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Google claims operators’ demand has “scary implications”

The search giant, Google, has claimed that mobile operators have lobbied the company to prevent their customers accessing its Mobile Maps, a move it described as having “scary implcations”.

According to technology site ZDNet, Google’s head of special initiatives, Chris Sacca told an event at Oxford University’s Said Business School, Monday, that his company has been “getting notes” from carriers saying “look you need to stop our customers from downloading this thing”.

ZDNet quotes Sacca saying that operators are “inserting themselves in between you and an application that you want”. Sacca went on to describe the actions as having “scary implications”.

He also rounded on mobile operators who restrict users from using maturing internet applications such as VoIP and streaming video.

Analysts have long warned that traditional mobile operators and internet content firms could clash over who gets paid for delivering content to a customer. Mobile firms have been looking at ways to limit the potential damage to their revenue streams by blocking data-hogging applications such as Skype and P2P clients.

Last week Nokia introduced tools to help mobile operators throttle data hungry applications. Nokia’s Peer-to-peer Traffic Control claims to allow mobile operators to profitably manage the bandwidth available for P2P traffic by balancing the allocation of network resources.

Eli Mahal VP of marketing at mobile data delivery firm, Flash Networks, warns that both mobile operators and content giants, like Skype and Google, need to sit down and work out a deal to share revenues and prevent problems in the future.

This is the beginning of a “clash between civilisations” Mahal says. He has several operator clients and believes the mobile content firms, like Google, “are coming from the position that content is key. That is what they are used to and that the content comes over a stupid pipe. In this scenario they are used to taking 100 per cent of the value chain.” However, he believes this scenario is not about to be played out on the mobile.

“The mobile operators are in charge of the pipes, the billing and so on and without content there is no enjoyment but without billing and someone taking responsibility for the infrastructure, there can be no content.”

Andrew Bud, co-founder and Executive Chairman of mBlox says operators are already getting a fair cut. “The retail cost of data is actually oriented towards carriers getting a reasonable revenue share from these scenarios so it’s not as though the carriers are not participating and being rewarded in an proportionate manner. In general carriers will be unhappy about powerful applications and their owners benefitting from the value their networks help create.”

Mahal explains that while Google would prefer the mobile world to mirror the fixed-line environment, operators will resist an ISP-style model. “Today we are seeing Google against the operators and tomorrow it could be Skype in the same position because they [operators] don’t want to be an ISP. Now is the time to take a seat with one another and work out a business model… it will take time but one will develop.”

Jupiter mobile analyst Thomas Husson agrees with Mahal and points out the nascent negotiations between the two sides.

“There’s always been a great contention that when the mobile and content players meet there would be problems,” says Husson, “but the partnerships between these players are only eighteen months old.”

Husson said he wasn’t surprised that Google had spoken out but suggested it could arouse old fears among operators. “There’s a fear that the new entrants in the mobile space could eat into operators revenues. In the long run I don’t see how they [operators] can prevent people from downloading and using what they want from the internet but it’s a tricky negotiation and there will have to be an agreement.”

The shift from the fixed-line to the mobile world, finally realised by the emergence of high speed mobile networks, has caught operators and content players early. Only 3 has embraced a monthly ‘eatallyouwant’ model for its mobile subscribers and that has yet to get a price tag. Husson reckons more operators will have to follow 3’s lead but it won’t be without argument.

“This is a question of positioning in the value chain and negotiation tools,” explains Husson. “Mobile operators, until recently, haven’t been willing to partner because they had a stronger role in value chain and they were subsidising phones. But now they are beginning to open up because they realise they need a smaller share of a bigger pie. Mobile operators need to partner with content players but they don’t want to lose their position in the value chain and share revenues with new entrants.”

Google did not return press calls.

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