A new technology is making it possible for two users on the Internet to connect without platforms such as YouTube or Apple App Store.
The mobile used to be a simple device when we used it only for making voice calls. However, with the deployment of wireless broadband data networks and the availability of powerful smartphones and tablets at reasonable prices, Two-Sided Markets (2SM) and the associated platforms have become the norm. In a typical 2SM, there are two sets of users who complement each other’s usage thereby increasing the network effect for enhanced value for both. The users of the mobile device on one side and the application/ content developers on the other side create strong cross-side network effects to complement each other in the wireless broadband market. The mobile operators’ network just happens to be a bandwidth pipe that interconnects these two sets of users. This phenomenon is supported by evidence that mobile users are avidly consuming content and mobile data traffic is growing at a compounded rate of about 95 percent and is expected to reach 6.3 exabytes (1 exabyte = 10 raised to the power 18 bytes) per month by 2015 as per Cisco visualization index. This has resulted in US $ 36 billion “post-PC era” of app value chain.
While the mobile operators have been struggling to juggle their traditional traffic based pricing plan to realize value out of these phenomenon using their “operator 2.0 smart pipe” strategy, the platform providers have used very diverse and innovative approaches. For example, Apple while making the content available at relatively low prices, makes it up by selling its uniquely featured mobile devices such as iPhones and iPads at high profits; Amazon while selling its Kindle series of devices at low prices, monetizes its huge libraries of books, audio and video content; Google while making the content freely available and selling its Nexus Tablets at low prices, makes money through targeted mobile advertisements. This is reflected in the valuation of telcos (e.g. $ 127 B of Verizon; $197 B of AT&T Wireless) vs. platform companies (e.g. $567 B of Apple; $220 B of Google)
Most of these platform and device vendors have also started bypassing the middlemen – the mobile operators. The Wi-Fi enabled devices enable access to the platform content completely bypassing the operators’ access networks. Thus the “walled garden” approach used by the mobile access providers to control and price what the end users consume have been cracked.
Almost all of the above platforms use the “client-server” principle of communication, the server typically being hosted by the platform provider. Hence the platform in which server is hosted, hooks the users; collects user related information for possible personalization; makes it difficult to interconnect with other similar platforms; thus enslaving the users for monetization purposes. Take for example, YouTube videos that are archived in the YouTube platform and accessed through a network using a mobile device. The platform knows who viewed the videos; has a recommendation engine for suggesting you similar videos; though making its content free, makes money through targeted advertisement. However, you can share your video only through these platforms and not in other ways. Today, YouTube is witnessing 20 percent of global views coming from mobile devices and traffic from mobile devices more than tripling each year.
In an earlier article by us in dated 19 Oct 2012, we argued that newer technologies such as Web Real Time Communication (Web RTC) are disruptive enough to threaten these platform providers. Here is how it works. Web RTC is a peer-to-peer communication protocols that bypasses the “client-server” paradigm. It enables building web based real-time communication applications (i.e. voice, video, chat) without the need for traversing intervening servers, traditionally hosted by the ubiquitous middle men (i.e. appstores, platform providers, telcos). Though in its initial stages, and being endorsed by the World Wide Web Consortium (W3C) and the Internet Engineering Task Force (IETF), it is a technology disruption that is likely to threaten the stronghold of platform providers. With Web RTC, innovative applications are possible thus connecting two users on the Internet through web browsers without anyone intermediating. The only requirement for Web RTC to run is the Web browser support.
This is an ultimate freedom the users can enjoy, with no tethering to any platform or network. Instead of capturing, storing and uploading on to YouTube, users can now share their videos live on real time to others on the Internet, peer-to-peer! People might prefer to watch live streaming than stored video. Incidentally, Google is one of the ardent supporters of this movement, including support for Web RTC in its updated Chrome browsers.
This poses many challenges. How can the telcos plan their network capacity and pricing (i.e. operator 3.0 strategy) to accommodate such peer-to-peer traffic to provide the same quality as that of stored video? Can the operators leverage such technologies to their advantage? Will this be disruptive enough to shift the attention of the application development community away from the platform provider owned appstores? Will the attention of platform providers shift from appstores to the ubiquitous browser once again?
First indications are visible. In an interesting move, the digital arm of the European operator Telefonica released the first open platform recently for building video chat applications using Web RTC. The objective is to support peer-to-peer cross device video applications thus eroding the usage of proprietary apps such as Apple’s FaceTime, thus diminishing the power of device and app providers. Can such cross-device applications, based on the browser, transfer the market power back to the network operators?
The ubiquitous Web browser is expected to make a triumphant return much the same way Firefox 1.0 browser turned the attention of everyone on Nov 9, 2004.
Interesting times ahead for real-time communication!
(The authors are employees of Sasken Communication Technologies. Views are personal. )