Wireless Cos' Control Of Web Access Helps Net, Irks Users

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NEW YORK (Dow Jones) The wireless carriers talk about the growth opportunities from surfing the mobile Web and downloading content such as music or games but they haven't made doing so easy for the consumer.

The carriers have traditionally been protective of their customers, preferring to keep tight control over where they go in an effort to maximize profits. Some carriers have warmed to the idea of opening up their Web access, while others are resistant to change. That restrictive mentality and the clunky user interface found on many handsets, some argue, is actually impeding the growth of data services and keeping the traditional Web companies from getting into the mobile Internet business.

"Walled gardens don't work," said Linda Barrabee, an analyst for research firm Yankee Group. "They need to understand consumers don't want to be confined. The walled garden mentality is very short-sighted."

The carriers - particularly Verizon Wireless - have been reticent to free up their consumer partly because they seek a higher return on the vast capital used to build their networks. By acting as both the pipe to the mobile Web and the provider of content such as music, ringtones and games, the carriers are able to derive more revenue out of their subscribers. That's become increasingly vital as pricing for voice plans drop and other sources of revenue are sought.

But some believe a more open environment would foster innovation and the development of new content and services, greatly expanding the interest - and market - for mobile Internet.

"The Web shows there is a faster path to growth if you let services develop independently," said Bengt Nordstrom, chief strategy officer for consulting firm inCode Wireless, an independently run unit of Verisign.

The carriers have begun heeding the call. Deutsche Telekom's T-Mobile USA features a T-Zone which is fairly open, as does Sprint Nextel's browser. Cingular Wireless, owned by AT&T, gave Apple free rein to put its own content and browser on the iPhone in a rare demonstration of blind faith in a device maker.

Verizon Wireless, jointly owned by Verizon Communications and Vodafone Group, still retains the tightest controls. The strategy, however, hasn't hurt its customer loyalty, as it boasts the lowest turnover rate in the industry. And while exchanging text messages remains the hottest area in data services, carriers point to other bright spots such as ringtone downloads.

Enter Mobile Portals

With the carriers offering frustrating and clumsy browsers, some believe they would be better off letting companies such as Google or Yahoo deal with the user interface.

The Web portals have established dominant positions on the Internet and look to do the same on mobile phones. Last month, Yahoo Chief Executive Terry Semel said he wants the company to be the top player in the mobile arena, acknowledging the area's growth opportunities. At the Consumer Electronic Show, both Yahoo and Google unveiled mobile versions of their browsers.

Yet the carriers' restrictive controls have meant the Internet giants have had difficulties breaking into the mobile market. While there was a lot of noise over their partnerships with the handset makers, none of the carriers have yet to adopt either Google Mobile or Yahoo Go For Mobile. The closest they have come are links to Yahoo and MSN, as well as links to their messaging and e-mail products.

The carriers fear that they will become marginalized by the Web portals and share the fate of the Internet service providers. Where Google and Yahoo has thrived, access providers such as Earthlink and United Online's NetZero business have lost the buzz that surrounded them during the dot-com bubble.

"The battleground will be about who will own the customer, and control access to content and services," said Dave Sanderson, head of consulting firm Bain & Co.'s global media practice. "He who controls the interface will drive the greatest amount of economic value."

Still, the Web portals will likely end up benefiting the industry. Their established brands could draw more users. "Yahoo, Google and AOL are the preferred brands for young people," Bengt said.

This in turn generates more data revenue as they spend more time online. The carriers can also lean on their billing relationship with the customer, which can help ensure that it gets a piece of every downloaded song or video clip since it delivers the monthly usage charges.

"Bringing down the wall will only accelerate growth," said William Power, an analyst for Robert W. Baird & Co. who covers the mobile industry.

- By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires"

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Tags: at&t  t-mobile usa  walled garden  yahoo  text messages  verizon communications  ringtone  cingular  ringtones  aol  blind  mobile web 

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