App stores shift power balance in mobile market

Apple, Google, and now Research In Motion are launching new application stores that will allow users to get third-party applications from them instead of their wireless carrier.

New mobile app stores launched by Apple, Google, and Research In Motion could shift the balance of power in the mobile market away from wireless operators and toward device and platform developers.

Until recently, wireless operators served as the gatekeepers of what content and applications made it onto mobile phones. Now mobile platform developers such as Apple, Google, and Research In Motion are providing marketplaces where consumers can get access to thousands of new applications tailored specifically for each of these device platforms.

On Tuesday, Research In Motion, the maker of the BlackBerry smartphone, became the latest device maker to announce it will offer an application storefront branded specifically for its own operating system.

Earlier this summer, Apple made headlines with the launch of the App Store , an online marketplace of games and other software designed to run on the iPhone and iPod Touch devices.

More than 3,000 applications are currently available, and Apple has said that users downloaded more than 100 million applications between the site's launch on July 11 and the beginning of September.

Google followed with its own application store for phones that use its Android operating system. The first phone, called the G1, will go on sale Wednesday on T-Mobile's network in the U.S. And the on-device application marketplace will also go live with it.

For developers, these new storefronts should make it easier to develop and distribute applications. For consumers, it means more choice in applications. But for operators, it means ceding some control over what applications make it onto their phones to other companies.

"The big picture trend is that mobile carriers are playing less of a central role in the marketing and distribution of individual applications," said Charles Golvin, a principal analyst with Forrester Research. "It's analogous to what happened on the Web. People initially accepted the walled garden of AOL, but as they became more skilled users they found that to be too restrictive."

To a certain extent, wireless operators appear to have accepted the trend. Verizon Wireless, which has developed a new open network initiative to speed up certification of devices and applications running on its network, claims that it is happy to allow new applications and services on its network, since ultimately it will drive network usage.

"We want users to bring any device or application to the network that they want," Eric Reed, vice president, Market Issues and Policy for Verizon, said during a panel discussion at the Consumer Electronics Association Industry Forum in Las Vegas on Tuesday. "That is what our open development initiative is all about."

But it's clear that carriers don't want to give free reign to application developers to put anything on their network. Wireless operators still insist there needs to be certification.

"We also have a responsibility to make sure that these applications and devices don't crash the network or hurt the user experience," Reed added.

That said, Forrester's Golvin believes that wireless carriers see the writing on the wall, and they realize they must be more open to new applications if they hope to drive usage on their networks.

"It's true that the role of the carrier as the key distributor of applications is dissipating," he said. "But the upside is that these same operators still stand to make money on their data plans."

The danger for wireless operators is that by ceding application distribution to handset makers or platform developers, they are essentially making themselves into dumb pipe providers. This is a wireless operator's worst fear and one they have already begun to see play out in the broadband market.

But Reed of Verizon said he still expects wireless consumers to come to Verizon for applications, too.

"There is not a one size fits all solution here," he said. "There will be multiple business models."

RIM has also acknowledged that there will be multiple ways for consumers to get applications. And it will continue to work with its carrier partners to provide on-device application centers that are created by the carriers to help promote application downloads. These centers will allow each carrier to offer a catalog on the device so that customers can discover and download applications.

 

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