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This story appeared on Network World Fusion at
http://www.nwfusion.com/columnists/2002/0826bradner.html

'Net Insider:

Giving away their future
 




Network World, 08/26/02	

At the same time that much of the traditional telephone world is looking to the mobile Internet as the keystone for its (I hope profitable) future, the phone companies' marketing enticements are giving away the main thing that might have made it possible for them to succeed.

These companies have built up impressive debt loads chasing rainbows, or maybe it was just a game of one-upmanship against the ISPs. Where the ISPs' drug of choice was fiber-optic cable, the phone companies lost all reason when enticed by governments dangling radio spectrum just out of their reach.

The phone companies built piles of borrowed money to stand on to try to grab the artificially limited, shiny licenses at government-sponsored auctions - artificially limited, in that much of what the phone companies want to do could be done with unlicensed spread spectrum. But the governments surely could not add to the availability of unlicensed spectrum because that would negate all the money that the phone companies pay for exclusive use of little bits of radio space. The fact that many of the auction "winners" will be crushed by the debt created, in part, by winning and will wind up not paying for the spectrum anyway is ignored.

So what do the companies plan to do with this painfully obtained wireless capacity? Some of their ideas can be seen in the new TV ads from Sprint. Using impressive graphics, Sprint lists a few of the cool (at least to Sprint) things such as sending full-color pictures to each other on your PDAs or phones. And you thought people just talking on cell phones while driving was dangerous.

Another, supposedly wonderful thing is that you can download screen savers. Gee whiz. I am significantly underwhelmed.

Dave Passmore explores some of the carriers' other plans in his column in the August issue of Business Communications Review, and they are just as unimpressive. Passmore points out the carriers' basic dilemma: Open mobile devices directly to the Internet and carriers can no longer capture "all the revenues" or limit customers to their services (thereby "risk reducing minutes of use or losing subscribers"). We have ample proof that the latter would be deadly because of the level of innovation of which the carriers have shown themselves to be capable - very low. But Passmore misses the reason that his first option is also deadly.

The carriers have given away thousands of "free minutes" to try to get customers' business. It is now counterproductive for a carrier to get customers to use its phones because the carrier gets no additional revenue, yet has to build up its networks. The only hope for carriers is to understand the basic lesson of the iMode system in Japan - open the system to the Internet so that thousands of third parties will create reasons for customers to buy the service, then charge for airtime or message transfer - and stop giving away the future.

Disclaimer: Harvard has been around for more than 300 years by not giving away its future, but the above advice is mine alone.

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