Telepocalypse

Unlinking the value chain

Over at WiFi Networking News they report that iPass are doing very nicely thank you. To remind you, iPass are essentially a provisioning aggregator: they sign deals with multiple WiFi network operators, and retail that unified connectivity onwards to enterprise customers.

What makes this interesting is that it indicates that the whole value chain of a telco is unravelling. Many wireless network operators are based on internal aggregators, through the use of affiliates or part-owned subsidiaries. This function is normally hidden away in a morass of roaming agreements and home agent network elements.

iPass could easily retreat into a wholesale business and let someone else be the retailer. As the broker of connectivity, they would be in a powerful position, with a natural increasing returns to scale effect -- particularly if they signed exclusive distribution contracts for WiFi network operators. It isn't hard to imagine them aligning with a broadband wireless WAN operator to enhance the value of their offering. Indeed, it is possible to imagine a showdown between the major cellular operators for the enterprise customer being won not by having the spiffiest network, but rather through superior distribution deals with 3rd parties like iPass (or even systems integrators like IBM and Accenture). In other words, adapt more quickly to a delaminated business model, focus on connectivity, time your unbundling of your business well, and you'll survive. Hang on to the "squeeze the customer" approach too long, and you won't.

The iPass approach also unties the user equipment from the connectivity service provider. They just sell you connectivity. This is important, because the network operator who issues devices usually tries to lock them down to extract maximum revenue from the customer, forcing the user through the telco toll booth. The lack of a vertically integrated business model makes it ever harder to enforce such an approach. Another seam of the old telco business model starts to rip.