'SmartPipes', today is a very hot area for wireless service providers/telecom operators (such as AT&T, Verizon, Sprint and T-mobile) because of the potential for revenue generation. Just to give you a background, currently all telecom operators in the US provide WCDMA technology, with data connection speeds of 5-6 mbps, to all handsets. The next generation of wireless communication will be provided through LTE (Long Term Evolution)/4G technology. What this means is that we will be able to get mobile broadband speed upto 100 Mbps on our mobile handsets. We would be able to stream movies, do video chat with friends, do online gaming and download apps to enhance our entertainment experience all at once. Currently telecom operators provide mobile broadband speed of only 5-6 Mbps, which shows that LTE/4G will completely change the end user experience.
The basic services provided by operators, prior to the launch of the Apple iPhone in 2007, were mainly voice and text. But with the iPhone, people were able to download apps which provided new features. People could watch videos, listen to music, surf the web and send emails. This made the iPhone a smart device and more commonly called a ‘smartphone’. Today many handset manufacturers (like Google, Nokia, Samsung, LG, HP-Palm) manufacture smartphones.
So how does this all tie into SmartPipes. Well, with handset manufacturers making smartphones and creating their own app stores telecom operators were not getting any part of the revenue pie. In essence, they were providing the connectivity to these smartphones, which in turn allowed users to download apps and all the money went to the content providers such as Apple and Google and some amount to the developers of the apps. So the telecom operators provided what was called the ‘dumb pipe’ experience since their network only provided good connectivity and high bit transfer rate. The challenge that many telecom operators are trying to address around the world today is how to move from being a ‘dumb pipe’ (and not giving away all their revenues to companies like Apple and Google) to becoming a ‘smart pipe’ and capturing a major slice of the services revenue.
'Smart Pipes', entails telecom operators to provide more value for every bit of data sent over their network. How can this be done, is much debated by analyst and experts in the market. Some of the common themes where we see them making money are by charging for data usage (since we have seen exponential growth in data usage with the advent of smartphones); creating their own app store; collaborating with other telecom operators to create a consortium of some sort (like GSMAOneAPI) where apps can be downloaded to any smartphone. All in all, they want to break the monopoly that Google and Apple have created in the App market. Also operators have an advantage in the services they can provide to users since they provide the connection based on the subscription plan the user chooses. Also they can provide great user experience through ‘quality of service’ and efficient network traffic handling.
Smartpipes is the future for telecom operators, since we already see that the US market has reached saturation on the number of subscribers. We also see that subscribers are spending less time on voice and more on data services. All this points to the fact, that operators need to focus their energies on getting a bigger slice of the services market by capitalizing on data usage.
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