Mobi-economics: how do we charge? why do we charge?

Greetings to all from LK and team metroCode.

As we head into the final stretch of phase II of Mobile MUSE we are being asked to evaluate our performance, synopsize our learning, and come up with at least some educated guesses and at best some solid models for creating a sustainable business from mobile cultural applications.

Back in early December metroCode's tech lead Nick Simon posted a blog entry entitled "Who do we charge?". As of the time of this writing it has received a whopping 573 hits (ed. note: Go Nick!). That says to me that there are more than a few people putting palm to forehead trying to figure out where the business in the particular slice of mobile our consortium is looking at resides.  We're not selling jokes by text messages, we're not distributing adult content, we're not doing mobile dating. 

But enough about what we're not doing. Let's talk about what we are doing, and where the value add is.  What each of the projects in the Mobile MUSE portfolio does is leverage the importance of the moment and/or specific location as it relates to information delivery. Whether it's the Mobile VIFF project, English2Go, PocketCine or metroCode, the one thing we all have in common is that we're offering 'just in time', wherever you want it, whenever you want it, content.

The great thing about creating content, and specifically in the applied R&D setting in which we are fortunate enough to find ourselves, isis that the possibilities are endless...we are only constrained by our ideas and approaches. The less than great thing about content is that since the mainstreaming of the Internet (let's set that date around 1997, for the sake a clean ten years) endless, hyperlinked information is expected to be as close as your desktop, and free. So i started thinking about the economics of the Internet, to see if there was some wisdom there that's applicable to mobile media economics. Surely economists had to tackle new issues related to the information economy and networked structures back in the 1990s...before the internet became part of most households, before investors were lining up to put millions into anything with a dot com suffix.  I approached a friend with expertise in this area and he pointed me in the direction of an economist named Hal Varian, well known for an online document he penned called “Economic FAQs About the Internet” (available online at: http://www.press.umich.edu/jep/works/FAQs.html).

Varian's argument is that pricing models should be linked to costs, and that in the case of networks the costs are: building/adding to the capacity of the network, connecting to the network, and the resulting congestion of the network (or lack thereof). Using Varian's model in the case of the internet we pay our monthly fees to our ISP and that covers the cost of the connection and the maintenance and expansion of the network. I recall being a compuserve user in the early 90's (74071,25077@compuserve.com for any old schoolers out there) and how in addition to a montly charge there were fees charged for emails sent...whether to other compuserve users (those were the cheapest) or to someone on this bigger thing called the internet (those cost a few cents more). As that bigger thing called the Internet became a part of daily life the business model and ISP billing eventually figured itself out, culminating in the ingenious model of Google

Ad Sense, in which advertisers payfor their sponsored links based on clicks. Finally, measurability in online advertising (move over banner ads, thank you very much).

Where this has brought us is to a point at which information isn't conceived of as a commodity, but as free flowing, across platforms (newspapers, radio, internet, podcasts etc) and available when we want it. The merger of XM and Sirius Satellite Radio today is a case in point. Here were 2 companies, with billions of dollars invested in infrastructure, administration, air talent, and marketing, and the longer they were in business the more money they each lost. Their uphill battle is that they are trying to sell something that people are used to getting for free. And what they're selling is not unique enough, not distinctive enough to make more than a very small percentage of people pay for it. Is it an issue of hardware? We shall see once the gear becomes standard in various makes and models of cars. 

For us in the mobile space hardware uptake is not the problem. In fact people are so hungry for the hardware they're getting new handsets at the rate of about one per year on average. So where is our 'sweet spot' in terms of a business opportunity? Particulary as people interested in imbuing physical environments with contextualizing information. We've all done and heard enough whining about the barriers imposed by the carriers. About how they are locking us into 'walled gardens', how they take usurious shares of the pie from 3rd party content providers, and how they have little or no incentive to change. But change may be afoot. According to a story in the Sat. Feb 17th/07 edition of Globe & Mail entitled "Ottawa looking to boost cell phone competition"

"The fight for Canadians' cellphone business could soon become more intense, after Ottawa announced yesterday it will hold a spectrum auction early next year that's expected to bring at least one more major player into the market. Industry Minister Maxime Bernier said the government plans to make available a total of 105 MHz of space on the airwaves for additional wireless services, a process that could be a boon for both consumer prices and federal coffers. It will seek public comment on the auction between now and early summer."

This potential freeing up of market strongholds may bode well for those of us still working out what the nature and dynamics of mobile media are. Once things get loosened up and competition is encouraged, as we have seen in the world of long distance, the consumer has options, and power. Right now people seem to love to hate their cell phone carriers, and that's

a problem on both the practical and symbolic level for us at Mobile MUSE. To the average person there is little to no difference between their carrier and services such as English2Go or metroCode. To most the billing associated with their cell phone is part of some invisible oppressive force  that charges them too much for things that they either want for free or they want to know exactly what they're paying for them; but even that's not possible until the bill arrives at the end of the month.

At present this reluctance is real, as are a variety of cognitive barriers related to what cell phones are used for.  The SFU team of Richard Smith, Florence Chee and Sean Hebert have done some very insightful work in this area, and I hope to see highlights posted here on the blog in the weeks to come.

Among our challenges as researchers and producers of mobile media is to turn what are currently limitations into advantages, to capitalize on that which is uniquely mobile; such as the ability to reach users on the go and provide them with what they want, when they want it, the ability to filter/customize information, the capacity for each mobile user to become connect directly with an indiviual, or with a group, or with a public screen/live site, the trackability of the user, and the new forms of meaning, communication, and social behaviours that are brought to the fore.