In my last post I commented on the consolidation of mobile phone networks in the UK and left a number of questions open at the end of the post. One of the questions related to whether users would over time be willing to pay a premium for higher quality distribution of content, thereby allowing the mobile providers of today to offer differentiation by bundling content with delivery.
In the wider world we are surrounded by, and accept distribution based business models that differentiate through speed or quality of delivery:
- postal/courier services where we are happy to pay for 1st class rather than 2nd class or a premium overnight service;
- premium passes at theme parks which offer the ability to queue jump;
- premium membership subscriptions on social networking sites that give enhanced services and access to information
The above are but a few that we encounter on a daily basis, however, when it comes to data distribution the models deployed to date are relatively basic and based on bandwidth or volume of usage. This is probably not too surprising when you look at the evolution of the market, modern data distribution has evolved from voice based communication models which were obviously real time. As consumers we have set our expectation that data delivery runs on the same real time model and to date very few if any suppliers have challenged this paradigm.
So, could this be about to change, and if so how?
We have grown up with the understanding and expectation that the internet works on a principle of net neutrality. Subconsciously we have probably assumed this carries over into the world of the private or ‘paid for’ networks that sit around the internet and either deliver content onto it or link our various devices to it.
Whilst I’m sure the hot debate around net neutrality will continue, it is possible that more savvy operators will start to try and differentiate offerings around the periphery of the internet.
For example:
- when you buy an album, a TV show, or a movie, today you expect to then be able to download it immediately and probably over a 3G mobile network if necessary. Would you be willing to get a discount if the network operator could chose when to deliver it to you over say the next 12 or 24 hours, thereby allowing them to schedule it when the network was less busy and using an optimum delivery route for them?
- with the increasing use of webinars and mobile video conferencing would you be willing to pay a premium to access a network that gave you a better level of service for video streaming vs. a standard level of service? But perhaps only for the period that you needed it.
- when the iPad was brought out a number of network operators, fearful of its impact on their networks compressed content, which whilst fine for some things, gave a pretty poor service for others on the larger screen. Would you be willing to pay a premium for a non-compressed service when you were say streaming a video?
The above are merely examples, however, I’m sure that providers are considering the same issues. What is almost certain is that the technologies that would enable such differentiation are available or being developed. The real challenge is that, whilst net neutrality may still reign in the internet, the content providers and the companies who we pay to connect our devices to the internet will need to come together to create aligned propositions.
In effect some of the major players have gone part way to this by providing the devices and the content. In this model, however, it is in their interest to provide as much rich content as quickly as possible, which isn’t always in the interests of the network providers.
As bandwidth moves from being an unlimited commodity, as it was perhaps in the early days of 3G, to being one where demand exceeds supply and it has to be rationed, then new business models that better balance the value chain will become imperative for all involved.
Maybe the person, who will make most value from this will be the person who creates the perfect compression algorithm?
