Can Google save mobile carriers from themselves?

Last year when Sprint started offering mobile video, and again this past spring when Verizon launched V Cast, I had high hopes for mobile video. Just out of b-school I was brimming with ideas. Unfortunatelty most didn’t have a hope of getting off the ground because getting on the carriers’ closed networks would be too costly. Remember these are the same companies that charge $2.99 for a ring tone when you can buy the whole song for $0.99.

By the way, the ring tone business is one hack away from total elimination. While a greedy little content producer like me can be persuaded that buying a song from iTunes doesn’t entitle me to play a little bit of that song every time my phone rings, that’s going to be one tough ethical case to make to the Kazaa generation. Have at it carriers.

The poor mobile carriers seem to forget that they are a commodity. They supply a dumb pipe. Trying to add value to their networks with exclusive content (or services) is a fools errand. Any content worth making available to millions of Verizon customers is worth making available to millions of T-Mobile customers. Unless the carrier’s willing to pay through the nose for exclusive content, it won’t be exclusive and they will be forced once again to compete on price. If the carrier does pay through the nose, the customers aren’t going to pay enough for it to make it worthwhile.

Here’s one way of looking at it. Let’s say the NFL wants to sell the rights to game summaries to wireless customers. Now if any organization understands marketing, it’s the NFL. They know exactly how many people want that content. They probably have a reasonable assumption about how much those people would be willing to pay. And they are also smart enough to know that very, very few people are going to switch carriers on the basis of NFL highlight availability on a 2″ screen. This last point is lost on the carriers. It’s a phone, not a lifestyle enhancement device. Until every carrier offers great reception everywhere (and they are not even close to that benchmark) people are going to choose a service based on reception. Verizon owns me. Cingular has no signal in the Kingpin Interactive northeast regional headquarters complex. Neither does T-Mobile, and Sprint has a poor signal. So I’m stuck, and VZ could charge me almost anything it wanted.

So I don’t care if Cingular has the NFL exclusively. I’m not going anywhere. And the NFL knows this. It would charge an exclusive carrier enough to make up for all that lost revenue from people like me who have been indentured by carriers. That’s why there are no NFL highlights on mobile phones. It’s a shame. I’d love access to game highlights around the NFL when I’m sitting in Gillette stadium at half time or in the parking lot for an hour after the game. But that’s only eight times a year. The better business model would be to buy a la carte from the NFL. But the stupid carriers don’t get this. They could make money selling me bandwidth to get to the NFL, but they can’t make money selling me the NFL. (If the NFL could ever pull this off, it can use Gotuit’s nifty ITV technology to tag the highlights I want and save a limited number of them on my phone.)

So how is Google going to fix this? I was reading Charlene Li’s blog the other day. She had a Forrester colleague review Google’s local service on mobile phones. Charlie Golvin noted this:

While the carriers may bemoan the fact that Google is taking traffic from their own yellow pages and directory information services, in truth this is a very good thing for them. The familiar Google interface as a simple extension of the desktop experience will drive users to consume more data on their phones, and while that doesn’t necessarily mean revenue for carriers like Sprint who price data flat, it means that consumers are shifting their behavior from voice to voice and data — which is the most significant impediment to the adoption of other data services today.

It’s great when an analyst gets it.

If the carriers wise up and let the Googles of the world do what they do best, they can make a living with their dumb pipes. But if they continue to try to become media moguls, they will fail.

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