Posted: 03/2001
Mobile Experience Promises to be Personal
By Josh Long
Crawling through Los Angeles traffic gridlock on a Friday night, a car dealer uses his mobile phone to access the company Intranet to re-examine his staff's sales numbers.
Through a pair of instant messages, he learns his starched shirts are ready for pick-up, and that an airline is offering a $100 first-class, round-trip ticket leaving for Seattle, where his children live, in 45 minutes.
Don't be surprised: You have just entered the universe of mobile mania, circa 2004.
Mobile Dollars
Today, mobile commerce is an ambiguous phrase. One thing is certain, however: Operators have coughed up billions of dollars to build next-generation networks, and from ESPN (www.espn.com) to Disney (www.disney.com) to Amazon.com Inc. (www.amazon.com), every dot com and brick-and-mortar behemoth is forging information and commerce-based alliances in the mobile environment.
At the very least, they and other business sectors, like the highly-involved financial institutions, are testing the airwaves.
"I wonder how far it is really going to go," muses Dale Gonzalez, vice president of wireless engineering for Air2Web Inc. (www.air2web.com), a hosted mobile Internet applications platform. But as Gonzalez chimes in later of the mobile phenomenon that has gone bonanza already in Asia and Europe, "Time has to pass."
Research group IDC (www.idc.com) predicts "rollout of mobile-specific commerce applications will be slow and steady rather than rapid," and that m-commerce will only generate $1 billion of the worldwide business-to-consumer Internet commerce market out of an estimated $95 billion this year.
Other analysts anticipate staggering cash flows in a few years. By 2006, 325 million people around the world will generate $230 billion in m-commerce revenues, according to a recent study issued by Strategy Analytics (www.strategyanalytics.com). However, only a byte-sized portion of revenues--3 percent--will fall into the hands of operators, according to m-commerce and 3G guru David Kerr, vice president of wireless services at Strategy Analytics.
"They [operators] ought to be cautious about prospects for short-term returns," says the mobile analyst, who notes that even he is not bullish enough to "bet the farm on rampant demand" in contrast to the European operators who have spent $150 billion so far to buy 3G licenses.
Wireless carriers, Internet leaders such as Yahoo! Inc. (www.yahoo.com), and infrastructure providers who support mobile transactions will share in the revenues, says managing director Marianne Wolk at investment banking firm Robertson Stephens Inc. (www.robertsonstephens.com), a Fleet Boston financial company. Wolk says the split will depend on which companies garner customer control.
"We believe it is too soon to say who will carry the lion's share of revenues," she adds.
Baby Steps
Mobile commerce is in its infancy--at least in the United States, where PCs represent the average citizen's first exposure to the Internet in stark contrast to a Finn or Japanese citizen.
Still, there were more than 109 million U.S. wireless subscribers as of January 2001. Carriers have introduced data-related commercial service during the past few years, and the number of subscribers is mounting steadily.
For example, 1 million customers had signed on with Sprint PCS Wireless Web (www.sprintpcs.com) by early January. The service was launched only about 18 months earlier.
AT&T Wireless Services Inc. (www.attws.com), which only released third-quarter results for 2000 as of press time, reported that 300,000 people subscribed to its AT&T Digital PocketNet Service since its introduction in March 2001.
And, Verizon Wireless (www.verizonwireless.com) reported a total of 750,000 data subscribers at the end of the fourth quarter, which included mobile web and cellular digital packet data (CDPD) network subscribers.
"I think the biggest challenge is demonstrating value to customers," says Jeffrey Nelson, a spokesperson at Verizon Wireless. "We need to throughout the industry demonstrate why wireless data service is important and how it can improve people's lives."
Americans thus far have demonstrated a considerable interest in obtaining information-based services such as travel and financial reports, and actual business transactions are beginning to play a greater role through dot coms and other enterprise partnerships, sources say.
Wolk says the financial services sector has been the most aggressive in the mobile arena followed by technology companies like Dell Computer Corp. (www.dell.com) and Sun Microsystems Inc. (www.sun.com).
Others coming to bat in the m-commerce game include consumer products, education, health care and manufacturing, she says.
"Psychologically I think many companies did not want to be left behind the wireless Internet or be the last to market," Wolk explains.
Carriers in the United States and abroad have spent billions of dollars to acquire 3G licenses and deploy networks that promise Star Trek speeds.
Strategy Analytics predicts operators will spend $250 billion during the next three years to acquire licenses for 3G services, and an additional $600 billion to build and deploy networks.
Inferiority Complex
For now, mobile technology in the United States is too inferior to seriously challenge web minutes on the PC.
Data speeds on mobile devices are slower than on a home or office PC, Internet content is limited, color is not an option, and even the best eyes must adjust to a screen half the size of a credit card.
Plus, operators often charge a per-minute fee on circuit-based networks rather than a flat rate, which will become feasible using packet-based infrastructure such as Universal Mobile Telecommunications System (UMTS).
Analysts say 3G systems will hold greater appeal.
Downloading content at 14.4kbps--the speed mobile devices now often support--is like topping out in a 10-year-old automobile at 50 miles-per-hour, says analyst Kerr. A 3G deployment, which will enable 384kbps in a mobile environment, is the equivalent of driving a Ferrari, the analyst explains.
Cultural Distinctions
Of course, prowess is not the only impediment to mobile mania. Cultural norms help explain the higher penetration rates and inclination to use mobile-based data services abroad.
In Tokyo, for instance, Japanese citizens spend hours each day on the public transportation system.
"I took the train every single day when I was in Tokyo," says AT&T Wireless spokeswoman Danielle Perry, who spent her junior year abroad at Sophia University (www.sophia.ac.jp).
What is more, many countries throughout the world introduced wireless devices ahead of the PC. Even now, Internet penetration is much lower in Asia, for instance, than the United States--a factor that may explain in part why NTT DoCoMo Inc.'s (www.nttdocomo.co.jp) i-mode service is so successful.
Although the mobile phone does not reproduce the experience of a PC, "it does some really cool things, and they are getting cooler all the time,"says Verizon Wireless' Nelson. "While we don't believe we will ever replicate the experience on a PC, we have learned a lot from peoples' uses of PCs and connectivity, and that is everyone wants something different."
Indeed, the mobile possibilities are vast. Air2Web's Gonzalez says mobile commerce has three aspects: business or information-based transactions over the web; use of the device as an alternative payment system to buy a coke at a vending machine, for instance; and businesses spending money behind the scenes to advertise or provide a sponsorship on the web.
Tracking Locations
Customizing content will be the golden ticket to mobile commerce and operators must lock into the daily routines and personalities of their subscribers, sources say.
Location-based technology--the ability to track a subscriber's whereabouts and deliver appropriate content via a mobile device--is hogging all the hype.
Research group Ovum Ltd. (www.ovum.com) predicts mobile location services driven by m-commerce will generate $20 billion by 2006. Ovum says operators, location technology vendors, and content providers must offer consumers services that are "personalized and easy to use" to maximize earnings.
Picture this: Your customer is standing at the movie theater waiting to see the new Indiana Jones movie. Harrison Ford memorabilia pops up on his mobile wireless device, then a discount on popcorn and Coke is displayed. However, if a viewer is sitting in the theater glued to the opening scene, he probably does not want a movie review at this time.
Because a subscriber's "contexts" or circumstances change rapidly in a mobile environment, technology must be suited to adapt to these changes on a minute-by-minute basis, says Ralph Kenney, COO at R Systems Inc. (www.rsys.com), an IT solutions provider that focuses on contextual computing.
Privacy Problems
The ability to track a customer's location and his evolving circumstances raises privacy concerns. Kenney and others say customers must specify they want to opt in to a service that would track their location.
"The privacy issue clearly looms large over the wireless sector, particularly [the] question surrounding location information," says James X. Dempsey, senior staff cousel for the Washington, D.C.-based Center for Democracy and Technology (www.cdt.org), a public interest advocacy group.
For instance, the public advocacy spokesman says, there is no clear standard in law that prohibits government agencies from requiring service providers to release location-based information.
While there is a "huge potential for services of value to consumers, users are going to insist upon trusting that their location information will not be used to profile them and track them without their knowledge and expressed prior consent," Dempsey says.
Operators also must address other privacy issues, such as the confidentiality of financial information. Allowing subscribers to pay for services in advance could save carriers money and mitigate fraud claims, according to Carla Schneiderman, vice president of marketing and business development at Corsair Communications Inc. (www.corsair.com), a company that provides carriers real-time billing and mobile systems.
"Most of the rest of the world does telecom through prepaid," in contrast to U.S. residents relying heavily on the credit system, says Schneiderman, who explains that operators must dispel consumer myths in North America that prepaid is only for people who cannot qualify for credit.
While Americans may be hesitant to make a purchase over the wireless web, their security concerns will be assuaged given time, sources say.
"Not a single one of us thinks twice of putting a card in [an ATM], typing a number and pulling cash out," Schneiderman says.
Josh Long is news editor for PHONE+ magazine.
