This post is something that's been in my head awhile, but the recent discussions for some client work and on a number of recent conferences makes me realise Planet Mobile is at a turning point. Here's the issue - Mobile multimedia (aka The Future of Mobile) is irrevocably broken across the value chain. In broad terms, there are 2 core reasons.
(i) Players up and down the value chain don't collaborate to create an end to end flow
(ii) Players in any one segment don't collaborate to create interoperability between them.
Its a derivation of the Prisoners Dilemma game, just more complex.
(Prisoners Dilemma is a 2x2 game - in its initial form 2 caught prisoners can either each confess, sending the other to prison but getting a reduced sentence themselves, or collaborate and keep quiet and get let off. The Payoffs are thus both Collaborate - 0 years each (0,0); both tell on each other and get reduced sentences (5,5) or one tells and the other doesn't (0,10) or (10,0) )
In the absence of any communication, the most rational solution is for both to defect. This is the Nash Equilibrium of this game (named after Paul Nash, the US mathematician celebrated in the film A Beautiful Mind). The Nash Equilibrium is the state where no party gets a better outcome from changing its play relative to the other
In Planet Mobile, this means that for example each operator tries to keep their own stack so you can't write content on one and it works on another. Handset manufacturers' make systems that don't inter-operate, with the same effect. There are no real agreed forms of distribution, with N types of broadband 'net, Mobile TV etc etc competing.
They are operating at the mutual defect Nash Equilibrium.
However, in a scenario where collaboration exists, another Nash Equilibrium is possible - one of mutual collaboration. That this equilibrium exists, and is better, is clear - Korea and Japan have a collaborative model across the value chain.
Imagine that this Positive Equilibrium occurs in Mobile in Europe or the US so that:
- it is rational for all the mobile operators to collaborate on their solution stack so that application and content creators can write once, as that makes the overal market bigger so more people will enter, more applications will be written etc.
- handset manufacturers would be better off collaborating so content would render the same way - and even be navigated the same way - on various handsets. This would have the same effect of making it more attractive to content players, and thus content consumers.
So why don't they collaborate if the benefits are so great? After all, its not as if they are sitting in prison cells without any communication. In game simulations, when this scenario occurs, its because the payoffs for collaborative behaviour are not enough relative to those of defection.
Up 'till now Planet Mobile has been able to persuade itself that collaboration has a low payoff, as defection has allowed them to carry on making serious money from extortionate interconnection deals, and growth plus lack of customer alternatives has kept overall subscription revenues high.
But that is changing - the Planet Mobile ecological niche is full - we all have as many phones as we need in the OECD, and alternatives are emerging. Defection payoffs are thus diminishing. However it is not rational for any one player to unilaterally collaborate, as that increases the payoff for cheating.
So how do we flip Planet Mobile into a positive Nash Equilibrium? There are succesful models.
One option is the Korean approach - the Deus ex Machina - the government determines standards and pricing. A regulator can potentially take this role in-country. Another option could be Deus in Machina - a collaborative grouping co-ordinates behaviour, or a dominant player drives behaviour. Japanese DoCoMo is a blend of this.
If one was to try to make the switch "self organising" in the industry, and do it faster than the industry would do if left to its own devices to avert sheer collapse, then probably the best approach is for the national regulator - or even better in the EU, a Union-Wide effort - to change the game payoffs such that the payoff shifts. There are two plays to this:
- increase positive payoffs
- make defection payoffs worse
Increasing positive payoffs is hard - how do you convince an industry to collaborate on standards etc - the Korean example is by government fiat, the Japanese by "assertive collaboration".
However, it will work if the alternative is something on the lines of certainly being hung apart if the industry does not hang together. To this end therefore, reducing the payoff of defectiving behaviour will probably also be required - and here there are two plays as well:
- Introduce competition (or threaten its introduction)
- Regulate away pockets of oligopolistic pricing
Regulators are already on the case, but possibly could do more. The iPhone is the start of a major "out of bounds" competitive push that may define a de facto standard set, and WiFi should concentrate the mind.......but to really make Planet Mobile come onboard to the Open Net fast will probably require some form of "Deus ex Machina" play to define a de Jure set of approaches
