Industry News

Controversial ad-blocking innovation latest sign of network operators’ continuing clout

mobile operator

One of the most common bits of conventional wisdom in the tech world is that over time mobile network operators – like ISPs – will inevitably turn into “dumb pipes” which do no more than provide a pathway to the Internet. While in the short term MNOs will obviously continue to offer traditional phone and text services, the thinking goes, over time they will have no choice but slowly retreat from offering services other than simple bandwidth.

But as is so often the case, this bit of convention wisdom is continuously being challenged by reality.

One recent example of this involves the currently very hot topic of ad-blocking, in this case a carrier-level ad blocking product offered by an Israel-based firm called Shine. Unlike most ad blockers, which are designed to free end-users from having to navigate past the increasing sprawl of online ads, Shine is designed to let MNOs cut bandwidth usage (a significant and growing percentage of data transferred by MNOs is ads). It also helps carriers pinpoint which ad networks and other companies are “monetizing” their users – and to potentially demand a cut of the action.

The firm says it has received a great response from MNOs around the world, though as one might guess, demand appears strongest in developing markets, where bandwidth is more expensive and users poorer and less likely to object to having the decision to block or filter ads taken out of their hands. Meanwhile, in the United States, recently-enacted rules guaranteeing “net neutrality” may make such ad-filtering illegal.

But even in the US, where the “dumb pipes” theory seems to be given most credence, there are ample signs that MNOs are failing to surrender to the end-to-end principle, or even getting out of the “content” business. Indeed, just this week, the CFO of Verizon said America’s top MNO would consider buying the website businesses of Yahoo!, following on the heels of its acquisition earlier this year of AOL.

And while there is an industry-wide consensus that carriers are likely to have little luck in NFC payments and other payment “plays” based on their control of the secure element, the ongoing strength of the carrier billing model is another sign of the continuing influence of MNOs. Just consider last week’s news of Apple’s quiet but hugely significant embrace of carrier billing in emerging markets, starting in Russia. To put this market in context, Juniper Research just forecast that within five years sales of digital content in Europe alone will account for $14 billion in revenues for mobile operators.

So while the future may eventually prove the “dumb pipes” theory correct, anyone who thinks MNOs can already be counted out would be smart to think again.

Illustration: Idaho National Laboratory