
Mozilla. Google acquires many companies and buys equipment from
vendors that mostly create open platforms.

The money that the mobile operators make mostly goes to boated and
expensive internal R&D and paying for equipment from a small number of
vendors that make the telecom equipment.

In 2006 in Japan, mobile advertising was only $330M vs Content
(Ringtones, Song-tones, Games) at $2.2B and Commerce at $4.7B. 
(http://www.johotsusintokei.soumu.go.jp/whitepaper/eng/WP2007/2007-index.html
) Although all of us are experimenting with advertising and
advertising is increasing on mobile, the overwhelming percentage of
money spent on mobile devices goes to paying for and the collection of
payments for a small number of not so innovative products from a small
number of providers.

I don't really blame the carriers. In most countries they are
struggling to operate with the burden of a huge auction purchased
spectrum license on their books. In most countries, they are heavily
regulated. The fact that they are typically a small group of
government licensed businesses make them an easy target for regulation
that also increases costs and lowers competition.

For example, there is a move on the part of the Japanese government to
provide content filtering to "protect youth" from "bad content". The
Net is trying to fight this sort of filtering system that would
regulate content on the Internet. In the mean time, the government
quickly forced mobile carriers to implement a content filter for
minors which is now in place in Japan. A mobile Internet is much
easier for governments to regulate and control and make "safe" against
the bad guys as well as small annoying startups and disrupters.

People point to the hacked iPhone as an example of how "we're making
mobile open." I do applaud it and I think it's great that we can now
run our own apps on the iPhone. However, what do you get at the
carrier level. Yay, you now can chose Vodaphone or Sprint instead of
AT&T. This doesn't solve the basic problem that at the carrier level,
we're still closed.

In the short term, MVNOs like e-mobile will help drive prices down,
but they are still built on an architecture that isn't really open to
competition and the prices will only go down so far. What we need in
the long run is open spectrum and alternatives to 3G.

In Japan, services like Mixi have announced that their web usage is
decreasing, their mobile usage is increasing and that more of their
users are using their services from mobile and than the web. I don't
think mobile monetizes as well (for the company) as the web. I think
that if we move over to mobile too quickly we're risking moving our
game to a platform where the DNA is not what we're used to on the
Internet and most importantly, putting money in the pockets of people
who do not redistribute it to startups, but instead feed giant vendor
ecologies instead.

Maybe those smart companies in the mobile space like Vodaphone and
Nokia who see the future should create a fund to invest in open
innovation on mobile. We definitely could make the argument that in
the long run, a healthy ecology on mobile is better for at least the
strong companies involved in the ecology, just like the Internet
increase the telecom economy as a whole. It reminds me of the big oil
states investing in alternative energy. If this could happen, this
could be a good thing and I'd be happy to help. ;-)




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