Mobile operators predict app sales boom

Mobile operators expect app downloads to become their biggest source of income in developed markets within three years and want to charge content providers for preferential access to their networks, raising further questions about net neutrality.

Executives surveyed by the Economist Intelligence Unit forecast that revenues from voice services, which account for about 70 per cent of their income, will be overtaken by app download revenues in 2013.

Many expressed concern that consumer habits – more social networking, downloading of videos and playing of games – will require investment on their part to handle the data usage, while content providers pocket a large slice of the extra revenue.

“Mobile operators are going back to the concept that content is king,” Natasha Good, partner at Freshfields Bruckhaus Deringer, the law firm that commissioned the study, said.

“But what operators are asking themselves is: am I just a dumb pipe delivering that content, or can I secure a piece of that pie?”

Of the companies surveyed, 55 per cent said operators should be able to charge to prioritise network traffic, versus 38 per cent who supported the current model, which in effect disallows the practice.

Prioritising certain types of traffic would fall foul of the “net neutrality” principles that have underpinned regulation so far and which state that all packets of information on networks should receive the same treatment when making their way to end users.

The debate has intensified since Google and Verizon’s joint proposal for how online traffic should be managed, which included the ability to charge more for some types of content.

Several European companies including France Telecom and Telefónica of Spain have said they want capacity-guzzling websites such as YouTube to compensate them for the extra data demand they generate.

“There is something totally not normal and contrary to economic logic to let Google use our network without paying the price,” Stéphane Richard, France Telecom’s chief executive, has said.

But regulators in Europe have reacted coolly to the idea of operators discriminating in favour of certain websites at the expense of others.

Executives in the survey say a new pricing structure could also help solve their traffic management problems.

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