Cellular carriers want to take control of consumer electronics

I have good news and bad news. The good news is that mobile broadband wireless Internet connectivity is being baked into a wide range of consumer electronic products, from netbooks and media players to GPS devices and digital cameras. Just about everything will be connected to the Internet from just about everywhere.

The bad news is that cellular carriers like AT&T, Sprint, T-Mobile, Verizon and others intend to take advantage of this trend to seize control of the industry.

Carrier control and its alternatives
Consumer gadgets that connect to the Internet using cell phone data networks are very complex from a marketing point of view, because they represent two products, not one. Like a cell phone, any mobile broadband-connecting product involves the sale of the physical hardware and also a subscription to a wireless data service.

Here are three basic models for selling these combined products.

1. In the original cell phone model, the carrier is dominant, lording over the whole process. The carrier chooses which handsets it will sell or not sell. The consumer gets a discount on the phone in exchange for entering into a two-year contract for service. The handset maker is merely a supplier to the carrier, which is selling the product to the consumer.

2. A newer approach, represented by Amazon.com, works like this: The gadget maker dominates the process. The mobile broadband relationship (which happens to be with Sprint) is hidden entirely from the user, who has no idea what Amazon.com is paying for the wireless connectivity and doesn't care. (For the user, it's free. But Amazon.com or other companies could easily charge a monthly fee for access.) In this scenario, the carrier is the supplier and Amazon.com is the company you're buying the combined product from.

3. The Apple iPhone uses a hybrid model between the two extremes. You can buy the iPhone from Apple or from AT&T, but either way you're on your own dealing with AT&T on wireless data pricing. However, as part of their contract with AT&T, Apple has forced the carrier to offer relatively simple data options.

Here come the carrier superstores
The carriers are all actively working on growing their retail and online stores to sell a huge range of laptops, netbooks, eBooks, GPS devices, media players, Internet tablets, wristwatches and other gadgets that will connect to the cell phone data networks. They want to sell them in the same way they now market cell phones.

Carriers aren't doing this because they want to lose money. They're doing it because this is how they can make more money. A lot more.

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