The Smart Enabler Role is a Tough Call for Mobile Operators

By: Ovum
( 1 Nov 2009 )

Mobile operators’ role as smart enabler is generating a lot of excitement, but despite the potential of this role, the industry is once again in danger of dressing it in too much hype and viewing it as a magic bullet that will solve the challenges facing mobile operators today.

Mobile operators aiming at establishing themselves as smart enablers will face a profound change, and not all players will be able to make the transition to achieve best-of-breed smart enabler status. Operators, in fact, need to view their network assets, communications expertise, customer intelligence and other capabilities as resources that can be marketed to third parties, not just end-users.

If on the one hand a business model for first-generation enablers is established, on the other there is no consensus on the commercial framework under which third parties utilize network application programming interfaces (APIs). A range of different models are being used, including revenue share on the applications sold, and revenue share from advertising and also from a variety of fee specifically tied to activating APIs. The latter, in particular, can prove expensive, particularly for those applications that are transaction intensive. Experimentation and flexibility are understandable at this early stage, but the industry should move quickly to establish a consistent commercial framework. “At Ovum, we think the most equitable model is one where there is an element of risk sharing; for example a tiered approach where operators only charge for API access once an application reaches a certain revenue threshold”, says Eden Zoller, principal analyst at Ovum.

A robust technical, operational and commercial framework is what operators need to build in order to support their assets and capabilities. “Creating a developer ecosystem is part of the smart enabler framework and one of the most challenging tasks for operators. Most operators’ developer programs do not compare well to those offered by device/platform vendors and online players”, says Michele Mackenzie, principal analyst at Ovum. Operators are still seen to fall down when it comes to providing the right tools; they must take a more nimble approach to acting on needs and implementing solutions.

Application stores are, in theory, attractive to operators and provide the final piece of the smart enabler puzzle in the shape of an attractive retail distribution model for developers. From the operators’ perspective, it can help them to offer a wider range of applications and address the long tail of content, which they have failed to do in the past. A compelling application store can help with differentiation and improve customer loyalty. There are wider ripple effects, for example, consumers might upgrade to more generous data plans as their appetite for applications increases, they likewise might upgrade to higher-end smartphones in order to enjoy a better user experience for their applications. However, in Ovum’s view, an operator branded application store is an option for the few. To make a play in this space, operators need, among other things, excellent scale and reach, a developer platform and support program, and of course a strong brand.

“Mobile operators are not the only players wanting to take on the smart enabler role”, says Zoller. “Developers and other third parties can turn to device platform vendors, like Nokia, Apple, Microsoft and Google, online players that, besides many of the aforementioned, also includes AOL, Yahoo! Amazon, Facebook to name a few. These players offer a number of benefits such as a large addressable market, lower levels of fragmentation with regard to the device and platform, and a trusted consumer brand.” Operators have been slow off the mark to open their APIs and may have left it too late to make the impact they hoped in some areas. Location is a case in point. In light of GPS, cell ID databases and other technologies, the operator’s network-based location services are just one of many options and not necessarily the best for all applications. “Before moving quickly, operators need to identify which enablers offer them most opportunity to differentiate as well as generate new revenues”, concludes Zoller.