Apple's introduction of the iPhone and the App Store has opened the gates for a flood of activities in the mobile industry, and device manufacturers are not the only ones being forced to rethink their business. The cards in the basic power relationship between manufacturers and mobile network operators are being reshuffled. In the so-called walled garden model, the network operator controlled the offered services. Moreover, the operator had the sole control over the customer and billing relationship. That has shifted in the meantime in favor of the mobile device manufacturers (OEM) and operating system suppliers. Vertical integration has enabled manufacturers to expand their reach in the value chain. They started with the provisioning of mobile services under their own brand; examples include Nokia with Ovi, Apple with MobileMe, or Google Mobile. Manufacturers exploit their control of the device to optimize it with pre-installed applications for the own service offerings and they exercise their control over the app store.

With this strategy, device manufacturers achieve more than to just increase their value share; they are also establish an own customer relationship (in Apple's case, even an own billing relationship), and they create new barriers by raising the switching costs for the customers. Mobile applications are neither cross-platform compatible nor can the licenses for the purchased software be transferred to another app store platform.

The impacts on mobile network operators are manifold and far-reaching. While the bargaining power of the device manufacturers increases, mobile network operators find themselves being reduced to mere providers of pure network access and data transport – so called bit-pipe.

The mobile market is going through a development which show certain parallels with an earlier market phase in the fixed-line communication market. The availability of broadband Internet access coupled with attractive flat rates and a diversified range of new, innovative Internet applications and content are driving the demand. During the first phase, the growth phase, DSL providers were able to capitalize on the rising demand. But now, during the second phase, the fixed network operators face a number of challenges. For one, the competition among access providers is intensifying as the market becomes saturated; for another, telecommunication companies now compete additionally with the so-called over-the-top (OTT) providers. The latter offer services such as Voice over IP, video telephony, or video on demand based on the Internet protocol, reducing the network operators to the role of broadband Internet access providers.