Over dinner with Facebook’s Zuckerberg, wireless carriers dish on being a dumb pipe

It’s no surprise that a dinner between Facebook’s Mark Zuckerberg and wireless execs at Mobile World Congress in Barcelona played out the way it did: The young CEO talked up the virtues of its $19 billion acquisition of WhatsApp, and the importance of cheap Internet access, and the carriers fretted about being reduced to a “simple pipe.”

Mark Zuckerberg. (Photo by Robert Scoble via Flickr.)

Mark Zuckerberg. (Photo by Robert Scoble via Flickr.)

After delivering Monday’s keynote at the wireless conference, Zuckerberg hosted a private dinner for about 20 executives, Bloomberg reportsMeals are a common way Zuckerberg interacts with others, literally breaking bread with other companies. For instance, in another such dinner, he talked over sushi to the top brass at 10 top social gaming companies that use Facebook’s platform for distribution.

This time, the tensions were much clearer.

While Facebook and carriers have a lot in common — they both help people stay connected — they do it in two completely different ways. The carriers were vocal about the need to level the playing field between the two industries. Facebook benefits from soaring mobile-advertising revenue while carriers are stuck footing the bill for a network that Facebook operates on for free.

Even more worrisome for carriers is that services, like WhatsApp, threatens the way they make money. WhatsApp allows users to side-step costly texting plans by sending messages over their data connection for cheap or via Wi-Fi for free.

Orange’s CEO Stephane Richard, who attended the dinner, summed up the concerns to Bloomberg succinctly: “The risk for us is being excluded from the world of services. If that happens, we’ll be downgraded to simple pipes.”

This is the same concern the carriers have had for more than a decade. For as long as I can remember, operators have only been successful at building out core telecom infrastructure to support services, like calling, texting and Internet access, while everyone else has come up with ways to exploit those pipes.

“A service like WhatsApp, to be honest, that’s something we could’ve and should’ve come up with before. We’re well decided to catch up,” Richard told Bloomberg.

I couldn’t have said it better myself.

  • http://www.christopherbudd.com Christopher Budd

    “[W]e’ll be downgraded to simple pipes”.

    Uh, newsflash, that’s all you ever were. Part of it is the carriers have the same high customer service standards that cable companies have. And so people hate them just as much. When there’s a choice, they choose to bypass them. There’s also trust issues. When I had an Android phone with Verizon apps bundled in (that I couldn’t uninstall) I never once opened them because I didn’t trust that I wasn’t going to start the meter running on my phone somehow.

    But too the carriers are just genetically incapable of innovation. I can’t think of a single app or offering from a carrier that I’ve seen anyone use.

  • Harkonnen

    Carriers will eventually become another regulated utility, like electric and gas providers. Once a critical mass of users rely upon them they will pushed into regulation for the same reasons that the old utilities were.

  • Matt

    It is frustrating to hear the carriers yell foul because someone is making too much off their service. They built out IP backbones and peered them with other carriers to create the WWW, so they could make more money off businesses and consumers. Now that a business is making too much money, using their service they are crying foul. This is like a land lord asking for more rent once he knows how much money you make. If Facebook was not making money this would be a non issue and the carriers would be happy that FB is creating a compelling reason for consumers to buy bigger data plans. They might complain that it is consuming to much BW, but that is a great reason to build more and sell more (or lose it to a competitor.) The carriers are to focused on defining themselves as a pipe that they lost the advantage of being the first “service providers”. Things change, you have to change with it.