The redesign of mobile business

Citation

Ballon, P. (2007), "The redesign of mobile business", info, Vol. 9 No. 5. https://doi.org/10.1108/info.2007.27209eaa.001

The redesign of mobile business

The business of mobile communications is undergoing profound change. Up until the advent of the current UMTS system in Europe, innovation in the mobile industry mainly consisted of the sequential introduction of generations of mobile systems. This was coordinated and dominated by mobile network operators and by the producers of complementary equipment. While the linearity and synchronicity of innovation in this area have since then come under pressure, mobile developments in Europe have remained centred around 3G cellular networks (see the special issue: Mobile futures – beyond 3G, info, Vol. 6 No. 6). Gradually, however, the number of business stakeholders as well as the technological diversity in the mobile arena has increased. This evolution is presenting a range of challenges for the traditional stakeholders (see the special issue: Next-generation mobile telecommunications networks: challenges to the Nordic ICT industry, info, Vol. 8 No. 4).

The introduction and expectation of various types of software platforms and internet-like end-to-end architectures in mobile systems is taking this process one step further. As a result, intense platform competition is increasingly observable in the mobile industry and is driving a drastic redesign of mobile business models. Technically, a platform may refer to a hardware configuration, an operating system, a software framework or any other common entity on which a number of associated components or services run. Economically, platforms and their providers mediate and coordinate between various stakeholder constituencies. Business models in platform markets, rather than to focus on profit maximisation in a single market, primarily deal with getting the various stakeholder groups on board, with balancing interests between these groups and with openness towards, versus lock-in of, customers. A growing body of literature points to specific characteristics of platform competition and is referred to in several of the papers presented here. In basic, formalised form, this concerns so-called two-sided market theory. This special issue takes a more encompassing view and adopts a mostly qualitative approach, considering multi-stakeholder business models across converging sectors, and competing platforms on various levels and in various domains.

The specific business model “lens” used throughout this special issue mirrors the mobile industry’s shifting preoccupation from single-firm revenue generation towards multi-firm control and interface issues. In fact, it can be argued that the guiding question of a business model has become “Who controls the value network and the overall system design?” just as much as “Is substantial value being produced by this model (or not)?”. Such an approach also refers to the tradition concerned with the political economy of information communication technology (ICT) (re)design, which stresses that control configurations, power relationships and different forms of bias pervade ICT design, and profoundly influence the outcome of the design in terms of individual, societal and economic value. This basic idea is followed through, in various guises, throughout this issue.

The seven papers of this special issue provide a conceptual as well as an empirical exploration of the present and imminent redesign of mobile business models. A considerable number of current, emerging and future platforms are treated, all attempting to establish themselves on various levels in the mobile industry. Such platforms include mobile phone operating systems, mobile payment platforms, mobile television platforms and networks, mobile content and service delivery platforms, the IP multimedia subsystem (IMS), mobile end-to-end architectures, and control entities for cognitive networks and flexible spectrum management. This issue considers not just the potential impact on business models, industry structure and customer value, but also on standardization processes and policy formulation and analysis.

The first paper by Ballon revisits the existing business model literature in the light of the challenges faced by today’s mobile telecommunications industry. It is argued that balancing interests between multiple stakeholders has come to the fore in recent business model literature, but that no workable framework exists which is grounded in established theory to fully reflect this. Therefore, an improved framework is proposed for business model (re)design and analysis, that conceptualizes business modelling as the (re)configuration of control and value parameters. This framework is used as a reference, in various ways, in several of the subsequent papers.

Standardization can be a powerful tool for establishing platforms and imposing dominant architectures. Hawkins and Ballon seek to demonstrate that the standardization paradigm has become profoundly influenced by business model strategies. Their case studies illustrate that regardless of institutional orientation or process, the most important standardization strategy for mobile equipment and service providers is to create platforms that are open to the development of complementary products and services while at the same time preserving the proprietary edge necessary to ensure lock-in effects. All three cases yield strong reasons to doubt whether many of the traditional advantages of standardization (interoperability, economies of scale, positive externalities, etc.) will be achieved equitably for all of the stakeholders in the mobile ICT arena.

Van Bossuyt and Van Hove focus on the role of various mobile payment models for next-generation mobile service platforms. These platforms are tailored to deliver mobile value added services composed in open and dynamic ways, with components originating from different stakeholders, without necessarily requiring up-front and individually negotiated agreements between all the parties. It is argued that payment models centred around intermediaries and/or payment service providers, possibly in combination with operator-centred models, are most suited to the requirements of next-generation mobile service platforms.

The paper by Braet and Ballon discusses the relative advantages and disadvantages of the IMS, which is probably the most prominent and all-encompassing platform for next-generation mobile service delivery. It builds on the insight that almost all services that are about to be implemented through the use of an IMS can also be introduced through the use of so-called end-to-end architectures, albeit with dramatically different business repercussions. The paper concludes with a number of strategic recommendations for the telecommunication industry as it is implementing (parts of) IMS, in order to mitigate the disadvantages and leveraging more fully upon the advantages of this architecture.

Delaere and Ballon venture into future scenarios that may be (even) farther ahead, as they sketch out the European roadmap towards flexible spectrum management and cognitive networks. They argue that, in spite of common perceptions, these likely developments do not eliminate the need for a number of centralized controlling entities, performing regulatory, commercial and technical functions of a diverse nature. One of the most prominent control entities, the cognitive pilot channel (CPC), is presented and analysed. The authors conclude that a hybrid model combining a meta-level CPC with operator-deployed channels may provide the best mix of technical and strategic control for operators, and value for users.

The final two papers discuss the usefulness of an integrated business model framework to mobile service provider professionals, and policy makers and policy analysts, respectively. Methlie and Pedersen present a model linking business model (re)design choices to customer value. Their survey of mobile service provider professionals reveals that providers of mobile services have underdeveloped perceptions of how business model choices facilitate extrinsic and intrinsic service attributes to achieve end-user value. They also conclude that whether open or closed business models will be successful, is dependent on particular services and particular structural conditions and caution, rightly, that one may not be able to identify universally successful business models.

Finally, Poel, Renda and Ballon discuss the relevance of business model analysis of the sort featured in this special issue, for policy formulation and policy evaluation in platform industries, including the mobile delivery of digital content. It is argued that the complex economics underlying mobile business models are almost never fully acknowledged by sectoral regulators. In reviewing a number of original studies on digital content platforms, they find that integrated business model frameworks are useful for taking into account the systemic nature of ICT innovation, and the multi-sided nature of converging ICT markets. In particular, because they shift the emphasis from traditional policy analysis based on specific policy domains or isolated “relevant markets”, towards the relevant determinants for successful platform business models.

Taken together, the papers gathered here explore some of the most important determinants and consequences of the redesign of the mobile ICT industry, as it moves from a coordinated innovation system towards a system characterized by intense platform competition on various levels. Without providing any definitive answer to the outcome of this competition, the papers clearly point to a number of ways in which today’s mobile industry may leverage its core assets and how it should adapt its present business model. I hope that this special issue of info may provide an excellent ground for debate on the future of mobile business.

Acknowledgement

The research presented here is mainly the result of a series of projects carried out in 2006 and 2007 by the IBBT-SMIT research centre of the Vrije Universiteit Brussel, Belgium. At national level, these projects are supported by the Interdisciplinary institute for BroadBand Technology (IBBT) of Flanders, Belgium. I wish to thank the IBBT for its encouragement to perform interdisciplinary work related to new business models for mobile services and systems. At the international level, the research was performed in the context of the Wireless World Initiative (WWI), the largest cluster of R&D projects on next-generation mobile within the European 6^th Framework Programme. I am very grateful for the opportunity of coordinating the cross issue on Business Models for the WWI, which has helped me tremendously in understanding the challenges faced by today’s mobile telecommunications industry.

In addition, the papers gathered here incorporate complementary, original research results by colleagues from TNO, the University of Calgary, the Centre for European Policy Studies, ECON (Vrije Universiteit Brussel), the Norwegian School of Economics and Business Administration, and Agder University College. This reflects several fruitful collaborations and/or debates on the topic of mobile innovation and changing business models, for which I am, again, very grateful.

The concept of multi-stakeholder business models for complex mobile services and systems also draws upon previous conceptual and empirical work carried out at the turn of the century by TNO, Technical University of Delft, and the Telematica Institute. I had the good fortune of leading the TNO participation on business models in three joint research projects, i.e. Gigamobile, BITA and B4U. Over the last few years, further joint research has taken place between a.o. TNO, IBBT-SMIT, Siemens, Motorola, NEOS, Erasmus University Rotterdam, Logica CMG, and Hogeschool InHolland. Ample references to this earlier work can be found in the various papers gathered here. At this stage, I want to express sincere thanks and acknowledgements not just to the authors present in this issue, but also to Uta Wehn de Montalvo, Pascal Verhoest, Richard Tee, Sander Limonard, Harry Bouwman, Carleen Maitland, Els van de Kar, Sander Hille, Edward Faber, Timber Haaker, Oscar Rietkerk, Marc Steen, Joe Sokol, Al Lee, Didier Bourse, Luca Galli, Jan van den Ende, Koen Dittrich, Irma Borst, Skylla Janssen and all other researchers who have been and remain central to establishing this line of work.

Coorresponding authorPieter Ballon can be contacted at: pieter.ballon@vub.ac.be

Pieter BallonProgramme Manager, IBBT-SMIT, Vrije Universiteit Brussel, Brussels, Belgium and is Senior Researcher, TNO-ICT, Delft, The Netherlands.