Apple’s decision to reject Google’s Voice software from its App Store is just an initial skirmish in a wider battle among wireless operators, cell phone makers, content developers and aggregators over who will generate revenue in years to come.
Google Voice is a free Voice-Over-Internet-Protocol (VOIP) application that provides no-cost phone calls in the US along with a range of services, including call screening, voice mail with transcriptions and Short Messaging Service (SMS).
With Apple not giving a reason for rejecting Google Voice, speculation has been rife that the company’s wireless operator for the iPhone—AT&T—demanded the application’s denial, fearing it could erode its service revenue from iPhone subscribers.
According to tech research firm iSuppli, Apple’s move, and the news following afterward that Eric Schmidt—chief executive officer of Google—would resign from Apple’s board, reflect changing circumstances in the global wireless industry due the rise of data applications and services for the new generation of smart phones.
“The explosive growth in wireless data service revenues, mobile applications and smart-phone device unit shipments during the past two years is spurring a dramatic shift for the global cell phone industry,” said Dr. Jagdish Rebello, director and principal analyst with iSuppli.
“Companies including Apple, Google, Nokia, RIM and Microsoft are trying to muscle in on the wireless carriers for a share of the lucrative and growing mobile premium content, service and application pies. Regardless of who wins, this battle will alter the balance of power in the mobile value chain.”
Global revenue for wireless data services, excluding messaging, is projected to grow by 26.2 percent to reach $87.7 billion in 2009. This follows 57.1 percent growth in 2007 and a 60.3 percent expansion in 2008 for total data revenue among the world’s wireless carriers.
iSuppli is forecasting that total data revenues of carriers worldwide, excluding messaging, will grow to approximately US$188 billion by 2013.
In contrast, total revenues for all services offered by the world’s wireless carriers will remain roughly flat at approximately $866 billion in 2009.
Mobile applications, such as those on Apple’s App Store, are key to stimulating the data service revenue growth.
“Clearly, mobile data revenue is key to the continued health of wireless carriers and the cell phone value chain in the future,” Rebello said. “In this battle, ownership of customers and who can monetize data services and applications are up for grabs.”
Apple’s rejection of Google Voice is a dramatic illustration of this fight for data revenues.
“By introducing applications and services that allow customers to make calls and send text messages without paying the operators, wireless operators have no incentive to invest in network upgrades,” Rebello said.
“This is the reason why many carriers are pushing out the upgrades of their networks to 2010/2011, compared to 2009/2010 before. With billions of dollars in expected investments, the stakes are huge for the wireless carriers.”
To sustain the growth momentum in data revenues while maintaining their relations with other players in the value chain, iSuppli says wireless carriers must develop and implement carefully thought-out business models.
Operators need to develop strategies that are built around four central tenets: monetising broadband access; co-operating with the mobile value chain to develop and offer compelling applications and content; offering revenue-generating services that take advantage of mobility; and leveraging mature billing capabilities and inherent customer trust to develop new applications that can take the industry to the next level.
iSuppli says it’s critical for wireless service providers to implement new strategies and to develop business models optimized for each of the different revenue opportunities in mobile broadband access, content and applications marketing and value-added service offerings.
“Failure to do so will result in contraction in data and total revenues, excessive subscriber churn and a slowdown in market development,” Rebello warned.
By John Kennedy