The gorgeous city of San Diego, California is nestled on the Pacific coast just above the southern border, about two hours south of Los Angeles. Tourists love this town for its sunny ambiance, its truly relaxed atmosphere (unlike its bustling, polluted cousin to the north), and its world-class selection of tasty Mexican cuisine and tequilas. To be sure, San Diego’s golf courses and marinas can turn business travel into vacation time in the blink of an eye.

BREW's Iceberg Effect

This laid-back ambiance permeates Qualcomm’s annual BREW conference, which is traditionally held in early June near the company’s world headquarters--everybody has a smile on their face, nobody wears a tie, and the hosting company spends lavish amounts on catering, parties and live music to make sure its guests have a good time (this year’s headline act was 70s funk outfit Earth, Wind and Fire). Even if it looks like nobody’s doing any work, however, there’s some very serious business being transacted under the surface; if you want to know how important the BREW show is to the wireless data market, all you need to do is glance at the high-powered speaker list. This year’s show touted representatives from Square Enix, Microsoft Casual Games, and Electronic Arts, to drop a few big names.

If you’re unversed in the wireless data space, don’t worry: you are probably in the vast majority, and a bit of explanation is in order. The BREW Solution--as Qualcomm likes to call its integrated commercial platform for mobile phones--has enjoyed robust global expansion over the last several years, especially in developing markets like India, China, and Latin America. Broadly speaking, BREW consists of a number of components working in concert, all of which are managed by Qualcomm. The most important pieces are the development platform, which developers use to build wireless applications; the program catalogue, from which carriers select said applications to load onto their mobile storefronts; and the commercial infrastructure, which orchestrates customer authentication and billing, as well as the all-important revenue split between the developers, publishers, carriers, and Qualcomm itself.

In essence, BREW positions Qualcomm as the ultimate middleman; for a small cut of the action, the company manages all of the horribly convoluted logistics of wireless commerce, allowing the various members of the supply chain to specialize on what they do best, while rendering the whole process completely opaque to the consumer. This is a very good thing for everyone involved--especially Qualcomm, because growth in wireless data nourishes their core business of selling increasingly complex multimedia chipsets for mobile phones. Among many other carriers’ data services, BREW technology drives Verizon Wireless’ Get It Now storefront, which is widely considered to be the prime mover behind wireless data growth in the U.S.

It may sound a little far-fetched, but in terms of revenue potential, it’s absolutely true: The Qualcomm/Verizon Wireless tandem is one of the most important alliances in video games that you’ve never heard of.

Verizon Gets It... Now?

The perennial highlight of the BREW show is Verizon Wireless’ presentation, when one of the carrier’s highly placed officials emerges from the corporate shroud of silence and delivers growth statistics and future strategy to a rabidly expectant audience. For those involved in mobile games, it’s kind of like waiting for the oracle to come out of her cave. This year’s session was delivered by John Stratton, Verizon Wireless’ Vice President and CMO, and he had some momentous news.

First came the raw numbers: according to Stratton, VZW currently sports 27.1 million data customers, who are expected to account for about 160 million downloads over the course of 2006. That’s a tidy 400% growth rate over the last 36 months--a pretty darned decent result for most retail outlets, eh? But Stratton made sure the audience understood that VZW isn’t content with mere organic growth, especially since it’s shown recent signs of slowing down. Sounding an introspective note, he wondered aloud, “are customers moving on to other types of entertainment services? Are the carriers taking their eye off the ball?”

Then came a truly startling admission, along with a plan for action. Stratton outlined several problems that have stunted data growth: VZW is continuously hit with a “fire hose” of content from publishers that it lacks the resources to sort through, its present download deck is “way too packed,” and the Get It Now experience “hasn’t fundamentally improved” for customers since its inception.

Moves To Improvement

These problems aren’t news to the mobile games industry, but Stratton’s candor certainly is. VZW’s evolving solution on the commerce side, said Stratton, will be to branch out to new sales channels, including the internet and retail (there are 1800 VZW stores in the U.S.), as well as allow certain off-portal partners to sell applications. At the same time, Get It Now is undergoing a complete user interface overhaul, which will allow for voice searching, contextual recommendations, and even Flash animations.

These revelations constitute the massive paradigm shift that mobile games publishers have dreamed of for years, but never dared to expect, since they knew that any change would be impossible without carrier involvement. Keep in mind that the cellular operators, including Verizon Wireless, are best characterized by inertia and slow, incremental improvements; they have consistently ignored pleas for retailing reform for half a decade. Indeed, while listening to Mr. Stratton give this presentation, one got the sense that we were witnessing history in the making. The only thing that could have upstaged him would have been a UFO crashing through the ceiling.

Of course, it’s always important to take a deep breath and think critically. Verizon Wireless may have committed to a historic program of reform at BREW 2006--but what will happen to mobile games during the long months and years it will take for the carrier to develop its new technology, roll out its new handsets to customers, and achieve sufficient market penetration to finally switch off the old Get It Now? My best guess is that we will be stuck with business as usual for some time to come.

Not An Instant Solution

In fact, Stratton roundly and explicitly rejected the most sensible short-term solution to stagnating growth--culling the download decks--by telling the audience that VZW had no interest in deciding “what’s good and what isn’t” for their customers. I agree that VZW probably doesn’t have the personnel necessary to exercise this sort of judgment right now, and that allowing the market to choose is clearly the best of all possible options--but I have to wonder how VZW’s present policy of shuffling hundreds of games up, down, and around their decks arbitrarily is any better than a pure, merit-based dictatorship.

Nevertheless, the significance of Verizon Wireless’ announcement at BREW 2006 cannot be understated, because without these kinds of commercial reforms, mobile gaming will never be anything more than video gaming’s dimwitted sidekick. Kudos to VZW for taking this step (even if they had to be prodded into it by Qualcomm, as I suspect). Neither they nor we will be sorry they did.

[Steve Palley is the Founder and Lead Analyst of Foci Mobile, a mobile games consulting firm. He was previously Chief Editor for Mobile Games at GameSpot and Wireless Gaming Review.]