Tuesday, August 08, 2006

Is revenue sharing the way to improve 3G mobile handsets?

In this article from RCR Wireless News, one of the United States' leading wireless industry publications, author Colin Gibbs takes up the question of "how can mobile carriers increase usage of wireless data" and discusses a unique proposition--share data revenues with handset manufacturers.

The article references a report from Strand Consult, a Danish market research firm. The thesis of the report is that carriers could increase wireless data usage if only there were better 3G handsets. (And handsets do have a long way to go. Reference this review of LG's Chocolate 3G phone from the Wall Street Journal's Walt Mossberg.) Yet the manufacturers are selling tens of millions of sleek design statements with basic features, like the Motorola RAZR, while smartphones remain a niche product.

Would a revenue share spur manufacturers to develop better handsets, which in turn would spur more usage of 3G, creating a virtuous cycle in which everyone makes more money? It certainly is a very different business model than exists today, in which the handset manufacturers sell their products to the carriers, who then resell them to end users, frequently (in the US postpaid market, anyhow) with a subsidy to reduce the initial price of the phone.

Alas, we may never get a chance to find out. According to Colin Gibbs at RCR, the carriers have little if any interest in another revenue-sharing partner for their mobile content offerings. So we'll just have to wait until one of the manufacturers develops the killer 3G phone--the RAZR, if you will, of the smartphone era.

(Apple, where are you?)

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