The world is going mobile and content is king. These two facts are undoubtedly true. However when it comes to the crown jewels there is much less clarity, with large questions remaining about who should control the content and how much revenue should go to content owners.

The current situation in Australia and internationally is that telecommunications service providers (telcos) are taking a firm position in controlling what content consumers can access, how much they pay for it and how much revenue the content owner receives. Consumers access content through walled-garden content portals. In the instances where telcos allow "off-portal" browsing, consumers are discouraged from doing so via high data charges for off-portal browsing.

Generally speaking there are some very sound reasons for the current level of telco involvement. Firstly, the telcos are currently best placed to educate consumers about new content. Secondly, there are many factors affecting user experience that require considerable support. For example, content to handset compatibility, the management of bill-shock, the creation of content packages, and centralising information around content charges can all be managed through the telcos. Thirdly, telcos are currently able to manage more complex issues such as controlling access to socially unacceptable content, including adult content and youth chat rooms, in an industry where regulatory bodies are struggling to keep pace with the new challenges of a converged media environment. Last, but not least, the telcos themselves are under immense pressure to maintain growth and fund the enormous infrastructure investments required to support the mobile content networks of the future, and a share of content premiums is a key carrot providing the incentive for them to do so.

The key criticism of this situation is that it stifles innovation. By taking large portions of the content revenues, the telcos make content creation less profitable. In fact, the telco slice of the pie varies considerably from one content deal to the next. Generally speaking the most generous deals are awarded to content providers with the most certain earning potential. This requires a combination of established brand status as well as ability to pull a reasonable premium for services. In contrast, innovative applications typically have a high degree of uncertainty around market size and earning potential, and hence often the least generous revenue split.

Consumers also suffer a reduction in options. Telcos will only bring content to market that is in accordance with their existing brand and market status, leading to conservatism in content choice that acts to reduce the breadth of content made available through these channels. Lack of scale and immediacy also impact the quality of the content available over telco portals. Despite the size of companies such as Vodafone, Telstra and others, they cannot individually compare to the world scale of a truly online experience such as the Internet.

So what is the likely outcome? In the short to medium term (at least the next three years) telcos will continue to bring mobile content to market in a form that provides a strong return. As the market matures, telcos will be forced to compete on the bases of data price and off-portal browsing freedom, leading to the inevitable demise of the telco portal as it is experienced today. At this point the mobile content experience will truly converge with today’s Internet "online" experience. This evolution is nothing new, and has a remarkable similarity with the early days of the Internet where ISPs such as AOL had great success with their walled-garden Internet experience that has little continuing relevancy today.

Now, given the outlook, what strategy should content owners adopt? To a reasonable extent this will depend on the size of the company, existing off-line vs online revenue dependency and strength of brand. For all companies bringing content to the mobile market, the end game needs to be kept in mind. Developing a strong relationship with customers is crucial, while maintaining a focus on usability, customer experience and ubiquity. For companies with strong off-line revenues streams (i.e for those that can afford to do so) this may mean sacrificing short-term revenue grabs in place of long-term mind-share ownership.

Another important lesson from the dot com era is that there is no point having tomorrow’s product and tomorrow’s business model if the company in question cannot last the distance. Accordingly, while it is true that mobile users of the future will have much greater choice and browsing freedom than they do today, telco control over mobile content will continue for a considerable period.