You don't come across many mobile operators who doubt that the future of their business is IP. And a growing number also accept that with IP comes a change in business models. IP means a shift away from operator-defined services to a more open environment where new services, applications and technology start life on the Internet.

But just because operators accept that IP will define the new (mobile) communications landscape doesn't mean that they are necessarily restructuring their businesses in readiness for the change. It has become all too easy for mobile operators to talk the right language - the language of open access - but are they practising what they preach? And is the open versus closed approach really as black and white as it is made to appear?

Maybe we need to ask ourselves the question what 'open' really means in a mobile context. Is an 'open' model the same as a wholesale model? And does a 'wholesale' or 'open' model necessarily mean a separation of (an operator's business into) access and services? And if so, are we talking about the separation of an operator' business into two separate companies, an access company and a services company (or a wholesale business and a retail business) or merely internal restructuring within a single business? And does the open versus close debate apply only to non-voice services or to mobile as a whole?

The last of these questions is the easiest to answer. Mobile operators are only adopting a wholesale or open model for their non-voice businesses. Voice still accounts for 70-90% of mobile operators' total revenues and while operators accept that the their voice businesses will stagnate (relative to data), most take the view that there is nothing to be gained by taking a wholesale approach. True, some operators are actively seeking to bring MVNOs onto their network. But they are taking a highly selective approach to the MVNOs that they partner and to the services and prices they offer. As such, this cannot really be described as a genuine wholesale or open approach.

So, what we are really referring to here is operators' non-voice business; or, to be more explicit, their non-voice, non SMS business. SMS generates, on average 15-20% of mobile operator's revenue in developed mobile markets and it is an extremely high-margin business. As such, operators are only really applying the wholesale/open access debate to part of their business that generates 5% or less of total revenues.

When mobile operators talk about open access models they are really referring to the Internet. In a walled garden business model mobile operators choose the content and services (games, music, news) they offer their customers while in an open access model they let their customers buy services directly from the Internet.  In the coming weeks mobile operators Orange and Vodafone will both launch mobile portals that provide a gateway rather than a barrier to the Internet (Mobile Media, May 4, 2007).

But mobile operators' vision of the mobile Internet falls some way short of the Internet that we all experience via our PCs and DSL connections. Orange has coined the term Internet Lite to describe the experience it wants to offer its (mobile customers). This is one based on snacking on mobile content and services rather than using them for long periods of time.

There is another important difference between mobile and PC Internets. This relates to the ability to use the browser to download software (applications) from the Internet. Downloading software is familiar to most PC users but it is alien to mobile customers. So, mobile operators' preference is to embed applications on peoples' phones. The 'Internet' services that mobile operator 3 offers its X-Series customers are already embedded on the device. There is clearly a limit to the number of applications that an operator can embed on single device which means that the operator retains control of the services that its customers can access. Is it not the case, therefore, that even the new mobile Internet strategies retain a strong element of the old walled garden approach?

The golden pipe

Those operators which are already embracing IP - or who, at the very least accept its inevitability - accept that in the future there will be room for both wholesale and retail strategies.

But it is less clear whether the tendency will be for single operators to have both a wholesale (access) and retail (services) business or whether operators will opt for either a wholesale or a retail strategy.

The evidence so far is that operators want to both have their cake and eat it. They plan to have both wholesale and retail elements to their business.  But will they be able to do this so long as the two sides to the business are integrated and the instinct of mobile operators is to control the user experience, brand and services?

Speaking at an Informa Telecoms & Media conference this month on IMS, a senior Microsoft executive likened the strategy and approach of mobile operators to the centrally-planned economies of the former Soviet Union. These were destined to fail because the 'centre' could never adequately respond to the needs of the market.

The Microsoft executive said operators committed to IP needed to think of their business as a 'golden [as opposed to bit] pipe'. In this model the operator's customers are the companies that deliver services over its network rather than the end users. Successful wholesale operators will be those that offer service providers the best interfaces to their networks and technologies at the best terms. 'If you don't know what you're doing to make content providers more successful on your network than on your competitors networks then you're going down the bit pipe route,' commented the Microsoft executive.

Interestingly, the Microsoft executive thought that it would be extremely difficult for operators to successfully implement both wholesale and retail strategies. He thought it more likely that operators would adopt one or other strategy.

So, where does this leave mobile operators and their IP strategies? The short term evolution of the mobile Internet is clear. 3 has demonstrated how it is possible to partner with some of the big Internet brands to enhance its own brand. And the evidence so far is that Skype and Windows Live Messenger - rather than cannibalising long-distance voice and SMS revenues respectively - actually stimulate usage. We can expect to see all operators taking a similar approach to 3 and partnering with other leading Internet brands, particularly some of the social networking sites.

But whether this is a genuine IP strategy or not is a different matter. Operators will only really be genuinely embracing the spirit of IP if they stop controlling devices and the software that gets preloaded (or disabled) before it gets to the end user. They may be prepared to do this when browsers and user interfaces improve and their networks have more bandwidth. But even when this does happen it is questionable whether many operators will be prepared to accept the loss of control of the customer that goes with any genuine wholesale strategy.

You only need look at BT, the UK's fixed operator, to see what it takes to get a carrier to embrace a wholesale strategy. BT was forced by the regulator to spin off its wholesale business, Openreach, into a separate (regulated) company at the start of last year. BT is now so taken with Openreach that it is seeking to replicate the model in other European markets.