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Operators Have a WAC at Apps

The operator-led Wholesale Applications Community (WAC) shed some light today on its new business model, in the latest move by operators to take on the likes of Apple Inc. (Nasdaq: AAPL) and Google (Nasdaq: GOOG) in the mobile apps market.

The WAC (aka, the WAC Pack) has previously announced what it wants to do -- namely, to enable apps to be distributed more widely across devices and platforms and ensure a healthy revenue share for developers and operators -- and today, it said how it plans to do that. (See Mobile Operators Strike Back on Apps and MWC 2010: Operators Form WAC Pack for Apps Push.)

First, the WAC revealed its basic business model: operators will distribute applications through their own apps storefronts and then bill customers for the apps on their mobile phone bills or through other payment methods. The application developers will set the price of the apps and negotiate the terms of the revenue share with individual operators. WAC, which is a nonprofit group, will take a small percentage of these transactions to cover operating costs.

The group says that it set up the model in this way because it's important for developers to have some control in the distribution of their apps. (See Developers Weigh In on WAC.)

"We're trying to put developers as much in control as possible," said Tim Raby, managing director of Open Mobile Terminal Platform Ltd. (OMTP) , who has been acting CEO of WAC. "The developer sets the price and targets the regions or specific retail outlets; developers know the value of their own assets."

But since there is not a universal revenue share, developers will have to negotiate these deals with individual operators wherever they want to sell their apps, which actually sounds like an onerous prospect for them.

Raby admitted that WAC had some work to do to simplify this process but said that it's not that complicated. "We're working on a user interface that will make that as simple as possible," he said.

In fact, WAC cannot set revenue share guidelines for all the operator members' transactions because such a move would likely breach competition laws, according to Orange (NYSE: FTE)'s vice president for strategy Daniel Gurrola.

"WAC by definition and by sheer scale will have dominance in the market," said Gurrola. "It's not possible to have a single revenue share model in the market."

WAC to the future
In the future, the WAC has other business models in mind such as enabling in-app purchases by opening up the operators' billing systems; app enhancements that leverage operator's location information; and serving advertisements within applications.

Each of those models involves creating and opening up a consistent set of network application programming interfaces (APIs) for developers, which is something that not all operators will be ready to do at the same time.

"It's not going to happen quickly," said Raby. "We'll specify a standard interface and they [operators] will do it on a timeline that suits them. It's not insignificant from a technology and cost point of view, and some operators are more advanced than others."

Some nuts and bolts
The WAC also said today that it has merged with Joint Innovation Lab (JIL) -- the Mobile Widget development joint venture of China Mobile Communications Corp. , SoftBank Corp. , Vodafone Group plc (NYSE: VOD), and Verizon Wireless -- which will be used in the first WAC specs.

The group has also appointed its executive team: Peters Suh is the new CEO of WAC, who was previously the CEO of JIL. Michel Combes, Vodafone's chief executive Europe has been elected chairman of the WAC, and Jean-Philippe Vanot, France Telecom's deputy CEO, is vice chairman.

The next big times in WAC's plan are September, when the group will make available the first materials and documentation for developers, and November, when the group will publish the full software developer kit (SDK) and hold the first developers event.

The release of the first WAC spec is scheduled for January 2011; and WAC plans to formally launch in February 2011.

— Michelle Donegan, European Editor, Light Reading Mobile

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