GenuineVC David Beisel's Perspective on Digital Change

June 27, 2005

Historically, the U.S. mobile carriers have taken a “walled-garden” approach to content. They have provided content providers with a closed-portal system in which nearly everything that consumers can purchase and use on their phones is distributed exclusively through their own proprietary deck. However, it appears that the tide may be turning. In the last few months, many have begun to predict that the U.S. industry will eventually emulate Europe’s model in which the carriers’ remove their walled-garden in favor of an off-deck distribution open billing approach. And while this diminishes the power of carriers as a gatekeeper for content, it potentially increases their revenue as they capture a slice of the exploding content stream through their frictionless billing service.

Antony Bruno of Reuters recently wrote in Sprint, Verizon Opening Doors to Mobile Content,

“Sprint and Verizon Wireless may soon lower the walls on their networks, allowing their subscribers greater access to third-party content, including ringtones and graphics. The mobile phone giants are responding to U.S. cell phone users’ growing interest in buying content from sources other than their wireless carrier. Allowing subscribers to access non-network content is a common practice for mobile operators in Europe, as well as U.S. carriers Cingular, Nextel and T-Mobile… In the last year, [other] carriers have seen off-portal content sales grow at a compound annual rate of 410 percent. In the last six months, total off-portal sales activity skyrocketed 1,024 percent, with a month-over-month growth of 141 percent this past quarter alone.”

QPass, a wireless transaction management firm, recently stated in a piece entitled North America Following Europe’s Off-Portal Purchasing Trend,

“Off-portal content will grow in the U.S. once operators realize they can only handle so much content via their own portals and they can make money from off-portal traffic… Most importantly, operators will enjoy significant revenue generation from mobile content and services as they bill off-portal space at a very low cost of acquisition.”

Finally, Moconews.net commented,

“While operators may mourn the decline of their ‘portal power’, they stand to benefit in the long run from the shift back to off-net content provision.”

The ramifications of the trend towards off-deck content – if and when it happens in this country – could be enormous. Of course, it will cause a dramatic shift in the way that “traditional” mobile content (like ringtones/music, wallpaper/graphical content, and gaming) is marketed and distributed. But more importantly from my perspective, the potential end of the walled garden creates opportunity for innovative content and applications from startups that have only begun to proliferate under the current industry structure. What hasn’t worked previously that will now begin to emerge through these alternative channels? Or even more exciting, what new content and applications that are just emerging as a result of other trends will be even further encouraged by a more open industry structure?

About Me

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  • I am a cofounder and Partner at NextView Ventures, a dedicated seed-stage venture capital firm making investments in internet-enabled startups. Read More »

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