Seven Questions That Will Decide Mobile’s Future—Part One

I always smile to think that we launched Xconomy on June 27, 2007, just two days before the original iPhone hit Apple stores in the U.S. That was a transformative moment in consumer information technology—as important as the launch of the Macintosh in 1984, Windows 3.0 in 1990, or Netscape in 1995. Thanks to Apple, the dam that had held back U.S. mobile innovation for a decade—the wireless carriers’ death grip on handset technology—was dramatically swept away, and Silicon Valley was eventually able to establish itself as a world capital of the mobile business.

As Xconomy has grown up alongside the iPhone and its companion iOS devices, not to mention the alternative universe of Android devices, we’ve naturally been drawn to write about companies exploiting the new free-for-all and making creative use of the amazing new smartphone and tablet platforms. We’ve also hosted a series of annual conferences showcasing mobile innovation and speculating on its future—in fact, the third one, Mobile Madness 2011, is coming up on March 9 in Cambridge, MA.

But our crystal balls are murky at best. There’s only so much we can predict about a business where the technology itself is evolving so quickly and dozens of powerful stakeholders are competing for dominance.

This is the 128th edition of World Wide Wade, and 128 happens to be 27. So here’s my list of seven huge, unanswered questions about mobile—one for each power of 2. In today’s column I hit the first three questions, and next week I’ll explore the other four. If you knew the answers to these seven questions, and you could go out and address the key market opportunities in each area, you could probably become the world’s first trillionaire. (Which actually makes a ticket to Mobile Madness a pretty good deal. For that event, we’ve recruited a stellar group of entrepreneurs and innovators from around the country to help us probe these questions and more.)

1. Who will be the new gatekeepers, and how much friction will they impose?

We know one thing: the stagnation of the early 2000s, when developers couldn’t get new software applications onto mobile handset “decks” without selling their souls to Verizon, Sprint, T-Mobile, Nextel, or Cingular (now AT&T), is over. We have Steve Jobs to thank for that. His exclusive deal with AT&T, though it may have cursed iPhone owners to three and a half years of dropped calls, bought Apple the flexibility to create the iTunes App Store, which opened the way for the Android Marketplace and the other mobile app stores, with all their glorious variety.

The questions now are whether the loosened rules around developer access to smartphone and tablet platforms will persist, and whether the tolls levied by the platform owners will remain reasonable. Apple keeps 30 percent of the revenue on every app, e-book, or subscription sold through the iOS ecosystem (that’s its operating system for iPhones and iPads). That’s a lot higher than its 10 percent margin on songs—but keep in mind that this market didn’t exist before Apple created it. Google also charges a 30 percent transaction fee for apps sold through the Android Marketplace, though it shares its cut with carriers. Microsoft, as far as I can tell, doesn’t charge developers anything to sell apps through the Windows Phone 7 Marketplace—in fact, in many cases it pays them to build Windows Phone 7 applications, as a way of catching up with the Apple and Google platforms. All in all, it’s a great time to be a mobile app developer, as long as you can figure out how to get your app noticed among the hundreds of thousands of others.

But over time, Apple or Google might decide to raise their fees. Or Microsoft might do something silly like banning Windows Phone 7 apps that use open source code. Or important new players might emerge in the mobile-app world, like HP (which hopes to revive Palm’s WebOS) and Nokia (which is abandoning Symbian in a last-ditch effort to rebuild its handset strategy around Windows Phone). The point is that in the post-carrier era, the major mobile platforms are still walled gardens—it’s just a different set of companies manning the gates. It’s going to require an unusual level of enlightenment and restraint on the part of these new overlords to keep the mobile software and services revolution going at its current pace.

Here’s an important sub-question: Where is Facebook in all of this? If the social networking service were to start selling phones to its 600 million users, it could become one of world’s largest carriers virtually overnight. (Even China Mobile has only 522 million subscribers.) Admittedly, Facebook probably isn’t interested in turning into Facephone, but the company’s sheer size makes it the elephant in the room in almost any area of consumer Internet technology.

Facebook has mobile stuff, but no mobile strategy as yet. There are nice Facebook apps for the iPhone, Android phones, and feature phones, and there are even a few “Facebook phones” with dedicated Facebook buttons. The Facebook Places feature added last fall is introducing hordes of people to the idea of the location-based check-in. And the company is working to become a sort of single-sign-on-provider for mobile services from other Web-based companies like Zynga, Groupon, and Yelp. But there doesn’t seem to be any guiding idea behind these miscellaneous efforts. If Facebook ever decides to articulate clearly how it plans to keep growing in a world where most of its members are mobile most of the time, watch out.

2. Open or closed? Can the best parts of the Web—its openness and interoperability—persist in the world of mobile apps?

Last summer, Wired proclaimed that “the Web is dead.” It was hyperbole, but the point was that more and more of the data we get from the Internet is presented to us not through a Web browser but through self-contained mobile or desktop apps like Pandora, Skype, Netflix, and Tweetdeck. For consumers, these apps often provide a cleaner, simpler, better-curated experience than what’s available on the open Web. And for content providers, they’re easier to control and easier to monetize.

But as we hurtle forward into App World, we risk losing some of the architectural features that made Web World so great, such as the ease of content sharing. The Daily, an iPad-only news publication launched a couple of weeks ago by Rupert Murdoch’s News Corporation, provides a case in point. As I noted in my February 4 column, everything about the app (which will soon be subscription-only) is designed to freeze in place the ideas The Daily produces—no circulation allowed. There are buttons that let you post tweets or status updates about articles, but if you do that, the links that you share lead Web users to static JPG screen shots rather than HTML Web pages. These image pages aren’t searchable, and you can’t cut and paste from them, or save the text on Delicious or Evernote, or do any of the other things that have made the Web such a wonderful playground for bloggers and trolls, students and scholars, pundits and plagiarists.

The Daily, as Scott Rosenbaum has so nicely put it, has seceded from the Web. And if News Corporation gets away with it—if audiences turn out to be willing to pay for a publication that is delivered via the Internet but is not of the Internet—then the whole cash-starved news industry will likely try to follow suit, and we could all wind up back in 1993, when finding out what the newspapers were saying every day meant spending hundreds of dollars a year on newsstand copies or subscriptions, or physically traveling to the library.

The question is whether some middle ground exists. Can publishers, game developers, TV and movie producers, and other creators build mobile apps that offer valuable, exclusive, monetizable content and experiences, but do it in a way that still provides for public discourse and fair-use reproduction? Or will it turn out that “social media” is an oxymoron?

3. Can wireless infrastructure providers keep up with demand while keeping broadband affordable?

When you buy an iPhone, an Android phone, a 3G iPad, or a Galaxy Tab, you expect an always-on Internet connection along with it—that’s part of the point. Which makes smartphone and tablet owners enormous data hogs. It’s difficult to find up-to-date statistics, but a May 2010 report from AdMob—released before the mobile ad network was absorbed by Google—showed that Android and iOS users spent an average of 79 minutes per day using mobile apps. iPhone users generated 40 percent of all mobile ad requests worldwide that month, and Android users accounted for another 26 percent. (AdMob didn’t even try to count iPad and iPod touch users.) Thanks largely to smartphones and tablets, overall mobile data traffic is growing at more than 130 percent per year, according to Morgan Stanley.

The current standard for wireless voice and Internet access, 3G, has been around for nearly 10 years. It’s capable of respectable speeds—here in San Francisco, I usually get about 3 megabits per second on my iPhone or iPad on a 3G connection. But that’s barely adequate for bandwidth-intensive applications like streaming video or two-way video calls. Now think about how many people will be using such applications in the near future: analysts expect consumers worldwide to buy 60 million to 100 million iPhones this year, 30 million to 45 million iPads, and probably equal numbers of Android smartphones and tablets. Something has to give.

To deal with complaints of slow data connections and dropped calls, AT&T spent much of 2009 and 2010 upgrading the 3G equipment in all of its cell sites from 3.6 megabits per second to a standard called HSDPA, capable of 7.2 megabits per second. (AT&T also said it was adding more “backhaul” capacity—the fiber optic networks that carry data to and between cell towers.) AT&T’s main competitor, Verizon Wireless, uses its own 3G technology, EVDO, which peaks at about 3.1 megabits per second. But neither EVDO nor HSDPA is great for video or for simultaneous voice and data transmissions.

That’s why the industry is looking for alternatives. One may be to offload 3G traffic in densely populated locations to shorter-range but higher-bandwidth Wi-Fi networks. Back in November, I wrote about Ruckus Wireless, a Sunnyvale, CA, company that has a lot of ideas about how to do this, and they’re one of the companies that will be sending an executive to Mobile Madness. But the only long-term alternative is to move to the next-generation cellular wireless standard, 4G.

Both AT&T and Verizon have settled on a version of 4G called LTE, for Long Term Evolution. Verizon leapfrogged AT&T by rolling out LTE to 38 U.S. cities in December. AT&T expects to start field-testing its own LTE network later this year. Then there’s WiMax, which is technically very similar to LTE but divides up data differently; championed by Intel and Sprint, WiMax is being brought to market in about 80 cities by Kirkland, WA-based Clearwire. WiMax is technically capable of speeds up to 72 megabits per second, and LTE peaks at a mind-blowing 300 megabits per second, but in practice both technologies are far slower: Early Verizon LTE users are reporting speeds around 10 megabits per second, in the same range as a home cable modem. Clearwire says that its CLEAR service averages 3 to 6 megabits per second.

So LTE and WiMax are both faster than 3G, but their speed falls off drastically as you move away from the transmitting tower. Which means the operators have to build more transmitters—which means 4G service is pricey. Clearwire delivers unlimited data to USB modems and home and portable Wi-Fi routers for $35 to $95 per month. Verizon sells LTE USB modems for $100 and charges about $10 per gigabyte of data transmitted.

Considering that a single 43-minute-long standard-definition TV episode runs about 600 megabytes, Verizon’s version of 4G clearly isn’t priced to encourage mobile media consumption. Even if the iPhone 6 or the iPad 3 were to come with LTE chipsets, in other words, you’d want to be within range of your home Wi-Fi network before downloading a movie or a bunch of apps. Clearwire’s version of 4G doesn’t have caps or per-gigabyte charges, but then it’s not really mobile—it’s intended for laptops and home networks, and so far there’s no such thing as a WiMax mobile phone or a WiMax tablet.

So we’re in one of those in-between moments when our gadgets and the things we want to do with them have outstripped the old infrastructure they depend on, but the new infrastructure is incomplete and prohibitively expensive. Maybe 4G networks will have so much extra capacity in the early days that operators will be forced to lower their per-gigabyte prices to draw users in—but if mobile traffic keeps doubling every year, then even the 4G networks will soon be as clogged as today’s 3G system, and prices will go back up. There’s likely to be ongoing tension between the network operators, who have to ration the spectrum, and the platform owners like Apple, who just want to sell content. And we consumers will probably stay caught in the middle, no matter how many Gs we have.

Next week, in Part 2, I’ll get to questions 4 through 7. But here’s a preview:

4. How will physical, bricks-and-mortar commerce evolve in response to mobile technology?

5. How much of business IT can be “consumerized” and replaced with cloud services and employee-owned mobile devices?

6. What matters most about context and location data? Is it a business or just a feature?

7. What comes next? What’s beyond mobile?

Join us to help explore these questions at Mobile Madness 2011—check out the full agenda here and register here.

Click here for a convenient full-text version of Parts 1 and 2 of this column.

Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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3 responses to “Seven Questions That Will Decide Mobile’s Future—Part One”

  1. androidlvr says:

    Mobile apps are like websites so on question one, I think we have to go back to the web days and ask: Who is the gatekeeper of the web? It’s Google, a search engine. Therefore, the search engine for all mobile apps will be the gatekeeper of the mobile internet.


  2. Wade RoushWade Roush says:

    @androidlvr. Well, interesting question. I’m not sure I agree that the Web has a gatekeeper. I think various companies have *tried* to be the Web’s gatekeeper, such as AOL and Yahoo, but they all failed fairly early on, because the Web just wasn’t built that way. Google is the closest thing to a Web gatekeeper but the metaphor isn’t great, since you don’t have to go through Google to get to the rest of the Web. It’s an index, a compass, a guide. (I think Facebook is trying to build its own separate Web where it is the gatekeeper and toll-taker — they just call the it the ‘social graph.’ But that’s another question.) So, if we managed to get a Web without a gatekeeper, maybe it’s unnecessary to worry about whether the mobile world will have one.

    On the other hand, to the extent that users’ experiences of the mobile world are filtered through apps, then the mobile world may evolve very differently from the Web. Right now there isn’t a “search engine for all mobile apps” to use your words; there are seven or eight separate ones depending on what you’re counting (one for each major mobile OS plus a few independent ones like GetJar and OpenAppMkt). And I doubt that any one mobile OS will gain unassailable market share the way Google has in search. So, we’re back to my original question — who will be the new gatekeepers, plural? But thanks for your comment!