From "Closed Garden" Business Models to Open by 2012? Highlights from the Democratization of Wireless and Promise of Open Mobile reports

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Deloitte LLP’s Technology, Media & Telecommunications practice recently released the results of a new survey of 230 executives in and around the U.S. wireless sector across multiple industry segments and job functions.

Issues discussed include the prospective impact on the future wireless landscape, planning and investment in open mobile, open platforms and open source technologies over the short-term, assessing the impact on the wireless value chain and capability building for open mobile.

Key findings

Today, the wireless sector is on the edge of a seismic shift – one precipitated by accelerated technology development and changing consumer demand. Survey results reveal that 53 percent of surveyed network carriers believe their current closed business models will no longer exist by 2012. However, only one-quarter of the network carriers surveyed believe their companies have formulated an open mobile strategy for capitalizing on this industry-wide shift.

• 53% of network carrier respondents believe in 2012 the “closed garden” business model will be over, and the future of mobile will be driven by open content and mobile software application providers
• 74% of all respondents believe that survival in an open industry will depend on making the transition from “closed gardens” business models to open technologies and "platform ecosystems”

More than half of the executives surveyed believe by 2010 the future of mobile will be driven by open mobile content, with 67 percent of the respondents believing it will be a “game changing” force within wireless in the short-term. Further underscoring this point, when asked which mobile operating system has the greatest potential to be the U.S. de facto standard in five years, Google’s open source Android operating system was the run-away favorite with 43 percent of all votes—more than double the score of the next highest finisher. In fact, 27 percent of those surveyed say that Internet companies, rather than network carriers and handset makers, will dominate the U.S. wireless sector in five years.

Among other key findings, the majority of those surveyed believe that open source technology will benefit consumers at the device level.

• 75% of respondents believe, that from a consumer perspective, there will be a positive impact on pricing of handset and user devices
• 79% of respondents believe there will be a positive impact on innovation of handset and user devices

Further, over half of the industry respondents predict increased investment in open source within their companies over the next three years. Established carrier incumbents, who have successfully delivered significant profits and a decade’s worth of strong growth however, may be reluctant to change business models for fear of substantial revenue loss and fear of losing control over access to products and services through their network portals.

Nearly 60 percent of industry executives surveyed agreed that the future of mobile will be driven by open content and mobile software application providers. However, application development by its very nature substantially outpaces network build-out. This, combined with the Federal Communication Commission’s recently proposed net neutrality guidelines, increases both the importance and the perceived risk of investment in next-generation networks.

While almost two-thirds of the survey respondents believe that open access regulations will accelerate the commoditization of U.S. wireless network carriers, companies that focus too narrowly on regulatory issues as the key catalyst for change may in fact miss the real market opportunities being driven by open platforms and technologies. The regulatory debate, while important and in need of refinement, is not the end game. In fact, keeping network access, devices and services tightly controlled and retain as much as possible current proprietary business models ranked the lowest in terms of opportunities for network carriers to sustain their competitive advantage.

In order to execute a strategy for migrating to an open mobile business model, organizations will require a range of capabilities including ecosystem building, platform development, effective partnering with third parties, understanding customer needs and effectively managing intellectual property. Among survey respondents who self-assessed their organization’s capabilities, those capabilities that rated the strongest included:

• Providing strong internal support for research and development
• Partnering effectively with suppliers and competitors
• Developing a deep understanding of customer needs

Conversely, those capabilities that posed the biggest challenges for survey respondents included:

• Building trust with developers
• Developing distributed networks of partners and developers
• Managing intellectual property

In the News

Google's Android Taking Steps Toward Being A Business Phone
Dow Jones Newswire | October 28, 2009
In a recent study conducted by consulting firm Deloitte, Android was the overwhelming top choice for de facto operating system standard in five years. That's partly because its open structure makes it easier for developers to create programs.

Motorola Droid Makes Its Debut
Wall Street Journal | October 28, 2009
Motorola Inc. and Verizon Wireless on Wednesday unveiled the Droid smart phone, which the companies plan to aggressively push as a challenger to Apple Inc.'s iPhone. In a recent study conducted by consulting firm Deloitte, Android was the top choice for an operating system standard in five years.

Survey: Last walled garden will wither by 2012
Telephony Online | October 28, 2009
The walled garden’s days are numbered. According to a Deloitte new survey of wireless industry executives, the closed business models for delivering mobile content and applications will fade away in the next three years...

Contact us

Deloitte would like to share survey insights from The Democratization of Wireless: Assessing the impact of open mobile and accompanying The Promise of Open Mobile: Capturing value in a brave new world reports with you. If you are interested in reviewing the materials with a member of our team, please contact:

Scott Wilson
Technology, Media & Telecommunications
Deloitte Research
Deloitte Services LP
+1 203 708 4772
scowilson@deloitte.com

Please send general questions to tmt@deloitte.com 

As used in this document, ‘Deloitte’ means Deloitte LLP (and its subsidiaries). Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

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