Analyst Angle (Special Edition): Mobile operators need help in moving to the age of software: Enhanced back-end systems can help them unleash digital vitalities

Editor’s Note: This article originally appeared in our September Special Edition, Behind the Scenes, a focus on integrated subscriber and network management systems. To download the complete Special Edition, click here.
The increasing use of mobile devices to access Internet content – or what is, perhaps incorrectly, referred to as the rise of the mobile Internet – has created a capacity crunch for network operators.
With voice revenues reaching a plateau – if not decreasing, as a result of competitive pressures – network operators have been looking at mobile data as a new source of revenue. The issue for the operators – following the growth in smart phones in the wake of the iPhone as well as the attendant rise in social networking and the dizzying explosion in mobile apps – is that the growth in mobile data revenues is nowhere close to being commensurate with the growth in network traffic.
Operator citadel under siege
The accelerated pace of change of technology and innovation has blurred what were once rather reassuring sectoral boundaries.
Historically used to a somewhat structured oligopolistic environment, mobile operators are now confronted with a converged, digital marketplace in which powerful new entrants from computing, broadcasting and the Internet – some armed with massive R&D budgets, some others, with treasure troves of content – are all competing with the mobile operators in the same content delivery space.
For its part, the venture-capital community has done its best to incite an onslaught on the operator citadel by offering unqualified support to developers who can design apps and services that bypass operators.
The proliferation of access technologies and smart devices, and the changing user behavior that they have spawned, have conspired to undermine the central role that the operator once enjoyed in the mobile environment. The current activism of federal regulators in favor of “openness” – or “net neutrality,” if you prefer – has added to operators’ headaches, at least in the U.S.
[Net neutrality, a considerably less than- stellar policy initiative, is U.S. preoccupation; for reasons that invite a separate column, the idea has not found favor among policy players in most other countries.]
Singular problem
All of these and associated issues together constitute a single, and singular, problem for the mobile operator – specifically, that even as they are required to continue to invest billions of dollars in building and maintaining the networks, mobile data revenue is increasingly tied to apps and services over which operators have little, if any, control.
Operators are becoming increasingly aware that merely selling access (subscribership, if you prefer) will not cut it. They recognize, however grudgingly, that business models developed in the last millennia – the one in which we got the Magna Carta! – will not hold till the second coming of Christ.
The key questions they are wrestling with, albeit, to varying degrees of success, are: How do they keep their margins and revenues in sync with investments necessary to build and maintain a robust network? How do they maintain their historic centrality to the mobile environment as the culture of mobile data consumption sets in? How do they provide capacity without going broke?
Convergence, cooperation, conflict
Convergence has resulted in telecom, broadcasting and Internet players competing in the same content delivery of the consumer wallet. Blurring sectoral boundaries have left market players – from device and chipset vendors to Internet and media firms – jostling for dominance in the still nascent digital marketplace.
Most of these players are seeking to shore up their respective standings by acquiring core assets they deem critical for success in the future and striving to shape and lead the new and evolving eco-system.
Convergence, in other words, has been a harbinger of conflict, with economic actors fighting over market and technical resources – from intellectual property to apps and app developers. The Dell/HP bidding war over 3Par is only a recent example of this continuing market struggle over resources.
Operator assets
This is not to suggest – as, indeed, some have, in what can only be seen as their naivet