The recent row between Google, Apple and AT&T concerning the removal of Google Voice from the Apple iPhone store highlights the friction existing between network operators and so-called over the top (OTT) application providers. Most observers believe that AT&T initiated the blockade because Google Voice (which offers free or highly discounted calling rates) is a direct threat to AT&Ts call revenue (Google Voice users need only pay AT&T for access to the Internet).

At the heart of the matter is the stark reality that network operators don’t want to be dumb pipes. More specifically, they dread the idea that outfits like Google may generate rich service fees from subscribers, while they are left with relatively paltry access fees. Especially after spending billions of dollars to lay fiber, buy frequencies, build cell towers, etc. Yet, the proliferation of OTT services, of which Google Voice is just one example, indicates that this is direction things are headed.

So what will the network operators of the world do? The immediate answer is that they will fight tooth and nail. They will give precedence to their own services using all available means for as long as they possibly can. They will lobby congress (or the relevant governing bodies in other countries) against open access in an effort to maintain the world they know (witness the 700Mhz auctions of 2007). Along the way, innovative services like Google Voice will continue to be suffocated, if not killed outright.

But does it really have to be this way? The answer is a definitive ‘No’. Not if network operators started to view the OTT application providers as potential customers instead of competitors. That doesn’t mean that application providers should pay “extra” for priority over the last mile, as some network operators have suggested. Rather, it means that network operators should ask themselves “how can we provide value to OTT applications?” rather than fighting them off in congress and the courts (especially the court of public opinion).

When viewed in this way, there is actually quite a bit about network access that need not be dumb:

Payments - The bane of all digital content providers is collecting payment. Without a physical address to which goods may be delivered, digital merchants are constantly battling fraud and chargebacks. Even Paypal, the 800 pound gorilla in the area of online payments, must battle fraud when no physical delivery takes place. A network provider could very easily fill this void. They know where the customer lives, and they have a tangible physical connection to them. Much like NTTDoCoMo has been doing for years with iMode, they could act as a trusted intermediary and OTT application providers would happily pay them for this service.

Presence - Many of the promising applications just over the horizon will depend on the concept of presence. Are you in your car, or at your desk? Is your preferred method of communication a video call or an instant message? Does your device of choice have the capability to support MP3 or AAC as a file format? All of these questions can be answered by presence, and as the entity with a direct connection to your gadget, the pipe provider is in an optimal position to mediate it.

Directory Services - Closely related to the idea of presence are directory services. The ability to reproduce the good old phone book has proven to be one of the most vexing issues of the post-Ma Bell era. Just try to look-up the phone number of a mobile phone or VoIP user and you will understand the dilema. The lack of a trusted repository has caused ambitious attempts at creating online directory information, such as ENUM, to falter. Rather than evolving into online resources, however, the Bells have been steadily shedding their directory services ever since divestiture.

Location - As with presence, the network operator can best determine the actual physical location of the mobile subscriber. The current generation of location-based applications require that the application be ‘turned-on’ in order to transmit location information to the application provider (hogging precious CPU, battery and screen real estate in the process). A much saner approach would be for the network operator to maintain location information and then provide it to interested applications (with the subscriber’s assent or course) upon request. Application providers would be willing to pay for this knowledge.

Marketing Intelligence - Since the pipe is the only common denominator between the subscriber and the many different providers of content the subscriber might access, the pipe owner is in an optimal position to provide marketing intelligence to the content owners. An astute pipe provider could build a comprehensive profile of its subscribers and offer this as a service to content providers. A Neilsen for the mobile age.

I can think of more, much more. But the above list should suffice to make the point.

Of course, there are some rough patches to be navigated. Chief among them is that all of the these services would entail drastic changes for the typical network operator (in terms of culture as much as business model). Further, a payment suitable model would have to be developed. The Internet is at odds with the traditional ‘pay for access’ model that network operators adhere to. A ‘pay for play’ model, where the network operator takes a chunk of the application providers paid-for transactions would work much better (again a’la iMode).

Yes, it’s still early days. But it is evident to me that network operators must change their way of doing business in order to remain relevant. The question is which network operator will be the first to seize the mantle? Somehow, I don’t think it will be AT&T.