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The historic link between subsidies & walled gardens

For a long time there has been a well practiced business model regarding subsidized devices and service providers. They give you the device for free or a low price and you are forced to use their service.

Ma Bell did it decades ago. You had to use their POTS phone to use their service.

MSOs do this. They give us a cheap set top box but it only works with their service. Now we have CableCards in some devices. But cablecards are crippled. they are just one way solutions.

Mobile carriers in the US market have the same practice.

The belief is that this model works. The consumer shouldn’t care because after all they are getting a low cost device. And the service provider can see a nice perpetual revenue stream.

After all, if you allowed 3rd parties developers to write apps for such devices than they could choose a different service for various things and that would be bad. Right?

Well you know where I’m going with this. I don’t think this form of subsidies and walled gardens makes sense for users and it’s not even in the best interest of the service providers either.

It’s all about innovation. Innovation cannot come from one source or one gateway. That’s impossible.

Consider the opposite.

Think of a world where developers could build apps easily and readily for set top boxes and mobile phones. Wouldn’t new business models emerge to pay subsidies if even required.

Would there be a search business model. You bet. How about virtual goods or new forms or micropayments.

Yep that too.

That’s how cable companies are going to get targeted ads. And that is how wireless companies are going to avoid this.

The relationship between devices and service providers needs to evolve. And it’s good for everyone.