How the iPhone puts a bomb under mobile networks

If you think everything that could have been written about the iPhone already has been written, prepare to be surprised. One vital aspect of Apple's strategy has been overlooked - with multi-billion consequences for complacent network operators.

Over at Telco 2.0, the blog of analysts STL Partners, we learn that networks who partner with Apple must install Apple gear at the data centre to support its services - specifically, the Push Notification service that wakes up the Jesus Phone. Forget the revenues from sales of extra server gear - the key point is that Apple now sits in the middle of the data stream, capturing the customer's data. The analyst outfit describes the iPhone as a potential "poison" for the networks.

STL wrote this week:

"Apple can data mine the application message stream — and it’s been a telco’s dream for years to mediate such flows."

Nokia sell two out of every five mobile phones in the world, and they've ruled the roost for a decade now. But they've failed to convert that market clout into mobile data revenue - for themselves, or the operators. When you discount application-specific services such as RIM's Blackberry Connect and new music services such as Omnifone's MusicStation, mobile data use is negligible.

Because the iPhone makes mobile browsing more of a pleasure than a pain, for the first time, this is changing. And because de facto standards are defined where the people are, this means Apple, not one of the traditional incumbents, could call the shots. Or as the STL boys put it:

"... it doesn’t take massive market share (stimulated by the new low price point) for the iPhone to de facto become the mobile web."

So, sorry, Nokia and Microsoft - you may have turned out to be the Osborne and the Altair of the 21st Century.

And bang go the commercial prospects of turning the bitstream into money:

"You don’t have to be too bright to realise that one of the most likely things to be pushed to a phone in future is an advert, mediated again by Apple," they add.

STL tempers this possibility with the very sensible point that the iPhone has may have limited it appeal. Apple has yet to prove it can break out of the niche in which it reigns supreme. Indeed the biggest threat to mass market adoption of the iPhone may yet be Apple itself, by refusing to add a numeric keyboard or hard-QWERTY keyboard. But if there's growth at the high-end, it will reaped by Apple, with its superior, easier to use technology which is now sensibly priced.

Yet the mere prospect of Apple sitting in the middle of their network, capturing customer data must make a mobile operator's blood run cold. They're unlike to accept a cuckoo in the nest - but who can help them?

Alas, the operators' strongest potential ally has decided to have a mid-life crisis. That's Nokia, of course, which is in a stronger position than ever after acquiring most of Siemens' COM division in 2006. Nokia can help with both back-end and devices, but it's decided that it, too, wants to shaft the operators. It's splurging on services such as music and maps that cut revenue opportunities for the networks.

As STL wrote last year in an excellent summary:

"The way Ovi has been positioned at its announcement could prove to be a mistake. It will confound Nokia’s efforts to address and bring to market answers the most important unmet user needs. Ovi annoys Nokia’s most important go-to-market partners for any new and better personal communications services."

Just when you need a friend... ®