Disrupting the Wireless model (Part 1)

April 11, 2007 at 6:48 pm 3 comments

Is it even possible?

When we started Fonav, that was the goal. Take advatdge of the WiFi penetration and dual mode devices to get around the cellular operators and get a consumer focused, great communication expirience offering. For many reasons we ended up in a different place (Yes, I also recommend Founders at Work: Stories of Startups’ Early Days or as others have suggested – Flounder at work) . Yet – the topic is still something I am thinking through a lot ..

Its a complicated questions as the industry is very complicated. So I will try to tackle it in a few seperate postings, each covering one of the required components.

The first two components are (i) Handset Distribution (ii) Business model

Handset distribution. In the US, majority of handsets are sold through the operators shops. In the rest of the world, the situation is better (I heard a number of 50% globally are sold through operators but not sure if it is correct). Yet, even when handsets are not sold through the operators, operators are attempting to control the handset software and offering.

Why is this so important? “Follow the money” Whoever is paying for the handsets, get to control or influence the default software on it. If you are the one placing an order for $10M of handsets (50K handsets) you get to tell the OEM or ODM that the what is the default configuration of the handsets – minor things like: “phones needs to have “Google” as the first bookmark “and have SIP pre-configured to point to “Vonage” servers. And the home page needs to point to my site where I will sell content. And by the way – can you make those settings read only ?

This is the kind of unlfuence the operators have today. Yes – lots of those changes can be done by end users. But thats not a solution for mass markets. Most people don’t have the technical ability to figure out those changes and make them – so anybody attempting to rely on the users to make those changes is automaticaly restricting themselves to a very small segment of the market.

Further more – in the smart phone segment, – both Microsoft Mobile and Symbian have special APIs that are only available to operators. This is done both for security reasons and because the operators are the 800 pound Gorilla who have asked for those features. So if you want to have your nice home screen widget application available from the home screen – you need to be the operator or approved by one.

But if you buy those handsets, you are the customer – and you get to decide what those settings are. Yes – with some of the vendors – like Nokia – $10M order might not be enough – might have to be $100M – but you need to start someplace.

The downside is that distribution is very capital intensive and careful inventory managment. What happens if you miss the xmess season or sell less then you projected? Think about a warehouse full of handsets in millions of dollars that were not sold. Not a pretty sight. And handsets – more then many other CE goods – have a very limited shelf life. SO VCs and reluctant to experiment here – and even though this is a critical element for disrupting the wireless industry, it is not an easy one.

Especially because this is not enough – the next components that is required is a different business model. I will write on this one over the weekend.



Entry filed under: Devices, Mobile, Nokia, Technology.

Violin for breakfast ? Yes? Maybe? Nokia 800, Rhapsody and should I send $10 a month to RNWK ?

3 Comments Add your own

  • 1. Arnon  |  April 12, 2007 at 7:13 am

    “it good to be the king” (Gorilla)…:)

  • 2. Unlocking the Handset « OJO Mobile  |  April 12, 2007 at 11:23 am

    […] Unlocking the Handset A colleague and friend of mine recently posted an entry on “Disrupting the Model“. […]

  • 3. Frederic Guarino  |  April 25, 2007 at 10:25 pm

    Hi Ram, great post ! The handset bottleneck is a key one in the mobile space, which is why the Best Buy-Carphone Warehouse link-up is going to be interesting, as it pushes consumers to buy handsets outside the carrier retail network.

    Check http://tinyurl.com/yuf6yn


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