One subject that always raises the ire of mobile service provider executives is the amount of revenue that now accrues to application providers, as compared to revenues earned by access providers.That does not seem likely to change much. While Yankee Group forecasts global mobile service provider connectivity revenue will exceed $1 trillion by 2012, the global opportunity for experience providers (some combination of device, connectivity and content) will be bigger, reaching more than $2 trillion by 2014.
That is not to say that over-the-top app revenue is necessarily already bigger than "access" revenue, but that it soon will be. That points up a key challenge for mobile service providers.
Can mobile service providers insert themselves meaningfully and centrally into the "experience" equation, to capture more of the new revenue? Keep in mind that the bulk of current revenues are built on voice services (second generation) and moderate-speed data access revenues (3G data services).
In the United States, 4G wireless networks will garner more than 30 million subscribers by mid-2012, about 10 percent of the more than 300 million subscribers. Take those 30 million customers, multiply them by the U.S. average revenue per user of $43 a month, and there will be a $15 billion market for 4G connectivity services in 2012, about $18 billion globally. But the big question is how big applications and services provided by third parties might be, in 2012.
In the United States, 4G wireless networks will garner more than 30 million subscribers by mid-2012, about 10 percent of the more than 300 million subscribers. Take those 30 million customers, multiply them by the U.S. average revenue per user of $43 a month, and there will be a $15 billion market for 4G connectivity services in 2012, about $18 billion globally. But the big question is how big applications and services provided by third parties might be, in 2012.
Yankee Group predicts revenue from enterprise cloud services will surpass $22 billion in 2014, for example, and the issue is how much of that will be in the form of "access" and how much in terms of application and subscription revenue. One would predict that most of that amount will be earned by application providers, not access providers.
The Yankee Group also predicts that more than $26 billion will be earned by sales of software and applications from mobile app stores in in 2014. Assume developers get 70 percent of that amount and app store suppliers about 30 percent. Almost none at all will be earned by mobile service providers.
"Experiences" increasingly are the "products" around which business models are built. For mobile service providers, the issue is to embed themselves more centrally into the creation of such "products."
That might not be directly related to the regulatory and antitrust review of AT&T's effort to buy T-Mobile USA. But it is nevertheless true that more of the value of mobile experiences, and the amount of innovation, now is delivered by multiple other providers in the ecosystem.
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