Why are telcos and other connectivity providers potentially just like AOL? AOL, you might recall, was a walled garden provider of first party or “end user” services and features including chat, groups and email, as well as internet access itself, in the dial-up days.
But AOL’s business model fell apart once third-party apps and services were easily accessible on third-party home broadband networks.
Telcos used to be walled gardens as well, offering their customers fully-owned first-party apps and services including dial tone for voice; messaging and video entertainment. Early on, telcos also offered walled garden experiences as well.
But all that falls apart when any lawful app or service can be provided by a third party and consumed by any user with internet access.
And that shift to third-party, open apps in a loosely-coupled ecosystem explains why access providers worry about their business models, profit margins and revenues.
No more than happened to AOL’s business model, openness itself leads to third-party app creation and demand in the internet era. The winners in the scale app business are no imposing costs and limiting access provider revenue. The value of those apps creates the demand for internet access.
Access providers can sometimes acquire additional roles in the app area or other parts of the value chain (data centers, content ownership, cloud computing roles, for example), though it is not easy to do so.
Organic efforts are possible but hard to scale. Acquisitions provide scale but generally at the cost of high debt burdens.
But the backdrop is important. Just as walled garden AOL lost its business model when first-party experiences could be supplied by any other entity on the internet, so telcos faced the same problem when their own walled gardens were challenged by third-party experience providers.
There is no easy way to return to the walled gardens of the past, for most apps and services.
No comments:
Post a Comment