Why you Should Avoid the new App Stores by Alfa and Touch… For Now

Consumers should try to stay away from app ecosystems created by their ISPs until they learn about some important details.

Beware the trap stores..

I learned today that Alfa and Touch are launching app stores to give Lebanese users “more options” in their mobile lives. The idea is that when you want to pay for an app (or presumably for an in-app purchase), you don’t have to use a credit card. The payment is simply added to your cell phone bill at the end of the month. This is called Mobile payment or Direct Carrier Billing, and it’s a huge thing especially in the developing world.

You can see how this is appealing to potential app developers; many people in Lebanon don’t use credit cards for online payments, so carrier billing is a big opportunity to get money from just about every person who has a sim card. This means that if a Lebanese software developer writes an app to rate and review your favorite man2ouch corner store, she can theoretically charge 0.99$ for that app and hope that users won’t mind paying because they trust the payment system. Even users find this appealing because of its relative ease and security.

What can go wrong?

To understand the potential for mischief by Alfa and Touch, we have to take a step back and see the larger picture.

  • The Telecom sector in Lebanon is the government’s largest source of income and its lack of competitiveness is by design to maximize said income.
  • Telecoms are being disrupted all over the world. People are using VoIP (like Skype) and data messaging (like WhatsApp) instead of services that brought serious money to the Telcos like long distance calls and SMS
  • The government once felt so threatened by the loss of income from VoIP that it tried to ban it outright

In other words, if you understand the incentive structure behind the telecoms and the government, incentives that made cell bills in Lebanon one of the highest in the world and made internet access artificially scarce, it wouldn’t be too paranoid to be concerned about the kind of power that an app store could give your mobile internet provider. Imagine for example if users started getting bribed with cheaper 3G if they used their app stores exclusively. Or imagine if the government mandates that all online payments should be made through “trusted” stores, like say, Alfa and Touch. Maybe the local app stores become so dominant that the government feels it can get away with banning other stores, and then lo-and-behold apps like WhatsApp and Skype disappear from the official app store.

Luckily, this is a far off prospect, chiefly because of the dominance of iOS and Android and because technology advances faster than governments. But that doesn’t mean we shouldn’t be prepared.

How local app “stores” can be done well

Let’s be reasonable. The carriers (and the government) should be able to make some money from the apps craze. It will help them survive and it will help our economy a bit. But that doesn’t mean that they should control or trap us. There’s a better way.

App stores provide three services: Curation (choosing which apps are featured), Payment channels (how you pay for apps) and Account Management (which person bought which app). The local telecom operators can provide curation by setting up websites with links to cool Lebanese apps, possibly powered by social media voting. They could also create a payment gateway, a profitable paypal alternative that is powered by direct carrier billing (through an independent cloud service that links your mobile number to a username and password).

But do they have to have an “app store” where they sell us the apps themselves? I don’t want that service from my mobile internet provider, it doesn’t make me feel comfortable and it can be a scary prospect.

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  • Fawaz Bassim

    I do believe Operator determined AppStore should be part of a service provider CSR initiative and their quest to create more and better local contents hence the development of an ecosystem allowing startup a better way for monetization of their innovation. Government in this case as well the supporting managed service should not collect any fee.

  • http://thelablive.blogspot.com Rany

    I was surprised by the Alfa/MTC App store story, since it’s not possible with the current mobile Apps ecosystem dominated by Apple, Google and Microsoft who monopolize the right to have an “App store”, each on its own platform.
    But I read the Dailystar article and found out that it’ll be applied on Nokia’s store. That means the apps will be released on Nokia phones, no not the ones that have Windows mobile OS like the Lumia, the ones who have Nokia’s legacy Symbian OS and this is quite funny,I mean does it still exist? Does it still have a market? Apparently yes, in rural India maybe but not in Lebanon where consumers have habits and purchase power that are somehow similar to those of consumers in some European countries.(Especially when it comes to phones)
    Nokia is clearly trying to keep its sinking mobile business afloat by targeting low income, low tech markets to capitalize on them, but will this work in Lebanon? I highly doubt if not tend to say it won’t. Did alfa and mtc make a study of how many active smartphones on their network are low end Symbian Nokia, before going into this venture? I’d like to know.

    It seems to me that again, those who are controlling the telecom sector in Lebanon are outdated, special interests individuals who are living in a parallel universe where Apple and Google didn’t enter the mobile business.

    I don’t think it’s a serious threat it’ll be a sorry waste of efforts for Lebanese developers who I assume will not be attracted by such a limited Lebanese, closed eco-system where their customers will be a tiny portion of the ~3million mobile users in Lebanon, it won’t be profitable for them anyway. And Lebanese developers should be pushed to think globally instead of being framed in a local market that is millimetric on a global scale.

    But it’s sad to see that instead of seeing people innovating and showing a solid intention to solve local problems like the difficulty of online payments in general in Lebanon, and providing better services for Lebanese customers they’re going back to the middle ages of mobile technologies.

    And neither Lebanese operators nor the Lebanese government can by any stretch of the imagination get close to controlling Apple’s, Google’s or Windows App stores. And for the remaining outrageous policies that were applied and those that might come in the near future, I think we should raise the voice against them, in a serious way. If Harb continues in the same abusive policies made by Sahnaoui I hope we won’t see people cheering(out of political motives) for being robbed and tied down when it comes to telecommunications, as we’ve witnessed before with Sahnaoui who was hailed as telecoms superman.

    And Arabnet is such a disappointment, as usual.

  • Fadi

    Lebanese corruption at its best!!
    Hilarious it’s just for this Nokia thing!!
    Which planet are they on?!
    Sahnawi thought he was smart enough to rob his people, they keep shooting themselves in the foot and pushing us back. This sort of corruption isn’t funny anymore

  • Samer Mehaidly

    It is good to see that you are writing about such a thing, although there are several aspects of your article that I do not agree with. To start with, direct carrier billing is a worldwide mechanism used by all carriers around the world and not just in developing world. In Lebanon, two ministries control the MNO’s (Alfa & Touch): ministry of telecom & ministry of finance. Tariff is set by ministry of finance while services are set by ministry of telecoms. In all markets, IM such as whatsapp, BBM, viber and others have taken over the SMS usage several years ago and are becoming a dominant aspect of a mobile phone. VoIP has become another dominant aspect also and is being used for international calls & sometimes for national calls where possible. Although you might think that carriers are losing a lot of money because of such apps (OTT apps), carriers are making money from the adoption of Mobile Broadband (MBB) by users and the adoption of smartphones. Smartphones and MBB applications that consume data vigorously! These have created a HUGE steam of income for carriers and have fueled new tech enhancements (4G & soon 5G). One more fact to rectify, the government has stopped VoIP call centers and carriers but not VoIP apps. You can download so many VoIP applications on your handset without any barriers. Even if the government stops such applications from being downloaded (Same as in UAE) customers always find a way to get over it through proxy bypass applications.
    Now after we have cleared such issues, let us go into the Lebanese carrier app ecosystem: instead of looking at such step as a bad one, I would look at it as an enabler to Lebanese youth & entrepreneurs. This step will promote and allow Lebanese companies to create & sell their applications and would not interfere with the international or proprietary apps on IOS or Android stores. Frankly, I totally disagree with your conclusion and believe is it a good strategy by both MNO’s that helps the Lebanese, as long as it is open and fair to all developers.
    Samer Mehaidly (@samermehaidly for more Telco articles and news)

    • beirutspring

      Thanks Samer for the comment,

      I don’t think we have any serious disagreements and I have respect for your expertise on the subject matter.. But let’s for a moment ignore the tiny and shrinking market share of the Symbian operating system in Lebanon and play along this App Store idea. Do you really believe that we will have an “open and fair” system for developers, when there’s so much tension between the MNOs, the MoT and the MoF ? There was already an indication that there will be a limit on the amount of apps on offer (the absurdly ambitious target of 1000 apps).. Who decides which app is of “good quality?”

  • http://www.waja3ras.com Tarek

    I think you need to take a step back to get the bigger picture.

    The idea behind the creation of these app stores (not mentioned in the Daily Star article) is the low barriers of entry to the mobile app ecosystem. Easily, if a Lebanese developer has a smart idea, and the grit to go through with it, (s)he can develop an app catered directly to the Lebanese market and present it to his/her relevant audience without it drowning among a million plus apps in the Play Store (or others later). The idea is that this developer can be retained in Lebanon; (s)he does not have to pay millions in infrastructure and (s)he can create a business that can make him/her money!

    No one is under the impression that these Lebanese stores will replace the iTunes Store or the Play Store. It’s simply unimaginable. Incentives that you mention such as cheaper 3G are already there, but for the right reasons: if you download an app using the touch app store over 3G, it will not be deducted from your 3G quota. That is purely an incentive to allure the public to using this app store and get more attention to it to move it from its current beta phase to a full fledged app store.

    As for operator billing. It’s already on offer (cloud.touch.com.lb) exactly as you mentioned it! You can use the cloud as a complete back end as a service to easily build your own app, or just use their operator billing API. There is absolutely nothing forcing the developer to deploy their app on the local app stores. They can submit it to the iTunes Store (as long as they are not selling digital goods), Play Store, Windows Phone Store or any store! Also, they can sell it on the local app stores and benefit from purchasing the app without a credit card, given that less than 15% of the Lebanese have credit cards, but three quarters have a phone bill/phone credit!