Get real: Opening up the wireless jungle

[Editor’s note: Richard Wong is a venture capitalist with Accel Partners]

In recent weeks, there has been much discussion on how to simplify the barriers to mobile innovation. Beyond all of the press and hype on the IPhone launch, most of the discussion has centered on the public policy issues of “opening up wireless” to create net neutrality in the wireless space. For example, Skype recently submitted a petition to the FCC to try to push for “open access” to wireless networks, helping ease spread of mobile Skype clients on phones. Of course, this “net neutrality” proposal was, no surprise, strongly opposed by the mobile industry association, the CTIA. As another recent article of note, Ram Sriram wrote an excellent article on venturebeat.com on a policy view of opening up wireless regarding the upcoming 700 MHz band spectrum auction.

So just about everyone shares the frustration of wanting things to move … Who doesn’t want the mobile jungle to be simpler? As someone involved in wireless data for some, and currently investing in mobile companies, I certainly agree that life would be easier if the value chain was less fragmented and simpler for startups to navigate.

However, from a near-term pragmatic perspective of a mobile startup, it is unrealistic to expect near term change. The real complexities in both handset software fragmentation and operator control will NOT be changed overnight through policy. So for now, it will remain a jungle out there, and despite the sound and fury of wanting things to be simpler, mobile startups must build their strategies in the REALITY of today, and learn how to navigate this pragmatically.

A backdrop to consider:

HANDSET FRAGMENTATION – First, fragmentation in wireless handsets isn’t anyone’s “fault” per se. As the market has evolved, multiple influences, including competition between GSM and CDMA, has helped drive fragmentation. Unlike the PC space, there is no dominant Microsoft-like player to standardize the space No one (and certainly not the Apple I-Phone), has the market power to flatten the platform ubiquitously across the market. This fragmentation is INCREASING and will exist for a long time. The best mobile companies must learn how to adapt and manage the complexity today, versus hoping for the market to simplify.

OPERATOR INCENTIVES – Second, mobile operators that have spent billions of dollars buying spectrum and building their networks are understandably negative on promoting easy access to players that destroy their businesses and result in a “bit-pipe-only” business model. Perhaps new attackers such as the MVNOs, Clearwire, or others building 4G networks may create new business models but it will take a long time to scale.

So, in the meantime, if you’re a wireless startup, how do you take steps to work in this ‘jungle’, innovate, and get traction? Consider three approaches in combination: (1) Go off road, (2) play nice, and (3) phase it …

1. GO OFF ROAD –- Consider the off-deck world. First, there is an off-deck world that is not dependent on the operator. While still early days, this off-deck world is starting to accelerate and become a dominant part of the mobile experience. As a datapoint, > 50% of premium content revenues are already off-deck in Europe (Ovum Research). Many new startups are putting up their own websites or widgets to drive traffic from web to mobile. Many are using companies like Admob or Third Screen Media to drive traffic to their sites. Gaining traction off-deck can make the next discussions with the mobile operator much easier, when you can user behavior, virality of application, etc. So be scrappy, make progress off-deck, and THEN consider operators your 2nd step, not your first step.

2. PLAY NICE –- Learn how to be collaborative with the mobile operator. After personally working with mobile operators for the past 7 years, its true that the maze of functions inside an operator can be a confusing jungle. Mobile is both a “club” and a complex jungle of technology – you need to get a ‘jungle guide’ who knows the space and the people. Mobile operators are usually rational by THEIR economic incentives. Many startups that go in and pitch don’t even understand the language of the operator or how they make money: MOU (minutes of use), CPGA (cost per gross add), churn rate, data plan cross sell, handset subsidy rate, etc. If you frame your story back to the things that a mobile operator cares about and your chances of success are far higher.

3. PHASE IT – Focus and target the value prop first. Handset fragmentation is a reality, but there are strategies to manage this. First, consider resources such as WURFL and Getjar.com that help manage the complexity. Second, the successful companies plunge forward to find a subset of devices that work for their service. For example, some players in video (e.g. 4thMedia, Mywaves, etc) figure out which devices can handle their service, others such as Mig33, Plusmo, etc build downloadable J2ME apps, and other focus on open OS devices (e.g. Symbian, MSFT Mobile, LINX). All accept the reality of today’s limitations, and find places to pioneer and tune the value.

In summary, the mobile world IS a jungle, and will not open up easily, but it can be done. In my opinion, if one moves to create traction and a great user experience, this innovation will become visible to the operators through an off-road/off-deck approach. Positive snowball effects will occur, and you’ll find it easier to break through with the operator. Lastly, get a ‘jungle guide’ who knows the terrain in mobile… the trip will be that much more fun and you’ll be less likely to get lost. Good luck!

Rich’s occasional writings on the mobile space can also be found at www.accel.com. [Disclosure: Accel is an investor in both Mig33 and Admob, among other wireless players.]