Channel conflict always exists, to some extent, in any value chain, since one participant’s revenue model is another participant’s cost of doing business.
That has been an issue in the internet ecosystem for some time, as app creation and ownership has been separated from network facilities ownership. In other words, the very organization of the internet and computing separates functions into layers that operate independently of each other.
source: GSMA
Participants in the ecosystem act in a “permissionless” manner. And that always has irked connectivity providers, as any person with access rights or any lawful app can use the network without a formal business relationship with the underlying network.
So the connectivity industry now is making a push to alter revenue models. Consider a couple of analogies. What if refrigerator manufacturers and air conditioning suppliers had to pay electrical utilities additional fees because they drive electrical use on the grid?
Connectivity providers argue about revenue or valuation shares to make the argument that they are due more value from the ecosystem. But that is like arguing all appliances and apps using electricity collectively represent the vast proportion of value in the “anything using electricity” ecosystem.
That is the case in virtually every ecosystem: the things humans do that use electricity are vastly more “valuable” in economic terms than the value of electricity that gets sold. In other words, things people buy and businesses sell is the bulk of value in any area.
source: GSMA
It is not a stretch to argue that increasing costs for some participants to shift revenue to some other part of the ecosystem is simply part of the normal desire of any participant to “make more money.”
In a sense, that is “calling party pays” in the communications business. That also is the principle behind “access fees” paid by one carrier to another when customers place calls between networks. If one network terminates a call placed by a customer on another network, the receiving network is paid for the use of its network to do so.
The model actually works in the reverse in the water supply business in the United States. The heaviest users--farmers--pay far less for water than do the lighter household users. You can think of all sorts of public policy reasons why that should be the case, but the point is that subsidies and prices in an ecosystem can vary, and will be the source of channel conflict within an ecosystem.
In the end, the retail buyer pays for all the other profits of all the other participants in any ecosystem. A sustainable infrastructure matters as much as sustainability for all the other essential parts of any ecosystem.
But make no mistake: what connectivity providers propose is similar to charging third party appliance, app, content or other suppliers in the ecosystem to use a network that--like any other utility--ultimately makes its money charging its own customers for usage.
There is nothing magical about business models. Markets can be created and sustained with revenue created both by buyers and sellers; users and customers; suppliers and consumers. To the extent that government can change the rules shaping any industry’s business model, there is nothing “unlawful” about some entities proposing that the government change rules about how internet access services are provided.
The proposal by connectivity providers that both customers (end users of connectivity services) and partners supplying appliances, apps, services and content also pay for access is, however, a change of business model for any utility-type business (natural gas, drinking water, sanitation; waste management; electricity and telecommunications).
Some might point to airports as an example of such “both sides pay” models. Airlines pay landing fees to airports. Passengers pay airlines for travel. But airlines also recoup the cost of landing fees from passengers. So, ultimately, passengers pay for the landing fees of the airlines.
Connectivity providers propose something along those same lines. It is not unusual nor unlawful for them to try. It would not be unlawful if implemented. But customers (or end users) would still wind up paying, as all the other participants who are assessed new costs would find ways to recover those costs from their own customers.
Those “customers” would be advertisers in some cases, who would then recoup their own higher costs by passing them on to retail buyers in some fashion. In principle, the costs could be partly passed onto their own suppliers or investors.
Sustainable infrastructure is a good thing. Sustainability for the rest of the ecosystem is a good thing as well. But this a prime example of channel conflict.
That has been an issue in the internet ecosystem for some time, as app creation and ownership has been separated from network facilities ownership. In other words, the very organization of the internet and computing separates functions into layers that operate independently of each other.
source: GSMA
Participants in the ecosystem act in a “permissionless” manner. And that always has irked connectivity providers, as any person with access rights or any lawful app can use the network without a formal business relationship with the underlying network.
So the connectivity industry now is making a push to alter revenue models. Consider a couple of analogies. What if refrigerator manufacturers and air conditioning suppliers had to pay electrical utilities additional fees because they drive electrical use on the grid?
Connectivity providers argue about revenue or valuation shares to make the argument that they are due more value from the ecosystem. But that is like arguing all appliances and apps using electricity collectively represent the vast proportion of value in the “anything using electricity” ecosystem.
That is the case in virtually every ecosystem: the things humans do that use electricity are vastly more “valuable” in economic terms than the value of electricity that gets sold. In other words, things people buy and businesses sell is the bulk of value in any area.
source: GSMA
It is not a stretch to argue that increasing costs for some participants to shift revenue to some other part of the ecosystem is simply part of the normal desire of any participant to “make more money.”
In a sense, that is “calling party pays” in the communications business. That also is the principle behind “access fees” paid by one carrier to another when customers place calls between networks. If one network terminates a call placed by a customer on another network, the receiving network is paid for the use of its network to do so.
The model actually works in the reverse in the water supply business in the United States. The heaviest users--farmers--pay far less for water than do the lighter household users. You can think of all sorts of public policy reasons why that should be the case, but the point is that subsidies and prices in an ecosystem can vary, and will be the source of channel conflict within an ecosystem.
In the end, the retail buyer pays for all the other profits of all the other participants in any ecosystem. A sustainable infrastructure matters as much as sustainability for all the other essential parts of any ecosystem.
But make no mistake: what connectivity providers propose is similar to charging third party appliance, app, content or other suppliers in the ecosystem to use a network that--like any other utility--ultimately makes its money charging its own customers for usage.
There is nothing magical about business models. Markets can be created and sustained with revenue created both by buyers and sellers; users and customers; suppliers and consumers. To the extent that government can change the rules shaping any industry’s business model, there is nothing “unlawful” about some entities proposing that the government change rules about how internet access services are provided.
The proposal by connectivity providers that both customers (end users of connectivity services) and partners supplying appliances, apps, services and content also pay for access is, however, a change of business model for any utility-type business (natural gas, drinking water, sanitation; waste management; electricity and telecommunications).
Some might point to airports as an example of such “both sides pay” models. Airlines pay landing fees to airports. Passengers pay airlines for travel. But airlines also recoup the cost of landing fees from passengers. So, ultimately, passengers pay for the landing fees of the airlines.
Connectivity providers propose something along those same lines. It is not unusual nor unlawful for them to try. It would not be unlawful if implemented. But customers (or end users) would still wind up paying, as all the other participants who are assessed new costs would find ways to recover those costs from their own customers.
Those “customers” would be advertisers in some cases, who would then recoup their own higher costs by passing them on to retail buyers in some fashion. In principle, the costs could be partly passed onto their own suppliers or investors.
Sustainable infrastructure is a good thing. Sustainability for the rest of the ecosystem is a good thing as well. But this a prime example of channel conflict.
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