The “State of the Internet” report by Morgan Stanley analyst Mary Meeker provides a compelling perspective on the future of digital commerce…

The Morgan Stanley analyst says that the world is currently in the midst of the fifth major technology cycle of the past half a century. The previous four were the mainframe era of the 1950s and 60s, the mini-computer era of the 1970s and the desktop Internet era of the 80s. The current cycle is the era of the mobile Internet, she says — predicting that within the next five years “more users will connect to the Internet over mobile devices than desktop PCs.”  [...]

But that mobile boom will take its toll on carriers, Meeker says, because mobile Internet use is all about data. The average cell-phone usage pattern is 70 percent voice, while the average iPhone is 45 percent voice. At NTT DoCoMo, data usage accounts for 90 percent of network traffic. The analyst says her team expects mobile data traffic to increase by almost 4,000 percent by 2014, for a cumulative annual growth rate of more than 100 percent. Such numbers will likely strike fear into the hearts of carriers, but joy into the hearts of equipment suppliers and mobile service companies. [...]

Meeker says that users are more willing to pay for content on mobile devices than they are on desktops for a number of reasons, including:

• Easy-to-Use/Secure Payment Systems — embedded systems like carrier billing and iTunes allow real-time payment

• Small Price Tags -– most content and subscriptions carry sub-$5 price tags

• Walled Gardens Reduce Piracy -– content exists in proprietary environments, difficult to get pirated content onto mobile devices

• Established Store Fronts -– carrier decks and iTunes store allow easy discovery and purchase

• Personalization -– more important on mobiles than desktops

Some observations based on Meeker’s presentation…

Wireless usage – and eCommerce – is growing exponentially.   But wireless is where net neutrality has NOT traditionally been applied – allowing carriers, device makers and users to create new, well-ordered environments alongside the digital commons.  Sure, people can also experience the digital commons, but they are increasingly choosing the device and app environments that create legitimate and voluntary markets while providing some useful experience management for the users and the content providers.

In many cases, Order > Chaos

Meeker points out that the dominant content business model on wireline broadband is advertising.  But the dominant content business model on wireless broadband is premium content revenue (user payment for content).  Why the distinction?  Well, users are willing to pay for content on wireless devices because

• It’s easy
• It’s secure
• The prices are right
• The proprietary environments reduce piracy

Meeker is not the first person to point out the advantages of closed environments. Recently, Markos Moulitsas (Kos) has been preaching the merits of proprietary systems.

My Xbox, despite being made by Microsoft, is stable, fast, and runs my games perfectly. How could a company that gave us Windows build such a great gaming platform?  Because it was a closed system. [...]

Will this work for you? Beats the shit out of me. It depends on what your job is, whether there are apps that fill your needs, whether you’re happy or not with an on-screen keyboard, and whether you care enough about “open versus closed” systems to let Apple’s heavy-handed control over the device’s hardware and software bother you.

For me, all I care is whether a device makes my life easier. [...] Remember, if you don’t like it, no one will make you buy it.

Kos, again…

The Apple haters are really out in force over this one, furious at the obvious success of the “closed” system. In the eyes of this crowd, technology must remain “open”, lest it stifle innovation and limit the ability of its owners to tinker and tweak.

Fair enough. If you’re a code warrior or someone who likes to take thinks apart to upgrade and modify, then the iPad is not for you. But for people like me, technology isn’t a hobby, it’s the tools I use to do my work and make my life better. I don’t care HOW it works, I don’t want to CHANGE how it works, and I get angry if it DOESN’T work. Ultimately, there’s a reason why the iPhone is more stable than even my Mac– it’s a closed system. There’s a reason my Wii or XBox rarely crash — they’re closed systems. Those devices do their jobs, and they do it well. And when a piece of technology is doing its job well, I forget it even exists, and focus solely on the task I’m trying to accomplish — whether it’s write a book, or play a game, or goof off on twitter, or whatever.

Of course, I also love open-source software, so this isn’t a question of absolutism or philosophical fundamentalism. There’s a time and place for open systems, and a time and place for closed systems. Me, I can’t wait for my iPad to arrive. And for those who don’t want one, don’t worry! ACORN won’t come knocking on your door with orders that you buy one.

Even former Google VP, David Eun, pointed out that “open access” requires respect for the rights of content owners, who also should have open access to the distribution model that they choose.

Open access and non-exclusivity requires that we be open and flexible to our users but to our partners and advertisers as well. We want to provide an experience where everyone wins on YouTube. Focusing on the user and maximizing consumer choice have always been top priorities. If a consumer wants to watch ad-supported full-length content or short clips on YouTube, they’ll be able to do that. If, however, they want to watch a movie just out on DVD, that may require a different business model. We recognize that. Open to us also means accessing different content through different models because we respect the rights of content owners.  We want to build as comprehensive an online video experience as possible for our users, and we recognize that we have to be open, creative and flexible with content owners to do it.

In many ways, the mobile broadband market may be showing the wired broadband market the path forward towards a digital economy that actually works on multiple levels – both the commons and the market.