More Channel Conflict in U.S.. Mobile Business

The loosely-coupled Internet ecosystem perhaps is not like some other tightly-coupled ecosystems that might tend to break down if there were channel conflict.

In some industries, industry segments have contractual relationships with each other, because the output from one segment is a necessary input for the next segment.

That is not true of the Internet ecosystem, where, almost by design, the value chain can work, to an extent, without any formal business relationships between participants, because the value chain is loosely coupled.

And channel conflict is growing within the Internet ecosystem. Google, for example, works on a number of fronts to reduce device and Internet access prices, for example.

And is when Google is not directly competing with other participants in the value chain, by becoming an Internet service provider in its own right, producing its own tablets and phones, or perhaps by becoming a mobile service provider as well.

That is neither illegal nor unethical. One might argue it is a rational business strategy. But it is a strategy built on channel conflict, perhaps a new type of competitive dynamic in a business with intra-segment competition.

In other words, mobile service providers are used to competing with each other. Telcos and cable TV companies are used to competing in the fixed network triple play business. App providers are used to competing with other app providers in many segments.

What has been happening more often is that competition now is developing between providers in different segments.

Recently, the U.S, mobile service provider business has been in the throes of a fierce marketing battle. Now, if Google enters the business, in another attempt to force down prices of yet another segment of the Internet ecosystem, channel conflict will grow even more.

Up to a point, one might argue that is a healthy thing, in the sense of markets producing better products, at lower cost. But channel conflict produces lots of friction between segments, not only within each segment.
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