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Network Operators' Worst Fears Realized: They Will Be Dumb Pipes

Research firm Analysys says that the wireless industry's walled gardens may come crumbling down within 5 years. In a new report, it notes that the likely outcome for carriers is loss of control over the services that flow through their networks, relegating them to commodities.

It has been predicted before. As more and more people choose wireless data services as their method of connecting to the Internet, the prices will inch downwards. The lower the cost per Megabyte per month, the less control network operators will have over their networks.

The report details three potential end-games for the wireless network operators between now and 2012. Here's a summary of the 'Low-Cost Data Pipes' idea:

Wireless data becomes a commodity as a result of the widespread introduction of low-cost, unlimited-usage mobile data packages and the deployment of WiMAX networks. Wireless networks become transparent data pipes, in much the same way as fixed networks, and wireless carriers lose control of (and the revenue from) the services that are carried across their networks. Wireless carriers are forced to focus on reducing cellular network costs substantially so that they can deliver high volumes of data traffic profitably.

"We are already seeing early signs of this scenario," says Dr. Mark Heath, co-author of the report. "The number of relatively inexpensive, uncapped-usage data tariffs from wireless carriers is increasing. Sprint Nextel's EV-DO Revision A mobile broadband service offers unlimited usage for $59.99 per month, and Sprint is undertaking substantial investment in a nationwide Mobile WiMAX network."

This trend is already apparent in the carriers' business models. Voice service via wireless is already a commodity, with the large buckets of minutes available to subscribers now versus the high per-minute charges of yesteryear. Data will eventually move in the same direction.

That won't stop the carriers from trying to wrangle every last penny they can out of those network investments, though. And rightfully so. They've spent (my best Carl Sagan impression here) billions and billions of dollars to get them up and running.

The question is, how long will they put up a fight?

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