Why the next battle ground for technology giants is control of your connectivity.
For the past twenty years, Internet access has been provided by large telecoms and cable operators. In the next 12 months, all that will change. From traditional technology giants like Google and Amazon to international juggernauts like Alibaba, Internet companies will not only offer their products, but also seek to bundle the internet access they are consumed over.
Why has controlling access become so important for technology companies? Foremost, their software and hardware products are increasingly reliant on connectivity to work. Whether a smart watch or a mobile app, connectivity is required and can be bundled with an underlying product or service to both drive product engagement and differentiate it in competitive markets. For example, if rumors around an Amazon phone prove accurate, Amazon will struggle to gain share in the crowded handset market without distinct differentiation. Bundling free LTE with its phone could provide that uniqueness.
Removing connectivity friction can also drive increased consumption of core online services. Facebook has tried to push free access internationally promoting "zero rating" to drive consumption globally. Google has taken it one step further with its Google Loon initiative aimed at beaming global wifi via hot air balloons and potentially bringing Google services to billions new users. In China, technology juggernauts Alibaba and Tencent are escalating their heated rivalry to access, both with wireless services in market by next month.
To understand fully how moving into access will reshape the entire technology landscape, it is helpful to look at a few high profile examples in more depth:
- Google already has a MVNO deal with T-Mobile and is also exploring an MVNO partnership with Verizon. Coupled with Google's extensive wifi wireless network (e.g. Starbucks, municipalities) and the aforementioned Google Loon, it is easy to see that Google is in a great position to offer a comprehensive wireless service enabling tighter integration with Google products from Hangouts to Android. For example, a Nexus phone with free data and Google Hangouts integrated into the native dialer would enable an end-t0-end mobile service fully controlled by Google.
- Amazon's "free mobile phone" may sound great, but if it requires a pricey data plan from AT&T or Verizon, that's a lot of added friction to move off your iPhone. However, if Amazon bundles free voice, text and data with each free phone, that might be differentiation enough to get real market share. Even if Amazon does not get that ambitious, it is still likely that all Amazon content will be free to download giving them added ammo in the war for content delivery.
- Microsoft has an MVNO agreement in place Sprint already and would benefit from bundling access with its mobile OS to try and gain share from Android and iOS. For example, a Microsoft tablet with free us of outlook, office 360 and MSN could provide enough value to pull people away from Apple and Google ecosystems. Moreover, a Skype phone with deeper Skype integration for texts and calls could further fuel gains in both hardware and software.
- Facebook/ Whatsapp recently announced an MVNO deal in Germany where it will be providing mobile data SIMs with free Whatsapp usage. This allows Whatsapp to own the entire communications value chain from the texting and calling to data access which until recently required a contract with a network operator.
- Alibaba just invested $280 million into video messaging app Tango and then announced it will launch 3G and voice services next month. This puts Alibaba in position to bundle both its eCommere platform and communication services with monbile internet access to drive deeper engagement of both and erect a defensive wall to competitors. For example, a phone in which you get free use of Tango and Alibaba commerce but have to pay a "premium" for data used by Tencent or other commerce apps could drive a shift to Alibaba properties.
Whether hardware or software motivated, the common theme is that technology companies are always looking for the next edge. Moving upstream to the internet access on which their services and hardware are consumed provides that edge. And, because access is merely being used to push their connected products, technology companies can price access well below current rates that carriers solely dependent on access revenues can provide.
Accelerating this movement, successful model for free connectivity are already live and scaling. FreedomPop, the innovative free voice, text and data, has proved out how larger technology companies may push free access to drive consumption of other revenue generating services. FreedomPop converts almost half of its free data users into other paid services like VPN and online security. Those of us old enough to live through the 90's can remember the days when your internet content, email and internet access were all provided by a single player like AOL or Earthlink. Those of us even older can attest to the fact that history alway repeats itself.
This post is sponsored and authored by FreedomPop. FreedomPop is solely responsible for the content and tone of this post. The views expressed in this post are those of FreedomPop and not those of Gawker Media.