Defining open mobile
There’s no doubt mobile operators, led by Verizon Wireless, are opening up their networks. But is that enough to guarantee success in a world where Apple, Google and an array of app upstarts are competing for their share of the stage?
In 2007, a new buzzword was born in the wireless industry: openness. Battles between developers wanting to take advantage of the new capabilities of increasingly powerful 3G networks and carriers needing to maintain control over their expensive 3G investments intensified. Mobile operators have always dictated what services and what applications would run over their networks — they picked and sold the devices, billed the customer and maintained the “walled garden,” those restricted portals that became the sole outlet for apps and services for the vast majority of subscribers. Developers and over-the-top-service providers — led increasingly in recent days by Google — wanted to see a mobile data universe that more closely resembled the wired Internet, where customers were free to choose the provider of their individual services and developers could get their apps on any network.
Those disagreements came to a head during the 700 MHz auction in early 2008. Google successfully lobbied the FCC to impose “open-access” stipulations on the most attractive block of spectrum in the auction, requiring any carrier using those frequencies to permit entry to any device or application that didn't harm the network. Though it fought the requirements, Verizon Wireless bid on and eventually won that C-block spectrum, making it the first operator under government mandate to run an open network. Naturally, all eyes turned to Verizon, curious to see how the operator would interpret that mandate.
And Verizon surprised everyone. Though open access would only be required for its long-term evolution (LTE) network — scheduled to launch next year — running on that 700 MHz block, Verizon announced shortly before the auction it would open up its 3G network as well. It initiated a string of programs around open device and application development. It partnered with China Mobile and Vodafone to form the Joint Innovation Lab, in part to create a more open approach to content widgets. And this fall, Verizon revealed it had been collaborating with the enemy: Rather than resent Google for its role in imposing the open-access burden, Verizon partnered with the Web services giant to develop a highly integrated Android-based smartphone, which the pair launched to acclaim this fall.
But is Verizon Wireless truly an open operator? It has led the public charge for openness in the carrier community and been much more welcoming toward players in the device and app markets than it has in the past, when it was typically viewed as the most restrictive of all walled garden operators.
At least part of that perception problem, it turns out, is the many definitions for the word “open.” (See a sampling of definitions we collected for “open” scattered throughout this cover package.) There are open models for the distribution of content and apps, open-source operating systems and open-access policies pertaining to the network itself. An operator can be open in one sense but closed in another. For his part, Lowell McAdam, CEO of Verizon Wireless, refuses to get caught up in parsing definitions.
“You've got to be careful about definitions here because the customers' needs change dramatically,” McAdam said. “If I had given you a definition of open in November 2007 when we announced our open development initiative, it would be very different from what I would tell you today. As we move into 2010, my guess is it's going to be different again. I would tell you that openness ought to be defined by the customer.”
According to McAdam, VZW's approach to openness hasn't followed any strict guidelines or pursued any firm benchmarks. Rather he said its shift to openness has been more philosophical, a fundamental change in worldview. “You have to have a different level of flexibility today than we had in the past,” McAdam said. “In the past we could pick the application and make sure that it worked well with our devices and our internal infrastructure. Today we not only have to open up that infrastructure and open up the devices, but really, frankly, change the culture of the employee body.”
One definition VZW must pay attention to is the FCC's open access requirements on its C-block spectrum. Regardless of what philosophical approach it takes to open access, the LTE network won't be open to all comers on day 1. McAdam, however, said that Verizon's approach to openness has already encapsulated the requirements tied to the C-block and embraced a far broader concept of openness than even the FCC envisioned.
“That was a guidepost along the way, but it's not a definition,” McAdam said. “The best the government can do with their regulations is to take a snapshot of a full-motion video. That's what they did with 700 MHz. It was a good effort — I'm not being critical of it. But my view is the market has moved well beyond the definition of the 700 MHz auction guidelines. Anybody who advocated for 700 MHz will tell you that we are well beyond those guidelines at this point [already]. My goal is to be way ahead of that in the future. Let's be the one to bring the innovative applications and devices to the marketplace. The government can never catch up to the market.”
McAdam pointed to the Droid — produced in partnership with Google and manufacturer Motorola — as the prime example of that commitment. While Verizon is still marketing and selling the device, it is giving up unprecedented control over the applications and services that reside on it. Rather than tap into its walled garden BREW store, Get It Now, or its new V Cast App Store, the Droid utilizes Google's Android Market, an app store open to any developer. Services that VZW charges premium rates for across its portfolio of devices, such as VZ Navigator, are replicated as free services on the Droid, such as with Google Maps Navigator. The full complement of Android apps that utilize voice, SMS and location — all with the potential of cannibalizing Verizon's core revenue streams — are available on the “wide-open” Droid. VZW is collecting a $30 monthly data subscription fee from its customers to utilize this new openness, but beyond pure access, how it monetizes the services on the Droid is still a bit of a mystery “It's a complicated relationship, and we feel very good about the economics,” McAdam said.
Apart from the Droid, the majority of Verizon's phones still run under the same walled garden model it has always followed. The operator's open device initiative has certified many machine-to-machine devices and apps for the 2G and 3G networks as well as an e-book reader, but there has been no big influx of new third-party devices coming up through the open program sold outside of the Verizon brand. In fact, last month Verizon launched its V Cast App Store, which functions almost as a meta-app store, funneling applications from multiple other platform-specific app stores into a single portal, where Verizon can control the billing relationship with the end user. While the approach is far more flexible and open than Verizon's BREW-based application distribution models, the V Cast store is still very much a managed content experience, if not a closed one.
McAdam, however, doesn't see the differing approach to the Droid versus the rest of its 3G portfolio as contradictory — rather, they are parallel, he said. Just because Verizon is committed to opening its network to new devices and apps, he said, doesn't mean its entire business model becomes one centered on that open access.
“Those two paths can co-exist,” McAdam said. “There will be some phones that customers want to have in an open environment, and there will be some phones and some customer segments that will want something directly from the carrier that's more of the traditional walled garden.”
THE IPHONE CONUNDRUM
While openness is almost accepted as gospel in many wireless circles, there is one glaring, and at times perplexing, contradiction in their midst: the Apple iPhone. By any account one of the most innovative smartphones ever released, the iPhone has broken new ground and sales records while at the same time being an entirely closed device. The platform is limited to Apple's devices, which are in turn are limited to a single operator — at least for now — in each market. Apple controls the application development and distribution platforms and has final say on what apps make it into its iTunes App Store.
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