MOBILE INDUSTRY GETS CLOSER TO LOOSENING CONTENT CONTROL

Cingular's recent move to open up its data networks to outside content providers is the first major move by a U.S. carrier to challenge the “walled garden” approach to wireless data. But Cingular isn't exactly tearing down the walls. Its partnership with third-party distributor Bango, one analyst said, is akin to opening an outer courtyard rather than flinging open the gates. But the move may have major repercussions for the infant wireless data sector, as other carriers closely watch the impact on Cingular's data revenue.

Bango allows Cingular's customers to access ringtones, games, wallpapers and applications not available on Cingular's Media portal, but to have those services charged back to their Cingular bill. While technically no great feat, the initiative opens Cingular's customer base to reams of content, much of which undercuts Cingular's own services in price. Cingular customers had access to much of that content before through mobile Web browsers, but initiating a payment transaction to access each bit of the content is a daunting task for most subscribers, said Anil Malhotra, Bango founder and vice president of alliances and marketing.

“The conversion rate from being sent to a payment page to actually completing it is very low,” Malhotra said. “Once the carrier gets involved with billing though, off-deck transactions shoot up.”

The problem is that no carrier wants to sacrifice high-revenue on-deck transactions for incremental off-deck revenue. According to Bango, a typical third-party download nets a carrier 30% of the revenue, as opposed to a transaction with one of that carrier's on-deck content partners, which yields as much as a 50% share. But, the big fear is that incremental revenue could drop to 15% or 10% per transaction or eventually to nothing.

“No one is in a hurry to become just a pipe,” said Adam Zawal, Yankee Group wireless analyst. “Rather than defending the wall until it collapses, [Cingular is] opening it up on their terms.”

Other carriers may not immediately follow Cingular's lead. Verizon Wireless and Sprint have spent much time and money building their content decks and their networks. The walled garden may not be sustainable, but carriers will try to sustain it as long as they can, said Roger Entner, wireless analyst with Ovum.

“The moment Cingular starts outperforming its competitors, even with an inferior network, is the moment the other carriers will switch,” Entner said.