BYOD: Open Access comes to Wireless

Since its commercial launch more than two decades ago, cellular has successfully positioned itself around the value proposition of freedom: freedom from wires, freedom from location and freedom from paying extra for enhanced services such as voice mail and caller ID. But just as there is no free lunch, there is no free wireless. Someone has to – and does – pay for those $200 handset subsidies, $250,000 base stations, $250 T-1 lines and $2.9 billion spectrum licenses.

The concept of “open access” upends that arrangement. Although there is no industry-standard definition yet, open access basically spans from handsets that end users can highly customize to devices that can be used on any network. That is a broad spectrum of possibilities. Another way of understanding what open access is, is by looking at what it is not, including subsidy-locked handsets and walled gardens (e.g., T-Mobile USA’s t-zones, Verizon Wireless’ Get It Now).

Based on statements by major companies, open access appears to be a matter of when rather than if. For example, in November 2007, Verizon Wireless said that it “plans to have this new choice available to customers throughout the country by the end of 2008.” That aggressive timetable forces rival operators that have not already committed to open access to at least consider it.

Whether open access is good or bad depends on one’s point of view. At the very least, it would be attractive to consumers who believe that free Wi-Fi is a Constitutional right or that they should not have to pay $50 or more to get a handset unlock code when their contract expires – if they can get the code at all. But apparently this new openness is semi-attractive to some device vendors and wireless carriers, too. For example, Nokia, Sprint Nextel and Verizon Wireless are among the major companies advocating open access. One clear benefit for wireless carriers is that open access provides yet another way to wean consumers off of handset subsidies.

But perhaps the biggest push for open access comes from Google. In late 2007, the company played a major role in a coalition that successfully pushed the U.S. Federal Communications Commission (FCC) into creating rules for the recent 700 MHz auction that would require winning bidders to, among other things, give customers the freedom to "download and utilize any software applications, content, or services they desire." (Google’s proposal and the FCC’s subsequent rules are discussed in Section II.) iGR believes that years from now, this auction could well be viewed as a pivotal moment in wireless history, especially if the U.S. market changes in a way that influences other world markets.

The decision by carriers such as Verizon Wireless to embrace open access also should be viewed within the context of increasing device sophistication. Handset browsers have improved dramatically in the past couple of years in terms of the variety of content they can render. Wireless networks also have gotten faster and thus better able to deliver bandwidth-intensive content in a timely manner. And more and more Web sites are providing mobile-friendly versions. Put all of this together, along with the steady increase in off-deck content – first in Europe, but increasingly in the United States, too
– and the result is an environment where it is increasingly easier for the average consumer to find and use content, services and applications of their choosing rather than just what their wireless carrier spoon feeds them. Just as AOL was derided as “the Internet on training wheels” and began to outlive its usefulness, the mobile Internet steadily is becoming less daunting
for the average consumer. So in one respect, carriers that embrace or at least accept open access are tacitly acknowledging that their control over customers is slipping away.

One wild card is how far wireless carriers such as Verizon Wireless are willing to take open access. Another is the ercentage of consumers and enterprises interested in true openness, which goes far, far beyond the classic European model of a wide
assortment of unlocked phones and SIM swapping. For example, it is one thing to wish to able to personalize a handset and service beyond wallpapers, ringtones and Opera Mini browsers, but quite another to be willing to put up with the under-the-hood tinkering and quality-of-service (QoS) issues likely to arise. In a nation of VCRs blinking 12:00 and consumers puzzling over how to get e-mail on their cell phones, the addressable market for truly open devices is smaller than some proponents like to believe.

Similarly, the major operators will likely use exclusive handset deals to lure subscribers into their stores and back into contracted agreements. For example, the LG Chocolate is still only available from Verizon Wireless and you have to visit AT&T if you want an Apple iPhone.

Open access creates as many challenges as it does opportunities. Pop quiz: What are your wireless carrier’s access point names (APNs)? If you don’t know what an APN is, let alone what your carrier’s are, imagine how daunting those basic settings are for someone outside of the wireless industry. Then imagine the customer support issues – and costs – that could arise if an open access carrier or other company (e.g., Google) does not plan ahead for ways to educate end users on how to configure their devices for use with their network or service. That is why iGR believes that these potential problems create major opportunities for vendors that provide solutions designed to help end users customize and troubleshoot their devices. Sold directly to end users, through carriers or to carriers, remote-troubleshooting and do-it-yourself configuration wizards will be key to helping open access live up to its potential.

All of the challenges discussed thus far and elsewhere in this report add up to major hurdles for companies looking to use open access to enter the wireless space. Google conceded as much in July 2007 when discussing how it and newcomers like it probably would struggle: “It is clear that the incumbent carriers have built-in advantages that will prove difficult to overcome (particularly the economic and operational barriers to entry for a company like ours, and the relatively greater value and usefulness that spectrum brings to existing carriers).”

At the very least, open access bears watching because it raises the possibility of additional players in a market that, despite the consolidation of the past decade, remains crowded and highly competitive. One key takeaway: Open access might be a game-changer, but many of the old rules will still apply.

This brief provides an overview of open access in terms of initiatives by wireless carriers, regulators, consumer groups and companies such as Google. It focuses on the U.S. market but also discusses relevant situations and initiatives in other world
markets.

 contact us to obtain a copy