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Mobile operators embrace app store mania

Mobile operators would rather own the shopping center than the individual shops when it comes to mobile applications, so long as they still get paid.

BARCELONA, Spain--Mobile operators at the GSM Association's Mobile World Congress here this week are happy to offer subscribers access to as many application stores as they can. But they still want some say in the apps offered on their networks, and they want a cut of the action.

Instead of creating and distributing mobile applications themselves to their subscribers, mobile operators are increasingly adding access to multiple wireless stores on their devices. In many ways, the switch makes mobile operators look more like owners of a shopping center, while device makers, operating system developers, and other third parties own the shops that sit in these virtual carrier malls. While this new model has spurred a great deal of innovation, it's also fragmented the market. And even though, operators may not be selling these virtual goods to consumers, they still want a portion of the profits.

"We want to be a facilitator like a shopping center in providing options for customers," said Hugh Bradlow, CTO at Australian operator Telstra during a keynote Wednesday at MWC. "We may have our own store, but (we'll also) provide options. There is a place for shopping center owners and most of them are rich."

Changing the model
Traditionally, wireless operators created and distributed their own mobile applications. But the emergence of the iPhone and its iTunes App Store, has changed the market. In addition to providing their own application stores on their branded devices, many subscribers are now downloading applications from third-party application storefronts.

In addition to Apple's iTunes App Store, there are now dozens of third-party application stores, including Google's Android Market, Research In Motion's store for BlackBerry, Microsoft's Marketplace for Windows Mobile, and Nokia's Ovi store. And there are no signs the trend is slowing, as other handset makers, such as Samsung, talk about building their own application stores.

Bradlow's sentiment is echoed by other operators around the world. John Donovan, CTO for AT&T's wireless business, said during an interview at MWC that his company wants its customers to have as many choices as possible when it comes to mobile applications. And he said that AT&T had no interest in being a mobile app shopkeeper.

"We don't want to run application stores to compete with these other stores," he said. "But we need to be involved. It's like we are helping stock the inventory. We put the products on the shipping dock so the goods can be delivered."

Sprint Nextel has a similar view of the app landscape. Last week, the company announced it would be offering a preloaded link on some of its feature phones to the GetJar application store, which provides free applications to almost any handset. Sprint also offers preloaded buttons on its Android phones for the Android Market and it will eventually offer access to RIM's store for BlackBerry apps on BlackBerry devices that are sold for its network.

"We think it's important for carriers to get out of the way when it comes to these other app stores," said Kevin McGinnis, director of product management at Sprint. "We want to give our customers a robust set of choices. And we don't need to have our brand on everything."

The diverse and growing mobile-application market offers many benefits for consumers. For one, there are more choices than ever in terms of mobile applications. Apple alone has 140,000 applications in its store. GetJar has over 60,000, and Android is said to have over 50,000.

The competition among app stores, devices and operating systems has also kick-started innovation, which is another benefit for mobile subscribers. There are applications for almost everything. You can monitor your heart rate, identify songs, stream music, manage your travel plans, and play games with people halfway around the world on your cell phone. If you can imagine it, there's likely an app for it.

The downside of App Store mania
But the application boom also has some trade-offs. For example, the market is incredibly fragmented. For instance, applications developed for Apple will not work on Android devices and vice versa. This means consumers can't move apps downloaded or purchased on an iPhone onto Android phones, BlackBerry devices, or any other type of phone. If a subscriber switches devices, he'd have to download those applications again for the specific operating system or platform his phone uses.

Not only does this limit and sometimes confuse consumers, but it's a lot more work for developers. Application developers have to pick and choose which operating system or app store they develop for first. Even large developers have to pick and choose where to spend their resources. And the problem is even more acute for smaller developers. This is one reason why devices such as the Palm Pre have a limited library of applications, while more popular devices, such as the iPhone, Android, and even Blackberry have many more applications.

Because operators are not controlling the application development process, it also means that some applications can be created that don't work well on certain networks. This is why AT&T would not allow services, such as Sling Player to operate over its 3G network. Sling Player, which redirects TV signals over the Internet to portable devices, ate up too much of the AT&T's network resources, the company has said.

Eventually, AT&T worked with Sling Media, the developer of Sling Player, to ensure the application limited its bandwidth consumption, and the application was approved for the network.

Donovan said in the future AT&T plans to develop baseline requirements for applications running on its network to ensure that the applications developed use the network in the most efficient way possible.

"We can't work with every developer individually," he said. "But what we'd like to do is provide tools and APIs to help developers create applications that use the network more efficiently. This isn't just about providing terms and conditions but showing them that A,B and C are required. And here is how you can get here."

AT&T plans to do this through its developer community. And the company is also working with the GSM Association's newly announced Wholesale Applications Community, which plans to create standards and APIs to help application developers create an application once instead of developing it several times for each operating system. Twenty-four operators, including AT&T and Orange, have already signed up to the project.

AT&T hopes that through this effort it can also provide standards that developers can use to create efficient applications. Olaf Swantee, a senior executive vice president at Orange Group, said the new standards will help developers, who are creating Orange-specific software and applications, create applications that can be used across all Orange devices, regardless of which operating each device uses.

"Operators and the developers we work with have to develop basic services and applications, like the menu and other things on all the different operating systems used on our network," he said. "But it would be really helpful if a developer could develop that code once to a standard, and then it could be used on various devices and on apps in various stores."

Show me the money
Even though mobile operators seem willing to work with developers and many don't seem to mind relinquishing complete control of app distribution, they still want a cut of the business.

"There are lots of ways to monetize applications," AT&T's Donovan said. "And there are business models where we can share revenue (with developers and app store owners.)"

Telstra's Bradlow concurred, noting the considerable investments operators have made in their networks to enable these applications, "Application developers can't expect to get all the return on a small percentage of the investment."