"Smart" pipes, "big fat" pipes & Citizen Kane

Thomas Husson | April 09, 2008, 05:46 PM

Tectonic shifts are happening in the mobile industry. New entrants and new approaches of existing stakeholders in the value chain are forcing operators to redefine their roles.

They were some interesting quotes reported in the press in the recent weeks made by the CEOs of 2 leading operators:

“…Carriers must not allow themselves to become bit pipes” - Arun Sarin - CEO of Vodafone

"We are not building freeways for Californian cars" ((november 07)and "I am not Citizen Kane" (les Echos) - Didier Lombard - CEO of France Telecom

In the latter case, to read between the lines, it means operators do not want to reduce their roles to being data pipes only and let Google & co do their business on the back of carriers. It also refers to fuel consumption (Californian cars vs small European cars such as a Smart...) that would imply bandwidth constraints and higher network costs. As my colleague Ian Fogg pointed out already a year ago, the net neutrality debate is finally taking place in Europe!

To maintain its strong positioning in the value chain, Orange is clearly investing the media space (but obviously not directly as a content producer, hence the reference to Citizen Kane). Orange Sport (203M euros invested in French football rights), Cinema (deals with Warner Bros & co) even though Orange only generated 400M euros in content revenues end 06.

This is clearly a mid to long term positioning and has been perceived as a war declaration by Canal + (see here and here). For now it would be risky to replicate such an approach elsewhere than France since the company needs a significant installed base of customers on all its platforms (PC, TV, mobile) to recoup such an investment.

Not all operators follow this route and some of them begin to admit they will become "smart" pipes, finally trying to leverage their assets and partnering with other players to become trusted enablers for their customers' day-to-day digital life styles. There are obviously different approaches and no one-size fits all answer.

However it seems a new era is opening up with the so-called co-opetition where the same companies can simultaneously be partners and competitors.

To know more about it, see the latest report published in European mobile: Mobile Content Value Chain: evaluating the impact of new entrants.