by Nic Haralambous, Motribe CEO

Should mobile operators be ‘dumbpipes’ or ‘smartpipes’? This was the topic being debated at a recent VAS Africa conference that I attended, and here’s what came out of it.

Dumbpipe or smartpipe – what’s the difference?
In the context of mobile operators, a dumbpipe refers to an operator that provides its users with the technology to make and receive phone calls, send and receive SMSes and browse the web. Dumbpipes have no control over what we do, who we do it with, how we do it and how often we do it. Dumbpipes have no data that tells them when we log in and what we’re surfing, and they don’t offer us products or value-added services (VAS). A dumbpipe is the infrastructure.

A smartpipe sells VAS such as ringtones, wallpapers, dating platforms, weather services, and so on – value-added services that users pay extra for, over and above their call, data and SIM costs.

Dumbpipe – a dying business model?
Mobile operators are nervous. They think being a dumbpipe is a dying business model, because the more people use data, and the more pervasive it becomes, the cheaper it must become – which means a drop in profit margins. In 30 years’ time, mobile phone calls will probably be a thing of the past – we’ll be using Skype to make calls. And here’s the conundrum: if mobile operators want more people to be on their networks, they have to bring the prices down to be competitive. The more they bring their prices down, the more the margins go down. Which means, in order to make up the margins, the lower their prices have to go to get more people onto the network. Although prices have already dropped quite considerably since the adoption of mobile, it’s the reality that prices will need to drop even further to retain more customers that’s causing the anxiety amongst mobile operators.

Embrace being a dumbpipe
It’s my opinion that mobile operators need to embrace being dumbpipes, and become very good at it. During our panel discussion, several members agreed: if operators offered a service that promised to ensure its users’ calls were never dropped, we’d be willing to pay an extra, say, R100 a month for that premium offering. But the operators’ focus seems, more frequently to be on apps and other VAS. Why not let someone else do the app store, while you focus on keeping your data running at a cheap level, and making sure it always runs? And offer premium packages and services around the dumbness of your pipe that gives your users the ‘always on’ or ‘all-you-can-eat’ option.

Partner up
I think the way to do it is the way Unitel in Angola is doing it. It’s embracing its core business while partnering with content producers and specialists to sell VAS via premium SMS. Unitel hasn’t seen the need to actually own the website, the content and the user yet – they simply sell the content to the user and increase their revenue that way.

I believe they’re on the right track, and other mobile operators should follow their example: focus on the VAS – the wallpapers, the ringtones, and whatever other VASs you can provide – by partnering with others (Facebook, for example). Instead of wanting to own 100% of the content and, therefore, 100% of the revenue, why not partner with existing content providers while keeping your focus on providing the very best core services, which will increase your customer volume?