Taking advantage of new technologies, peer-to-peer companies, otherwise known as dotcoms, are porting services to wireless subscribers without operator consent.
Through handsets, personal digital assistants, laptops and other mobile devices, end users can enjoy services such as music downloads and file sharing, video on demand, picture transfer, data exchanges and a slew of multimedia services.
U.S. carriers did not respond to RCR Wireless News inquiries on the subject.
Peer-to-peer companies, using off-portal sites, are taking advantage of Session Initiation Protocol, a signaling protocol that allows application providers to send services in packets. SIP is a part of the Internet Protocol Multimedia Subsystem, which major carriers and vendors are adopting to facilitate the provision of packet-based services.
“IMS is an opportunity and threat to carriers,” remarked Martin Dunsby, vice president and general manager of Openwave Global Services, explaining that carriers have to develop a counterfoil to the trend or risk becoming Internet service providers.
“It’s got to be a concern,” said industry analyst Andrew Seybold. He said the problems arise partly from the perception that the Internet is free.
“The Internet costs money, especially in terms of bandwidth,” he said.
Some of the companies enabling these off-board downloads without carrier consent are Bango, 4Friends-Only.com, Mobile 365, M-Qube, Jigsaw and Action Engine.
Bango.com, which has had success in Europe, is now trying to enter the U.S. market.
“The carriers are involved without knowing it,” said Anil Malhotra, vice president of alliances for Bango, adding that carriers in Europe and Asia are learning to live with the trend. He said U.S. carriers are resisting it, but he said T-Mobile USA Inc. is more receptive to the idea of third parties using their networks than some of the other carriers.
How does it work? The peer-to-peer companies provide the platform on Web sites and allow the content providers to use it via short message service short codes and offer their services to end users.
For example, a piece of music can be downloaded from Bango’s site for say, $3, and an end user will buy it using his wireless device. Bango will serve as the middleman and charge the end user, usually through a credit card. Once the transaction is complete, the service is delivered to the subscriber. The money is shared among Bango, the content provider and the carrier, according to Malhotra. He said the content provider gets about 60 percent of the money, the carrier about 25 percent and Bango about 10 percent.
He said the carrier’s billing infrastructure completes the transaction.
Malhotra said the business model is most successful when the carriers are involved, but noted that carriers would be involved only on their own terms. U.S. carriers like Cingular Wireless L.L.C. and Verizon Wireless prefer to control the content, the pricing, billing and the provisioning of the services, a process at odds with the business models of third-party companies.
“It’s not peanuts what the carriers are getting,” commented Malhotra, noting that it pays the carrier to work with them.
“There is so much content a carrier can control,” he said, adding that they can achieve a “superb synergy.”
He said carriers can partner in two ways. The first is by improving their ability to access content through the deck of the carriers. He said carriers can also provide SMS codes to those who want to offer services to end users.
He said if a carrier allows them to bill directly to a subscriber’s phone account, customers will buy more and afford economies of scale and better revenue for the operators.
Malhotra insists “we are not undercutting carriers,” adding that what they have is called “co-opetition,” adding that their business provides increasing choice of content.
He noted that peer-to-peer companies flood the market with a variety of content, and the content has to be of high value because, unlike carriers, they do not have the resources to market their products, he said.
Dunsby said carriers like Nextel Communications Inc., Sprint PCS, Verizon and Cingular understand their customers and can develop business models to secure the networks for themselves, noting that Nextel did it with its push-to-talk service and Sprint PCS with it PCS Vision.
He highlighted two strategies the carriers can adopt: personalization and security, explaining that carriers can adopt the credit-card companies’ model of understanding customers-where they go, how they move, what they like, what they do-and then tailor services to suit them. Since third-party companies do not have access to such data, with that personalized service, the carriers will not have to worry about the peer-to-peer services, he explained.
He also said the off-deck services do not come with security, like protection against spam and abuse, protection the carriers are in unique positions to provide.
Malhotra said his company was established after a thorough research of the market, including the subscribers, carriers, content and payment methods, what languages end users speak, and what country in which they are based.
4friendsOnly.com has a more intriguing business model, which allows consumers to resell downloaded services to friends who have similar tastes on a commission. The company is partnering with Jigsaw to provide music services to subscribers.
Part of the challenge for carriers is the absence of a technology to shut out the peer-to-peer companies.
“Memory and processing limitations have stood in the way of SIP interactions,” remarked Wade Vesey, chief commercial officer of Sonim Technologies, explaining some of the challenges carriers are grappling with. He said the dotcom companies will still have to deal with the challenge of getting their products from one carrier pipe to another.
“As standards were being developed for bringing SIP into wireless domains, operators had concerns that SIP provided a service delivery model that could turn them into a bit pipe,” explained Kevin McCracken, senior manager of GSM/UMTS marketing at Nortel Networks Ltd.
He said to ensure quality control, industry players developed mechanisms around policy control, quality of services and admission control. He said Nortel is working with major carriers to ensure tighter controls of their networks, such as setting network-wide or subscriber-specific rules that apply to certain types of services.
He said the 3GPP Release 6 standard for IMS will ensure greater control of the network.
“We are moving to an all-IP world,” remarked Seybold, adding the technology is evolving, so the carriers will increasingly know what is traveling on their networks. He said wireless should not fall into the trap of the wired networks that are just pipes. “Wireless has done a good job of monetizing its services.”
He noted that the new trend of third-party companies “is hurting them (carriers) in their pocketbooks.” But Seybold added: “They’ll find a way.”
A letter to the editor regarding this story is available at No ‘us vs. them’ in mobile-data services.
