One of the hottest topics at this year’s CES was definitely the acknowledgement that the wireless industry reached a tipping point in 2007 in its movement towards market openness. Apple launched the iPhone. Google announced the Open Handset Alliance for the Android platform. VZW announced its Open Access network strategy. The 700 MHz Auction requirements included open access provisions. The industry is moving from its traditional “walled garden” approach, where carriers had predominant control, to one where access is open to third-party developers and all devices and applications are compatible with each network. This concept of open networks allows carriers to focus on marketing profitable features and services while outsourcing device and content development to third parties. This shift towards decentralization should benefit the consumer with empowerment through choice as companies specialize and release new products and content. But is that what consumers really want?

There’s a study called “The Paradox of Choice”, in which psychologist Barry Schwartz discovered that too much choice becomes “not only unproductive, but counterproductive—a source of pain, regret.” We see similar patterns in our research of online wireless shopping behavior. In December, Compete asked online shoppers of consumer electronics devices about their shopping experiences in multiple device categories. 59% of respondents told us that their wireless carrier already has enough content and service choices, and half of those said that there were actually too many choices. Considering technology advancements and increased marketing dollars, one would expect the shopping experience to get easier over time.

Yet only about half of respondents in each category thought that was the case (those who chose 1 & 2 on the scale). In the wireless/cellular phone category, 32% of consumers believe that the shopping experience has actually gotten harder in the last two years. This could increase exponentially as open networks grow in popularity and traditional consumer electronics devices enter the consideration set with new network connectivity features. Of course for some niche segments the shopping experience will improve with increased choice, but as a whole the mass market could be increasingly confused and overwhelmed.

It shouldn’t take an advanced degree to purchase a digital camera, cellular phone or laptop computer. Part of the challenge will be to determine which products truly meet consumers’ needs. Does it really make sense to turn a mobile phone into an all-in-one device? Or would it be better to bring network connectivity to other existing devices that consumers are accustomed to and enjoy? Who will be the big winners and losers? For more on this topic, check out Compete’s Telecommunications practice January newsletter (posting at competeinc.com on 1/28/08). To see more data from our recent consumer electronics survey, please contact us at telecom@compete.com. We look forward to hearing your thoughts on the future of open networks.

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