There was a time when being a kid with his “head in the clouds” was asking for trouble. For one thing, the head might be high enough to get lopped – something Australians love to do with their tall poppy dreamers. Cloud level can mean harsh sunshine too, and that means the prospect of a tailspin like poor Icarus who flew too close to the sun only to sear his delicate wax wings and plunge back to earth. Yet nowadays, it ain’t necessarily a bad thing to have your head in the clouds. At least when it comes to the Internet clouds. Take Google for example, which determinedly positions its features in the so-called “network cloud” where anyone can access anything, anytime and any place. This has reduced to almost zero friction, people’s ability to access Google’s services. Along with new advances for data portability – eg sharing user identity and profiles – a serious new phase has begun for social networks, online communities and virtual relationships, all played out in the Internet cloud.

Indeed, there is a wild land grab underway for the revenue that will flow from next generation broadband services around social networks, user generated content and location-awareness – and the new kids in town reckon they have a hot claim on the turf traditionally occupied by telco carriers.

Here are some examples:

1. Media technology companies (eg Yahoo) are rolling out social networking applications that elegantly allow users to meet new people, contact their friends and stay abreast of their friends’ activities from their mobile phone. The purveyors of these services (which may be created by the media company itself, or in collaboration with another company such as Facebook) put the services on a mobile phone by direct arrangement with the handset manufacturers, either at the point of manufacture or via an easy download process. This essentially makes the media operations of the handset distributor (eg Telstra) bypassed.

This process is called disintermediation and involves “cutting out the middle man”. At best, the handset distributor which owns the mobile network to which the phone is connected makes money from data “carriage” when information is passed back and forth between the phone and the Internet. However, the carrier can’t make money from advertising and does not “own the customer” in the way it is traditionally accustomed to do for mobile phone-based experiences.

2. Mobile phone manufacturers (eg Nokia) are building location-based services which do not use a carrier’s network technology to pinpoint a phone’s location. A typical alternative available to them is to use wifi (for phones that have wifi Internet access) and global satellite positioning systems. The result is that the carrier is bypassed. The phone manufacturer can sell map-based services (eg revealing shops nearby a traveller) and sell advertisers location aware mobile advertising, without requiring the carrier’s assistance. Mobile phone manufacturers are also creating Web backends for their phones via which content captured on the phone, such as photos and video, can be uploaded to an Internet-based server and shared with other mobile phone users and online visitors in communities that the mobile phone manufacturer is in a powerful position to control.

The world’s more advanced telco carriers have tried to diversify their value proposition and reinvent themselves as “technology based media and communications” companies. Telstra has done this more effectively than most because its stable of properties include diverse assets which mutually reinforce each other’s value propositions. For example, BigPond’s news and sport content, along with its online movie, music and game shops, compliment its blogging (BigBlog), online productivity (BigPond Office) and RSS capabilities (I-Pond). But these properties also synergise with the Yellow and White pages, maps and CitySearch properties at Telstra’s wholly owned subsidiary, Sensis, not to mention Sensis’s ad serving capabilities. All of these properties collectively synergise with BigPond’s role as an ISP given that billing based on the amount of data that flows into or out of Australian homes is a long term commercial feature of the Australian online landscape. In other words, Telstra can take its content products out of that billing regime (ie “unmeter”) content, at its discretion, thus using content its provides its broadband subscribers as an attractant for new ISP customers and a reason for existing ISP customers to upgrade to higher speed access plans. These characteristics fortify Telstra against some of the adverse trends that buffet more traditional media companies which do not have an ISP makeup in their business activity. It means even if its communications services are gradually commoditised, Telstra can still make money from advertising and by virtualising its traditional services it should be able to prevent commoditisation’s other forms of ravagement too.