Mobile applications: Ultimately good or bad for the wireless operator?

Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
From an outsider’s point of view, it’s easy to say mobile applications should be a slam dunk for mobile operators. In most cases they get a piece of the revenue when the application is sold, and many apps also use data – if not within the app itself, then certainly when they are downloaded over the air. With the iPhone and Android we have even seen people switching operators to get their hands on mobile apps and the phones that run them well.
But as with most things, there are two sides to the coin.
Just like premium SMS, which obviously generates revenue, the picture isn’t always rosy. Some customers don’t understand the potential charges associated with usage. In a time when people are still getting shocking bills just for using their phone and going over their allotted voice minutes one month, the same is happening with data usage. While some operators are starting to put caps on charges and offering “insurance” limiting overage charges, there are still cases where customers get bills much higher than expected – including me.
Some apps do a good job of putting data usage right on the main screen. Take Google Maps for Mobile as an example. It is a fantastic app that tells you each time you use it and how much data is being consumed – in real time. Simply updating my location can use 25 Kb on a BlackBerry Curve. This is just one example of how easy it is to consume more data than you might expect.
So what happens when we go over? Most of us call the operator and complain, ask about our rate plan, or ask for a credit; but in all of these cases we need to speak with someone in a call center. That call center attention costs the operators time and money.
Worse still, what happens when the app doesn’t work after downloading it? Since some mobile app vendors are small shops or even hobbyists, it can be pretty hard for users to get technical support or a refund. While there currently are some major players out there, the market for developers is quite fragmented. Generally there is a low level of expectation on software quality; however, user-generated reviews of mobile apps are helping improve the situation.
Once again, the operators are left to handle disgruntled customers frustrated by mobile applications that don’t perform as expected, and the non-working mobile apps reflect poorly on the overall service of the operators to their customers.
With these support issues in mind, it might seem that mobile applications present a larger drain on operators than they are worth. Not so.
The best way to see what is going to happen with the mobile-phone space is to look back at the PC. While the computer hardware itself is still a factor when a consumer chooses to buy it, the first decision is often the operating system. Mac, Windows or Linux are the common choices now, and then once that choice is made the computer is selected accordingly. On mobile phones we are starting to see the same thing, and it too is driving purchasing decisions for the phones, and even for the choice of carrier.
Today, if you want an iPhone and all of its apps, you don’t have a choice for your operator. If you want an Android device, it’s the same story, for now. Five years ago, people just looked at the device hardware alone, but that has changed.
Increasingly software is driving that choice.
In this same PC space, the Internet service providers (ISPs) became dumb pipes and the PC became the platform for apps and content. While that future may not appeal to the carriers very much, there is an upside: People tend not to complain to their ISP when an app doesn’t work, and in the future, people may not call their carrier either when the app they downloaded doesn’t work.
Looking even further ahead – do the ISPs care about how much data is being used? Yes, they do as long s they can continue to charge higher amounts for their data packages. I predict that the same will hold true for the carriers. More apps ultimately will mean more revenue, and that can only be good.
Alan Lysne is CEO of Cascada Mobile. Before joining Cascada Mobile, Alan was co-founder and CTO of Davinci Technologies, where he created software to enable wireless carriers to develop and deploy scalable vertical market applications. You may contact Alan Lysne at [email protected]. You may contact RCR Wireless News at [email protected].