M-Commerce: Global Experiences and Perspectives Nikhilesh Dholakia University of Rhode Island, USA Morten Rask Aarhus School of Business, Denmark Ruby Roy Dholakia University of Rhode Island, USA
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Library of Congress Cataloging-in-Publication Data M-commerce : global experiences and perspectives / Nikhilesh Dholakia, Morten Rask and Ruby Roy Dholakia, editors. p. cm. Summary: "Based on research and practitioner-generated reports, this book focuses on the emergence and growth of mobile telecommunications and mobile commerce around the world"--Provided by publisher. Includes bibliographical references and index. ISBN 1-59140-315-4 (hardcover) -- ISBN 1-59140-316-2 (softcover) -- ISBN 1-59140-317-0 (ebook) 1. Mobile commerce. 2. Telecommunication systems. I. Dholakia, Nikhilesh, 1947- II. Rask, Morten, 1971- III. Dholakia, Ruby Roy. HF5548.34.M42 2006 658.8'72--dc22 2006003551
British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library. All work contributed to this book is new, previously-unpublished material. The views expressed in this book are those of the authors, but not necessarily of the publisher.
M-Commerce:
Global Experiences and Perspectives
Table of Contents
Preface ....................................................................................................... vi Chapter I Mobile Communications and Mobile Commerce: Conceptual Frames to Grasp the Global Tectonic Shifts ............................................ 1 Nikhilesh Dholakia, University of Rhode Island, USA Morten Rask, Aarhus School of Business, Denmark Ruby Roy Dholakia, University of Rhode Island, USA Chapter II Canada: Mobile Commerce Under Construction ............................... 15 Detlev Zwick, Schulich School of Business, York University, Canada Chapter III China: M-Commerce in World s Largest Mobile Market ................ 34 Nir Kshetri, University of North Carolina at Greensboro, USA Nicholas Williamson, University of North Carolina at Greensboro, USA David L. Bourgoin, University of Hawaii at Manoa, USA Chapter IV Denmark: M-Commerce Experiences and Perspectives .................. 46 Morten Rask, Aarhus School of Business, Denmark
Chapter V Finland: Internationalization as the Key to Growth and M-Commerce Success ............................................................................ 72 Tommi Pelkonen, Satama Interactive and Helsinki School of Economics, Finland Chapter VI France: Mobile Communications and Emerging M-Commerce ....... 90 Pierre Vialle, STORM Research Group, GET-INT, France Olivier Epinette, STORM Research Group, GET-INT, France Chapter VII Germany: From Chart-Topping Ringtones to 3G M-Commerce .... 112 Timo Kehr, DaimlerChrysler AG, Germany Tobias Lührig, McKinsey & Co., Germany Chapter VIII India: The Awakening of M-Commerce ............................................. 133 Syagnik (Sy) Banerjee, University of Rhode Island, USA Mark M. Lennon, University of Rhode Island, USA Chapter IX Japan: Keitai Krazy, From the Web to the Wallet ........................... 157 Mark M. Lennon, University of Rhode Island, USA Chapter X New Zealand: M-Commerce Beyond the Basics, Adopting Added-Value Services ........................................................................... 177 Chadinee Maneesoonthorn, University of Canterbury, New Zealand David Fortin, University of Canterbury, New Zealand Chapter XI South Korea: Vision of a Ubiquitous Network World ...................... 197 Jounghae Bang, Penn State University, Mont Alto, USA Inyoung Choi, Georgetown University, USA Chapter XII United Kingdom: Current M-Commerce Developments and Future Prospects ................................................................................... 220 Savvas Papagiannidis, University of Newcastle-upon-Tyne, UK James Carr, University of Edinburgh, Scotland Feng Li, University of Newcastle upon Tyne, UK
Chapter XIII United States of America: Renewed Race for Mobile Services ..... 240 Mats Samuelsson, Mobio Networks, USA Nikhilesh Dholakia, University of Rhode Island, USA Sanjeev Sardana, Mobio Networks, USA Chapter XIV It s an M-World After All: Lessons from Global Patterns of Mobile Commerce .............................................................................................. 259 Nikhilesh Dholakia, University of Rhode Island, USA Morten Rask, Aarhus School of Business, Denmark Ruby Roy Dholakia, University of Rhode Island, USA Glossary of M-Commerce Terms ........................................................ 276 About the Authors ................................................................................. 291 Index ....................................................................................................... 299
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Preface
Towards Fast
CLIP
Growth
This book is a product of research-based and practitioner-generated reports about the emergence and growth of mobile telecommunications and mobile commerce (m-commerce) around the world. To go into the details of how mobile communications and m-commerce are unfolding in various global regions, the chapter authors in this volume have examined one country in depth in each chapter. In addition, the editors of this book have provided overview chapters at the beginning and end of the book. The CLIP application-theoretical framework provides conceptual integration across the various countries. CLIP is an acronym for Communications (C), Locatability (L), Information (I) provision and Payment (P) processing — four core functions that underlie various mobile telecommunications services offered the world over. Mobile communications services and m-commerce applications that generate revenues over and beyond the basic charges for voice telephony all rely on creative combinations of some or all of the CLIP functionalities.
Why a Global Approach? There are several reasons for studying m-commerce on a global scale. First, some countries have raced ahead rapidly while others (including affluent ones) have lagged behind considerably in utilizing mobile communications and commerce technologies. Second, many of the m-commerce services stop at national borders because of missing roaming agreements or incompatible network and equipment standards among the telecom operators. Users often cannot
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replicate experiences with a service that they have developed in their home countries when they move into networks hosted in another country. Third, there is a great deal of national level experimentation going on with m-commerce worldwide, and countries can learn from each other’s experiences. Finally, the national leadership patterns in mobile communications and m-commerce are changing. The countries that led in early-generation technologies and applications are not necessarily in the lead in the late-generation technologies and applications. There is significant learning from the experiences of mobile communications pioneers as well as from the experiences of countries that are relative latecomers with respect to the development of mobile networks and services.
The Introductory Keynote Chapter As we note in Chapter I, the keynote chapter entitled, “Mobile Communications and Mobile Commerce: Conceptual Frames to Grasp the Global Tectonic Shifts,” written by the editors of this book, the global landscape of mobile telecommunications and mobile commerce services is not only extraordinarily complex, it is undergoing tectonic shifts in terms of exploding user bases in Asia and technological cross-currents. In the keynote first chapter, we provide some conceptual anchors for this “wild” landscape. The main conceptual anchor is the CLIP framework. While not constricting the creativity of our “country chapter” authors, we nonetheless urged them to hark back to the CLIP conceptual anchors to the largest extent possible.
Our Approach to the Country Chapters Except for the initial and the concluding chapters written by the editors, this book is comprised of “country chapters,” each focusing on one country. These chapters are organized alphabetically, according to the name of the country. The subtitle of each country chapter tries to capture some key elements driving mobile communications and m-commerce in that country. For the country-focused chapters, the authors were especially urged to review and report on the emerging value-adding mobile communications services and revenue-generating m-commerce applications. We have been very fortunate in obtaining the cooperation of “country chapter” authors who not only understand the complexities of mobile communications technologies and business models, but also have deep insights into the business
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and consumer environments of the countries featured. While it would have been nice to cover every region of the world, to stay within reasonable page limits we have chosen to focus on selected countries in three major regions of the world: North America, Europe and Asia-Pacific. Within each region, we have focu sed on countr ies that are significant because of their size, innovativeness of mobile applications or both. Thus, in North America we have chapters on the U.S. and Canada. In Europe, our chapter authors provide close looks at m-commerce in Denmark, Finland, France, Germany and the UK. In the Asia-Pacific region, the chapters deal with China, Japan, India, New Zealand and South Korea. The countries were chosen for their large existing base of mobile telecom users, their potential mobile telecom market sizes in future years, their innovativeness in mobile telecom technology development and their leadership in launching new mobile applications. We have chosen our countries to capture the range of large mobile communications markets as well as countries that have either led or are likely to lead in technologies and applications in the third and fourth generation (3G and 4G) mobile communications. Taken together, the country chapters (and the Appendix to Chapter XIV, the concluding chapter) constitute a global comparative study bringing together the talents of a worldwide group of researchers and practitioners. A book like this makes it possible for students, scholars, and professional practitioners to get innovative ideas about new m-commerce services and to benchmark existing services. Each of the country studies analyzes m-commerce penetration, service provider prices and products, and m-portal solutions in order to lay the ground for understanding how any given country can be compared to the others in the study. Among other things, the country studies focus on the available CLIP-applications. By referring to some common conceptual anchors, but surveying diverse national experiences, this book creates an understanding about which business strategies are effective for m-commerce. In addition to the conventional market-expanding functions of mobile telecom — communications (C), information (I), and payment (P) — many of the chapters and applications also focus on “locatability” (L), the geographic dimension that adds extra value in m-commerce settings. The locatability dimension has been a technological challenge in the past but by mid-2000s, multiple ways of locating a mobile device user — via satellites, cellular coverage zones, and short-range networks — were available, and location-based services are set to expand.
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Preview of the Country Chapters Altogether, this book features 12 country chapters covering most major economic regions of the world. The following sub-sections provide a quick preview of what the readers can expect in these 12 country chapters.
Country Chapter on Canada The first country chapter in the book, entitled “Canada: Mobile Commerce Under Construction,” is authored by Detlev Zwick of Schulich School of Business at York University in Toronto, Canada. Dr. Zwick brings his intimate knowledge of the information and communications technologies sectors in North America as well as Europe to bear upon this chapter. With over 50 percent of the population having access to wireless devices, there is a large potential for further growth of mobile communications and mobile data services. Potentially retarding further expansion, however, are several factors. These including high cost structures and pricing inflexibilities, partly due to the oligopolistic market structure that contributes to limited competition. Contributing to this problem are the restrictions on foreign ownership in the telecommunications sector, limited to 25 percent of a firm’s stock. Voice is still the predominant application, with such basic technologies as SMS being used by less than five percent of users. With broadband connectivity widely available, especially in the urban areas where most of the population resides, the personal computer, rather than the mobile device, is the preferred method of Internet access. Still, the chapter indicates that mobile commerce services are beginning to gain a foothold. The challenge for mobile operators is to create a more desirable pricing structure that would encourage greater data-related usage by mobile telecom users.
Country Chapter on China Nir Kshetri and Nicholas Williamson of the University of North Carolina at Greensboro and David L. Bourgoin of the University of Hawaii at Manoa have collaborated to develop Chapter III, entitled, “China: M-Commerce in World’s Largest Mobile Market.” With over 300 million users, China is the largest and fastest growing mobile market in the world. By 2008, 50 percent of all handsets sold in the world will be produced in China. Realizing its market power in the mobile communications sector, China has developed its own 3G standard: TD-SCDMA. This homegrown 3G standard is expected to account for 30 percent of all domestic users.
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Many innovative m-commerce applications were first developed in China, including the first electronic stock trading over wireless devices as early as 1998. A major obstacle to future growth of m-commerce is the limited availability of options for mobile payments. China is still largely a cash-based economy, with m-payment support structures only recently being developed. Another major challenge is that while the penetration rate of mobile phones in the Chinese coastal cities is among the highest in the world, mobile phones are relatively few in number in China’s geographically vast countryside. Further restricting growth is the reliance on old technologies. Since voice is still the dominant application, decades-old mobile technologies are still some of the most profitable — and there is little incentive for many mobile operators to upgrade large parts of their networks to the 2.5G and 3G technologies needed for most mcommerce applications. Given China’s rapid growth rate, however, there is no doubt these problems will be overcome. China can be increasingly expected to call the shots regarding the types of mobile technologies that are developed and deployed, not only within its own borders but also in many emerging markets.
Country Chapter on Denmark Morten Rask, one of the editors of this book and an expert on mobile technologies based at the Aarhus School of Business, is the author of Chapter IV entitled, “Denmark: M-Commerce Experiences and Perspectives.” With a 95 percent penetration rate of mobile phones and 99 percent geographical coverage, Denmark is among the handful of nations in the world that are very intensive users of mobile technologies. SMS is a widely used service, with a vast array of applications, including the innovative humanitarian use of SMS during the 2004 Asian Tsunami disaster. Mobile operators and the government authorities in Denmark urged the Danish citizens to send messages to all the Danes they knew of who could possibly be traveling in the affected areas. By this means, it was possible to quickly account for the safety of hundreds of people. Use of SMS as a payment method has been hindered, though, by varying interpretations of government regulations. These rules currently allow just a maximum of $12 per SMS message as payment, thereby restricting the creation of higher-priced Valued Added Services (VAS). Locatability and payment features have been further limited due to the a priori requirement that users interact with e-commerce sites, establish accounts and give relevant permissions in order to use m-applications. Privacy concerns have dictated such requirements. For Denmark to further develop as a CLIP enabled m-commerce market, these limitations would have to be overcome.
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Country Chapter on Finland Tommi Pelkonen, straddling the academic world of the Helsinki School of Economics and the business world of the mobile commerce consulting firm Satama Interactive, is the author of “Finland: Internationalization as the Key to Growth and M-Commerce Success,” Chapter V of this volume. Nokia, the world’s largest maker of mobile handsets, is a Finnish firm and therefore looms large on the mobile applications landscape, not just in Finland but also all over the world. With a small population, Finland in no longer the only testing ground for cutting-edge mobile technologies for Nokia and other Scandinavian mobile technology firms. There simply are not enough users to make the development and production of advanced handsets with m-commerce capabilities economically feasible. The only alternative, then, is to go overseas and target their products for larger markets such as those in East and Southeast Asia, North America, Latin America and the rest of Europe. With very high domestic penetration of 3G networks, though, mobile media in the form of publisher-originated content, person-to-person content, community-created content and space and location content have been very successful in Finland. With advances in mobile technologies, these applications will continue to develop further and — with the help of leading technology firms such as Nokia — will percolate into global markets.
Country Chapter on France Pierre Vialle and Olivier Epinette of the STORM Research Group at INT-GET, France’s main telecommunications research and education institution affiliated with France Telecom, are the authors of Chapter VI of the book, entitled “France: Mobile Communications and Emerging M-Commerce.” Compared with the rest of Europe, at approximately 74 percent France has a relatively low mobile telecom penetration rate. This is partially due to fact that there are just three major providers and Vodafone does not currently have a subsidiary operating within the country. Despite this, however, France is a highly innovative market for m-commerce applications. SMS is an increasingly popular application, with a 66 percent growth rate in 2004, corresponding to 24 messages per subscriber per month. SMS tariffs are based on either the peract payment option, in which content is download from a single source, such as ring tones, or on a per-session option in which different participants are put in contact with one another, such as for mobile games or chat. Because of these flexible and innovative pricing methods, and the variety of mobile applications, France has the potential to become not only a more robust m-commerce market but also to be a base for exporting m-commerce application ideas.
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Country Chapter on Germany Chapter VII of the book, entitled “Germany: From Chart-Topping Ringtones to 3G M-Commerce,” has been authored by Timo Kehr and Tobias Lührig, business executives from Germany with global experience and a keen and longstanding interest in e-commerce and m-commerce markets and methods. Like mobile commerce ventures in various other world markets, music in the form of ring tones is extraordinarily popular, accounting for 10 percent of the music industry’s revenues. Equally successful in Germany has been the development of wireless email, especially in the form of e-mail using the popular BlackBerry handheld device. Interestingly, up until the mid-2000s, the attempt to create m-payment systems has been a dismal failure. This is because Germans, who are the lowest credit cards users in the G7 nations, are simply distrustful of the concept of electronic cash. For similar trust reasons, as well as for reasons of privacy protection, location-based services have yet to catch on. For Germany to advance in the m-commerce arena, these social challenges would have to be addressed. With mobile technology giants like T-Mobile in the mobile communications field and Siemens in the handset and switching businesses, however, Germany would continue to set the pace in many mobile technology application arenas.
Country Chapter on India Two authors with significant technology experience in Asia collaborated to write Chapter VIII, entitled “India: The Awakening of M-Commerce.” Syagnik (Sy) Banerjee worked for a major mobile operator in India and Mark M. Lennon worked in several information and communications technology companies in Asia and North America. Mobile communications were unknown in India before the mid-1990s, but by the mid-2000s India had become one of the largest mobile markets in the world. In the wake of widespread deregulation, an assortment of mobile operators has arisen. Prepaid mobile services have proved to be the most popular form of mobile offerings in India because ancillary financial systems (e.g., credit ratings) are not needed in order to quickly establish a prepaid mobile phone service account. By contrast, the subscription-based model of “post-paid” mobile telecom services has made limited headway in India, where the financial systems for credit checking, billing and payment are not very well developed. SMS has emerged as the “Killer App” in mobile services because the cost is either free or virtually free. SMS has proved especially popular with service companies and marketers as a means of communicating real-time information to consumers — offering them instant incentives, deals and opportunities to enter
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various contests. Indian companies have also created unique mobile solutions to resolve real world problems, such as sending SMS to get updates about flight schedules. Given its rapid pace of economic development and large consumer base, as well as a burgeoning software sector doing applications development work for mobile telecommunications, India is destined to become a preeminent player in the applications of mobile commerce.
Country Chapter on Japan With wide-ranging business experience in the information and communications technology sectors of Asia and North America, as well as being equipped with analytical academic insights, Mark M. Lennon provides the readers a window into how and why Japan became an m-commerce pioneer. In Chapter IX, entitled “Japan: Keitai Krazy, From the Web to the Wallet,” he looks at the historical evolution of mobile communications and mobile commerce in Japan and proceeds to examine a range of contemporary m-commerce applications from the CLIP perspective. On the many cutting edges of mobile technologies, with nearly 70 percent of the population using mobile phones, Japan is a mature mobile commerce market. The groundbreaking i-Mode service from the mobile operator NTT DoCoMo not only created early interest in mobile commerce in Japan, but this service was also responsible for the vast majority of Japanese accessing the Internet for the first time in their lives — via their mobile phones. With the advances in 2G followed by 3G mobile communications technologies, the handset in Japan has evolved from a mere communications device into an m-commerce tool. The mobile device is increasingly used in Japan to interact with real world infrared sensors, Wi-Fi hotspots and Bluetooth readers that support a wide variety of location-based m-commerce offerings. With its technologically savvy consumers, this chapter shows why Japan is sure to remain a leader in mcommerce offerings.
Country Chapter on New Zealand Chadinee Maneesoonthorn and David Fortin of University of Canterbury in Christchurch, New Zealand are the authors of Chapter X, entitled “New Zealand: M-Commerce Beyond the Basics, Adopting Value-Added Services.” Together, these two authors bring not only knowledge of New Zealand but also experiences from Asia and North America to bear upon this chapter. Similar to the situation in India, where mobile technology has built upon the popularity of SMS, New Zealand mobile firms have sought to increase revenues by providing a host of Value Added Services (VAS). Various forms of
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interactive marketing — many of which entail sending SMS messages to enter contests — have proven quite popular in New Zealand. One restriction on mcommerce development, though, is the duopolistic nature of the mobile communications market. With only two mobile operators, the amount of competition is limited. This could continue to hinder m-commerce development due to the lack of price competition. Things could change rapidly, however, if additional mobile operators are suddenly allowed entry into the market.
Country Chapter on South Korea Jounghae Bang of Penn State University at Mont Alto and Inyoung Choi of Georgetown University — authors experienced with information and communication technologies in South Korea as well as the United States — collaborated in developing Chapter XI, “South Korea: Visions of a Ubiquitous Network World.” Joined in agreements with the American-based mobile technology giant Qualcomm, Korea has adopted CDMA as their core mobile communications standard. Through judicious licensing from Qualcomm, the Korean firm Samsung has emerged as the largest global manufacturer of CDMA enabled phones for the American market as well as for the selective Asian markets where the CDMA standard is used. By adopting this national standard, advanced MMS applications, such as video-on-demand and videophone services have been made available widely and rapidly in South Korea. With tight integration between handset manufacturers and service providers, Korea is expected to remain on the cutting edge of the development of new mobile technologies. The influence of South Korean firms such as Samsung and LG extends far beyond the country’s borders and can be expected to grow even more.
Country Chapter on the United Kingdom Three researchers specializing in the business aspects of e-commerce and mcommerce — Savvas Papagiannidis, University of Newcastle upon Tyne; James Carr, University of Edinburgh; and Feng Li, University of Newcastle upon Tyne — are the authors of Chapter XII, entitled “United Kingdom: Current M-Commerce Developments and Future Prospects.” When the government auctioned off the wireless spectrum rights for 3G licenses in the United Kingdom, the bids made by the competing mobile operators vastly outstripped predictions of industry watchers. This led to difficulties — the money spent on the license rights drained the coffers of mobile operators. As a result, m-commerce proliferation in the United Kingdom has been
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slower than expected in development. Customer demand has been slow to build up to reasonable levels and there are many promising but unproven m-commerce business models. As in other markets, however, SMS is quite popular, used by over 65 percent of mobile users. Even the government has acknowledged the power of SMS, with Prime Minister Tony Blair using text-messaging technology to communicate directly with constituents. The government also uses m-commerce methods to sell National Lottery tickets by enabling users to buy these tickets with mobile phones. With the advances in 3G networks, video clips and camera phones have also proliferated. Due to this high level of acceptance, m-commerce is expected to continue to expand with the increasingly advanced capabilities of technology. This chapter presents a number of case studies of emerging mobile communications and mobile commerce applications.
Country Chapter on USA The last country chapter, Chapter XIII, entitled “United States of America: Renewed Race for Mobile Services,” has been written by Mats Samuelsson and Sanjeev Sardana, two practitioners with over 40 years of combined experience in telecommunications and computer industries, together with an academic expert, the first editor of this volume. The two industry authors are also cofounders of Mobio Networks, an m-commerce startup company in the process of developing innovative mobile applications and are therefore able to offer a glimpse into what the future holds in this arena. While initially behind the more robust and sometimes technologically innovative mobile communications markets of Europe and East Asia, the United States has made strides in the 2000s to catch up. Unlike the Japanese market, for example, where a majority of users had their first brush with the Internet via mobile devices, Americans have been used to Internet content on the large screens of desktop and laptop computers. Since the computers provide a rich, multimedia e-commerce experience, Americans had not been too keen on exploring the few early m-commerce options available through the small formats of mobile devices. This led to some resistance to the early m-commerce applications. From the mid-2000s, the situation has been ameliorated to some extent by the 3G advances of richer m-commerce offerings. Mobile payment systems, however, have been slow to catch on in the United States. Micropayment systems using mobile devices often entail the tallying and consolidating of charges on the mobile phone bill. This is a common practice in Japan and some European countries, but in the United States, such payment methods have been hindered by lack of cooperation and resistance amongst the mobile operators and third-party service providers. Internet web browsing, too, has been hampered by the slow connectivity and the cumbersome interface of WAP. Attempts to replicate the successful Japanese i-Mode system have fallen short.
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For m-commerce to be truly successful in the United States, new business models integrating the advances in handset and network technologies must be developed and deployed. This chapter offers a framework for the innovative technology solutions and business models that are evolving rapidly in the United States. It is quite possible that, although a latecomer to the m-commerce scene, the United States could catapult into m-commerce leadership in many different areas through 3G networks, innovative Wi-Fi coverage patterns and new solutions based on Web services.
Concluding Chapter and Its Appendix Chapter XIV, the concluding chapter of this book, entitled “It’s an M-World After All: Lessons from Global Patterns of Mobile Commerce,” is again authored by the three editors of this volume and accomplishes several things. First, it brings together the key ideas, illustrations and learnings from the 12 country chapters. It also draws overall conclusions about the CLIP — Communications, Locatability, Information and Payment — dimensions and reflects on what seems to work and where the challenges are in the development of mobile commerce. Finally, it provides a near-term, future-oriented view of where mobile communications and mobile commerce seem to be headed. While the 12 country chapters cover a good range of major, populous countries, as well as some smaller but innovative and high-tech leading ones, the world is considerably bigger and more diverse than the countries featured in the 12 country chapters. To provide a flavor of what is happening with mobile communications and mobile commerce in other parts of the world, a special Appendix has been added to Chapter XIV, the concluding chapter of this book. This Appendix to Chapter XIVprovides thumbnail sketches of mobile communications and mobile commerce in 11 additional countries. As in the case of the 12 countries chosen for the in-depth treatment in the country chapters in this book, these 11 additional countries featured in the Appendix to Chapter XIV were also chosen either because of their large population and market size or because of the innovative character of mobile communications technology and mobile commerce applications resident there. These countries, as well as many others, are, of course, attractive candidates for further in-depth study by the readers of this book and by researchers and practitioners with special knowledge of the telecommunications sectors of such countries.
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Dealing with the Terminology Like most information and communications technology fields, mobile communications and mobile commerce rely on an evolving set of specialized terms and abbreviations. Most chapter authors have defined such terms in their chapters. Additionally, to help the reader deal with the alphabet soup of abbreviations, we have provided a comprehensive glossary of mobile commerce terms at the end of the book. The field of mobile commerce is constantly evolving, so the readers are encouraged to keep abreast of new technologies, terminologies and abbreviations as they appear on the global m-commerce scene.
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Acknowledgments
We owe a great debt of gratitude to the authors of the “country chapters.” All of the authors, experts on mobile communications and mobile commerce in their own rights, exhibited patience and cooperation in terms of accepting and incorporating feedback from the reviewers and the editors. We have provided short profiles of the authors featured in this book, the country chapter authors as well as the three editors, in the section entitled “Contributors.” The institutions where the editors are located, as well as the institutions and companies that the chapter authors belong to, have all provided strong support for the research efforts that form the bases of the chapters. As editors of this volume, we would also like to acknowledge the very professional assistance provided by Kristin Roth of Idea Group Publishing throughout the entire publication process. Nikhilesh Dholakia, Rhode Island, USA Morten Rask, Aarhus, Denmark Ruby Roy Dholakia, Rhode Island, USA January 2006
Mobile Communications and Mobile Commerce
1
Chapter I
Mobile Communications and Mobile Commerce: Conceptual Frames to Grasp the Global Tectonic Shifts Nikhilesh Dholakia, University of Rhode Island, USA Morten Rask, Aarhus School of Business, Denmark Ruby Roy Dholakia, University of Rhode Island, USA
Abstract In this keynote chapter, we provide an overview of the emerging global landscape of mobile communications and mobile commerce, circa 2005. We introduce the four core CLIP functionalities — communications (C), locatability (L), information (I), exchange and payment (P) facilitation — on which mobile commerce systems and services are based. We then explore the various requirements for creating successful mobile commerce portals, or m-portals, using the CLIP functionalities as well as ways for personalization, permission and specification of service formats and content.
Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
2 Dholakia, Rask, and Dholakia
Tectonic Shifts in Global Mobile Communications In 2004, the nation of China was adding five million new mobile telephone customers every month. That is the equivalent of adding the whole nation of Denmark, or Finland, every month to the mobile user base of the world’s most populous country. India, the world’s second most populous nation, was far behind China, but its mobile user base was also galloping ahead at a phenomenal pace. By 2005, India had, by some estimates, over 79 million users and various observers expected the number to double in 12-18 months. While emerging nations such as China, India, Vietnam and South Africa were adding mobile telecom users at a phenomenal rate, in the advanced countries with very high mobile penetration rates, the race was on to promote new patterns of life based on mobile technologies. Take the example of the United States. Although the U.S. was slower than most European nations and the leading Asian nations in terms of mobile technology penetration and mobile data applications, by the mid-2000s a distinct pattern of making mobile communications and applications ubiquitous was becoming evident in many American cities (see Box 1 “The Race to Ubiquitous Mobile Connectivity”). Mobile commerce, or m-commerce, refers to monetary transactions conducted via a mobile telecommunications network using devices such as mobile phones, personal digital assistants (PDAs), enhanced alphanumeric handheld gadgets and so on. The global wireless mobile networks of various kinds, and the user bases of such networks, constitute the bedrock infrastructure of mobile commerce. The growing variety of terminal devices and services are the facilitative and revenue-producing tentacles of the mobile telecommunications networks. Together, the network, the devices and the services constitute the growing, globalizing and ever morphing “mobile ecosystem.” As we survey the mobile ecosystem circa 2005, tectonic shifts are occurring in it. Such shifts will continue into the foreseeable future. Including the explosive growth in Asia’s mobile user base, the following represent the main tectonic shifts expected to shape the mobile commerce landscape for decades:
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Emergence of China as the world’s biggest mobile communications market and the likely impact of this on everything from services to technical standards.
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Emergence and rapid growth of a massive mobile user base in the lowincome economy of India, paving the way for super-discounted services.
Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
Mobile Communications and Mobile Commerce
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Box 1. The race to ubiquitous mobile connectivity Towards the end of 2005, many cities in the United States started receiving proposals from a variety of information technology companies to blanket metropolitan areas with Wi-Fi mobile connectivity. For example: § Google proposed to make the entire city of San Francisco into a large, urban Wi-Fi network. Users would of course be able to take their laptops and be connected to the Internet. With the newly launched “Google Talk” service, using VOIP technology, use rs would also be able to make […] § Earthlink, a major Internet Service Provider, similarly offered to blanket the city of Philadelphia with a ubiquitous Wi-Fi network, and to offer highly discounted services to Earthlink users while on the move anywhere in the city. § Intel, the maker of the Centrino and other mobile data communications chips, launched programs for Wi-Fi blanketing, not only in the United States but also in a dozen cities across the world. These offers of “Wi-Fi blanketing” were, of cou rse, made because of the obvious commercial benefits to the firms making these offers. While these developments of creating ubiquitous urban mobile n etworks were going on, the venture capital firms in the United States were bankrolling a large number of startup companies developing mobile applications. Of course, looking into the future, many uncertainties and glitches remain. But it is almost certain that particular areas in the United States would become so saturated with free, or nearly free, mobile networks that people would begin to reo rient their lifestyles — carrying a single mobile device o f some type that would be phone, a wallet and a browser all rolled into one.
Source: Authors’ research
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Launching of third generation (3G) services in Europe, Asia, North America and elsewhere. The advanced 3G and the soon-to-follow 4G networks provide super-fast data speeds capable of opening the gates for new classes of mobile commerce offerings.
•
Increasing degrees of “convergence” across various mobile communications formats (cellular, Wi-Fi, WLAN, RFID, Bluetooth and satelliteaided) and between mobile media and other communications media (landlines, cable TV, broadcast and satellite TV) and other information technologies (the Internet and computers). Each instance of convergence opens new product and service possibilities.
•
Complex interplay of “standards” (CDMA, TDMA and GSM — just to name some of the cellular standards) and “generations” (2G, 2.5G, 3G, 4G, etc.). Incompatibilities of standards create barriers, but they also present opportunities for multi-format and integrative devices and services.
Because of these ongoing shifts and complexities, it is difficult to fit neat conceptual frameworks on the patterns of evolution of mobile services and
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4 Dholakia, Rask, and Dholakia
mobile commerce. Nonetheless, conceptual structures are necessary for strategic purposes as well as for the practical need of training hundreds of thousands of people to work effectively in the mobile sector. In this keynote chapter, we present some basic precepts, cutting across global regions and technology formats, to help tame the complexities of mobile commerce services.
Structure of This Chapter We begin by providing a simple definition of mobile commerce, and then review the four core ingredients — Communications (C), Locatability (L), Information (I) provision and Payment (P) facilitation — that underlie most mobile commerce applications. Next, we introduce the idea of a mobile commerce portal, or m-portal, the electronic window through which users become aware of and deal with mservices. We outline success requirements for building versatile and appealing m-portals, based on thorough integration of functionalities. Additional factors that lead to mobile commerce success — personalization of content, permission seeking and specification of formats and content — are discussed. Finally, we reflect on elements that service partners of m-portals should pay attention to, and provide conclusions and an overview of the country perspectives that constitute the remaining chapters of this book.
M-Commerce: The Core “CLIP” Ingredients M-commerce refers to monetary transactions conducted via a mobile telecommunications network by employing devices such as mobile phones or palmtop units. For mobile commerce to happen, at the minimum the device and the network should be configured to enable communications (C), information (I) exchange and payments (P). Adding the additional geographical dimension of “locatability” (L) creates the CLIP — Communications, Location, Information and Payment — framework. CLIP functionalities are very useful for designing mobile portals (or m-portals) and providing mobile services. The winners of the battle for leadership will be the m-portals that can utilize the key success factors for m-commerce — mobility and locatability — with a high degree of integration. Even though we are in the initial stage of m-commerce, where locatability is not fully implemented, effective business strategies for
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Mobile Communications and Mobile Commerce
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mobile commerce in the future hinge on locatability in addition to the other core functions: communication, information and payment. The communication (C) applications include the basic offerings of Internet service providers (ISPs), fixed-line service providers (FSPs) and wireless service providers (WSPs). Regarding voice, most mobile phones handle calls supplied by both WSPs and FSPs. Text messages come in multiple flavors like e-mail, fax, SMS (Short Message Services) and MMS (Multimedia Message Services). In many countries it is possible to route calls from the FSP to the WSP and to get e-mail messages forwarded to mobile phones or other handheld devices. Sometimes, to accomplish such integration, users have to buy a mobile phone that is WAP-enabled or can handle POP3 protocol and therefore accept e-mail. In order words, if the user chooses the right service provider and buys the right mobile device, the communication (C) functionalities could be fully integrated. The state-of-the-art regarding information (I) delivery circa 2005 relied on SMS, MMS, WAP and Web. In the simplest versions, text-based data can be accessed. Many m-portals team up with content providers to deliver news and entertainment, and some also give access to the employing company’s information system and/or private information stored in a personal information manager such as MS Outlook. Multimedia and streaming video content are gradually becoming available via network enhancements (transition to 3G networks) and device enhancements (phones with cameras). When it comes to payment (P) functions requiring efficient and secure exchange of financial data, the methods of integration are still evolving. We are not aware of any portal that can handle stock trades, m-banking, e-wallet and billing at the same time. Terminals and services offering separate applications of these types do exist in some countries. Billing information flows directly form the WSP to the mobile end user as SMS. Most of the larger Scandinavian banks offer mbanking solutions with stock trades included. E-wallet trials are also available in Scandinavia, focused on payment in supermarkets, for parking and paying highway tolls. Locatability (L) functionalities are also still evolving. These are based upon geo-coded data. Aggregation and integration of such data are still at low levels. We are aware of mapmakers making it possible to download maps to palmtop units that also can be equipped with a GPS receiver. Also, some trials are underway where users can get the location of the nearest restaurant, bar or convenience store based upon geographical position determined by the WSP. Most geo-coded datasets, however, are not yet available in ways that m-portals can use to personalize CLIP functions.
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6 Dholakia, Rask, and Dholakia
M-Portal: User’s Window to M-Commerce Users interact with mobile communications and mobile commerce systems through the small screen-based interface on their handheld devices. To the users, this small screen opens up an electronic window to the world. Besides text, tones and icons, the mobile device can also potentially offer music, photos, video, animation and other types of content. Of course, both the network and the device have to be advanced for such multimedia content to flow to the user. To the users, the handheld device — and especially the small screen — represent the mobile portal, or m-portal, the gateway to mobile services. For service providers and device makers, the challenge is to make the m-portal versatile and capable in CLIP terms, so as to seamlessly and easily deliver a range of services to the users.
Profiling a Versatile M-Portal To illustrate, consider the case of Angela, a sales engineer traveling from Stockholm’s Arlanda airport to Tokyo’s Narita airport. Upon arrival at Narita airport, her CLIP device automatically shifts from her Stockholm portal to the Tokyo portal and only shows the links relevant to Angela and Tokyo. When she enters a convenience store at the Narita airport terminal, the m-portal lists goods offered in that store based on her previous purchase history — even pointing out the shelf location of Financial Times, her favorite newspaper, and her preferred flavor of Altoid mints. After some personal shopping while on the hour-long Narita Express train ride to downtown Tokyo and the New Otani hotel, Angela checks her CLIP device for new e-mail messages. In one of the e-mails, a new purchasing officer at Fuji Xerox, the Japanese client firm she has come to visit, introduces himself and explains that he will be at Angela’s impending sales presentation. At the Wi-Fi enabled New Otani hotel, Angela uses her mobile device as a remote control, and on the flat plasma TV screen checks out the profile of the purchasing officer on the client company’s WAP site. After a quick shower and change, as she heads to the client’s offices in a taxi, Angela adjusts two slides of her presentation located on her own company’s Intranet, and leaves the taxi, paying with the e-wallet equipped mobile CLIP device. The m-portal is an individual-specific portal tailored for both personal and professional tasks. In addition to the personalization features evident in the Tokyo trip illustration, the m-portal is PIM-based. 1 It can draw on all of Angela’s contact, schedule and task information and use such information to automatically generate the contents of the portal. The success of the m-portal depends Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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on a continuous-loop personalization. Such a personalization makes it very difficult to maintain the distinction between Angela’s private and professional lives. It is entirely possible, for example, that a musical greeting card sent by her 7-year old son back home in Stockholm could pop-up on the handheld screen in the middle of the sales meeting in Tokyo. Angela needs to ensure that her handheld device is programmed to keep a discrete line of separation between personal and professional content. Figure 1 shows the need for integration, which is the primary key success factor for the m-portal. All the four CLIP functionalities need to work well within each individual function (e.g., integrating various payment types [P], such as from ewallet and credit cards) and across the CLIP functions (e.g., Angela’s locatability [L] at Narita triggering information [I] about the availability of her favorite flavor of Altoid mint, and enabling her to pay [P] for the purchase). Figure 1 illustrates the business opportunities for the m-portal, where the arrows symbolize the needed integration. The first-level integration of the communication, location, information and payment functions happens in the CLIP device. The figure also shows that the m-portal owner has to integrate already existing offerings or build applications that integrate the possible wireless data flows, aggregations and sources. Seamless and smooth-functioning partnerships with shared revenue are needed for effective integration of sources and services. In the initial phase of the evolution of m-commerce, for some of the larger players, the key strategic goal will be to attain a leadership position in the m-
Figure 1. CLIP integration requirements for an m-portal
ISP
Voice
C
L
rs ake
MMS
pm Ma
WSP Sa te Ge llit ogr FSP E-mail es pos aphic a i l t ion Fax Ge o-c Phone o WSP dat ded Writings a Maps SMS/
iders prov tent Con
User Te a News xt I P at WSP Billing -b ld a se Entercia n Shops d na tainment da i F E-wallet ta Company MIS Em Stock banking CreditPIM systems trade plo cards ye r Banks Private Stockinformation exchange
CLIP functions
Wireless data & Aggregation Source voice flow
Source: Author’s research
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8 Dholakia, Rask, and Dholakia
services space, i.e., to become an m-portal. For other firms, and for the firms that fail to become m-portals, strategies will have to evolve in terms of becoming effective m-portal service partners. While it is too early to predict what the competitive field of m-commerce will look like in various global regions, we can utilize Figure 1 to delineate some of the success requirements. We can do so for three situations: the global battles for leadership in the m-commerce space, the strategic requirements for the leading successful m-portals and the strategic requirements for m-portal service partners.
Dynamics of Leadership in M-Commerce Space It is evident from Figure 1 that the Wireless Service Providers (WSPs) are well positioned for attaining leadership positions in the m-commerce business space. Besides being in charge of the wireless data and voice flow to and from the CLIP device, WSPs also have access to sources that provide the value-adding communication, location, information and payment features. Additionally, some WSPs are also building applications that access the information systems of the users’ employers. For example, the Danish WSP Sonofon has teamed up with HP to create access to the company’s Intranet (Hewlett-Packard, 2000). In a report, the consultant firm Strategis Group Europe (2000a, 2000b) concludes that “wireless portals will provide operators with key competitive edge in Europe” and the WSP and the device manufacturers have core competencies in creating mportals. Durlacher, another European consultancy, suggests that WSPs team up with traditional Internet portals because they have complementary strengths. WSPs bring experiences with mobile communications, billing and location information to the table. These elements represent the weaknesses of the traditional Internet portals that, in return, have strengths in portal configuration, content creation and presentation, application and partnering experiences (MüllerVeerse, 1999). Partnering will be a key success factor for m-portals, a theme that we will visit later in this chapter. With the exception of Japan’s NTT DoCoMo (see Bradley & Sandoval, 2002; see also the Japan chapter in this volume), WSPs did not have a very good start in the m-portal business. 2 There have also been a lot of teething troubles with the first version of the preferred WAP protocol. 3 Many WSPs bet on the previously used “walled garden” content model, which restricts subscribers’ access to third party portals. That approach — limiting of services to a set controlled and promoted by the WSP —– had no success at all (see the Denmark chapter in this volume). 4
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The key success requirement for mobile commerce is the seamless integration of mobility and locatability. In the case of Angela presented earlier in this chapter, her m-portal configured itself as she moved, first internationally from Stockholm to Tokyo, then locally in the Narita convenience store and then to her Wi-Fi enabled hotel room. Leading mobile commerce portals would be those that offer high degrees of integration of CLIP services, based on location and context, for users on the move. At the current stage of mobile commerce, the geocapabilities of locatability are not fully implemented yet. Future business strategies for mobile commerce — especially in those global regions where 3G networks exist — must be based on locatability being a key feature of the mobile commerce network.
Additional Elements for M-Portal Success To be effective and appealing, m-portals must blend elements of personalization, permission and specification of the CLIP features in m-commerce services. From the prior experience of landline and desktop terminal-based e-commerce, we know that the e-commerce players that survived and thrived did a very good job of personalizing the content to the users, carefully seeking the users’ permission for various types of communications and services, and allowing the users to specify how the services and content should be presented to them. As Table 1 shows, for m-commerce these three elements — personalization, permission and specification — take on an even stronger role than for ecommerce. The essential task of the m-portal is to be an intermediary between service provider and user, and a mediator between multiple media and service formats. In principle, the m-portal can be a database permit, specify and personalize the communication, provide information, enable payment and provide location functions, where the primary mobile communications provider delivers all the data and voice. This is illustrated in Table 2. The m-portal will handle the permission element by giving the user certain rights to define the types of communication, information and payment features. The mportal will also offer one-button (or voice activated) disabling functions so that pre-set permissions — such as determining and communicating the user’s location — can be suspended temporarily. Successful m-portals would have to allow users to become partly or totally invisible to the commercial side of the network for those situations and contexts when the users desire privacy.
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Dholakia, Rask, and Dholakia
Table 1. Personalization, permission, and specification in m-commerce and ecommerce Dimension
E-Commerce
M-Commerce
User-centric database
Slow Evolution: Evolves from navigation and transaction behavior of the user
Fast Evolution: Evolves from daily communications and linking of multiple databases
Tailoring of services and content
Somewhat Limited: Depends on inferences about user’s preferences and roles
Possibly Extreme: User revealed preferences, inferred roles and preferences and location factors can be used to tailor offerings
Learning and intelligence
Limited: Based on collaborative filtering and profiling
Extensive: Based on collaborative filtering and profiling applied to multiple databases
Scope of permission
Relatively Narrow: Merchant-specific, defined in user agreement
Relatively Broad: Often unspecific and location based
Depth of permission
Relatively Shallow: Very specific transactions and charges are permitted
Relatively Deep: Extensive range of transactions and payments are permitted
Role demarcation
Sharp: Especially in firewalled work environments
Blurred: Difficult to tell whether user is on or off duty
Nature of role specification
Static: Determined by the location of the client terminal
Dynamic: Depends on user preferences, merchant preferences and geographic location
Service or content specification
Somewhat Configurable: Depends on client terminal IP address and revealed user identity
Evolving and Dynamic: Depends on user preferences, merchant capabilities and location characteristics
PERSONALIZATION
PERMISSION
SPECIFICATION
Table 2. Contents of an effective business strategy for m-portals Communication
Location
Information
Payment
Permission
Types of communication and senders can be permitted or forbidden
Types of information and senders can be permitted or forbidden
Payment features can be enabled or disabled, individually or collectively
Locatability and geo-positioning features can be enabled or disabled
Specification
Off/on duty “button,” preferences, current time of the day and location of the user specify which messages go through
Off/on duty “button,” preferences, current time of the day and location of the user specify types of information
Off/on duty “button,”, user and merchant preferences, current time of the day and location of the user specify types of transactions
Geographical position feeds CLIP specification features
Dynamic unified inbox
“Me & My”: Personalized information portal for news, travel information, PIM, company information and entertainment
Personal e-wallet, stock portfolio and phone bills
Dedicated maps
Personalization
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Mobile Communications and Mobile Commerce
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Table 3. M-portal partner products and services Communication
Location
Information
Device Manufacturers
Mobile Phones, PDAs and Pagers
Mobile Phones and GPS receivers
Payment
Mobile Phones, PDAs and Pagers
Mobile Phones, PDAs
Infrastructure Enablers
ISP, FSP and WSP
WSP and GPS Networks
Content aggregators and Internet portals
WSP, Banks and Credit card firms
Content Providers
WSP
Map makers
News agencies. Travel firms, Entertainment firms, PIM firms and Employers
Banks, Exchanges, WSP and Virtual and Physical businesses
Success Requirements for M-Commerce Service Partners Firms with diverse interests and competences have to cooperate to create and operate effective and attractive m-portals. Three vital groups of partners are central for mobile commerce: Device Manufacturers, Infrastructure Enablers and Content Providers. Table 3 shows these types of firms according to the communication, information, payment, and location features in mobile commerce. Mobile phone manufacturers such as Nokia, Sony-Ericsson, Motorola, Samsung and Kyocera are working intensely to create standard devices for mobile commerce communications and transactions. Firms such as Palm, Psion, Handspring and Microsoft have wireless strategies allowing the use of handheld Personal Digital Assistants (PDAs) as the main m-commerce device. These firms will attempt to drive mobile commerce in the directions they think are most profitable. Some outsiders, however, will also be in the game. These include Pager firms such as Research in Motion (maker of BlackBerry devices), Glenayre and Tandy Radio Shack; and GPS receiver makers such as Garmin, Lowrance and Magellan. No de facto standards and protocols have emerged yet, so it is too early to describe the general interface between the devices and the mportal. It seems reasonable, however, to focus strongly on the mobile phone producers because they already have developed solutions for all four primary CLIP functions — communication, location, information and payment — of the m-portal. When it comes to infrastructure enablers, the most important partners for the mportal are the wireless service providers (WSPs). Other contenders include Internet service providers (ISPs), fixed-line service providers (FSPs), GPS network providers, content aggregators, Internet portals, banks and credit card
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Dholakia, Rask, and Dholakia
firms. In some cases, electric utility companies, transportation firms and television firms may play important roles in enabling mobile commerce. In the initial years of mobile commerce, WSPs hold an advantage — they are already positioned as the mobile communications companies that have either their own or strongly dedicated infrastructures. Over time, however, other firms could make inroads — just as they did in the fixed line and ISP businesses in the recent past. Perhaps the most important group of partners is the content providers. Each of the CLIP elements has specialized partners. The appropriate partner to handle the communication part will be the WSP. For location-related services, mapmakers are best positioned to provide location-related content. Many third-party information and entertainment providers could be partners in providing information. In order to handle the payment function, banks, exchanges, WSPs and virtual and physical stores are likely to provide content. A big challenge for all will be the need to supply geo-coded information so that specification of the m-portal services can be appropriate to the location-role of the user. Another and even bigger challenge is to integrate multiple and often competing technologies such as the following:
•
Network Technologies (GSM, HSCSD, GPRS, EDGE and 3G) and shortdistance wireless technologies (such as Wi-Fi and Bluetooth)
•
Service Technologies (SMS, MMS, USSD, Cell Broadcast, SIM Application Toolkit, WAP, Web Clipping and MexE)
•
Mobile Middleware (Mobile Portal Platforms, Mobile Commerce Platforms, Mobile Payment Platforms and Mobile Banking Platforms)
•
Mobile Commerce Terminals (Operating Systems, Physical Terminals, Microbrowser, Bluetooth, Smartcards, PKI and Synchronization)
•
Mobile Location Technologies (GPS, TOA, E-OTD, COO and LFS Independent)
• • •
Transportation modes (bicycles, cars, buses, trains, airplanes and boats) Mobile Personalization Technologies Content Delivery And Format (XML, WML, VXML and cHTML)
While the competitive picture at this stage is emergent and blurred — with many potential m-portal partners — it is a good strategic stance to have a strong focus on the specific business strengths of each potential m-portal partner.
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Mobile Communications and Mobile Commerce
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Questions for Discussion 1.
Which of the CLIP dimensions have proved to be most challenging in the global m-commerce context so far? Why?
2.
Why are the concepts of “Personalization,” “Permission” and “Specification” important for the success for m-commerce services? Illustrate using the examples of at least two mobile commerce services.
3.
Discuss how partnerships among various service provider and technology developer organizations help in the creation and promotion of m-commerce offerings.
References and Additional Readings Bradley, S.P., & Sandoval, M. (2002). Case study: NTT DoCoMo – The future of the wireless Internet? Journal of Interactive Marketing, 16(Spring), 8096. Dholakia, N., Dholakia, R. R., Lehrer, M., & Kshetri, N. (2004). Global heterogeneity in the emerging m-commerce landscape. In Nan Si Shi (Ed.), Wireless communications and mobile commerce (pp. 1-22). Hershey, PA: Idea Group Publishing. Funk, J. L. (2001). Global competition between and within standards — The case of mobile phones. New York; London: Palgrave. Godin, S. (1999). Permission marketing: Turning strangers into friends, and friends into customers. New York: Simon and Schuster. Hamilton, E. (2000). Japan mobile Internet case study: NTT DoCoMo i-Mode (Presentation). Washington, DC: The Strategis Group. Retrieved from http://www.strategisgroup.com/press/pubs/docomo.pdf Hewlett-Packard. (2000). Intranet åbnes for WAP. Retrieved August 24, 2000, from http://www.hp.dk/firma_information/presse/2000/000313.html May, P. (2001). Mobile commerce: Opportunities, applications, and technologies of wireless business. Cambridge UK: Cambridge University Press. Müller-Veerse, F. (1999). Mobile commerce report. London: Durlacher. Retrieved November 19, 1999, from http://www.durlacher.com/research/ resrepdetail20.asp
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Pelkonen, T., & Dholakia, N. (2004). Understanding emergent m-commerce services by using business network analysis: The case of Finland. In Nan Si Shi (Ed.), Wireless communications and mobile commerce (pp. 10531). Hershey, PA: Idea Group Publishing. Peppers, D., & Rogers, M. (1993). The one-to-one future: Building relationships one customer at a time. New York: Currency/Doubleday. Rask, M., & Dholakia, N. (2004). Configuring m-Commerce portals for business success. In Nan Si Shi (Ed.), Mobile commerce application (pp. 7694) Hershey PA: Idea Group Publishing. Samuelsson, M., & Dholakia, N. (2004). Assessing the market potential of network-enabled 3G m-business services. In Nan Si Shi (Ed.), Wireless communications and mobile commerce (pp. 23-48). Hershey, PA: IGP. Strategis Group Europe. (2000a). European wireless portals: Strategies & market positioning (Presentation). London: The Strategis Group. Retrieved July 13, 2000, from http://www.strategisgroup.com/press/pubs/ ewireless.pdf Strategis Group Europe. (2000b). Wireless portals will provide operators with key competitive edge in Europe (Press Releases). Strategis Group. Retrieved July 5, 2005, from http://www.strategisgroup.com/pr
Endnotes 1
PIM stands for Personal Information Manager. It refers to software, devices and databases that keep track of personal calendars, addresses, notes, etc.
2
See Brandt, 2000; Economist, 1999c; Economist, 2000c; Hamilton, 2000; Hara, 1999; Hoffman, 2000; and Kunii, 2000.
3
See Baker, Gross, Kunii, & Crockett, 2000; E-business Forum, 2000; Economist, 2000b; Financial Times, 2000g; Hara, 1999; Müller-Veerse, 1999; Nielsen, 2000a; Nielsen, 2000b; and Young, 2000.
4
See Baker, 2000; Economist, 2000a; Economist, 2000b; Nielsen, 2000b; Smith, 2000; Strategis Group Europe, 2000b; and Young, 2000.
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Canada: Mobile Commerce Under Construction
15
Chapter II
Canada: Mobile Commerce Under Construction Detlev Zwick, Schulich School of Business, York University, Canada
Abstract This chapter sketches the Canadian mobile commerce space. Relative to other parts of the world, Canadians have been slower in their embrace of the brave new wireless world. The Canadian mobile commerce market is characterized by relatively high costs for consumers combined with inflexible pricing strategies and the rather limited content available for wireless communication and commerce. In addition, limited network speed and robustness to handle more advanced services remain obstacles for wider application rollout and adoption. As a result, the Canadian market for mobile communication and commerce will remain dominated for some time to come by consumers’ demand for reliable and low-cost voice services.
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16 Zwick
Introduction: Mobile Communications in Canada1 Canada’s telecommunications market is characterized by a relatively strong growth in wireless services, high levels of penetration of broadband Internet services and moderate competition for local and long-distance services (Budde, 2005). A recent slowdown in revenue growth for the industry as a whole is due to increasing competition that puts pressure on prices and fuels investment in product and service innovation. Together with wireline services, such as cable and direct-to-home, and multi-point distribution systems (DTH/MDS), the wireless segment has driven growth in the communications service industries. Together, these three market segments account for more than a fifth (up from 14 percent in 1998) of the entire communications service market in Canada (Statistics Canada, 2003). Revenue in the resellers, satellite and other telecommunications segments has remained relatively stable since 2001. Canada’s mobile industry has been expanding significantly from its inception and, according to Informa Telecoms and Media Group (2005), demand is expected to remain strong for the foreseeable future. This assessment is likely to hold true as currently only just above 50 percent of Canadians (about 15 million) have access to a wireless device and subscribe to wireless products and services. 2 Hence, with regard to wireless adoption, Canada ranks quite low internationally, leaving room for growth. One reason for such slow and low adoption of wireless services is the inflexible and comparatively high cost structure in the Canadian cell phone market, protected by what could be called an oligarchic market structure. Within such a market, lowering price points or pushing different payment models, such as the prepaid phone card, to attract higher volume of what are typically lower margin customers, is not essential. In addition, wireless operators have invested a rather modest C$12 billion in infrastructure and services since 1990 (Informa Telecoms Media Group, 2005). Yet, in 2003 alone the Wireless Service Providers segment, which in Canada includes Bell and its partners (Bell Mobility, Aliant Mobility, MTS Mobility and SaskTel Mobility), TELUS Mobility, Rogers AT&T Wireless, Microcell Telecommunications Wireless services as well as paging companies and other radio communication carriers, generated C$8.2 billion in revenues (Statistics Canada, 2003). Relative to the total economy, the telecommunications service industry’s total share of the economy’s capital investment was 2.9 percent in 2003, its lowest level over the past seven years (Statistics Canada, 2004). The Canadian market is currently split between the CDMA and the GSM/GPRS network standards. Among the dominant carriers, Bell Mobility and Telus use
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Canada: Mobile Commerce Under Construction
17
CDMA (or updated versions such as CDMA 2000 1xRTT or CDMA 1xEV/DO) while Rogers AT&T and Microcell (acquired by Rogers in 2004) runs on GSM/ GPRS (while phasing out its TDMA network). Rogers Wireless has initiated efforts with its United States partner, AT&T, to enhance the Canadian and United States networks by introducing EDGE (enhanced data rates for GSM evolution) capability across the network. Rogers AT&T claims this to be a 3G network enhancement, but according to the ITU (International Telecommunications Union) the data rates for 3G have to be 384 Kbps and above, which EDGE does not provide. So, although EDGE is a 3G technology, the Rogers network is a true 2.5G enhancement. The other carriers follow the United States model and are moving towards CDMA 1X standards with comparable transmission speeds. In the following sections we first provide a brief historical context for the emergence of Canada’s mobile commerce industry. Then we discuss current success stories in the Canadian mobile service business and subsequently place our observations in the CLIP framework. Finally, we offer our views on the future direction of the industry and respective managerial opportunities.
Mobile Commerce in the Canadian Context Mobile commerce is comprised of many kinds of wireless services, driven by different technologies that operate within various frequency bands. Four major wireless service providers — Rogers Wireless, TELUS Mobility, Microcell and Bell Mobility (see Figure 1) — offer such services in Canada.
Figure 1. Wireless market share by wireless company, 2004
Rogers AT&T
Bell Mobility Telus Others
Source: Statistics Canada and companies’ annual reports
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18 Zwick
Figure 2. Growth in wireless subscriber base relative to residential and business wirelines, 1988-2003 16000 14000 12000 10000 Residential Lines 8000
Business Lines Wireless Subscribers
6000 4000 2000 0 1988 1990 1992 1994 1996 1998 2000 2002 2004
Source: Industry Canada, Survey of telecommunications service providers (April 2004), and Buttle (2005). Residential and Business line numbers for 2003/04 are based on estimates by Industry Canada and NBI/ Michael Sone Associates (2004).
In 2004, however, Rogers Communications Inc. acquired Microcell, taking over its subscriber base and the Fido brand. Since their inception in 1988, all of the incumbent telecommunication service providers have increased their wireless subscriber bases. Since 1999, the increase in the number of subscribers has been particularly robust with annual growth rates for the national wireless service providers of more than 20 percent (see Figure 2). The steady growth of the wireless subscriber base has been accompanied by a steady decrease in prices, thus decreasing the average contribution per user to overall revenues from almost C$80 in 1994 to below C$28 in 2004 (Miezejeski, 2004). As a rough approximation of a customer’s wireless bill, declining average revenue per customer means not only falling prices for existing services but also underscores the difficulty of wireless service providers to market new valueadded, high-margin services to new and existing customers. However, in the past two years average revenues per customer have stabilized as companies now focus on retaining higher margin customers rather than acquiring new ones. A strategic emphasis on revenue growth to the detriment of aggressively adding new customers may indicate that the market is maturing, even though the teledensity indicator of wireless subscribers is still just above 50 subscribers per 100 inhabitants (Miezejeski, 2004).
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Canada: Mobile Commerce Under Construction
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Figure 3. Telecommunications services operating profit margin 1997-2004 30 30
25 25
20 20 Wireless
% % 15 15
Wireline
1010
55
00 1997
1998
1999
2000
2001
2002
2003
2004
Year
Source: Industry Canada, Survey of telecommunications service providers (April 2004), and companies’ annual reports.
The wireless segment had experienced negative operating profits due, in part, to the significant start-up costs associated with the introduction of the digital Personal Communications Services (PCS) network. Operating profits significantly improved in 2002 and have since surpassed the operating profit margins of the wireline segment. This is largely due to a significant drop in capital expenditures per customer from previous years. At the end of 2004, the wireless service provider market presents itself as transparent and is largely divided among three remaining big players in Canada– Rogers, Telus and Bell Canada. Competitive pressure in the wireless market has been moderate, and with the loss of Microcell and their flagship brand Fido, it is unlikely to increase. As one commentator puts it (Englehart, 2004), “[L]ocal telephone competition in Canada has been a flop. The incumbent telcos have nearly all of the market after seven years of competition. Almost all of the competitive local exchange carrier (CLECs) have become insolvent and many have disappeared.” With respect to mobile commerce and the wireless market, the combination of sustained profitability, uncertainty about what wireless services, phone features, and applications consumers really want, a strong broadband-based Internet presence and absence of high competitive pressures to innovate provide for a less dynamic market environment in Canada than perhaps in other parts of the world. One of the unique features of the Canadian market in general, and the telecommunications marketing in particular, is the regulatory constraints put on Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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foreign companies interested in competing. Foreign ownership is limited to 25 percent, which means that the existing oligarchic market structure is relatively safe from foreign threats. However, an interesting development will be the arrival of Virgin Mobile in the guise of a mobile virtual network operator (MVNO). In a deal with Bell Mobility, Virgin Mobile rents wireless capacity rather than build its own network. It is a model that has been known in Europe but took longer to develop inroads in Canada because none of the big carriers wanted to open up the market. It can be expected that Virgin Mobile will shake up the market and increase competition, especially for the lucrative youth market.
Successful Services in Canada’s Mobile Sector As Goggin (2004, p. 2) observes, “[C]ontemporary soundscapes now feature not only voice calls in previously quiet public spaces such as buses or restaurants but also the aural irruptions of customized polyphonic ringtones identifying whose phone is ringing by the tune downloaded.” In Canada, cell phone use, while prevalent, does not yet have the same public pervasiveness it has in other parts of the world. It is far from absent, of course, but compared to Berlin, Rome or Tokyo, where busses and subways, waiting lines, town squares, cafes, university dining halls and high schools are considered ideal space/time configurations for eclectic cell phone uses, Toronto seems conspicuously empty with wireless chatter, frantic multimedia- and text-messaging and absorbed game-playing. SMS, for example, one of the most successful applications in Europe, has been a slow starter in Canada. A recent Ericsson survey (Ericsson Consumer Lab,2004) reported that only four percent of Canadian wireless phone users report sending or receiving text messages once a day or more. Only about half of all cell phone users send SMS messages at least once a week. On the other hand, North Americans claim to spend about 49 minutes a day talking on their cell phones, which is almost twice the global survey’s average talk-time of 27 minutes. Cost remains the main reason for this different usage pattern in North America. Voice service is relatively inexpensive, with flat fee plans that provide users with a set amount of weekday minutes (typically between 100-1,000, depending on the price of the plan) and unlimited evening and weekend time. Such a price/usage structure replicates in essence the fixed-line service plans in Canada, which charge consumers a flat fee for unlimited local calls and a perminute fee for long-distance calls; SMS, in comparison, is relatively expensive. Hence, unlike other parts of the world, in Canada the economic incentive to
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switch modes of communication from voice to the somewhat cumbersome and slow text messaging does not exist to the same degree. Furthermore, the slow adoption rate of innovative services such as SMS has to do with the fact that WSPs showed little interest in compatibility between services, hoping that theirs might become the standard. Thus, interoperability between systems (enabling consumers of different carriers to exchange short messages) was not achieved until 2002, when carriers looked to Europe and noticed that almost 15 percent of WSPs’ profits came from the use of the short messaging service. As a result, wireless carriers pushed for interoperability between systems to enable short message exchange that was independent of the digital wireless technology of the sender or receiver. In April of 2002, Bell Mobility (CDMA), Telus (CDMA and iDen), Rogers (TDMA, GSM/GPRS) and Microcell (GSM/GPRS) set up the CMG Interoperability gateway, which enabled short messages exchange between any cell phone on their combined systems (Crowe, 2002). 3 While interoperability was established for SMS, the existence of two network standards has also hampered the development and functionality of other complex interactive network applications (i.e., applications that do not run from the handset), such as Multiplayer games or mobile banking services. As a result of this, and a cost structure that favors voice service, the market for data transfer is comparatively small. Yet even as domestic demand for mobile communication services, productivity applications and entertainment content may remain limited for the foreseeable future, Canada is home to a number of companies like AirG, one of the most successful mobile enter tainment content supplier companies,headquartered in Vancouver, British Columbia. While AirG provides games and multimedia content to Canadian carriers, with some exclusively for Bell Mobility, the company sources and sells globally.
Mini Case Studies: From the Canadian Mobile Desert As Dholakia, Rask and Dholakia state in the opening chapter of this book, mcommerce refers to monetary transactions conducted via a mobile telecommunications network by employing devices such as mobile phones or palmtop units. For m-commerce to happen, at the minimum, the device and the network should be configured to enable communications (C), information (I) exchange and payments (P). In the Canadian context, such configurations are still somewhat limited. Yet, some m-commerce applications are beginning to emerge. We preset case studies that are representative of the emerging models in the Canadian market. The study of Paymint exemplifies the use of the phone as wallet. Another case study relates to Research in Motion’s (RIM) BlackBerry device and the versatile communication capabilities it provides. The case of Swordfish
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presents the small but trendy market for location-based entertainment applications, while the Instant Talk case features a voice-based, multiple-user communication service by Telus.
Paymint Monday afternoons are a hectic time for Angela Smith, a freelance sportswriter for the Toronto Star and mother of two teenage daughters. At 1 p.m. she gets in her Chrysler Sabre to drive from her home in one of Toronto’s sprawling suburbs to the weekly editorial meeting at the newspaper’s downtown headquarters. Luckily, she finds a parking spot close to the Star’s facilities in one of the city’s public parking facilities scattered all over downtown and prominently marked with a large green P-sign. As she enters the parking garage, she takes out her cell phone and speed-dials the phone number displayed at the entrance. An automated answering service recognizes her phone and prompts her for a password. She enters a 5-digit code and immediately receives a conformation that she has been registered in the garage. The meeting with the newspaper’s sport editor is short this time, and just 60 minutes later Angela returns to her parked car. As she starts it up and slowly makes her way to the exit, she again speed-dials the parking lot’s phone number to “check out.” The system on the other end confirms the transaction, provides Angela with the exact duration of her stay in the garage and the amount that will be charged to the credit card associated with her phone number and password. If she is lucky, she might make it in time to watch her daughters’ ice skating lessons. Paymint is a parking service provided by Mint Inc., a software company headquartered in Toronto, Ontario that allows for a simple and convenient way of paying for parking services through the use of a mobile phone. The customer is the Toronto Parking Authority (TPA), the largest municipal parking operator in North America, which manages more than 200 parking facilities and thousands of automated street-side parking meters. In Toronto, there are two typical methods of paying for parking. The first involves paying an electronic parking meter (cash or credit card) for street-side parking; the second involves paying a human parking attendant or automated teller upon entering or leaving the parking garage. With the Paymint System, customers avoid these hassles by first parking their vehicles, then dialing a specified telephone number and entering their lot number. When a customer is ready to leave, he or she dials the number again to end the parking session. The session is then charged to a pre-authorized credit card that users specified during their registration phase. Payments can then be viewed on a consolidated on-line statement for easy tracking. The city pays Mint Inc. a commission for handling payment security, billing and collection of fees.
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The adoption of this technology has been promising, especially in downtown Vancouver, British Columbia where the Paymint System has been incorporated into 80 percent of the 7,500 EasyPark lots run by the city. In Toronto, the TPA has implemented Paymint in at least 30 of the 200 Green-P downtown lots. It represents one of the first e-wallet type applications in Canada.
BlackBerry (Research in Motion) Peter doesn’t know the meaning of the word “relax.” As the creative director of one of the biggest ad agencies in the country, he is constantly on the road to meet with clients, check up on designer teams and oversee implementation. Just as Peter was leaving his office in a trendy neighborhood in the east of the city to get some Sushi for lunch, he notices a beeping sound coming from his suit’s breast pocket. It was his BlackBerry reminding him that he had a 12:30 p.m. appointment with the account manager and the client of his biggest current job. He had forgotten about the appointment which was scheduled a month ago, but like many other appointments over the past few days (since the largest Canadian beer company announced that it was looking for a new agency to conduct a major re-branding campaign), got lost in a deluge of new activities. He quickly ran back to his office, took the files he needed for the meeting and called a cab. In the car, he used his BlackBerry to send a message to his two team members reminding them of the meeting and what he expected them to talk about. Peter knew that unlike their cell phones, his colleagues never switched off the BlackBerry device, so they would receive his message instantly. Within minutes, he received confirmation that they were on their way to the meeting with their gameplan in hand. Peter sinks into the back seat and tries to relax as much as possible during these busy times. He still had not had lunch and decided to e-mail his client’s secretary to order some sandwiches. Two minutes later his beeping BlackBerry displays a reassuring “no problem.” The BlackBerry is a hand-held mobile device created by Research In Motion (RIM), a Canadian firm based in Waterloo, Ontario. The BlackBerry is ideal for busy professionals who need to stay connected while away from their desks. The device allows individuals on the road or away from their offices to receive their e-mails instantly (always on cellular connectivity), organize their contacts and make phone calls. It also provides Internet accessibility via a fully functional web browser. On traditional PDA devices, users have to log into an e-mail program and manually retrieve their e-mails. The RIM BlackBerry eliminates the need to manually connect to such programs through what they call “push” architecture. The BlackBerry’s “push” technology enables messages to be automatically and immediately routed to the hand-held device. The BlackBerry has a minikeyboard, which makes it relatively easy to compose e-mails and text messages.
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The latest BlackBerry models (7100 series in North America) have a quite large (high-resolution 240x260 pixel screen) color screen, operate on a 850/900/1800/ 1900Mhz GSM/GPRS network and have an integrated phone with speakerphone along with Bluetooth connectivity. The operating systems provide support for MIDP 1.0 and WAP 1.2. The BlackBerry devices and subscription plans can be purchased directly from partnered network service providers such as Rogers Cable in Canada. Shipments of the BlackBerry increased 289 percent in 2004 from the previous year, boosting the company’s market share to 18.6 percent from 5.3 percent at the end of 2003.. The BlackBerry has become indispensable among the Canadian corporate elite. Its cellular connectivity and always-on feature deliver reliable, anytime/anywhere communication and information services on a decent size screen. However, the device and usage rates are expensive, currently preventing private consumers from adopting BlackBerry devices in any significant numbers.
Swordfish At 3 p.m. Peter and Claudia can’t wait to get out of their midtown high school classroom and, armed with their cell phones, hit the streets of Calgary. They aim for Kensington and 10th Street, a trendy hangout for students from local colleges and universities. The district’s alternative/granola/urban tech feel makes it easier for Peter and Claudia to inconspicuously disappear into their cell phone screens and launch Swordfish, North America’s first location-based mobile multiplayer game. They will need to separate, though, because as of the moment they connect to the network, they are competitors in this challenging skills game, which pits the player against a virtual school of swordfish and against other players trying to get to the fish first. Peter and Claudia arrange to meet up later for dinner at their favorite organic sandwich bar a few blocks north, where they will compare the results of their afternoon’s worth of fishing. As Peter says good-bye to Claudia, his mind is already racing, scheming how to make the best use of roughly three hours of playing time before they meet up again. He loads Swordfish and immediately his location is verified and the fish become visible on his screen. As he scans the screen, he sees a few smaller fish up north, probably 300 feet. They will be easy to catch, he thinks, but Claudia went in that direction when they parted and, while he contemplates his chances of beating her to them, a message appears telling him that these fish are being approached and caught by Superfly (Claudia’s screen name). The good news is two much bigger fish are swimming just about 200 feet east of him and, since Claudia will need some time to reel in her catch, he should be able to get there first, unless, of course, someone else interferes; currently the area looks clear. As he gets closer to the fish, one of them, it turns out, is a Swordfish. The Big Catch! Hard to find, and even harder
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to catch. It will take patience but, even if that is all he will get out of this afternoon — just one Swordfish — his high score will get a major boost, destined to move him close to the top spot in the Calgary Swordfish rankings — and finally past Claudia — at least for a few days. Blister Entertainment Inc. of Calgary, Canada, has launched North America’s first assisted global positioning satellite (GPS) game with the introduction of Swordfish, a high-tech contest that pits cellular phone users against virtual fish and other users. To play Swordfish, users need to download the game onto their java-enabled, GPS-equipped handsets first (Audiovox 8450 or 8455, a Samsung SPH-A600 or Sanyo 8100 phone), and they need to be in a Bell Mobility CDMA 1X network. The game system is comprised of three main components: the client software that resides on the phone, KnowledgeWhere’s Location Application Platform (LAP) and the mobile providers’ location-based system (LBS). Swordfish client software provides the gaming interface to the end-user. The first version of the game was launched in the summer of 2004. Version 2.0 was released December 2004. Carriers charge a flat fee for the purchase and an additional usage fee of around 15¢ per scan. In addition, mobile browser airtime charges may apply. When the game is launched, the user’s actual position is determined via assisted GPS and rendered on screen in relation to the nearest school of virtual fish. In order to go fishing, the user needs to physically move within range of the object, cast the lure and try to catch the fish. The game uses artificial intelligence for the creation of virtual fish and schools of fish. Hence, the objects behave relatively intelligently, depending on their type. Some will try to move away from the fisher to avoid being caught, while others struggle and fight for freedom when actually caught and skills are required to hold on to big fish. Users can always check their scores on the phone and online and see their local and national ranking against other players. In sum, mobile multiplayer network games take advantage of high-speed networks and services that mobile service providers are eager to sell. The problem with the current game ecology is that the payment structure favors handset games rather than networked multiplayer games. In addition, the value of a network game depends on the presence of other users. Yet, presenting a typical high-technology marketing dilemma, users are unlikely to sign up if the existing user network is perceived as weak (Frels, Shervani, & Srivastava, 2003; Moore, 1991). Carriers are partly responsible for the low adoption rates of these games at the current time. 4 Nevertheless, with network connectivity growing faster and more robust, interactive network- and location-based games are likely to become important applications, spearheading the development and introduction of immersive communications environments that operate and persist across phones and networks. And if these systems make for smooth micropayments, the early
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multiplayer, multiplatform game systems could usher in a new era of mobile commerce and content (Hall, 2003).
Instant Talk Sitting in one of Montreal’s bohemian cafés savoring the short-lived silence before the evening crowd files in for concentrated espressos and urbane tête-àtêtes, John glances over the quarterly sales figures on his laptop. Selling high-end chocolate in Canada was a challenging business! After a large amount of coffee, John thinks up a way to improve distribution but he needs to check with a number of folks to verify whether his idea has legs! John reaches into his pocket and pulls out his cell phone with the Instant Talk feature available to his company’s employees. With the push of a single button, John is able to access his “partner list” and send out “message alerts” to everyone he needs to talk to. Within seconds he is connected simultaneously with Paul at the head office in Utah, Peter, main supplier of milk in Calgary and Wendy, sales director of the western region in Vancouver. They are holding a virtual meeting. With everyone there, throwing around ideas and making suggestions, John refines his idea and, once disconnected, begins drafting the memo of his distribution scheme! As the café is filling up with the after-dinner crowd, John transmits the memo and heads home. Instant Talk is a new feature offered by Telus Mobility, a Canadian wireless telecommunications provider. The Instant Talk feature allows users to use their cell phones like traditional walkie-talkies. By pressing a single button, clients can communicate immediately with one or many contacts simultaneously. This feature only works on selected handsets, therefore, for a party to be included in an Instant Talk session, an Instant Talk-enabled phone is needed. The service is targeted at businesses that want to enable employees to have instant meetings without having to travel. To activate the service, the client simply pushes the button on the side of the phone, inputs the receiver’s number or selects a client list then presses the button again. This sends an alert message to that person(s) and once received, they can begin their conversation. A unique feature of Instant Talk is the ability to create online client lists, which enable the client to talk to multiple people across the country simultaneously with the click of a button. Registering client lists is done online via Telus mobility’s online account management system. In the scenario above, if John wants to get in contact with Paul in Utah, Peter in Calgary and Wendy in Vancouver, all he needs to do is to select the contact list that contains these contacts and press the call button, which sends an alert message to all three parties instantaneously. Instant Talk uses Telus’s national CDMA 2000 1X network, which provides decent coverage across Canada. The carrier offers this
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service as an addition to its existing PCS phone plans and charges between C$10 and C$20 for it.
Viewing Canada’s Mobile Sector in the CLIP Framework At this point in time, the CLIP framework captures many possibilities for mobile applications and services that will take many years to materialize in Canada. The Canadian mobile ecology is currently largely focused on and fueled by integrating communication capabilities and providing entertainment-based information exchange. Network coverage for mobile phones is generally good across the country and excellent in large urban centers. Communication integration is improving as new handsets can now be used to send and receive e-mail. Customers of Rogers AT&T, for example, can log into their Yahoo! accounts to check and respond to e-mail. With RIM’s BlackBerry leading the way and setting standards with regard to integrating all possible communication formats, adoption of handsets will be driven by their ability to bring multiple communication formats to the consumer across platforms. The second driver of mobile commerce and wireless business in Canada is entertainment-based information exchange. Short and multimedia messaging has seen slower adoption and growth than in other parts of the world but both information formats will keep growing and fuel the data market. Handsets are improving, adding new features such as camera capabilities and Java support, running more sophisticated games and playing diverse ringtones. Here, the arrival of Virgin Mobile could have an accelerating effect because of the company’s focus on aggressively marketing mobile usage as fun and entertainment to the youth market, historically the early adopters of new services. This may include pushing more handset- and network-based games, even as network standard incompatibility issues between major carries set a barrier. Payment services, contrary to what the Paymint e-wallet mini case above may indicate, are the exception and location-based services are almost entirely absent from mainstream consumer markets. In the payment sector of the CLIP m-portal framework (see Figure 1 in keynote chapter), banks offer mobile banking services including account balance, money transfer and bill payment. However, none of these services have seen encouraging adoption rates. In fact, some banks have already terminated development and support for mobile stock trading after recognizing that there is not sufficient interest among existing and new consumers for this service. The 724 Solutions wireless banking service, launched first in Europe and later offered by the Bank of Montreal in collaboration with
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Nokia’s network division, flopped while costing the bank a lot of money. Many problems driving up cost while not generating any measurable return had to do with the complexities of making such services available across different network standards. At a time when there were, in effect, three coexisting main network standards, banks had to make sure their interactive, network-based banking communication service was operational with all of them. Similarly, even though information about strategies, investment and results of mobile initiatives is difficult to obtain, some of the MBA students at a leading business school who are directly involved with their employers’ mobile initiatives confided to the author that so far consumer demand for any mobile service has been disappointing and that any future initiatives will be tested very conservatively for their profit potential. The conventional wisdom among these IT marketing professionals is that consumers simply will not tolerate the mobile device’s small screen and slow connection speed while they have high-speed connectivity and intimate familiarity with the environment on their home or work computers. In addition, it should be noted that electronic banking in Canada is also much less prevalent and common than in Europe. It could be theorized that because of low profile electronic banking, an important socializing force is lacking that would support the adoption of mobile banking. Location-based services (LBS) are increasingly available and are only very slowly becoming more popular, mostly among the youth segment interested in location-based multiplayer games such as Swordfish presented above. The lackluster LBS market does not suffer from a supply side problem. There is no dearth of choice for consumers interested in transforming their handsets into mobile game machines. However, closer scrutiny of actual adoption rates of some of the multiplayer games reveals very low numbers. For a good gaming experience, handsets need to be java-enabled and GPS-equipped and networks need to have at least 2.5G data transfer rates. Such requirements slow down the rate of adoption of new technologies. In addition, unlike handset games that are played locally and individually, network multiplayer games suffer from the network effect, which states that a critical mass of players is needed to make the experience valuable for everyone (Lee & Colarelli O’Conner, 2003). More promising at this point are less complex and more functionally oriented LBSs. For between C$3 and C$12 per month, Rogers sells a user plan called “navigate mobile internet,” which allows users to browse the Web, download ringtones and video clips and locate the closest taxicabs. In addition to the youth market, safety needs drive location-based traffic. Bell Mobility’s Roadside Assistance service has been enhanced to include location-based technology, called the e9-1-1 in North America, which allows Bell to locate customers in case of an emergency, if they consent. In 2003, the Roadside Assistance service was the first commercial application of Assisted GPS roadside assistance technology offered by a wireless carrier in North America. Bell also has a service called Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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MapMe™, which uses Global Positioning System technology (GPS) and Cell Tower technology to locate the user and display a live, real-time map. The user can zoom in and out of the map, pan in all directions, display street names and get step-by-step directions from his current location to restaurants, movie theatres, ATMs, gas stations and hotels. In sum, within the Canadian context, WSPs build the m-portal. Since charges occur on a pay-per-use basis, WSPs try to increase content of the wireless Internet, such as ringtones, e-mail accessibility (e.g., Yahoo! and Hotmail), chats or games. Promotion of these services is moderate and user acceptance comparably low, chiefly because of the perceived high costs of using them. Key limitations to more aggressive development and adoption of payment- and location-based services are found on the supply and demand sides. In the payment arena, meaningful offers have been rare and carriers, financial players and third parties appear unenthusiastic about building up a mobile commerce product line. On the location-based service side, product offers are increasing more rapidly but technology issues dampen their adoption. Upgrading to more advanced, GPS and java-enabled handsets is costly for consumers and 2.5G network rollouts (CDMA and GSM/GPRS) have been slower than expected; coverage will remain spotty for some time to come.
Concluding Remarks: Standard Barrier and the Future Exchange students from Europe and Asia frequently comment on what they perceive as a backward mobile ecology in Canada. Undoubtedly, Canadian students are much less reliant on, and possibly more selective with, cell phones than their foreign counterparts to satisfy their communications, entertainment and personal organization needs. Mobile commerce in Canada largely consists of voice, some moderate short- and increasingly multimedia-messaging use, entertainment (single-user games) and some customization-related services (such as downloading ringtones and printing skins for one’s phone5 ). With broadband connectivity at home among the highest in the world and the number of wireless networks in cafes, hotels, airports and campuses growing very quickly, PCs currently represent the preferred means of satisfying mobile communication, entertainment and information needs for Canadians. In addition, in the eyes of consumers the flat fee pricing strategy favors voice services over data transfer. Without a price differential between voice and data, text messaging, often perceived slow and tedious by the users, remains relatively unattractive.
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Furthermore, in many parts of the world the mobile phone increasingly plays an important role in contemporary visual and material culture as a fashion item and status symbol (Goggin, 2004, Jan 12; Harney, 2004). In Canada, however, cell phones for the moment maintain a distinctively utilitarian appearance, while their effect on the cultural and aesthetic fabric is still relatively confined to subsegments of the population, such as younger consumers and, to a lesser degree, businesspeople. As mentioned above, Canadians have been slower in their embrace of the new wireless services that have swept Europe and Asia, including global blockbusters like SMS and, increasingly, MMS. Our analysis of the Canadian wireless context suggests that the uniquely Canadian “mobile consumer behavior” is the result of the comparably high cost of the medium and carriers’ rather inflexible pricing strategies, the still somewhat limited content available for wireless communication and commerce and the lag of network speed and robustness to handle more advanced and sophisticated services. However, attempts are being made to promote what is available, such as SMS, at least in some market segments. During the 2004 presidential elections in Canada, Nokia’s Youth Text 2004 program sponsored an unprecedented text message initiative designed to engage young people in the issues of the federal election campaign. The program staged a number of successful live text messaging chats between presidential candidates of all parties and young Canadians across the country (Schick, 2004). As in other parts of the world, WSPs and content providers face a lot of uncertainty about consumer preferences beyond a desire for reliable and clear voice connections. Hardware features such as wireless headsets and color screens have been successful, as have personalization features such as downloadable ringtones and printable skins. Nevertheless, surveys by Forrester show that cameras, videocams, and other doodads each right now generate interest in only smaller groups of American users (LaGesse, 2004). It appears that unlike in the United States, where competition has squeezed profit margins on voice calls, Canadian WSPs are less pressured to introduce new services to increase the data traffic sent over their networks. Still, even for Canadian carriers, increasing the data market must have high priority to remain profitable in the long run when voice will become commoditized even here. The addition of Virgin Mobile to the carrier ecology is likely to speed up this move towards data services. Hence, features and applications will be launched in the hope that something will catch on. In the final analysis, it is not a question of whether additional m-commerce functionality will be offered to Canadians, but rather when and how. Judging from our analysis, information- and entertainment-based services prompted by the availability of new phone features (device convergence) and faster networks are most likely to be added to the current products because the
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infrastructure to deliver these products is already in place. LBSs are a promising, yet wholly unpredictable market, and one thing carriers have going for them is that they have been very cautions in managing consumer expectations for these services to forestall disappointment. Particular functional services such as roadside assistance and taxicab location will catch on sooner because these services are clearly defined in the mind of the consumer and they do not require the same technological level of sophistication that, for example, network games do. Payment services using handheld devices will take longer. Banks, while initially relatively eager to develop such capabilities, have since learned that consumers are less interested than anticipated. In addition, banking in Canada is still relatively paper-based (checks are still a very common and often preferred method for paying rent, phone and utility bills, or government services). Electronic wire transfers have only very recently been introduced to the consumer market and are still considered a novelty(!) and, compared to their European counterparts, many years behind in the process of integrating information technology in business and consumer banking processes. Banks also face high cost hurdles and disadvantageous economies because they have to make services work across handsets and networks. In addition, the banking sector is characterized by a handful of powerful incumbents, which does not make for an overly competitive and innovative environment. In sum, growth and evolution of mobile commerce in Canada is hampered by the co-existence of the CDMA and the GSM network standards. Once the 2.5G networks have been rolled out and users upgrade to more powerful handsets, a more viable environment for developing and delivering third-party services, especially in the payment and locatability application field, will exist. However, whether the mobile Internet i-Mode style (based on the delivery of entertainment and “fun”) will take hold in Canada is another question that will have more to do with the right marketing approach than merely good technology (Moon, 2004).
Questions for Discussion 1.
What are the main factors that have held back the development of largescale m-commerce applications and services in the Canadian mobile telecom markets?
2.
What actions would you recommend to expand the market for locationbased services (LBS) in Canada?
3.
What can Canadian companies do to leverage the global success of Research in Motion (RIM) with its BlackBerry handheld devices?
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References Budde, P. (2005). Broadband and consumer e-commerce in Canada Dec. 2004 r eview. Retr ieved Ja nuar y 30, 2005, f r om http:// www.internetworldstats.com/am/ca.htm Crowe, D. (2002). SMS interoperability: Canada leads the way. Retrieved November 21, 2004, from http://www.cnp-.wireless.com/ArticleArchive/ Wireless%20Telecom/2002Q3-SMSInterworking.htm Englehart, K. (2004). No new rules: Incumbents must remain regulated if voice competition is to grow. Retrieved January 12, 2005, from http:// www.cablecastermagazine.com/issues/IS article. asp?id=151779&story_id=17602111609&issue=06012004&PC= Frels, J. K., Shervani, T., & Srivastava, R. K. (2003). The integrated networks model: Explaining resource allocations in network markets. Journal of Marketing, 67(1), 29-45. Goggin, G. (2004). Mobile text. M/C: A Journal of Media and Culture, Jan 12, 7(1). Hall, J. (2003). Multiplayer—the only mobile game. Retrieved February 12, 2005, from http://www.3nw.com/pda/gaming/mobilegaming.htm. Harney, A. (2004). It’s the catwalk calling. National Post, Oct 23, p. SP4. Informa Telecoms Media Group, (2005). 2003/2004 telecoms in Canada: Industry report. Retrieved January 30, 2005, from http://www.telecoms. c o m / m a r l i n/ 2 0 0 0 1 0 0 0 4 6 1 / M A R K T _ E F F O R T / m a r k et i n g i d / 2 0 0 0 1 1 9 9 0 3 6 ? p r o c eed = t r u e & M a r E n t i t y I d = 1 1 0 6 9 3 1 2 8 7 0 7 3 &entHash=1001dc55761. Lab, E. C. (2004). Ericsson study. Retrieved December 3, 2004, from http:// www.ericsson.com/ca/en/press/2004_11_23.shtml LaGesse, D. (2004). The spell of the cell. U.S. News & World Report. Retrieved February 12, 2005, from http://www.usnews.com/usnews/culture/articles/041129/29cell.div.htm Lee, Y., & Colarelli O’Connor, G. (2003). New product launch strategy for network effects products. Journal of the Academy of Marketing Science, 31(3), 241-255. Miezejeski, T. (2004). Wireless in Canada. Retrieved January 16, 2005, from http://www.intelecard.com/features/03features.asp?A_ID=360 Moon, Y. (2004). Don’t just do something, stand there! Harvard Business Review, 82(3), 16-17.
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Moore, G. A. (1991). Crossing the chasm: Marketing and selling technology products to mainstream customers. New York: Harper Business. Schick, S. (2004). How political groups could improve their online approach. Retrieved October 12, 2004, from http://www.hillwatch.com/ Media/ITBusiness.aspx Statistics Canada (2004). Telecommunications service in Canada: An industry overview. Retrieved January 28, 2005, from http://strategis.ic.gc.ca/ epic/internet/insmt-gst.nsf/en/sf06084e.html
Endnotes 1
This chapter has benefited from the excellent support of my research assistant Anthony Rotondo, for which I am very grateful.
2
Different surveys generate different estimates, ranging anywhere from below 50 percent (Statistics Canada) to just above 60 percent (Ericsson).
3
SMS interworking is not an issue in Europe, where GSM originated and is still the dominant wireless technology. For the Canadian carriers, there is only GSM and, consequently, only one SMS format. Interoperability is assured at every protocol layer.
4
A scan of the company’s Website suggests that only about 40 or 50 users currently play Swordfish, most of them located in Calgary, where Blister Entertainment Inc. is headquartered.
5
The emergence of Top 10 ringtone charts demonstrates the popularity of this option.
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Chapter III
China: M-Commerce in World’s Largest Mobile Market Nir Kshetri, University of North Carolina at Greensboro, USA Nicholas Williamson, University of North Carolina at Greensboro, USA David L. Bourgoin, University of Hawaii at Manoa, USA
Abstract China is emerging as a global capital of m-commerce applications. China is the world’s biggest mobile market in terms of subscriber base and the fastest growing in the history of telecommunications. Although China currently lacks advanced mobile applications compared to Europe, North America, Japan and Korea, a number of mobile players are rapidly launching sophisticated mobile applications. Unique institutions and the nature of mobile market conditions in China, however, superimpose in a complex interaction that harbors a paradoxical nature. The Chinese mcommerce market is thus drastically different from that of the Western world. This chapter examines the Chinese m-commerce landscape and analyzes its drivers. We also examine the Chinese market from the CLIP perspective.
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Introduction Consider the following observations on the development of mobile technology and the potential of m-commerce in China: For the tech industry, it’s China — not Europe, or Japan, or other Asian countries — that will soon be its [USA’s] main rival. The implications are profound. No longer content to cheaply make other people’s products, a task it has clearly mastered, China wants to be a global standards setter. … One place to watch the flexing of power is in mobile phones1 . The mobile Internet has really saved China’s Internet industry2 . As the above statement indicates, China has emerged as a capital of the global mobile market. The growth rate achieved by the Chinese mobile network, the biggest in the world, is the fastest in the history of telecommunications. Rapid development in the Chinese mobile market has driven increasingly China-centric activities of major players in the global mobile market (Kshetri, 2004a, 2004b). Unique institutions and the nature of mobile market conditions in China, however, superimpose in a complex interaction that harbors a paradoxical nature (Kshetri, 2005). This chapter provides a brief survey of the paradoxical Chinese mcommerce market and analyzes its driving force. The chapter structure is as follows: The next section provides a brief overview of the Chinese mobile market. The paper then analyzes some major forces behind China’s rapid growth in this market. Next, we examine the Chinese market from the CLIP perspective. Finally, the paper presents its conclusions.
A Brief Survey of the Chinese Mobile Market The Chinese mobile market became the largest in the Asia Pacific in 2000 and the world’s largest in 2002 (Stout, 2001). By the end of 2004, there were over 300 million mobile subscribers in China and an additional 75 million “Little Smart”3 users (BBC News, 2004). During 2004, mobile phone users in China grew by 27 per cent (Reuters, 2004). An estimate by the telecom analyst firm, EMC, suggests that China will have 36 million 3GSM4 (W-CDMA) subscribers by 2009 (globalsources.com, 2004).
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Kshetri, Williamson, and Bourgoin
In 2002, 120 million handsets, or 27 percent of the world total, were produced in China. The proportion increased to 33 percent in 2003, 35.1 percent (233.5 million) in 2004 (SinoCast, China Business Daily News, 2005a) and is estimated to reach 50 percent by 2008 (Symbianphone.com, 2003). China’s handset exports increased from 22.75 million in 2000 (GIS News, 2001) to 55 million in 2002. During the first half of 2003, China exported 37 million handsets. China’s Time Division — Synchronous Code Division Multiple Access (TDSCDMA) — developed by Datang is currently accepted as a global third generation (3G) standard. Among 16 proposals submitted for IMT-2000 5 standards, TD-SCDMA was one of the three 3G mobile standards selected by the International Telecommunications Union (ITU) in May 2000. The other two standards are the U.S. based CDMA2000 system and Europe’s WCDMA. The Third Generation Partnership Project (3GPP) accepted the TD-SCDMA in March 2001. TD-SCDMA is scheduled for launch in the second half of 2005. Estimates are that following its launch, the TD-SCDMA will capture 30 percent of the Chinese market and 10 percent outside China (Einhorn, 2003). It is also interesting to note that some innovative m-commerce applications were first developed and employed in China. To take one example, the world’s first electronic stock trading over a wireless network, took place on byair.com in Shanghai, China, in 1998 6 (see Box 1). By 2008, China’s wireless mobile market is estimated to exceed US$200 billion7 . An estimate by Lehman Brothers Inc. suggests that revenues of mobile portals generated by sending news updates, games and online dating amounted to $200 million in 2001, and was estimated at $3 billion in 2004. China Mobile, the world’s largest mobile operator, was the most profitable telecom operator in the AsiaPacific region in 2002, with a profit of $3.5 billion on revenues of $12.2 billion. A 28 percent return on revenue is an excellent indication of where the Chinese market is developing. China introduced Wireless Fidelity (Wi-Fi) technology in 2002 and is diffusing rapidly (Clark & Harwit, 2004). By mid 2003, 80 percent of China’s five-star hotels, airports and high-grade office buildings in its four largest cities were connected to China Netcom’s Wi-Fi network8 . At the end of 2003, China Telecom, China Netcom and China Mobile had about 10,000 hotspots deployed or planned for rollout (Clark & Harwit, 2004). One estimate suggested that the Chinese Wi-Fi market was at $24 million in 2003 (compared to the worldwide market of $600 million) (Koprowski, 2004). Another estimate suggests that China’s Wi-Fi market will reach $250 million by 20059 . This growth from 4 percent to 30 percent of the market is astonishing. Venture capital companies such as Intel Capital are capitalizing on the huge Wi-Fi
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potential in China by funding the deployment of Wi-Fi technology (Clark & Harwit, 2004). The Chinese mobile market, however, is characterized by a high degree of bias towards urban areas. For instance, in 1999, 78 percent of the population owned mobile phones in the three wealthy cities — Beijing, Shanghai and Guangzhou (Tsuchiyama, 1999) — compared with the national average of 3.42 percent that year (UNDP, 2001). This disparity can indicate a huge potential market for future investment and development, or, conversely, show the sophistication of the Chinese wealth sector, with its high technology development and implementation that is close to the cutting edge.
China’s Rapid Mobile Diffusion 10 Starting the mid-1980s, China invested heavily in the telecom sector. The heavy investment was supplemented by a series of programs designed to accelerate telecom development, including extensive re-engineering of and intense competition in the mobile sector. China Unicom, formed in 1994, competes with the former monopoly China Telecom and is licensed for mobile, paging, data, Internet and long-distance (James, 2001). Fierce competition in the Chinese mobile sector led to low connection fees as well as lower subscription fees for mobile services. In the late 1990s, for instance, monthly subscription rates as well as connection charges for mobile services in China were lower than the average in lower-middle income countries or in general across the world (Table 1). Fixed line connection, on the other hand, was more expensive than both of these comparative averages. Competition and technological development have steeply reduced the costs of mobile phones. When mobile handsets were first introduced in China in 1994, the price was US$850, which decreased to about US$200 in 1999 (Tsuchiyama, 1999). Similarly, the connection fee declined from US$600 in 1994 (Tsuchiyama, 1999) to US$60 in 1999 (Table 1). By mid-2001, China Mobile eliminated its mobile connection fees in many cities. To penetrate the market, mobile subscribers have reduced subscription fees and introduced other promotional measures. Examples of such measures include China Mobile’s heavy discount plans in Beijing, Shanghai and Guangzhou (Wall Street Journal, 2003), and China Unicom’s plan allowing users to set five local phone numbers at 1.2 cents per minute (one-sixth of normal rate) and up to 60 percent discounts for heavy users of short messages. The planned rollout of Xiaolingtong (Little Smart) 11 and the ongoing heavy price competition among mobile suppliers have intensified the promotion.
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Table 1. A comparison of fixed and mobile charges in China and the world China
Lower-middle income countries average
World average
60 6.04 0.05 0.05 10.87
90 20.99 0.25 0.18 39.69
86 21.40 0.27 0.18 38.15
226 226 1.9 2.9 0.01 3.1
133 212 4.8 8.8 0.05 3.8
109 155 6.9 11.5 0.09 7.5
Mobile network (1999) Connection ($) Monthly subscription ($) Tariff per minute (peak) ($) Tariff per minute (off-peak) ($) 100 minute basket ($) Fixed network (1998) Residential connection ($) Business connection ($) Residential monthly subscription ($) Business monthly subscription ($) Cost of 3 minute local call ($) Subscription as a % of GDP per capita
Source: ITU (1999), Adapted from Kshetri and Cheung (2002)
The Chinese government expects that a richer and more technology-orientated economy might help increase respect for the nation. The government also has the ambition of providing every household with a telephone. To achieve these objectives, top priority was given to building R&D capacity in mobile telephony in the late 1990s (Niitamo, 2000). The government is also promoting mobile phones as the “people’s phone” and is actively encouraging Chinese consumers in cities and the countryside to buy mobile phones (Kshetri & Cheung, 2002). Innovations in mobile pricing, such as the introduction of mobile prepaid cards, have been the major driving force for the rapid diffusion of mobile phones across the world. Mobile prepaid cards were introduced in China at the end of 1999 and are contributing to the high mobile growth rates.
Chinese Mobile Market from the CLIP Angle China differs widely from the developed world in terms of the four CLIP dimensions: communications (C), information (I) exchange, payments (P) and “locatability” (L). Compared to developed countries, voice communications account for a significantly higher proportion of the Chinese mobile market. In data communications, technologies that are a decade old and outdated in most developed countries are among the most profitable in China. For instance, SMS, a standard feature on almost every wireless phone, which sends text messages at 80 percent less cost than voice transmission is very popular in China12 . The
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Box 1. GWcom’s mobile portal in China 13 GWcom is a mobile wireless ASP in China. It launched its wireless portal, byair.com14, in 1998 to provide timely information and e-commerce capabilities such as stock trading and banking to users with mobile phone or wireless palmtop devices in the U.S. and Greater China. The company provides its networks and handheld device (netset) to individual investors. By 2002, GWcom had partnered with over 30 Internet content providers and e-commerce portals in the U.S. and Greater China and was connected with more than 20 securities trading firms. By March 2000, byair.com had over 6,000 subscribers, with the number of stocks traded as high as 3,500 daily and 250,000 page views daily. By early 2002, it delivered services to over 250,000 mobile users and more users on Information on Demand (IOD) and messaging services. GWcom users mostly use the two-way paging capability for trading stock electronically, and such transaction-type services have turned out to be its “killer application” (TDAP, 2002). The company’s pricing structure made stock investment on its paging network more attractive than on the fixed network. Because of low PC penetration and relatively higher Internet access fees, the only way to trade stock for a large proportion of Chinese is to read newspapers or magazines and then pick up a phone15. These factors have made GWcom’s Web portal more attractive (Ebusinessforum.com, 2000). GWcom describes its network product, PLANET, as a “high-capacity and low cost cellular packet data network that is optimized for serving wireless palm computers and PDAs.”16 The users pay a monthly service charge of only about US$5-10. With the increasing demand, GWcom has decided to specialize in the mobile wireless data network infrastructure and outsource the equipment manufacturing to Ericsson and Chinese vendors. This is likely to result further reduction in price. China’s stock market is growing very fast17 and the stock exchange companies are located in Shanghai and Shenzhen. GW Trade selected these two cities for its initial trial. Wireless users have been using GWcom’s application platforms to conduct online trading since 1998 in Shanghai and since 1999 in Shenzhen. In March 2000, 3,000 investors in Shanghai and 100 in Shenzhen were trading stocks over the paging networks managed by GWcom. The average daily volume of 3,000 Shanghai users in early-2000 was $3.6 million, about 30 times as much as the average trading volume on stockstar.com, the largest and most popular Web-based stock trading company in China. In developing countries like China, non-voice technologies (such as paging) have potential to offer a cheap and reliable way to transmit data that will be a viable alternative to the mobile phone. In other parts of the world, big players are not following such paging routes (Holland, 2000). The GWcom case also provides some evidence of he leapfrogging potential of mobile technologies. For instance, the world's first electronic stock trading over the wireless network took place on the GWcom network in 1998 in Shanghai.
popularity can be attributed to its low cost and the fact that even basic wireless handsets can perform it. Nevertheless, more advanced m-commerce applications are rapidly emerging in China. For instance, through revenue-sharing deals with China Mobile and China Unicom, China-based Web portals such as Sina, Sohu and NetEase have launched new business models that are tailor-made for the Chinese market. These companies charge the users for news updates, games and online dating information on mobile phones. The services have thus evolved beyond simple text messages. Sohu, for instance, sends out color greeting cards accompanied with voice messages from basketball star Yao Ming (Einhorn, 2004). By April 2003, Sohu provided 150 fee-based wireless products (such as the Japanese game “Kung-Fu Boy”) to its over one million SMS services subscribers (World IT Report, 2003). Virtual games played on mobile devices are also growing rapidly in popularity. By the end of 2004, there were over 10 million mobile game players in China generating about $100 million in revenue (SinoCast China Business Daily Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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News, 2005c). The Chinese mobile game market is expected to grow by 80 percent in 2005 (SinoCast China Business Daily News, 2005b). IDC suggests that the Chinese online game market will reach $809 million by 2007. Virtual games offered on mobile devices are becoming increasingly popular. For instance, in a game offered by Mtone Wireless Corp in late 2003, 500,000 people signed up in three months (Einhorn, 2004). Chinese and foreign mobile players are planning to launch a wide array of business models for the Chinese mobile market. In mid 2005, for instance: a.
Global cellular NetVillage was at a final stage to distribute its pinball game to Java-enabled handsets in China and aimed to develop a variety of business models (Tsukioka, 2005).
b.
Tom Online and Warner Bros. Online were planning to launch a Chineselanguage Web site featuring cartoon characters such as Bugs Bunny and Scooby-Doo for mobile phones (Wall Street Journal, 2005).
Mobile payment is less attractive in China compared to Europe and North America. A major hindrance is China’s cash-based economy — over 90 percent of business transactions takes place on a cash basis. Nonetheless, companies are launching a variety of innovative business models to facilitate m-payment (see Box 2). In the payment realm of business, in 2002 Sumit Mobile Systems Ltd., working with mobile network providers, banks and utility companies in Shanghai, designed a system that allows users to pay their bills by cell phone. When a
Box 2. M-payment in China Although m-payment is in a nascent stage in China, it is growing exponentially. One estimate suggests that wireless payment will be 15 percent of e-commerce payments in 2006 (Rashtchy, 2004). Mobile companies with innovative business models are capitalizing on this rapid growth rate. Smartpay, a multi-province mobile payment system which allows subscribers to pay phone bills simply by sending an SMS message (DMAsia.com, 2004) had over 100,000 users as of December 2004 (Ortolani, 2005). The company also has partnerships with seven banks, including China Construction Bank and Agricultural Bank of China (Ortolani, 2005). The Chinese mobile market, however, lacks more sophisticated m-payment services. M-payment in China is hindered by a number of factors, including a lack of secure network with an efficient authentication system in banks, lack of a retail network that accepts codes linking to customers’ bank accounts and perceived fraud in transactions (chinanex.com, 2004). Basic services such as handset banking, in which a cell phone user can check his/her account online and transfer funds within the same bank have been available for some time (chinanex.com, 2004). China Mobile and China Unicom launched one-way payment services in 2003. China Unicom’s one-way payment card launched in 2003 attracted over 20,000 new users in three days (SinoCast China Business Daily News, 2005d). Nonetheless, major players such as China Mobile are aggressively expanding m-payments (Rashtchy, 2004). In May 2005, for instance, China Mobile and China UnionPay announced their cooperation with ten banks to launch m-payment services in Beijing (pacificepoch.com, 2005).
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payment is due, a message displays on the screen that shows the amount due and where the user can then authorize the payment from a bank account by typing a secret code. The service attracted 90,000 users in Shanghai in nine months (Manuel, 2003). Similarly, in mid 2005, The Music Engine (TME), a UK-based technology and online marketing solutions provider, was planning to provide mpayment services in China (Salz, 2005). The Chinese mobile landscape is also developing rapidly on the locatability dimension. In the mid-2004, Cambridge Positioning Systems (CPS) partnered with Wisemax, a Beijing-based supplier of multimedia messaging and SMS,to provide the Chinese wireless market with location-based services supported by its Matrix software solution (Geospatial Solutions, 2004). Similarly, in November 2004, Sichuan Yingda, a China-based mobile value-added service provider, launched location-based services based on the Matrix location system of CPS to track its vehicles, security personnel as well as other assets of the company (Wireless News, 2004).
Concluding Remarks The discussion in this paper makes clear that m-commerce in China is expanding quickly while unusual paradoxes coexist. For instance, the Chinese mobile market is the biggest in the world and penetration rates in some of the wealthiest Chinese cities are much higher than the averages of many developed countries. Yet mobile phones are virtually non-existent in many Chinese villages. Similarly, some of the most modern m-commerce applications are emerging from China. At the same time, decade-old mobile technologies that are outdated in the developed countries are widely used in China and are among the most profitable applications. A technology marketer’s success in the Chinese m-commerce market, thus, is a function of its capability to go beyond superficial indicators and understand how the company can capitalize on the paradoxes.
Questions for Discussion 1.
What are the most important factors that are driving the diffusion of mobile technology in China?
2.
How does the Chinese mobile market differ from European and the U.S. mobile markets? What do you think are the opportunities created by the Chinese mobile market that do not exist in European and U.S. markets?
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3.
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Basing your examination from the CLIP perspective, how does the Chinese mobile market differ from mobile markets in Western Europe and North America?
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ITU (1999). World telecommunications development report. Geneva: International Telecommunications Union. James, D. (2001). China’s sizzling circuits. Upside, 13(1), 60-67. Kahn, G. (2003, Sept 22). World business; what’s old is new: A Chinese Internet company has thrived by focusing on a seemingly obsolete technology. Wall Street Journal, R.4. Koprowski, G. J. (2004). Wireless world: China’s WiFi revolution. United Press International. Retrieved July 5, 2004, from http://chineseculture.about.com/ g i / d y n a m i c / o f f s i t e. h t m? s i t e= h t t p : / / w w w . u p i . c o m/ v i e w . c f m %3FStoryID=20040506%2D101652%2D8297r Kshetri, N. (2004a, March 11-12). China’s emergence as an epicenter of the global mobile market. Proceedings of the Austin Mobility Roundtable, Center for Business, Technology and Law, McCombs Business School at the University of Texas at Austin. Kshetri, N. (2004b, July 10-13). Internationalization of the Chinese cellular industry: The inward-outward connection. The 2004 Annual Meeting of the Academy of International Business (AIB), Stockholm, Sweden. Kshetri, N. (2005). Six paradoxes of China imperative for technology companies. Working Paper, Department of Business Administration, University of North Carolina at Greensboro. Kshetri, N., & Cheung, M. K. (2002). What factors are driving China’s mobile diffusion? Electronic Markets, 12(1), 22-26. Manuel, G. (2003, Oct 20). E-commerce; dialing for dollars: Will people use their cell phones to buy lots of stuff? Phone companies are determined they will. Wall Street Journal, 3. Niitamo, V. (2000). Making information accessible and affordable for all. Wider Angel. Retrieved July 20, 2001, from http://www.wider.unu.edu/newsletter/angle2000-1.pdf Ortolani, A. (2005, Feb 2). Chinese begin paying by cellphone. Wall Street Journal, p. 1. Pacificepoch.com (2005). China Mobile joins China UnionPay for mobile payment s ervice. Retr ieved Ma r ch 25, 200 5, fr om http:// www.pacificepoch.com/newsstories/25207_0_5_0_M/ Rashtchy, S. (2004). The China analyst. Retrieved September 2, 2005, from http://www.piperjaffray.com/760 Reuters. (2004). China’s mobile subscribers rise 27% in 2004. Retrieved January 20, 2005, from http://147.208.132.198/news/181_1206466,0003.htm
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Salz, P. A. (2005). Power to the people: Do it yourself content distribution. EContent, 28(6), 36-41. SinoCast. (2005a, July18). Shenzhen produced 10% world’s cellphones in 2004. China Business Daily News, p. 1. SinoCast. (2005b, July 12). Mobile game market to grow 80% this year. China Business Daily News, p. 1. SinoCast. (2005c, July 5). China mobile game market to reshuffle in 2005. China Business Daily News, p. 1. SinoCast. (2005c, May 31). China unicom Chongqing branch launches one-way payment service. China Business Daily News, 1. Stout, K. L. (2001). China mobile has eyes only for 2.5G. CNN.Com. Retrieved June 5, 2005, from http://archives.cnn.com/2001/BUSINESS/asia/06/05/ hk.chinamobile2.5g/ Symbianphone.com. (2003). Every third mobile phone made in China. Retrieved April 1, 2005, from http://www.symbianphone.com/?l=apr03.htm TDAP. (2002). China’s new regulatory environment spurs UNICOM’s subscriber growth. Interview with Wang Jianzhou, Executive Vice President of China Unicom, Telecommunications Development, Asia-Pacific. Retrieved July 10, 2003, from http://www.tdap.co.uk/uk/archive/interviews/inter(unicom_0012).html Tsuchiyama, R. (1999). The cellular industry in China: Politics, rewards, and risks. Pacific Telecommunications Review, 2nd quarter, 149-160. Tsukioka, A. (2005, July 15). NetVillage, KAZeNet form alliance in mobile game business in China. JCNN News Summaries - Japan Corporate News Network, p. 1. UNDP. (2001). Human development report 2000. New York: United Nations Development Program. Retrieved July 11, 2001 from, http://www.undp.org/ hdr2001/completenew.pdf Vogelstein, F., Boyle, M., Lewis, P., & Kirkpatrick, D. (2004, Feb 23). 10 tech trends to bet on. Fortune, 75-80. Wall Street Journal. (2003). China’s mobile operators bring discounts to big cities. Retrieved April 21, 2005, from http://www.bdachina.com/content/ about/pressquotes/P1051109819/en Wall Street Journal. (2005, June 21). Tom online signs deal with Warner Bros. to distribute content. p 1. Wireless News. (2004, Nov 26). China’s Sichuan Yingda turns to CPS software for location-based solution. p. 1. World IT Report. (2003, April 9). Sohu launches interactive cellular game in China. p. 1. Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Endnotes 1
See Vogelstein et al. (2004).
2
Victor Wang, CEO of Mtone Wireless Corp, quoted in Einhorn (2004).
3
“Little Smart” is a low-cost, limited-roaming service provided by several fixed-line operators.
4
The 3GSM standard builds on GSM to allow the integration of IP (Internet Protocol) technology and new features such as video calling, faster Internet, WAP access and downloada ble content (htt p:/ / www.wavetelecom.com/content/shared_content/mobile/downloads/ Wave_FAQs.doc).
5
International Mobile Telecommunications (IMT- 2000) is a general term for technologies planned for inclusion in ITU world standards for 3G mobile communications.
6
See http://www.mobic.com/news/2000/01/gwcom_receives_capital_ investmen.htm.
7
See http://mobile2004.com/ (4G/B3G-OWA Will Reshape China’s Future Mobile Communications Research).
8
WiFi Makes Internet Plus Coffee Possible in Beijing and Tianjin , SinoCast, China Business Daily News. July 25, 2003, p. 1
9
See http://www.itfacts.biz/index.php?id=P448
10
This section draws from Kshetri and Cheung (2002).
11
Xiaolingtong is provided by fixed-line phone companies and is much cheaper than mobile services provided by China Mobile and China Unicom.
12
See Kahn (2003).
13
This case draws from Dholakia and Kshetri (2003).
14
GWcom restructured the corporation in April 2002, dividing the business into two companies. The short messaging service (SMS) business has been renamed to byair Corporation, which encompasses the mobile media services. The network business is GWcomPlanet Corporation.
15
See http://www.gwcom.com.cn/gwcom_news-m17.htm
16
See http://www.chinatelecomconference.com/china-dc/bio/bio13.html
17
See http://www.gwcom.com.cn/gwcom_news-m17.htm
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46 Rask
Chapter IV
Denmark: M-Commerce Experiences and Perspectives Morten Rask, Aarhus School of Business, Denmark
Abstract With a CLIP-device in hand, communication is not dependent on location and time. Users can get location-specific, proactive information from mportals, reactive SMS notifications and have an always-ready e-wallet. The Danish m-commerce market has been through some difficult times and is now ready to develop further along the CLIP dimensions. Practical and research challenges lie in terms of micro coordination, reinterpreting the meaning of distance and the tradeoffs between richness and reach.
Introduction: Mobile Communications in Denmark In the streets, beaches, buses, trains, cars, houses, offices and everywhere else in Denmark, one can see people of all ages and in all walks of life using their mobile phone for making calls, sending and receiving messages, and checking
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Denmark: M-Commerce Experiences and Perspectives
47
information in order to manage and coordinate their professional and private lives. The penetration rate of mobile phones in Denmark is approximately 95 percent of the 5.4 million inhabitants (National IT and Telecom Agency, 2005). The geographical coverage in Denmark is about 99 percent and a recent investigation concluded that, “All the Danish network accessibilities are in a real good range compared to other European networks” (Jost, 2003). While pervasive, mobile communications in Denmark have not yet made the “Evernet” idea come true — the idea that one is connected and online everywhere and at any time (Friedman, 1999). What then is the status of m-commerce in Denmark circa 2005? The SMS revolution in Denmark has gone considerably beyond messaging and functions as a kind of “Swiss army knife” of communications, useful for all purposes. Also m-portals are under way in Denmark and essentially work like the start page for wireless browsing. Additionally, many Danish companies are using m-commerce to increase efficiency and customer satisfaction.
Structure of the Chapter This chapter focuses on three case studies of the above-mentioned impacts on m-commerce in Denmark, prefaced by an initial background on the development and structure of Danish m-commerce. The first case study, “Mobile applications at Metax service stations,” is a good illustrative example of the use of different mobile applications to serve mobile customers. The second case study, “SMS messaging in Denmark,” describes the use of SMS for different purposes. The third, and last, case study about “Danish walled-garden m-portals” compares the m-portals of the two leading wireless service providers, TDC Mobil and Sonofon, which have built their m-portals on WAP and GPRS services. After the case studies, some reflections on the CLIP framework are offered to derive technological and managerial lessons from the Danish experience.
Danish M-Commerce Background In 1981, 14,700 Danes owned a mobile phone and in 1984 the analog Nordic Mobile Telephone (NMT) cellular standard had 30,600 subscriptions in its first year (IT-og Telestyrelsen, 1996). The Nordic firms have been among the world leaders in the mobile phone industry. As a joint effort in 1981, the Nordic telecommunication providers launched the common analogue Nordic Mobile Telephone system, named NMT (Dalum, 1995). NMT penetration was at its
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48 Rask
highest in 1995 with 306,001 subscriptions; this standard was dropped in 2001. The digital standard GSM entered Denmark in 1992 and grew rapidly. In 2005, approximately 95 percent of Danes had a GSM mobile phone (National IT and Telecom Agency, 2005). Since October 2003, it has been possible to buy a 3G phone in Denmark. Approximately 124,000 Danes (National IT and Telecom Agency, 2005) had used the 3G standard by 2005. Figure 1 illustrates the relatively steep curve of penetration rate in Denmark and underscores some of the milestones in the development of the Danish mobile sector:
•
From monopoly to oligopoly. In 1990, the Danish Government passed a law abolishing the monopoly formerly held by the General Directorate of Posts and Telegraphs — called TDC today. In 1991, A GSM license was issued to Sonofon that by 1993 had 35,000 subscribers (Sonofon, 2005c).
•
Liberalization of the Danish telecommunication structure. From 1995 to 1997, liberalization went on to secure better and cheaper telecommunication services and to improve conditions for mobile operators (Forskningsministeriet, 1995).
•
New players. In 1997, two foreign wireless services providers entered the Danish market by building their own wireless telecommunication network.
Figure 1. Mobile subscriptions in Denmark 6000000
100 NMT
GSM
Penetration rate
90 5000000 80
4000000
Percent
60 50
3000000
40 2000000 30 20 1000000 10
1988
1989
1990
1991
1993
1994
1995
1996
1997
Price war
New players
Liberalization 1992
1998
1999
2000
2001
2002
Consolidation
1987
3G
0 Oligopoly
0
2003
2004
Source: National IT and Telecom Agency (2004a, 2005)
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Number of subsriptions
70
Denmark: M-Commerce Experiences and Perspectives
49
France Telecom established Mobilix (later renamed Orange) and Sweden’s Telia established Telia Mobil in Denmark. In 2000 two more mobile players, Telmore and CBB, started operations. Telmore was a reseller of access to the TDC Mobil wireless telecommunication network and CBB used Sonofon as a sub-supplier (Børsens Virksomhedsfakta, 2005). In 2005 the total number of suppliers of mobile telephony in Denmark was 15 and they together offered 85 different subscription plans (IT — og Telestyrelsen, 2005).
•
Tough price war. During 2000-2004 the focus was on price rather than on development and sales of new value-added mobile services. Many operators and analysts describe Denmark as a “nightmare” scenario of the mobile sector — and even called the discount wave the “Danish Illness” (Strand Consult, 2005).
•
Heading towards 3G. Since October 2003, 3G service has been available in Denmark. While it is too early to draw conclusions about the 3G development and growth trajectory, some lessons are available from the early 3G marketing strategies of mobile operators. One of the early 3G entrants, Hutchison’s “3,” had experienced a drop in their customer database from nearly 125,000 subscribers in January 2005 to under 117,000 subscribers in June 2005, indicating some initial consumer disenchantment with 3G offerings. Learning from the early experiences of Hutchison’s “3” service, other Danish mobile operators, such as TDC Mobil, announced that their 3G solution would be launched in late 2005 in an evolutionary fashion — and not positioned as a radical “revolution” that may make some mobile users skeptical. Hutchison’s “3” service had a strong early focus on consumers that were considered heavy users in terms of downloading highbandwidth content such as music, news and sports clips. TDC Mobil, on the other hand, marketed its 3G offerings with a focus on the business usage of e-mail and other business-related communications and information with mobile broadband PC cards that enabled devices to access the 3G network. For TDC Mobile, the non-business customers were seen as the next market to focus on, after some success with business users. With their existing SIM-card and a new 3G phone, TDC Mobile users would have access to all preexisting 2G related voice, SMS, MMS and content as well as to new 3G applications. The m-portal FLY would continue to be the customers’ portal into the new range of 3G services. Together with the launch of 3G, TDC Mobile also planned on slashing the prices of data transmission by half for all TDC Mobile customers. Such price reduction was planned for all data transmission — the preexisting GSM network as well as the new 3G network. The price of voice and SMS in the 3G network was kept at the same level as in the existing GSM network (Dyrskjøt, 2005; TDC Mobil, 2005d).
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50 Rask
Figure 2. Distribution of market shares in the Danish market 6% 3%
1%
9%
3%
13% 11%
9% 22% 9%
13%
5%
3%
36%
17% 67% 1%
3 TeliaSonera Orange CBB Mobil Sonofon Telmore TDC
14% 22%
22% 9%
2%
22%
20%
2%
3% 12%
8% 17%
1% 3% 1%
8%
9% 29%
33%
38%
12% 21%
17%
12%
GSM Subscriptions
Outgoing voice traffic
SMS
MMS
1%
GPRS subscriptions
Up- or downloaded via GPRS - # MB
Source: Danish Telecom statistics — second half of 2004 (National IT and Telecom Agency, 2005)
•
Consolidation of the industry. The former Norwegian telecom monopoly, Telenor, acquired a majority stake in Sonofon in 2000 and, together with BellSouth, full control by 2004 (Sonofon, 2005c). TDC Mobile bought Telmore in January 2004 (Telmore, 2004), Sonofon acquired CBB in April 2004 (CBB Mobil, 2004) and Telia Mobil took over Orange in Denmark in October 2004 (Orange, 2004). All firms continued with their previous brands and products.
Figure 2 illustrates that the original monopoly, TDC Mobil, and its acquired wireless service provider Telmore dominate the 1G voice market, followed by the original challenger, Sonofon, together with its acquired wireless service provider CBB. In the 2.5G GPRS market, the newcomer “3” had, in spite of very low market share of GPRS subscriptions, taken two thirds of the market of the actual upload and download through GPRS. It took “3” only a year to take over that market where TDC Mobil/Telmore and Sonofon/CBB Mobil are now reduced to followers. The only market where the two (now merged) foreign wireless services providers have room to expand is in the messaging market where they dominate, especially SMS but also MMS. In the near future, competition in Denmark will be centered on the attractive massaging and GRPS data market that benefited from impressive growth rates in 2003-2004 (Table 1). Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
Denmark: M-Commerce Experiences and Perspectives
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Table 1. Distribution of growth and penetration of the m-commerce infrastructure in Denmark
Net Increase from 2003 to 2004 Pr. 100 inhabitants in December 2004
1G (Voice)
2G (Messaging)
GSM subscriptions
Outgoing traffic (# minutes)
SMS
MMS
GPRS subscriptions
Up- or downloaded via GPRS - # MB
7%
20%
30%
73%
87%
87%
95
507
654
1,5
41
1,1
2½G (Data)
Sources: Danish Telecom statistics — second half of 2003 (National IT and Telecom Agency, 2004b) and second half of 2004 (National IT and Telecom Agency, 2005).
By 2004, intense price competition led to a 95 percent penetration of the Danish market and a 20 percent jump in airtime over the previous year. SMS increased by 30 percent. In 2004, the average Dane sent 654 SMS messages, more than talktime measured in minutes. MMS had an impressive 73 percent growth rate but it was based on a limited number of messages in total. The GPRS market also had impressive growth rates. In December 2004, approximately four out of ten Danes had a GRPS subscription and the number was rising. In summary, competition in Denmark is no longer about selling voice plans. This market is mature does not have growth rates comparable to messaging and data. The SMS market is still promising because of the fine growth rates, and will be subject to high competition, with challengers fighting to improve their market positions. The GPRS market exhibits impressive growth rates and extensive usage in which the older players have been challenged with the newcomer “3.” Established players who had gained substantial market shares in the 1G voice market will try to protect and expand their market shares in the GRPS market so they do not lose market shares, as happened to some in the messaging market.
Successful Applications in Denmark’s Mobile Sector This section presents three mini-case studies of successful m-commerce applications in Denmark. The first case study, “Mobile applications at Metax service stations,” is a good illustrative example of the use of different mobile applications to serve mobile customers. The next two case studies — “SMS messaging in Denmark” and “Danish successful walled-garden m-portals” — are focused on particular types of m-commerce services.
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52 Rask
Mobile Applications at Metax Service Stations What is more natural than offering mobile application to car owners? The car owner is mobile by default and often the service desired is location dependent.
Background In 2004, Metax employed 42 people and had a turnover of $100 million (Børsens Virksomhedsfakta, 2005). Metax was founded in 1892, and since 1979 has been an independent subsidiary of Danish Shell. The primary focus of Metax service stations has been selling discount priced petrol and minimizing the cost of operation. Metax was the first chain to offer a plastic fuel card with a PIN-code to encourage self-service. The company invested strongly in IT, making the chain a leader in service station IT usage in Europe (Bergh, 1992). The intense IT focus continues: Since 2000, all Metax stations have been “ghost-stations” with no face-to-face customer contact (Carstensen, 2001). The CEO of Metax, Anders Buss Jensen, made the technology strategy very clear: “For us, it is very important that we do not use new technology for its own sake. It is essential that the opportunities of the new technology are of advantage for our customers as well as our employees” (Carstensen, 2000). Besides creating a corporate homepage in 1999 (Metax, 1999), Metax created a WAP-site and an SMS promotion application in 2001. The latest Metax mobile application offers mobile payments. Metax is very satisfied with most m-commerce applications but the WAP-site is used sparingly (Jensen, 2005).
WAP In 2001, Metax created a WAP-site to guide customers to the nearest service station. This did not employ location-based technology but simply suggested locations and driving directions based on the customer indicating the area where s/he was located at the moment. Additionally, it was possible to obtain information about offerings, such as a car wash, at the suggested service station (Carstensen, 2001). Even though the WAP-site is still working and updated on a regular basis, Metax does not promote this service because of the WAP platform’s poor market penetration (Jensen, 2005).
SMS From 2001, Metax offered an SMS-functionality of its customer loyalty program called “Metax-Carwash Club.” When the customer is a member of this club, he
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Denmark: M-Commerce Experiences and Perspectives
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or she can get their car washed for about half the general list price in the carwash market. Metax is expanding its carwash capacity rapidly. When it rains, people are not inclined to wash their cars. Metax sends a special discount SMS to customers when the weather forecast predicts rain in the area of the customer’s selected service station (Rasmussen, 2003a). By requiring customers to register at the Metax homepage and to choose a specific service station of interest, Metax has created a low-tech/low-cost context-related and location-based mobile application.
Mobile Payment By late 2004, almost all Danish print and broadcast media carried a story about the Metax mobile payment application. The idea that Metax customers should be able to pay for petrol by using their mobile phone, however, had been on the Metax planning map for years. In 1998 a software firm, Carl Bro Gruppen, made a security assessment (Carl Bro Gruppen, 1998). In 1998/1999 the wireless service provider Sonofon cooperated with Metax in developing and testing a prototype payment solution (Bredsdorff, 1998; Sommer, 1999). Announcement of the system launch was made in 2000 (Carstensen, 2000) and 2001 (Carstensen, 2001). Finally in 2002, two engineers from Carl Bro Gruppen developed a robust new system (Carl Bro Gruppen, 2002). After solving security problems, the payment solution became a reality in late 2004 (Jensen, 2005). The mobile payment system is based upon an Interactive Voice Response system (IVR) that can be used for refueling and calculating mileage. When a customer fills up at a Metax service station, there is no need for a Metax card — payment is possible via the mobile phone. When the customer wants to buy petrol, he or she calls a toll-free phone number and follows the voice instructions. Keying the car’s mileage at the time of fill-up allows users to track their car’s fuel economy over the Internet. “The idea is that people can use their mobile phone as a kind of remote control,” says marketing manager Kurt Serup (Carl Bro Gruppen, 2004a). This mobile application is covered by a worldwide patent and Metax plans to sell the system to other petrol station chains (Carl Bro Gruppen, 2004b). In early 2005, Metax was in the process of exporting the system, making it a good “side business” and an additional revenue-earning opportunity for Metax (Stenvei, 2005).
SMS Messaging in Denmark The power of SMS media was demonstrated after the tsunami catastrophe in the Indian Ocean following the Christmas holidays of 2004. The Danish police asked all wireless service providers to send SMS to all Danish mobile phones located Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
54 Rask
in areas where the tsunami had been present and asked people to contact the Danish authorities or relatives (Klarskov, 2004). These were the most important Danish SMS messages in the technology’s history. Simple SMS connected distant humans where at least one of the parties was mobile. While no economical benefits were involved, the social benefits of SMS in this case were immense.
Background As in many other countries, the commercial prospects of the SMS revolution came as a surprise to most Danish wireless service providers (Trosby, 2004). SMS is a true loss leader in Denmark and the price competition is tough. Price wars intensified in 2003 when Telia Mobil Denmark launched its flat rate product called Xpress, developed by the CEO of Tele Mobil Denmark. The inspiration came from the CEO’s 15-year old son, when his father discovered that his son sent 1600 SMS messages every month (Rasmussen, 2003b). Since then, Telia Mobile has been the market leader in SMS. Today, all the other wireless services providers in Denmark offer flat rate SMS subscriptions. The flat rate subscription appeals to the youth segment in Denmark. Young people in the 15-24 age bracket are the most active users of mobile phones in Denmark: 96 percent of them have mobile phones and each sends approximately 20 SMS messages a day. Over 35 percent have 2.5G GPRS or 3G connections and they spend US$35 a month on mobile communications (Rasmussen, 2004d). While the youth segment dominates SMS usage, the following illustrate the widespread popularity of SMS in Denmark.
SMS for Communication The number of SMS messages sent during New Year set records during 20032005. In 2005, 22 million SMS messages were sent: four SMS messages for every Dane (Thomsen, 2005). For the youth market, SMS allows constant contact with friends and family regardless of location and time (Barfod, 2004b). The mobile phone is in use for maintaining relationships and micro-coordination. Micro-coordination, such as where to meet downtown, is facilitated very well by SMS (Hjarvard, 2003). With SMS, public TV and radio stations in Denmark experienced new forms of interaction with their viewers. Many TV and radio programs include competitions where viewers vote through SMS. The Danish branch of the Eurovision Song contest, Junior MGP, and several radio programs integrate SMS responses as a part of the shows (Ibsen, 2004; Rasmussen, 2004c). The users pay for participating, creating lucrative revenue streams for the future (Schollert, 2005). Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Location-Specific Use of SMS Location-related SMS messaging in Denmark is primarily focused on traffic information. Several SMS services inform users about police speed traps, extraordinary traffic jams and temporary roadblocks (EasyTraffic, 2005; Razzia.dk, 2005). DR Traffic Service from Danish Broadcasting Corporation sends SMS messages about temporary roadblocks and delays in train and bus departures (DR, 2005b). The business models employ either flat rate subscriptions or a per-message fee. Some services are promotional in nature and free of charge, e.g., the Scandinavian Airline System’s “SMS-Info” about delays and canceled flights (SAS, 2005). In all cases, users have to create a Web-based profile including locations of interest. Afterwards, the SMS messages are received on the user’s mobile phone.
Information through SMS Besides getting breaking news from newspapers (Berlingske Tidende, 2005; Børsen, 2005) and TV stations (DR, 2005a; TV2, 2005) and entertaining information such as jokes (Jubii, 2005), most SMS information in Denmark is advertising notifications about products and services. While current news and entertainment generate direct revenue via US$0.20-US$1 per message, other SMS information is free of charge for the customer. The advertiser, however, pays about US$0.10 for every SMS message sent. Hydro Texaco sends SMS messages to registered customers when the petrol list price changes (Hydro Texaco, 2005). One of the most active infrastructure enablers is Mobitech (Mobitech, 2005a). The firm created an e-mail-to-SMS gateway that enables companies to send out notifications on SMS using their email application. This has resulted in free SMS services from dentists, car repair shops and schools to send notices about appointments. With SMS reminders, these service providers ensure better capacity deployment and customer satisfaction while customers are pleased with these extra services (Mobitech, 2005b). With a focus on employees, the Copenhagen division of Post Denmark has installed an e-mail-to-SMS gateway. Post Denmark uses SMS to call in extra personnel as needed and to manage capacity according to demand (Barfod, 2004c). SMS technology can also be used in market research. Department store Magasin uses SMS to track the placement of price labels, displays and posters. A 300-person panel uses SMS to provide feedback on what they see in the shops. These SMS messages are collected in a central database and real-time results are available online to managers to make point-of-purchase adjustments (Consensus Management, 2005). Epinion, a successful Danish market researcher,
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employs SMS for exit-polls, leading to results that are faster and more precise (Bøggild, 2005).
SMS and Payment Wireless service providers, credit card firms, banks and stock exchanges have used SMS as a payment tool. In early 2003, the Danish consumers’ ombudsman announced that a premium SMS message was illegal and all Danish development of mobile content stopped. By mid 2003, the ombudsman changed the ruling to mean that premium-rate SMS messages were legal if the amount of payment was US$5 or less and if the selling company made price and sales agreements distinctly clear (Rasmussen, 2003c). Essentially, the underlying issue was whether SMS could be treated as means of payment or not. The discussion continued in early 2004 when the Danish Financial Supervisory Authority started to investigate the area and was of the opinion that premium SMS messages could be construed as “money,” and made it clear that banks were the only actors allowed to issue such electronic money (Larsen, 2004). In other words, wireless service providers were not banks. This ruling also put developments in SMS payment systems on hold. Then the Danish Minister of Economic and Business Affairs entered into the discussion (Rasmussen, 2004a). In early 2005 the result was a framework that allows a maximum amount of US$12 per SMS message, together with a simplified sales agreement process. The new framework recognizes SMS, MMS, WAP and other types of valuation media as means of micro-payments (Barfod, 2005). The Copenhagen Stock Exchange provides SMS-based information in real time about share prices, top and bottom-performing four shares, index information and company announcements. The cost of the service is US$1 for every SMS message (Copenhagen Stock Exchange, 2005). Besides the widespread ability to pay for content like ringtones and news in Denmark, it is possible to send money via SMS to another person. The amount will be drawn on the user’s credit card account. It is made possible by ewire — a Danish payment infrastructure enabler that has made the e-wallet come true. Over 225,000 Danes have an ewire account (ewire, 2005). Car parking payments are a popular SMS application. Easypark makes it possible to pay for, limit and expand parking time through an IVR-system and get warnings via SMS. Besides eliminating coins, this enables businesses to pay for employee or visitor parking. Easypark systems exist in major Danish cities and have a market share of 14 percent in Copenhagen (Barfod, 2004a). As indicated earlier, TV and radio channels have also developed SMS payments as major revenue streams.
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Denmark: M-Commerce Experiences and Perspectives
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Danish Walled-Garden M-Portals In early 2000, TDC Mobil and Sonofon were very optimistic about the future of the WAP-enable mobile Internet (Dietrichsen, 2000a, 2000b, 2000c). The Sonofon CEO believed m-portal needs to be out of the “walled gardens” and that such portals should be personal (Bülow, 2001). Things changed and terms like “Mobile Internet” and “WAP” acquired negative connotations as technologies and services failed to meet expectations.
Background When the high-profile Danish Internet-based wireless service provider Telmore started offering GPRS data service at US$1.50 for one megabyte (Telmore, 2003), other wireless service providers followed with lower access prices. In 2005 one MB downloads were priced in the US$1.50-US$4 range (IT-og Telestyrelsen, 2005). Sonofon launched its m-portal called e-go in late 2003 (Sonofon, 2003) and TDC Mobil followed in early 2004 with its m-portal, FLY (TDC Mobil, 2004). Even though these m-portals were based on the WAP-protocol, the use of “WAP” terminology was carefully avoided; the portals were promoted as the “startpage” for the wireless service providers’ customers only. The purpose of this “walled-garden” strategy was to generate access revenue and to make customers ready for 3G. Both Sonofon and TDC Mobil were satisfied with development of the business. By January 2005, e-go had acquired 80,000 unique users a week. In November 2004, FLY had gained 35,000 unique users a week (Breinstrup, 2005; Skouboe, 2004). Given different launch dates, these two m-portals had comparable rates of takeoff. By mid-2004, both Sonofon and TDC Mobil experienced GPRS traffic that had jumped five-fold in six months and saw their m-portals as reasons for this explosive growth rate (Thomsen, 2004). By late 2004, Sonofon had 22 percent and TDC Mobil had 38 percent of the Danish GPRS-market market (National IT and Telecom Agency, 2005). In May 2005, TDC Mobile announced that as a part of their 3G launch, they would offer a Mobile Content Solution and let other companies offer services at TDC’s FLY portal, thereby moving away from the “walled garden” strategy (Rasmussen and Dyrskjøt, 2005).
Personalization and Specification Both Sonofon and TDC underplayed the personalization and specification aspects of their m-portals. TDC Mobil described their m-portal FLY as a
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58 Rask
supermarket where customers could get 80 percent of their needs fulfilled with no need for personalization (Breinstrup, 2004). On the basic technological level, personalization and specification are limited to the types of mobile handsets employed. Both e-go and FLY automatically reflect the mobile phone’s capabilities in showing graphics, etc. Mobile phones sold by Sonofon and TDC Mobil are pre-configured such that the m-portals are the start pages in the WAP browser. Both m-portals are also similar in their focus on consumers. Initially, Sonofon had the ambition to make a unified inbox and TDC Mobil wanted to create a business version of FLY m-portal (Rasmussen, 2004b). Content for businesspeople was limited. Sonofon also promoted business-related services for e-go. Neither of these m-portals used permission-based m-commerce.
Partnerships and Applications These two m-portals share similarities but also have some significant differences in m-applications and partnerships involved, as Tables 2 and 3 illustrate. The content of e-go is a result of the cooperation of ownerTelenor with Sonofon. Together they held a “beauty competition” of potential partners. The selected partners are parts of the m-portal and are allowed to market their own brands via
Table 2. The e-go m-portal applications and partners Communication Device Manufacturers Infrastructure Enablers
Information
•
•
Content Providers
Payment
Location
Sonofon recommends 52 mobile phone models from Alcatel, Nokia, Samsung, Siemens and Sony Ericsson Sonofon gives access Content Aggregation Management Delivery and billing to WAP through a Solution from End2End GPRS connection.
•
Customer service about phone usage MMS messages
• •
• •
• •
News from TV stations (TV2 and Danish Broadcasting Corporation), newspapers (Berlingske Tidende, BT and Børsen), magazines (Mobil Magasinet), portals (Sportsplaza) and record publishers (EMI Music) TV Guide (Se and Hør) Cinema listings and download, ringtones and film posters as screensavers (Nordisk Film) Weather forecast (Danish Meteorological Institute) Entertainment as games, graphics and ringtones through the End2End solution and EMI Music Jokes (Sonofon) Horoscopes (Telitas)
• •
Provisioned by Sonofon “overthe-air” Links to Danske Bank and og BG Bank
N/A N/A
• • •
Driving directions and maps (KRAK) Find nearest taxi (Sonofon) Bus arrival timetable (Bus services Copenha-gen and Aarhus Sporveje)
Based on multiple sources: (Breinstrup, 2005; Delichte, 2003; Dixen, 2004; Infostrada Sports, 2005; Sonofon, 2003; Sonofon, 2004a; Sonofon, 2004b; Sonofon, 2005a; Sonofon, 2005b)
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Denmark: M-Commerce Experiences and Perspectives
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Table 3. FLY m-portal partner products and services Communication Device Manufacturers Infrastructure Enablers
Content Providers
Information
Payment
All WAP-enabled phones; TDC Mobil recommends 16 Mobile phone models from Nokia, Samsung, Siemens and Sony Ericsson TDC Mobil gives access to Wireless application infrastructure and value-added service platform from WAP through a GPRS Realtime connection • News from TV stations (TV2 and Danish Broadcasting Corporation), newspapers (BT) and portals (Sportsplaza, Soundvenue Music Portal) • Weather forecast and pollen count (Danish • TDC Mobil Customer Meteorological Institute) • Provisioned by service regarding • Lotto numbers (Dansk Tipstjeneste) TDC Mobil “overphone usage and the-air” • Entertainment as games, graphics and configuration ringtones through the Realtime solution • Stock index • MMS messages • Video streaming (TV2 and Danish information • Photo album (Copenhagen Broadcasting Corporation), • Chat and Dating Stock Exchange • Jokes and horoscopes (unknown source) service and Bonnier • Find your new house (real estate agent EDC • B2B: Access to the FinansMæglerne) company’s Outlook information) • Find a new job (Jobindex portal) system • B2B: Secure Mobil access to company server; access to the company’s Outlook system; access to the MS Exchange hosted by TDC Mobil; access to the company’s Microsoft Business Solution (TDC Mobil)
Location N/A N/A
•
•
Driving directions, maps, yellow pages and nearest business locator (TDC Yellow Pages) Bus and train arrival timetable (Danish Railway system – DSB)
Based on multiple sources: (Infostrada Sports, 2005; Realtime, 2005; TDC Boomtown, 2005; TDC Mobil, 2004; TDC Mobil, 2005a; TDC Mobil, 2005b; TDC Mobil, 2005c)
e-go (Hoffmann, 2005). Sonofon has a very young customer base: “Young men that live at home with their parents or have just left home to live in their own apartments are heavy users,” says Peter Berg of Sonofon. “Reading the news at e-go is the most popular activity followed by getting sport results and downloading games and ringtones. However, a year ago downloading games was the most popular activity… so I am very optimistic,” says Peter Berg. In early 2005, m-portals generated 3-5 percent of the total revenue, with a strong growth rate (Breinstrup, 2005). Unlike e-go, FLY stresses business applications. TDC Mobil believes that content is less important in a business-to-business setting while communication and access to employers’ information system, are the most important mapplications. M-portals are one of six m-business focus areas. First and foremost is the simple GPRS access; other focus areas are third-party content, access to company systems, telemetric applications and messaging (Rasmussen, 2004b).
Summary of M-Portals E-go and FLY are similar in many aspects. Both recommend the same device manufacturers and neither use the locatability-capabilities of hardware (devices and infrastructure). The parent wireless services provider enables the communications infrastructure while information and a single supplier provide payment
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functions. FLY is more comprehensive in terms of content variety and third party providers, making it the strongest m-portal in terms of content. With a large user base, e-go from Sonofon could be seen as strongest in terms of user appeal. Over time, the walled-garden strategy could be vulnerable. Seven of the mobile phones recommended by Sonofon and TDC are ready for the Web-browser Opera: two of the mobile phones even come with Opera pre-installed (Opera, 2005; Sonofon, 2005a; TDC Mobil, 2005a). With such an Opera-equipped phone, the user can easily wander away from the m-portal “walled garden” and sample content alternatives beyond the offerings at the m-portals. So far, this does not seem to have influenced the successful walled-garden m-portals in Denmark because Sonofon and TDC Mobil do not promote this possibility and the wireless service providers do not subsidize the Opera-ready phones. Another, and perhaps stronger, reason is the mobile customer’s desire for simple and direct access to the needed m-applications. It remains to be seen whether the impressive success of walled-garden m-portals will continue or whether users will be tempted away by external content.
Danish M-Commerce in the CLIP Framework The three cases are different in terms of units of analysis. Metax deals with a single-company viewpoint, SMS messaging focuses on nationwide successes of a specific technology and the m-portal case deals with WAP and GRPS-based market experiences of two leading mobile actors. This is done on purpose. It shows that the CLIP-framework can be used to analyze many situations and also that the meaning of CLIP-functions is context specific. In other words, the CLIP-framework gives insights into the technological and managerial lessons from any country’s mobile experience. With the exception of communication features, Metax used m-commerce to support the ICT strategy of the firm to increase efficiency and customer satisfaction without expensive face-to-face interaction. Metax used m-commerce locatability features. Without relying on costly and still-evolving GPS capability, Metax relied on customer interactions to determine location. At the WAP-site, customers can choose the nearest service stations. To use the SMSbased Car Wash Club, the customer indicates a priori the service station of interest. SMS messages carrying weather-related discount codes are sent by human agents. An employee decides which of the service stations would be subject to bad weather and thereby activates the SMS distribution to the proximate customers. The m-commerce information features available at
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Metax improved the capacity deployment and increased customer satisfaction. This was done by the SMS-based Car Wash Club and the WAP-site. Metax Mobile payment functions made it possible to pay for petrol without using the Metax plastic card. In that way, Metax created an m-commence application that replaced the plastic card with a mobile e-wallet. In the general SMS case in terms of communication, SMS is used to keep in contact with friends and family without being dependent on location and time and for last-minute micro-coordination. SMS messages increase the interactivity dramatically where radio listeners and TV viewers vote through SMS. In terms of locatability, SMS is focused primarily on traffic information. Besides news and entertainment, in terms of information features, SMS is used for promotional notifications about products and services in order to ensure better capacity utilization and to increase customer satisfaction. A special application is SMSbased market research. Besides the widespread ability to pay for content like ringtones, news, parking, competitions and SMS-based stock exchange information, in Denmark it is possible to send money via SMS to another person. In other words, SMS has become the e-wallet for many applications and a new potential revenue stream. The case of the two m-portals in Denmark shows CLIP-features similar to mportals in other places. The m-portals support communication by interaction with the wireless service providers’ customer service as a central part. Additionally hosting photo albums, chat rooms and providing employee access to the Outlook system are also available.. Locatability-oriented features at the mportals do not rely on any kind of specification technology. The m-portals offer driving directions, maps, taxi and other business locators and provide bus and train arrival timetables. Information delivered at the m-portals are about general, business, technology and sports news, TV guides, cinema listings, weather forecasts as well as entertainment, such as games, graphics, jokes, horoscopes and lotto numbers. Most of the content comes as simple text and graphics but video streaming is evolving as an opportunity. Also information of more special interest can be found. This is about houses for sale and job opportunities as well as access to an employer’s server and business management software. Besides payment features like links to banks and stock index information, the use of the m-portal is restricted to the subscribing customers of the wireless service provider and is in general free of charge. Extra services like downloading games, ringtones and some of the news are provisioned by the wireless service provider “over-the-air,” so the mobile phone transforms into an e-wallet that the wireless service provider has access to. In summary, in Denmark, the “m” in m-commerce stands for “mobility.” With a CLIP-device in hand, communication is not dependent on location and time. Users can navigate in different locations when on the move. They can get proactive information from m-portals and reactive items from SMS notifications; Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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for selected applications, the users have an available e-wallet in their mobile devices.
Additional Reflections on Denmark’s Mobile Sector The Danish mobile experience shows tremendous progress on many CLIP dimensions, but it also indicates areas where service configurations and customer acceptance lag technological capabilities. For example, personalization and specification of m-portals are limited to device types and do not tap into user preferences. Human intervention is needed. The users base their configurations of information, locatability and payment features upon a priori selections. Often the m-applications have to be pre-configured and rely on users’ interaction with a Web site beforehand. In other words, mcommerce relies on e-commerce interaction too, and the two worlds cannot be separated. However, with browser-loaded smart phone sales doubling in 2004 (Nielsen, 2004), the “e-commerce” part may not require a PC: It can be done on the mobile device screen. These smarts phones, as well as many other mobile phones sold in Denmark, can handle normal e-mails, taking messaging beyond just SMS/MMS. Another widely used technology is the interactive voice response technology (IVR). Using IVR, Danes can use mobile handsets to pay for petrol and parking slots. Sales of PDA-phones are growing rapidly and the main driver is navigation software (Rasmussen, 2005). Smart phones in Denmark are starting to be sold with navigation software and GPS antenna included, so the infrastructure for technically sophisticated locatability features is growing. Taking the concepts of the CLIP framework from Chapter I and using them as a vehicle for further theoretical reflections on the Danish mobile sector, we can see that the first stage of m-commerce (see Figure 1 in Chapter I) is describing the situation in Denmark. Using Edward Hall’s notion of culturally-acceptable distances (Hall, 1968) and the size of the screen interface, Hjarvard (2003) suggests that with its limited screen size, the mobile phone promotes intimate proximity and the mobile device becomes an individual tool for small tasks, entertainment and intense personal communication. The bigger screen on the PC promotes a more personal proximity suitable for more complicated tasks. With that understanding, it is natural that the pre-configurations of the m-commerce applications are done on the ergonomically comfortable PC’s Web browser. In this way, businesses approach the customers in a large-format PC interface, customers configure their interaction preferences in the large-format PC
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interface and then — when on the go — customers invite the marketers into their personal small-format mobile CLIP-devices. The CLIP integration at the Danish m-portals is not very tight due to the lack of devices and infrastructures that enable the activation of location features, and also because few content providers are working with payment features. Figure 2, Tables 3 and 4 in Chapter I can be sources of inspiration to understand this situation. Regarding the location-based services, it is difficult at this stage to visualize how such services would develop because there is a lack of geo-coded data. In Denmark — because of intense privacy concerns — it is illegal for the wireless service provider to use the geographical position of its customer in order to tailor services, so the user cannot give permission to receive geographically tailored services. Another possibility for application development is to use GPS in obtaining the geographical position of the mobile user. This is popular in Denmark, as many have bought PDA-based GPS navigation systems. In other words, the Danish situation will improve when device manufacturers offer mobile phones with GPS capabilities. At the moment the wireless services providers have a monopoly as infrastructure enablers of the payment feature. When the wireless services providers open their portals for other content providers and allow banks and other infrastructure enablers to handle payments, the use of this feature will increase in Denmark. The use of voice, SMS and GPRS has increased dramatically in Denmark. Teenagers decide at the last minute where to meet in town and transport companies’ redirect the drivers to new tasks when they are on the road. Retailers and service firms can notify and redirect customers through the use of voice, SMS and special m-portals. Where writing ensures the reproduction of culture, m-commerce enables the everyday coordination of tasks. It is no longer a requirement to plan in detail; coordination can be done on the move in real time through m-contacts (Hjarvard, 2003; Ling & Yttr, 2002). Frances Cairncross proclaimed the “death of distance” caused by the communications revolution (Cairncross, 1997). If we define the size of distance as the intensity and frequency of interaction between two social positions (Castells, 1996), we see m-commerce as a phenomenon that will have an additional impact on the death of distance. With the mobile phone, one has ongoing access to family, friends, and colleagues. Voice and SMS messaging are useful tools to maintain such relationships with a high degree of intensity and frequency of interaction. Marketers who hope to win in the future will have to develop the capability to be very close to the customer’s heart and wallet (Rask & Dholakia, 2001). The Metax case illustrates these attempts together with a different focus on the traditional tradeoff between richness and reach. E-commerce enables the firm to reach respondents with richness of Web site information. The Internet, however, is not able to cover the digitally divided, unconnected world and its Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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reach is thereby limited (Evans & Wurster, 1997, 2000). M-commerce is the wing player. With the CLIP-device used to talk and send personal messages, people can come very near a face-to-face interaction characterized by high degree of richness and low degree of reach. On the other hand, using the CLIPdevice to get and send information, the level of richness is very low but the reach can be extremely high (Baldi & Thaung, 2002) because of high global penetration rates of mobile phones. The richness in these notification-like pieces of information is extremely low but there is the potential to reach an extremely large audience in terms of variety and quantity. Because the mobile phone is recognized as a personal device (Netsize, 2005) it can be difficult for the market to target a customer without being too offensive (Rask & Dholakia, 2001). This is the grand challenge for the future of mcommerce in Denmark: to reach widely, create intimacy and enhance richness of content; all without being overly intrusive. In other words, CLIP integration is central and in order to make it work, permission, specification and personalization are needed. These acts can only be done via mutual cooperation of device manufactures, infrastructure enablers, content providers and, of course, the end users. The outline of this tectonic shift is seen in Denmark but so far we have only witnessed the tip of the iceberg.
Questions for Discussion 1.
How would you describe the opportunities for 3G in Denmark? Are the later strategies of firms like TDC Mobil likely to be more effective than the early strategy of Hutchison’s “3” service? Why or why not?
2.
Discuss the strength, weakness, opportunities and threats that marketers face when using various types of m-commerce platforms such as an established m-portal, services obtained via SMS messages or formulating a completely independent m-commerce strategy in approaching Danish customers?
3.
Assume that the Danish market for infrastructure enablers is turning into a commodity market characterized by standardized offerings, relatively high market transparency and great focus on price. From the end-user perspective in such a setting, what strengths, weaknesses, opportunities and threats remain for the content providers?
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National IT and Telecom Agency. (2005). Telecom statistics - second half of 2004. Copehagen, Denmark: National IT and Telecom Agency. http:// w w w . i t s t . d k/ s t a t i c / t eles t a t i s t i k/ 2 0 0 4 / T el es t a t i s t ik % 2 0 f o r % 202%20halvår%202004.pdf Netsize. (2005). The mobile phone is open for business (Report). Paris: Netsize. Retrieved from http://www.netsize.com/?id=5&sid=1 Nielsen, J. (2004). Salget af smartphones eksploderer. ComOn, November 22. http://www.comon.dk/index.php/news/show/id=20123 Opera. (2005). Products Featuring Opera Mobile Browser. [Corporate homepage]. Opera Software ASA. Retrieved February 3, 2005, from http:/ /www.opera.com/products/mobile/products/ Orange. (2004, Oct 11). Den næststørste mobiloperatør i Danmark er grundlagt TeliaSonera afslutter handel og køber Orange Danmark. [Press Release]. Orange Danmark. Retrieved January 31, 2005, from http:/ /orange.dk/omorange/presserum/pressemeddelels/pressemeddelelse/ ?contentId=2106&lang=dk Rask, M., & Dholakia, N. (2001, Feb 16-19). Next to the customer’s heart and wallet: Frameworks for exploring the emerging m-commerce arena. Paper presented at the 2001 AMA Winter Marketing Educators’ Conference, Marriott Mountain Shadows Resort, Scottsdale, Arizona. Retrieved from http://www.morten-rask.dk/2001a.htm Rasmussen, K. (2003a, March 15.). Bilpleje: I kø for at få bilen vasket. JyllandsPosten, JP Århus Rasmussen, K. T. (2003b, Aug 26). 15-årig dreng bag mobilsucces. Børsen. Retrieved from http://borsen.dk/pdf/?2003/08/200308262008.pdf Rasmussen, K. T. (2003c, Aug 26.). Ombudsmand bøjer af i sms-strid. Børsen. Retrieved from http://borsen.dk/pdf/?2003/08/200308261005.pdf Rasmussen, K. T. (2004a, Aug 31.). Bendt Bendsen afværger mobilt betalingskaos. Børsen. Retrieved from http://borsen.dk/pdf/?2004/08/200408311004.pdf Rasmussen, K. T. (2004b, May 18). Portal øger mobil-omsætningen med 7 pct. Børsen. Retrieved from http://borsen.dk/pdf/?2004/05/200405182006.pdf Rasmussen, K. T. (2004c, April 20.). Sms får P3’s lytterkontakt til at boome. Børsen. Retrieved from http://borsen.dk/pdf/?2004/04/200404202012.pdf Rasmussen, K. T. (2004d, November 20.). Sådan bruger de unge mobiltelefonen. Børsen. Retrieved from http://borsen.dk/pdf/?2004/11/200411302004.pdf Rasmussen, K. T. (2005, February 8.). PDA-salget i Danmark boomer. Børsen. Retrieved from http://borsen.dk/pdf/?2005/02/200502082002.pdf Rasmussen, K. T., & Dyrskjøt, M. (2005, May 9.). TDC Mobil klar til 3Glancering. Børsen. Retrieved from http://pdf.borsen.dk/2005/05/ 200505091004.pdf Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Razzia.dk. (2005). Velkommen til Razzia.dk. [Corporate homepage]. Fartkontrol I/S. Retrieved February 9, 2005, from http://www.razzia.dk/ Realtime. (2005). Company History. [Corporate homepage]. Realtime. Retr ieved Ja nuar y 28, 2005, fr om http:// www.r ealtime.dk/index. php?id=242&linkno=2 SAS. (2005). Info Automatic via SMS. [Corporate homepage]. Scandinavian Airlines System. Retrieved February 9, 2005, from http://www.sas.dk/ Schollert, P. (2005, March 9). Sms er en god forretning for tv-stationerne. Jyllands-Posten. Skouboe, J. (2004, Nov 26). TDC i forkølet 3G-lancering. Berlingske Tidende. Sommer, N. (1999, April 27). Teleselskaber på konfrontationskurs med bankerne. Børsen. Retrieved from http://borsen.dk/pdf/?1999/04/199904272006.pdf Sonofon. (2003, October 20). e-go makes the mobile world simple. [Press Release]. Corporate Communications, SONOFON. Retrieved January 31, 2005, from http://www.sonofon.dk/om_sonofon/presse/vis_artikel. asp?ID=1251&area=presse&Lang=UK Sonofon. (2004a, December 22). Cinema listings for mobiles. [Press Release]. Corporate Communications, SONOFON. Retrieved January 15, 2005 from, http://www. sonofon.dk/om_sonofon/pr esse/ vis_artikel.asp?ID=1320&area=presse&Lang=UK Sonofon. (2004b, January 15). Marked rise in MMS messaging by Sonofon customers. [Press Release]. Corporate Communications, SONOFON. Retrieved January 31, 2005, from http://www.sonofon.dk/om_sonofon/ presse/vis_artikel.asp?ID=1271&area=presse&Lang=UK Sonofon. (2005a). e-go. [Web]. Sonofon. Retrieved January 31, 2005, from http://www.sonofon.dk/ego/ Sonofon. (2005b, April 20). Get Musicbuzz on your mobile. [Press Release]. Corporate Communications, SONOFON. Retrieved May 31, 2005, from h t t p : / / ww w. s o n of o n . d k/ o m_ s o no f o n / p r es s e/ v i s _ a r t i kel . a s p ? ID=1332&area=presse&Lang=UK Sonofon. (2005c, 2004, April). The Sonofon Saga. [Corporate homepage]. Sonofon. Retrieved January 31, 2005, from http://www.sonofon.dk/english/ profile/history/the_sonofon_saga.shtml Stenvei, M. (2005, May 26.). Ideen på vej til udlandet. Jyllands-Posten. Strand Consult. (2005). The moment of truth: A portrait of the discount MVNO / mobile operators’ success. Copenhagen, Denmark: Strand Consult. Retrieved from http://www.strandreports.com/sw658.asp TDC Boomtown. (2005). Boomtown. [Games Portal]. TDC Totalløsninger A/ S. Retrieved February 2, 2005, from http://www.boomtown.net/en_uk/ staff/bt.contact.php?dogtag=help_home Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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TDC Mobil. (2004, March 15). High-flying cell phone portal. [Press Release]. TDC’s Press Secretariat. Retrieved January 31, 2005, from http:/ /tdc.com/article.php?id=59323&dogtag=tdc_o_english_press_release TDC Mobil. (2005a). FLY. [Portal]. TDC Mobil. Retrieved January 31, 2005, from http://www.tdcmobil.dk/fly/ TDC Mobil. (2005b, March 8). Følg aktien på mobilen. [Press Release]. TDC’s Press Secretariat. Retrieved May 31, 2005, from http://om.tdc.dk/ artikel.php?id=67664&dogtag=tdc_o_presse_presse TDC Mobil. (2005c). Prøv Fly gratis online. [Portal]. TDC Mobil. Retrieved January 31, 2005, from http://www.tdcmobil.dk/portal/mobilfly/mobilfly/ hvordanmobilfly/prov_fly/index.jsp TDC Mobil. (2005d, Sept 12). TDC to launch 3G. [Press Release]. TDC’s Press Secretariat. Retrieved September 20, 2005, from http://om.tdc.dk/ artikel.php?id=72801&dogtag=tdc_o_english_press_release Telmore. (2003, Oct 1). TELMORE dumper prisen på GPRS og fjerner abonnementet. [Press Release]. Telmore. Retrieved January 31, 2005, from https://www.telmore.dk/about/press/viewNewsItemAction.do ?id=200405171348142833 Telmore. (2004, Jan 27). TDC køber de resterende aktier i TELMORE. [Press Release]. Telmore. Retrieved Janua ry 31, 2005, from https:// w ww . t e l mo r e . d k / a b o u t / p r es s / v i e w N e ws I t e m A c t i o n . d o ? i d = 200405171339005023 Thomsen, C. (2004, June 2). Eksplosiv vækst i danskernes brug af GPRS. ComputerWorld. Retr ieved from http://www.computerworld.dk/ default.asp?Mode=2&ArticleID=23925 Thomsen, C. (2005, Jan 5). Nytår sendte danske mobilnet i knæ. ComputerWorld. Retr ieved fr om http://www.computer wor ld.dk/defa ult.asp ? Mode=2&ArticleID=26549 Trosby, F. (2004). SMS, the strange duckling of GSM. Telektronikk, 2004 (3: 100th Anniversary Issue: Perspectives in telecommunications), 187-194. Retrieved from http://www.telenor.com/telektronikk/volumes/pdf/3.2004/ Page_187-194.pdf TV2. (2005). TV 2|NYHEDERNE på mobiltelefonen. [Corporate homepage]. TV2. Retrieved February 9, 2005, from http://nyhederne.tv2.dk/mobil/ topnyheder/?service=sms
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Chapter V
Finland: Internationalization as the Key to Growth and M-Commerce Success Tommi Pelkonen, Satama Interactive and Helsinki School of Economics, Finland
Abstract This chapter describes Finnish mobile telecommunications industry trends and prospects. In addition, it presents two theoretical frameworks based on the Finnish companies’ experiences in the turbulent m-commerce markets. First, the internationalization framework is targeted to facilitate m-commerce actors to position themselves in the global telecom business. Second, the mobile media framework is targeted to facilitate analyses related to the emerging mobile media markets. Furthermore, the chapter presents five mini-cases of Finnish m-commerce companies and concludes with theoretical and managerial implications to m-commerce actors.
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Introduction: Finland – The Mobile Pioneering Country As a small North European country with only 5.1 million inhabitants, Finland is a very unlikely country to be the homeland for the mobile telecom industry giant Nokia. Yet, since the early 1990s, Nokia has been one of world’s leading companies in creating and orchestrating the m-commerce industry. Finnish telecom industry has a long and fascinating background, having links to the Russian Czar and nationalistic movement in the late 19 th century and pioneering scrambled radio communications solutions for the Finnish Army in WWII. As such, Nokia’s outstanding business performance in the 1990s and early 21 st century offers an attractive subject of analysis for this book. Additional interest in this tiny Northern country stems from the fact that very few economies globally have become so rapidly linked to the success of one single homegrown multinational company. This chapter illustrates the status of the Finnish mobile industry in early 2005. The key objective of the chapter is to assess how a small m-commerce related company originating from a small and open economy (SMOPEC, see Luostarinen, 1979) has a significant need to start planning its internationalization strategy and operations nearly from day one of its business operations. In addition, the chapter aims to illustrate the international interorganizational networks a leading m-commerce company has to enmesh in to succeed in the contemporary world. The following questions are addressed in this chapter: 1.
How can an m-commerce industry actor analyze its position in dynamic and global mobile telecommunications markets?
2.
What kind of challenges is the global mobile telecommunications industry likely to face based on the pioneering Nordic experiences of Finland, and particularly Nokia?
3.
What kind of impacts does a single multinational corporation, such as Nokia, have globally on the development of fruitful and successful m-commerce business environments?
In this analysis, the companies originating from small domestic markets, such as Finland, are seen to relate to the “born global/international”-category (BG) (Madsen & Servais, 1997). BG companies have from inception a strong ambition to operate their businesses internationally.
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The chapter has five main parts. First, selected basic facts of Finnish markets are presented. Second, an analysis framework to help position companies within the global m-commerce value creation networks (Pelkonen & Dholakia, 2004) is formed and described. Third, as one of the core areas for mobile commerce — at least in 2005 — is mobile media content; the chapter presents a model to evaluate various elements of mobile media development. Fourth, some interesting success stories are presented to illustrate the impact Nokia has had on small companies wanting to expand from marginal domestic markets to major global markets. Finally, conclusions and recommendations are drawn from the cases and models presented.
Historical Overview of Finnish Development The Finnish telecom industry dates back to the 19 th century when the first telecom networks were built in the country, initiated by the Russian Czar and the Finnish autonomous government. Until the 1980s, because of very limited capital resources available in the country, local telecom companies and cooperatives dominated the Finnish telecommunications markets. Yet, the nearly 300 local telephone companies had very talented personnel and Finland’s telecom industry, led by the national monopoly company Telecom Finland (now part of Swedish-Finnish TeliaSonera), gradually developed one of the most sophisticated networks in Western Europe. Liberalization and digitization of the telecom network, strongly initiated and steered by the Finnish government, boosted the sophistication of the networks. In addition, the Finnish Technology Agency, TEKES, supported strongly the formation of the Finnish mobile cluster with several technology programs and networking events. In the early 1990s, Nokia, the Finnish industrial conglomerate, was incurring major losses (business areas: paper and pulp, car tires, rubber boots and consumer electronics) — changed its strategy to divest all other operations except mobile and fixed telecommunications equipment and manufacturing and services. The company took major risks in investing most of its available resources into GSM-technology development and commercialization (see Pulkkinen, 1997). Nokia’s devotion and capability to develop, sell and deliver high quality digital mobile telephony enabled it to become the global market leader by the turn of the century. Nokia’s success created strong opportunities for Finnish startup companies to leverage their locally strong relationship with this global market leader. Despite
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the IT “dotcom” crash of 2000, several venture financiers were still actively seeking investment opportunities from Finland in 2001. Of course, not all such venture investments succeeded. The Finnish business scene experienced some dramatic bankruptcies of pioneering, high-end m-commerce startups (such as Riot Entertainment or WapIt, see Pelkonen & Dholakia, 2004). By 2005, the technology markets revived and the survivors of the crash, as well as new startups became active in technology and market development. In 2004, the success of content-driven m-commerce companies started shaping the m-commerce business overall. Neogames, the Finnish initiative for boosting mobile game development and commercialization, supported strongly again by TEKES, enabled Finnish mobile game-related companies to emerge as top actors in international markets (see, e.g., Pelkonen, 2004). We will take a closer look at some of these companies later in this chapter. Key figures and facts about European mobile telecommunication markets are available at multiple Websites (see, e.g., www.netsize.com and www.stat.fi, www.mintc.fi). Since markets evolve constantly, only the key facts about the Finnish markets are summarized here (see Table 1). In the late 1990s, the early years of m-commerce, markets were still emerging and mobile operators, as well as pioneering application developers, were investing continually and strongly in “future” solutions and trials, even when immediate demand growth and returns were not forthcoming. Innovation, R&D and technological capability and compatibility, and relationships with Nokia — were the key competitive factors for Finnish m-commerce companies. Pioneering companies attracted investments and were seen as future winners. In 2005, the markets became mature and highly competitive for Finnish companies. There were multiple reasons for this. First, the globalized Nokia Corporation was sourcing its partners worldwide, not just from Finland or Nordic nations. Second, Japan and East Asia overtook the Nordic nations in many
Table 1. Selected facts about the Finnish mobile markets in 2003 Number of mobile subscribers (2004): 4.7 millions (91% of total population), telephony (wired/wireless) 98 %, more wireless subscriptions than wired. Key operators: TeliaSonera, Elisa, DNA Finland and Saunalahti
Status of 3G: Operations started in 2003, still marginal. Terminals: 0ver 50 % color screens, 65 % Java-enabled
Most successful value-adding services: Ringtones, logos and images; also recently downloadable interactive applications for mobiles
Other characteristics: Strong impact of Nokia on market development. Many start-ups with an international focus. Home of multiple trials and technology programs. Total value of value-added services markets (2003): 188 million euros
Source: Netsize (2004) and Statistics Finland (2004)
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aspects of mobile commerce innovation and solution development. Third, there is an emerging consensus that mobile solutions need to be tested with end users in large, core markets — Central Europe, the United States, UK, Japan, China, etc. It is no longer sufficient to build solid business cases based on technology trials in small marginal markets such as Finland. Fourth, media- and branddriven mobile solutions have become increasingly common — and the major media and brands are located outside Finland. Finally, there is fierce price and market power competition as well as strategic leveraging of relationships throughout global mobile value networks. Therefore, it is no longer easy to innovate merely by working from a small domestic country, even with the advantageous proximity of Nokia. M-commerce companies have little choice but to internationalize.
Internationalization Framework for M-Commerce Companies As the global markets for m-commerce solutions get crowded with companies (media, software, transactions, middleware technology, etc.), it is fruitful to create a model to facilitate the understanding of linkages between various kinds of market actors. In their analysis of the Finnish mobile telco markets, Pelkonen and Dholakia (2004) leveraged the Scandinavian network-research models (Johansson & Matson, 1986) to illustrate the prevailing strong market dynamics within the mobile telecom industry. The key objective for market actors, they argued, is to gain a strong position within their business network that consisted of various types of mobile telecom market actors and market activities. The strategic goal for leaders was to obtain strong control over core assets, various tangible and intangible resources in the mobile telecom markets. This model is developed further for the purpose of this chapter. The analysis to follow shows how challenging it is for a mobile solutions company originating in a small local market (such as Finland) to penetrate major global markets. In the model presented in Figure 1, there are two main value chains leading up to the end users of mobile solutions. The focus in this framework is mainly on B2C solutions and markets. First is the content creation value chain, commonly referred to as the core process in the media business (see, e.g., Baubin et al., 1996). Second is the consumer software development and commercialization value chain, commonly known as the software (mobile or computer-based) industry functional structure (see Pelkonen, 2003). Both value-adding processes lead up to the adoption and usage of the solution/media and generate payments from the end-users — the ultimate source of all the earnings logics within mobile
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Figure 1. Internationalization framework for m-commerce companies Content creation
Software/solution R&D
Content m arketing & sales
Content distribution
Software/solution packaging
Software /solution marketing & sales
Software/solution distribution
Consumption/Usage Commun ications (C) Loc ation (L) Info rmation (I) Payme nt (P)
Global software Global software Global m-comme rce developers vendors portals Global IPR owners Global Global Global content telcos media companies creators
INTERNATIONAL LEAG UE(s) (e .g. Europe )
Regional software deve lopers Regional IPR ow ners Regional content creators
DOM ESTIC/SUBREGIONAL LEAG UE(s) (e .g. Finlan d, the Baltics)
Domestic softw are Dom estic softw are devel opers vendors Domesti c IPR owners Dom estic Domestic content media companies creators
Regional software vendors
Regional m-commerce portals
Regional media companies
Regional telcos
Dom estic m-commerce portals Domestic tel cos
ACCESS PROVISION
G LO BAL LEAGUE (se v eral contine nts)
Content aggregation
"The mobile consumer " Mobile s olution/content consumption takes place alw ays via dom es tic mobile ne tw or k . Yet, global and re gional operator s can of fer the ir s er vices globally.
telecoms. The CLIP-framework presented earlier suits this picture perfectly. Mobile content/software product is communicated (C) at a specific location (L) to the consumers who obtain it through the access networks (I). Providers obtain the payment (P) from the consumers. The bottom part of the framework is distributed into three main layers: global, international and domestic/sub-regional leagues. These three layers of international business underscore the fact that mobile telecoms represent one of the most internationalized fields of contemporary business. Mobile consumers move and travel with their devices and the global telcos (such as Vodafone or TMobile) constantly seek new opportunities for additional revenues. Consumers expect to have their services available wherever they move at any time of the day or year. The walled-garden strategy (limiting the access to services of only one operator or geographic location) may in the long run become a major obstacle for the industry’s development. A developer/vendor of m-commerce solutions — content or software — from a small domestic market such as Finland would have to, at a minimum, partner with domestic operators and m-commerce portals. If domestic business potential for the solution is only marginal, the only way to grow and develop the business is to expand operations abroad (see Luostarinen & Gabrielsson, 2004). To
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succeed in this, the developer will have to obtain access to the content/ distribution portals of (1) other domestic markets, (2) regional markets and/or (3) global markets. Developer/content creators with these kinds of ambitions are required not only to expand their geographical reach, but also to ensure that all the elements within the CLIP-setup (e.g., communications and international payment systems) are expanded to support the targeted expansion. Relationships with global manufacturers, such as Nokia, become crucial for such operational expansion. Furthermore, the domestic company can expand via international/ global alliances entailing partnerships, mergers or acquisitions. This can take place either horizontally in the value chain or vertically within the internationalization layers.
Mobile Media as the Source for Innovation and Growth of M-Commerce As a third main area of analysis in this chapter, we examine one of the key developing areas in the m-commerce business: mobile media. Mobile phones are developing from a communications-only device into true portable mini-computers and media consumption devices. The increasing penetration of high-speed transmission networks (3G/UMTS/Wi-Fi), increased computing power and storage capacity (hard drives) in the devices, as well as the changing consumption habits for mobile media users have created an interesting landscape for mobile content and media innovation. The analysis that follows is based on the experiences that Finnish companies have had in the early years of mobile media. Such analysis contributes also to the broader understanding of what mobile media are and what kind of innovations can be expected in the coming years. Mobile media, by definition, reside at the interface between two major business areas: media publishing and telecommunications. The two sectors have their own legacy and earnings logics, which make the “mobile media” industry innovations face continual pressures from two established and conventional sectors. Based on the author’s research in the North European m-commerce markets, mobile media can be categorized into four main categories. The categories are based on the content creator’s origin and a combined category termed “the meta-data.” The main categories are: (1) publisher-originated content; (2) personal and person-to-person content; (3) community-created content; and (4) content related to spaces and locations. In the overlaps and interstices of these four content areas lie the meta-data driven innovation areas, with key focus on the question: “What is new, relevant and matches the consumption needs and contexts of the mobile end-user?”
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Figure 2. Mobile media solution and innovation areas PUBLISHER-ORIGINATED MOBILE CONTENT
PERSONAL MOBILE CONTENT
MOBILE MEDIA
Mobile television
Mobile music (Ringtones, MP3s etc.)
Personal Camera phone images
Mobile radio Mobile ads Mobile games
Mobile publications (books, magazines) Professional Images
Mobile messaging enhancers animations, images etc) Personal mobile video
Mobile news (SMS, MMS)
Mobile browsing Mobile webfeeds Web feeds
Mobile idendity identity & reputation
Mobile TV games Mobile TV chats
Mobile access online communities
Mobile avatars
Personal messaging (MMSs, SMSs, e-mails)
Personal collections Conference calls
MobBlogs
Mobile preferences
ImageFrames LiveSpace
Location-guides
ImageBlogs Ringtone charts Favourite listings
ImageBoards
Location-based tagging Archive space
Mobile in retail stores MessageBoards
Shared collections
AMBIENT MOBILE CONTENT
Shared Hot spot content Social networks (FOAFs)
COMMUNITY-BASED MOBILE CONTENT
Location-based advertising Hot spot content portals
Location data
Characteristics of mobile media: Portable, contextual, relevant, personal, distributable/propriatory
Source: Author’s own research and Satama Interactive (2005)
The mobile media framework along with some of the up-to-date technology area buzzwords is presented in Figure 2. The technology areas are not explained in detail in this article: Details can be obtained via simple Internet searches. For example, Kymäläinen (2004) has published a very thorough analysis of the whole mobile entertainment (media) market in a recent project, M-Gain (www.mgain.org). This EU-funded analysis gives detailed insights into the areas of this framework. In analyzing the future potential for m-commerce innovations, this framework helps understand the challenges an innovator may face in commercializing its solutions. If the innovation is related to something in the traditional publishing sector (top-left corner), the business model will have to somehow reflect the content publishing models: earnings by transaction or subscription or by advertising. On the other hand, the personal mobile content sector reflects the value and models controlled traditionally by telcos: business revenues generated by communications time and volume. In 2005, newcomers to the mobile content consumption seem to arrive from the broadcast business — mobile television markets seem to be emerging (see, e.g., www.mobiletvforum.com). Comparing the publisher-driven and personal-driven content areas indicates that the content possessing the highest perceived value for the end-users is very often in the personal segment. Images taken, for example, from family events or important messages from cared ones — these usually constitute the most
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valuable elements for mobile consumers. Yet, profit margins for media companies and content producers from such person-to-person content are nearly nonexistent. Telcos and various mobile portals that offer storage capacity are in somewhat favorable market positions to gain from this segment. In late 2004, the power of personal media content production was clearly shown during the Asian Tsunami catastrophe: Individuals’ digital cameras and mobile device recordings became the most authentic reports of the wave’s attack. As a consequence of this, media companies were willing to pay major sums for these personal content files. A similar case was even stronger with the July 2005 London bombings. User-generated online sites such as Flickr.com and Wikipedia.org are starting to play an increasingly significant role in journalism, and the mobile phone is becoming a key enabler for this new wave of “citizen” journalism. The two remaining sectors provide very interesting sources for innovations. Solutions designed to facilitate communications between individuals’ social networks may become a surprisingly important element in m-commerce/mobile media revenue generation. Apple’s iTunes listings and favorites-sharing functionalities have shown that there is major value in community-oriented media consumption. Moreover, the success of real-time TV chats and games via text messaging with mobile phones (see, e.g., www.waterwar.tv) have proven that Andy Warhol’s 15 minutes of fame have turned into 15 seconds of fame via consumer messages appearing on live TV chat discussion. Location, as the keynote chapter of this book clearly indicated, is one of the core elements in the emerging m-commerce, as well as mobile media, consumption environment. The common term that researchers and the mobile telco industry in Finland are using to characterize solutions designed for spaces and locations is “ambient media.” In the early 21st century, Nordic mobile operators and software producers have been active in testing and developing location-based concepts, and their commercial potential is starting to become a reality. In urban areas, such innovations appear to be especially feasible. The near-GPS-accurate location possibilities of installed cellular networks have enabled location-based cellular gaming (see, e.g., the Swedish website www.itsalive.com). Furthermore, solutions combining urban area maxi screens and SMS/MMS-based interaction are becoming popular (see, e.g., www.satama.com: MMS-board). Interesting opportunities may also occur in the areas of tourism. For example, MMS-photos taken of famous sights under perfect weather conditions could soon become available to visitors trying to take photos at less than optimum conditions. A professional photographer–in fact anyone with a camera phone — could take these photos. Regardless of the origin of the mobile media solution, the end-user needs an intelligent “sensor” device that can become “aware” of the mobile media solution/content/access possibilities. Until recently, mobile phones have been the dominant device for mobile media interaction. Yet, Finnish sports equipment Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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manufacturer Suunto (www.suunto.com) has demonstrated — in cooperation with Microsoft — that other kinds of devices can be used for mobile media consumption. Suunto’s M3 wrist-top computer receives data (e.g., weather forecasts) based on the user’s settings. Combined with Suunto’s special expertise in physical performance measurement, such devices can “sense” both the environment as well as the individual’s movements, and share such data with preferred target groups. In the near future, this kind of new generation of mobile media information and consumption may open up interesting opportunities for mobile companies.
Successful Mini-Cases in Finland’s Mobile Sector To bring more clarity to the two frameworks presented in the previous section of this chapter, we turn to some Finnish mini-cases. Each of these companies has their own solutions for benefiting from the internationalization opportunities and the media consumption-driven future for m-commerce.
Sulake Labs, www.sulake.com Year of Founding: 1000 Short Description of Activities Springing from the hobby of its multimedia-enthusiastic founders, Sulake Labs created one of the first truly profitable “virtual goodie” environments. Their concept “Habbohotel” is a virtual 3D community in which registered members can interact, move, chat, play games, dance, etc. Furthermore, users can create their own rooms in which they can purchase virtual furniture and other decorations with their mobile phones. Surprisingly, the concept has proven to be very successful and Habbohotel has several thousand active members. The original Finnish operation, “Hotel Kultakala,” is offered in cooperation with a Finnish telecom operator and has become profitable for both parties. In addition, the solution has won several awards in international digital design contests. Status as of Early 2005 Sulake continues to develop its technology solutions. It has opened its Fuse software solution for developers worldwide. Sulake has also expanded into
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international markets with operations in the UK and elsewhere. In January 2005, Sulake collected additional financing of 18 million euros for its international expansion. The company has set targets to become one of best-known global brands among young mobile consumers. Sulake employed 220 people, operated in 17 countries and had a turnover of about 20 million euros in 2005.
Sumea, www.sumea.com Year of Founding: 1999 Short Description of Activities Sumea started as one of the pioneering companies to produce professionally miniature digital games for mobile devices. The company benefited strongly from Nokia’s need to have well-functioning, attractive and compact games to promote its devices. Sumea’s games were in just the correct format and the company’s timing to develop the games was just perfect. Sumea’s games became immediate hits in 2002-2003 and have been among the most sold mobile games globally. Sumea attracted many financiers to invest in it, but in June 2004 was acquired by a US-based mobile game-focused developing company, Digital Chocolate (DC). DC was formed by one of the gaming industry giants’ Electronic Arts founders, Trip Hopkins. Status as of Early 2006 Sumea/Digital Chocolate is still located in Helsinki, employs over 100 people and operates as the European headquarters for Digital Chocolate. The company earns its main revenues from direct sales via operators’ mobile portals. Through the parent company, Digital Chocolate, Sumea has got its products are available through more than 200 operator and distribution partners, including Cingular, Orange, Sprint, T-Mobile, 3, Verizon Wireless, and Vodafone in over 60 countries worldwide.
Digia, www.digia.com Year of Founding: 1997 Short Description of Activities Originally founded as an e-learning and digital media service company in the early 1990s, Digia changed its strategy radically in 2000. It was faced with
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profitability challenges and decided to focus all of its resources on Symbianbased software solution development. Symbian, of course, is the popular operating system for mobile devices. The risky but bold strategy has propelled Digia to become one of the powerhouses in global Symbian production. Despite the global IT-crash in 2001, Digia kept on growing and has been able to produce both customized and standardized software solutions for its clients. Status as of Early 2006 SysOpen Digia Plc. is one of the leading producers of Symbian OS solutions in the world. Its smartphone devision has nearly 300 software professionals and had a turnover of 21 million euros in 2004. Moreover, SysOpen Digia Plc. is a leading integrator of information and communication solutions, providing engineering services, software solutions, training and consulting for enterprises, smartphone manufacturers, operators, public organisations and associations internationally. SysOpen Digia provides a complete end-to-end offering for both smartphone and information systems development. Company operates globally and employes over 800 professionals. SysOpen Digia’s pro forma turnover reached 64.1 million euros and EBITA 5.8 million euros in 2004, and the company is listed on the Helsinki Exchange. Company’s key clients include Nokia and TeliaSonera.
Sofia Digital, www.sofiadigital.fi Year of Founding: 2000 Short Description of Activities Having its origins in FutureTV, a research project led by the Helsinki University of Technology, Sofia Digital (SD) became the first company to produce commercial interactive software for the MHP-standard-based (Multimedia Home Platform) digital television solution network. SD created the national user interface for the Finnish digital terrestrial TV program guide. Besides television applications, SD has been able to expand its line of operations to include mobile interaction with television broadcasting. In 2004, Sofia acquired the Finnish market leader in mobile TV game production, Outerrim, to benefit from this growing field of business.
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Status as of Early 2006 Sofia Digital is among the leading European companies producing interactive applications for digital television. It employs 40 television and software professionals. Sofia’s key customers include Antenna Hungaria, Czech Telecom, Helsinki Televisio, Mediaset, MTV3, Nelonen, Nokia, Nordea, ST Microelectronics, Sun Microsystems Italia, Veikkaus and YLE. The company’s MHP expertise is of the highest standard and it has expertise also in cross-media solution design and implementation. SD’s future within the field of televisionbased interaction is strongly tied to the popularity of interactive set-top boxes as well as to the penetration of text-message-based interaction among television broadcasters.
Satama Interactive, www.satama.com Year of Founding: 1997 Short Description of Activities As the leading Finnish creator of digital solutions for Finnish companies, Satama has conducted mobile Internet-related operations since 1999. Satama has been actively helping its customers to promote and commercialize mobile applications. Satama’s special expertise has been in mobile event and maxi-screen interaction solution design. Satama’s core business has been in digital marketing communications and solution design, but mobile solutions have started to play an increasingly important role in the company’s revenue generation. In late 2004, Satama acquired a small Finnish software company, Mind-on-Move, to increase its presence and expertise in downloadable mobile application markets. Moreover, during 2005 Satama carried three strategic acquisitions, Neomotion (GER) focusing in mobile innovation and design, Oer (NL) focusing in interactive marketing communications and Quartal Content Management (FIN) focusing in Microsoft .NET technologies. Status as of Early 2006 Satama currently employs about 400 digital media professionals. In 2005, it had a turnover of about ~27 million euros and had offices in Finland, in the Netherlands as well as in Sweden and in Germany. Satama’s key customers include mobile industry companies such as Nokia, Vodafone, KPN and TeliaSonera and media companies such as Reed-Elsevier, MTV Networks Benelux, Talentum, Sanoma and Yhtyneet Kuvalehdet.
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Movial, www.movial.fi Year of Founding: 2001 Short Description of Activities Movial’s founders have their background in the dotcom-era high-end consulting company, Adcore. The founders sold their Linux-technology-focused software and consulting company to the Swedish-led Adcore coalition in 1999. Adcore expanded globally at an extremely rapid pace and had, at its peak in 2001, operations in 13 countries and employed over 2,000 IT-professionals. After radical restructuring, Adcore was left with operations only in Stockholm and 300 employees. The Finnish entrepreneurs left the Adcore coalition in late 2001 to form two companies: Creanor, focusing on digital design, and Movial, focusing on mobile application design and implementation. From its original 25 employees in 2002, Movial has grown rapidly, employing 90 IT-professionals at the end of 2004. Status as of Early 2006 Movial is constantly expanding its expertise and product portfolio in both customized and standardized mobile software production. The company had a turnover of almost 5 million euros in 2004. From its original 25 employees in 2001, Movial has grown rapidly, employing 100 IT-professionals at the end of 2005. Its main customers were Nokia, Orange, Telefonica, HP, One World Wireless, Blueberg Digital Ltd. and Buscom. The founders own the company and are constantly leveraging experiences gained from the Adcore’s rapid internationalization efforts as well as the expertise and cost-efficiency obtained by Linuxbased server solutions.
Technological and Managerial Lessons from Finland’s Mobile Experience Though its pioneering moves have been overshadowed to some extent by Asian developments, the Finnish case in the global m-commerce business is still very relevant for business analyses of mobile markets. Nokia’s transformation from an industrial diversified manufacturer into one of the leading high-tech companies in a bit over a decade is unparalleled in global economic history. Nokia’s massive growth has given a kick-start to multiple Finnish start-up companies and
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Figure 3. Key criteria for MNCs to decide location of operations Appropriate R&D funding arrangements Efficient internal market conditions; cost efficiency
FIRM
Access to top-level research
Access to high quality experts and labour; mobility; respect for diversity
Efficient VC markets
Rich fabric of private partners; enabling vertical and horizontal integration
Favourable regulatory environment; harmonised rules; IPR provisions; company statutes; taxation, etc.
Source: Kosonen (2004), and Nokia
enabled a much higher role for these companies than others originating from comparably small, high-tech countries. Finnish governmental support has been strong in supporting the visionary and risk-taking strategy that Nokia and its partners adopted. The major challenge for any company or economy performing excellently for several succeeding years is to keep up with pace of innovation. Nokia’s failures to foresee the demand for clamshell-shaped mobile phones caused it to lose its market share in 2004. Yet, the industry giant was able to react to the need and streamline its operations, design and R&D — and rapidly developed the models needed to keep up with the constantly intensifying rivalry. In contrast to earlier crises, Nokia sought solutions from all global units of the company. For the Finnish economy, especially the ICT-sector, Nokia’s global sourcing willingness creates greater challenges. Without stronger internationalization, small actors– previously dependent on Nokia–may risk of losing markets and revenues. Similar situations prevail also in other smaller economies. The Swedish ICTsector was strongly dependent on the activities and initiatives of Ericsson, which has now become the more global Sony-Ericsson. As the globalization of ICT firms continues apace, relying on a single large domestic partner becomes increasingly risky. Nokia Vice President Kosonen, for example, has presented some key criteria for a multinational corporation seeking partners and business operation locations. His approach (see Figure 3) sums up succinctly and supplements the issues presented earlier in this chapter and in the mini-cases. Kosonen’s criteria show clearly the kind of elements that governments, start-up companies, financiers and other actors in the turbulent m-commerce markets should focus their actions on to serve global mobile actors. The Finnish success case of the 1990s demonstrates clearly how positive development can take place when all the elements are present. Furthermore, Nokia’s more recent capability to expand beyond conventional national boundaries demonstrates how challengCopyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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ing it is for small and open economies to sustain the positive development year after year. The Finnish mini-cases demonstrate that for m-commerce start-ups originating from small domestic economies, dependence on a local “locomotive” (such as Nokia) may be a very fruitful strategy in the early phases. Yet to succeed on a larger scale, these companies need to expand their customer base rapidly to new markets and segments that are independent of the success of the “door-opener/ locomotive” company. The small and medium enterprises (SMEs) need to expand their internationalization networks (Johansson & Matsson, 1988) and establish positions in business areas and markets that that let them develop their operations regardless of the activities of the “godfather/door-opener/locomotive” company. Convergence of mobile communication technology into consumer electronics is bringing the m-commerce industry to another turning point. As media are starting to be consumed via networked mobile devices, mobile telcos, start-ups and equipment manufacturers are faced with the challenge of cooperating with media-driven companies. In the 1990s, the boom for mobile communications was driven by technology innovation and provision of additional technology features to mobile phones. By contrast, the boom of the second half of first decade in the 21st century may well be led by mobile content. Consumers’ preferences are about to switch from technological attractiveness to media consumption-driven models. In the next few years, portable gadgets such as mobile phones will be purchased to consume content, not just communicate. In these evolving markets, time will show which of the winners of the 1990s, mobile telcos and manufacturers, will continue to triumph and which new players will carve out significant market shares. Based on the Finnish case, the mobile companies are in a solid but turbulent situation. Competition from Southeast Asia and traditional consumer electronics are strong. Regardless of the outcome, for the incumbent m-commerce actors one thing is sure: there are, once more, great and emergent opportunities for innovations in the m-commerce markets.
Questions for Discussion 1.
What kind of strategies can m-commerce companies in Finland use to expand the geographical business reach for their products and services?
2.
What challenges does international expansion create for m-commerce companies, especially for companies from small but innovative nations such as Finland?
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3.
How can mobile portals benefit from user-generated content in their content and service offerings?
4.
What kind of business strategies and conditions are needed to make location-based mobile solutions break into mainstream markets?
Acknowledgments This chapter is dedicated to the memory of D.Sc. (Econ.) Matti Pulkkinen, my former research supervisor and honored colleague and to all the victims of the December 2004 Tsunami in Asia.
References Baubin, T., Bruck, P., & Hofbauer T. (1996). Electronic publishing — Strategic developments for the European publishing industry towards the year 2000. ECSC-EEC-EAEC, Brussels-Luxembourg. Gabrielsson, M., & Gabrielssson, P. (2003). Global marketing strategies of born globals and globalising internationals in the ICT field. Journal of Euromarketing, 12(3/4), 123-145. Johanson, J., & Mattsson, L.-G. (1986). International marketing and internationalization processes — Network approach. In P.W. Turnbull & S.J. Paliwoda (Eds.), Research in international marketing (pp. 234-265). NH: Croom Helm. Johanson, J., & Mattsson, L.-G. (1988). Internationalization in industrial systems: A network approach. In N. Hood & J.-E.Vahlne (Eds.), Strategies in global competition (pp. 287-314). New York: Croom-Helm. Luostarinen, R. (1979). Internationalisation of the firm. Doctoral thesis, The Helsinki School of Economics. Luostarinen, R., & Gabrielsson, M. (2004). Born globals of small and open economies (SMOPECs) — A new entrepreneurial challenge. In L.P. Dana (Ed.), Handbook of research on international entrepreneurship. Cheltenham, UK: Edward Elgar. Madsen, T., & Servais, P. (1997). The internationalization of born globals — An evolutionary process. International Business Review, 6(6), 1-14.
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Kosonen, M. (2004). Global competitiveness of MNCs. Presentation at EIBA academic conference, Llubljana, Slovenia. Kymäläinen, P. (Ed.). (2004). Mgain: Mobile entertainment industry and culture. Helsinki University of Technology. Retrieved from www.mgain.org Netsize Guide. (2004). Developing the mobile multimedia market. Retrieved from www.netsize.com Pelkonen, T. (2003). Value creation patterns and current trends in digital media service creation: A case study of the Finnish digital media industry. Europrix Scholars Conference paper, November 13, 2003, Tampere, Finland. Retrieved from www.mindtrek.org/sc Pelkonen, T. (2004). Mobile games markets. ACTen E-Content Report 3. Retrieved from http://www.acten.net/cgi-bin/WebGUI/www/index.pl/ mobile_games Pelkonen, T., & Dholakia, N. (2004). Understanding emergent m-commerce services by using business network analysis: The case of Finland. In Nan Si Shi (Ed.), Wireless communications and mobile commerce (pp. 105131). Hershey, PA: Idea Group Publishing. Pulkkinen, M. (1997). The breakthrough of Nokia mobile phones. Doctoral dissertation, Helsinki School of Economics. Satama Interactive. (2005). Satama insight: Mobile media as a business opportunity. Company internal material. Helsinki, Finland.
Endnote In addition to the mentioned sources, the following online news database were used in this article: Case company Web sites; news from www.it-viikko.fi, www.tietoviikko.com, www.talentum.com, www.r eka ksois. com, www.digitoday.fi; several statistics and analyses from www.stat.fi; and www.mintc.fi.
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Chapter VI
France: Mobile Communications and Emerging M-Commerce Pierre Vialle, STORM Research Group, GET-INT, France Olivier Epinette, STORM Research Group, GET-INT, France
Abstract This chapter introduces the emerging m-commerce market in France. Despite the current low level of use, this market is characterized by the implementation of an increasingly efficient m-commerce value chain by network operators, content providers and content enablers. As a consequence, innovative and attractive services are being introduced progressively for both consumers and businesses, which are analyzed here with the help of the CLIP framework. Furthermore, the authors argue that an m-commerce strategy should be designed in synergy with a fixed network-based e-commerce strategy whil e carefully following and anticipating the progressive implementation of significant technological advances.
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Introduction Despite the significant growth exhibited in previous years, France has the lowest wireless penetration in Europe, 73.9 percent, compared with an average penetration rate of 77 percent in Western Europe, and 80 percent in Italy, Finland or Sweden (Jupiter Research, 2004). This is consistent with several other ICT indicators (OECD Key ICT Indicators, n.d.; Vialle, 2003) where the French market scores lower than average in Western Europe. In addition, the French mobile telecommunications market exhibits three other characteristics. First, a relative concentration of service supply, since there are only three mobile operators in France and Mobile Virtual Network Operators (MVNOs) are quasi-absent from the market. Second, it is the only large European country where Vodafone does not directly operate a mobile telecommunications company. Third, the market for both voice and data services tends to be somehow less developed than in other European countries. However, with 44.5 million subscribers, the French market is the fourth most important market in Europe and is expected to become the second market by 2007 (Salcedo, 2004).
Multimedia Services Market Nearly one quarter of the market, or 10.3 million subscribers, uses a diversified range of multimedia services. The bulk of the market concerns messaging services. The most popular service is SMS: 10.7 billion SMS were sent in the year 2004, corresponding to a monthly average of 23.6 messages per subscriber. The SMS+1 traffic enjoyed a 66 percent growth in 2004, reaching 228 million messages and generating revenues amounting to 135 million euros. The MMS consumption is also increasing, but is limited by the number of compatible handsets — around 12 million in 2004 — technical complexity and high tariffs. Tariffs can vary according to the operator and the type of message (text, picture, video and postcard), from around 0.10 to around 2 euros. The bulk of the content services market concerns ringtones, then icons, wallpapers, logos and animations, followed by mobile alerts, and finally mobile games (Salcedo, 2004). According to Bigot (2004), 58 percent of mobile handset owners regularly send SMS, 29 percent download icons, logos and games, 18 percent use vocal information services, 13 percent send SMS+, 11 percent send MMS and 8 percent consult mobile Internet sites2 . The current usage of services involving monetary transactions is very limited, and is not expected to represent a large share of revenues in the near future. This rather undeveloped picture of the mobile multimedia market corresponds to the “old” supply environment: that of the relatively low bandwidth of GPRS
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supported services with an effective bit-rate, usually not exceeding 50 Kbps. Furthermore, the market was limited by the number of multimedia-enabled handsets used, about 14.2 million in 2004 (Salcedo, 2004). Limited deployment and security concerns seem to be the main barriers for adoption. The higher bit-rate allowed by UMTS (up to 384 Kbps) or EDGE (up to 150 Kbps) may trigger market development in France. Video telephony, which has been a mythic telecommunications service in the mind of the French for more than twenty years3 , could well be the killer application for UMTS in France. The French operators have taken care to ensure interoperability between UMTS and other technologies and to provide dual mode handsets. This should allow them to avoid the difficulties encountered by NTT DoCoMo in Japan, because of the limited coverage of UMTS combined with the impossibility to use the 2.5G network with 3G handsets. Location-based services could also trigger the use of transaction services in the future. However, price may constitute a significant barrier to adoption: Tariff plan subscriptions are still expensive, starting at 52 euros for SFR and 55 euros for Orange, and the cheapest handset is priced at 199 euros. One minute of video telephony is priced as two minutes of voice call4 , and 30 minutes of video or TV cost between 10 and 15 euros.
Structure of the Chapter French mobile operators are presented first in order to provide some background information on the French market. A selection of m-commerce services is then introduced, followed by the assessment of the state of service provision in France with the help of the CLIP framework. Furthermore, the role of content-enabling companies is outlined in reducing complexity for both users and suppliers. Significant technological and managerial lessons are suggested in the conclusion.
Background There are currently three mobile operators in France offering GSM services (Table 1): Orange (France Télécom), SFR and Bouygues Télécom. All three implemented 2.5G GPRS services in 2002 and hold a 3G UMTS license. Compared to most other large European mobile markets, which have four or more operators, this situation may be detrimental to competition. On the other hand, it may facilitate the deployment of UMTS, due to the high investment involved and the uncertainty of market development.
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Table 1. French mobile market in 2004 (France and overseas departments and territories) Operator Orange SFR Bouygues Télécom Others 6 Total
Number of subscribers 21,251,500 15,819,800 7,468,400 12,100 44,551,800
Market share 47.7% 35.5% 16.8% NS 100%
Contract Customers 60.6% 60.7% 66.1% 11.5% 61.5%
SMS/Month Q4 20045 21.9 26.4 22.3 NA 23.6
Source: Le tableau de bord du marché national (2005)
Orange France is a 100 percent subsidiary of Orange SA (100% France Télécom), created in 2001 after the acquisition of Orange plc by France Télécom in August 2000. The wireless activities of the two companies were merged to create an international wireless group with a strong focus on Europe. France Télécom has been present on the mobile market since 1985 with analog services and launched GSM services in 1992. The former national monopoly is now a strong group with a significant international presence. With 47.2 billion euros in revenue, the group ranked fifth in the world and second in Europe in the year 2004. With 19.7 billion euros in revenue, Orange SA was the seventh largest mobile operator in the world and the third in Europe. It is present in 18 countries and has shown a strong commitment to mobile Internet with the acquisition of UMTS licenses in six countries. In Europe, Orange is the leader in the UK in number of customers, but is not present in the three other main markets: Germany, Italy and Spain. In August 2003, it formed an alliance with Telefonica Moviles, TIM (Telecom Italia Mobile) and T-Mobile, which aims to deliver a seamless customer experience across its combined geographical footprint. The creation of this alliance is obviously a response to the threat represented by Vodafone, whose extensive presence allows the provision of seamless, advanced services in Europe. In December 2004, Orange France officially launched its UMTS services under the “Orange Intense” name. It is part of France Télécom’s broader strategy to offer seamless broadband services to its customers, such as video telephony, across various network accesses such as UMTS, EDGE, Internet, Wi-Fi or Wimax. With an initial network investment of 500 million euros, the UMTS services were targeted to reach 40 percent of the French population by the end of the year 2004. Orange will also roll out EDGE technology on its network in order to provide complementary “medium bandwidth” services, which will result in coverage of 85 percent of the population. For the launch, six dual mode UMTS/ GPRS handsets were available, and UMTS/EDGE handsets should be available during the year 2005. Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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SFR is a subsidiary of SFR Cegetel (56 percent Vivendi Universal, 44 percent Vodafone), and reached 6.7 billion euros in revenue in 2003. SFR launched analog NMT services in 1988 and GSM services in 1992. With 8.3 billion euros in revenue in 2004, SFR Cegetel is the second largest French telecommunications company for both fixed and mobile telephony, and thus France Télécom’s main challenger. Its major stakeholder, Vivendi-Universal, is a large international entertainment and media group, with 21.4 billion euros in revenue in the year 2004. Its other stakeholder, Vodafone, is the number one mobile operator in the world, with £43,602 million in revenue in 2004. It has an extensive international presence, and operates mobile networks in nearly all the European countries, including four of the “big five” European markets: Germany, UK, Italy and Spain. France is the only major European country where it does not control a subsidiary, and Vodafone is seen as a possible candidate for a takeover of Vivendi-Universal. SFR Cegetel is focused on the French market, but is also present through other Vivendi Universal subsidiaries in five other countries. Despite its independent management, SFR benefits from the same international services as a Vodafone controlled subsidiary, such as roaming agreements, access to the Vodafone live!™ portal, business solutions or a wide range of suitable handsets. After testing UMTS in Monaco and other cities, SFR launched its services in November 2004. The initial network investment is similar to that of Orange (500 million euros) for a coverage of 38 percent of the total population at the end of 2004. The range of services corresponds broadly to Vodafone’s offering, with continuity of 3G services in 12 countries. For the launch, eight dual mode UMTS/GPRS handsets were available. SFR also claims interoperability between 3G and Wi-Fi. Bouygues Télécom is a subsidiary of Groupe Bouygues (83 percent), a large building and media company with 23.4 billion euros in revenues in 2004. Created in 1994, it launched its DCS 1800 services in 1996, and generated sales of 3.7 billion euros in 2004. As the latest operator on the market, Bouygues Telecom has used innovation to differentiate itself from the two market leaders: It was the first to target the mass market with offers of rate plans by the minute, and introduced high resolution sound on its network. It remained mainly focused on the mass market, and its prime target market is in the 18-38 age bracket. Interestingly enough, it signed a contract with NTT DoCoMo in April 2002 in order to launch i-Mode services in France. Taking advantage of the technical resources and the knowhow previously developed in Japan, it was able to launch i-Mode services at the end of November 2002. Bouygues Télécom claimed to have one million i-Mode subscribers in December 2004, having access to 300 services on its portal and 3,000 independent sites. i-Mode represents a major stake for Bouygues Télécom and is allocated 50 percent of its advertising budget.
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An average i-Mode subscriber represents an ARPU increase of 13 euros compared to a non-i-Mode subscriber for the same user range. Bouygues Télécom belongs to the i-Mode alliance with Telefonica, KPN mobile and Wind, allowing joint procurement of handsets. Bouygues Télécom did not participate in the first UMTS license contest, but applied for one in May 2002 as the French government had decided to lower the license fees from 4.9 billion euros to 619 million (plus one percent of revenues). The license was awarded in September 2002 and the operator has been testing this technology since 2003. However, Bouygues Télécom has announced its intention to implement EDGE technology for a transitory phase from the year 2005, before rolling out UMTS. The data rate of 150 Kbps is lower than the 384 Kbps data rate of the first UMTS generation, but is estimated to provide enough comfort to users. EDGE could be implemented at a reasonable cost in order to cover 90 percent of France by the end of the year 2005, an advantage over noncontinuous UMTS networks. Bouygues Télécom prefers to wait for the second UMTS generation using the HSDPA format that should be available from 2006 and would provide a data rate of 2 Mbps. Three MVNOs operate in France with very limited market presence. Transaltel has had a contract since 2001 with Bouygues Télécom and concentrates on cross-border travelers between France and Belgium. Under pressure of the ART, the French regulator, two new agreements were signed in 2004: one between SFR and Debitel, a company formerly marketing mobile services on behalf of mobile operators, and one between Orange and Omer Telecom. Under the Breizh Mobile brand, the latter company is focused on the Brittany region. One radio station, NRJ, and one TV chain, M6, have also signed an MVNO agreement with Orange and SFR, with young people as the specific target. The French market is somehow atypical in Europe. It is the only large European market where Orange has a leader and not a challenger position, as it is a subsidiary of the main incumbent. This position may be also explained by the fact that Vodafone does not operate directly in France.
Selected Services in France’s Mobile Sector In this section, we present a selection of m-commerce services because of their popularity, their usefulness or the innovative way they exploit technical capabilities in order to answer customer requirements.
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Location-Based Services: The Cityneo Case Location-based services allow mobile users to get useful information according to their geographical location. They are all the more attractive in that the intensity of needs may be very high, as mobile handsets may be the only available or most practical link to information for users. They are challenging for suppliers because information needs to be accurate and up-to-date, and these services must correspond to the temporal requirements of users. For example, indicating a restaurant or a pharmacy that is closed at the time it is requested would be useless to users. The variety of the possible needs and tastes also means offering a high level of personalization and selection. The services provided by Cityneo provide a good example of how to answer customers’ needs. Created in October 2000, Cityneo aims to provide localized information to mobile users through services that are attractive, exhaustive and easy to use. Cityneo provides information concerning the 50 main cities of France by combining maps, an updated database of information and the location information provided by mobile network operators or users. Its services can be accessed through the three French operators, with both WAP and i-Mode technology. Information is selected according to different criteria, but the most important are location, as well as the date and time of day. The services are the following (Cityneo Press Releases, n.d.):
•
“Cityneo Plan” is a map and itinerary calculation service. Users indicate the departure and arrival points and get a recommended detailed itinerary, depending on whether they walk or drive, with an estimation of the travel time;
•
“Cityneo Guide” provides access to addresses of bars, restaurants, clubs and various cultural events, corresponding to user location and time of day. A specific feature is the possibility of selection according to the user’s mood: hype, Zen, sexy, air, culture, fun, in love or surprise;
•
“Cityneo Pratik” allows localized practical information to be found, such as an open pharmacy, a cash dispenser, a tobacco shop or a gas station, provided with the relevant map; and
•
Cityneo also offers related services in partnership with other companies: “Guide Nova,” providing advice on concerts and other cultural and social activities recommended by the trendy Radio Nova station; “Guide Pudlo” for gastronomic information; and “Le Petit Futé,” a French tourist guide.
Cityneo relies on continuous innovation in order to improve its services. For example, in December 2004 it introduced a new service, providing the location Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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of automated speed traps on an itinerary or a city, in response to the increasing use of such speed traps by the French police. Due to its experience with i-Mode in France, and particularly with DoJa 7 , Cityneo has been able to extend its service to three other European countries where i-Mode services are also proposed: Italy (with Wind), The Netherlands (with KPN) and Spain (with Telefonica). Interestingly enough, starting from a pure mobile player position, it also began offering its city guide on the Web in March 2004.
Charity: The “One SMS for Asia” Case One of the most impressive cases is not related to business, but to charity. Potential donors are often discouraged by unknown or uneasy access to charity organizations, or by practical matters such as writing and sending checks. SMS appears to be a good way to reduce this loss of potential donations by providing a quick and easy solution. After the devastating tsunami of December 25 and 26, 2004 in Asia, the three French mobile operators launched a charity campaign called “one SMS for Asia.”8 By typing “ASIE” on their mobile handset and sending an SMS, mobile users could send an SMS+ to one of the three charity organizations associated with this campaign. By doing so, they could donate one euro, plus the cost of the SMS that was donated by the operator. From January 2 to January 31, 2005, more than 3.4 million SMS were sent, generating more than 3.8 million euros of donations (Bilan de l’opération “Un SMS pour l’Asie,” 2005). This campaign was so successful that other charity organizations, which had not been asked to be associated to it, complained about it.
Community Service: The Orange Moblogging Case Blogs have become very popular on the Internet. The large number of mobile handsets, their increased functionalities and the possibility for users to take advantage of their spare time suggest a high potential for mobile blogging. The mobile blogging service launched in June 2004 by Orange is becoming the most successful community service of this company. Reserved for Orange France subscribers, this service enables them to create their own mobile blog, which can be accessed by either Web or WAP. Users can update their page through SMS, MMS or on the Orange Internet Portal, and can also send messages to other bloggers in the same way. Only Orange subscribers can view the Website with their mobile, but everybody can access it on the Web. Six months after its launch in June, 20,000 blogs have been created, with 90,000 submissions by bloggers every month (Guerrier, 2004). In November, three million pages were viewed on the Web and seven million via WAP.
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One of the reasons for this success is that, unlike other mobile operators that have launched similar blogs, such as O2 Ireland or T-Mobile USA, Orange has chosen not to charge its subscribers for the service. Revenues for Orange come through increased data, SMS and MMS traffic. Interestingly enough, even though users can update their blog for free on the net, 65 percent of the image posts are via MMS, which is more than 10,000 MMS a month. With UMTS, this service will be upgraded in order to allow videos to be posted.
Music Entertainment Services: The Musiwave Case Musiwave is a French company that has become the European leader for mobile music entertainment services. The added value of Musiwave’s offer relies on the quality of content cleared of rights, state-of-the-art mobile technology and marketing and content management expertise. Musiwave provides turnkey mobile music entertainment services to mobile operators such as Vodafone or TMobile, and media companies such as AOL or MTV. In France, although working with the three mobile operators, it has c form in 2004. The platform now integrates a wide range of advanced services, such as streaming music (Smart Radio), full track downloads, music recognition, superdistribution (DRM enabled P2P) and a large mobile music library. The services provided by Musiwave are the following (Musiwave Press Releases, n.d.):
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“Musitones” (excerpts of original music as ringtones), “Pictones” (multimedia ringtones);
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“Ringback tones” (audio files that callers will hear while the phone is ringing), and music-related images;
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“MODS” (Music on Demand Service), a full track purchasing and downloading of music, giving access to a 50,000-track catalogue that includes major record labels. Consumers start listening to songs immediately as the rest of the song downloads, and can also retrieve their purchased tracks on their PC through a secured music storage vault;
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“Superdistribution,” a P2P-type legal trading of music via messaging, Bluetooth, etc., essentially making one’s friends an interface for mobile music;
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“Music Wizard,” a music recognition service that works with any handset;
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“Cross-selling,” a service that allows the buyer of a full-length, hi-fi title to be offered the opportunity to buy content type from the same artist or musical genre.
“Smart Radio,” a streaming music service, providing unlimited listening, storage and music channels. While traditional streaming technologies use pre-programmed channels, Musiwave’s Smart Radio technology allows users to seamlessly create their own personalized streaming music channels. Personalized music channels are automatically created through realtime analysis of the user’s behavior with powerful profiling technologies; and
Travel: The SNCF Case The French railway company SNCF has always been an advanced user of information and communications technology, and its on-line information and reservation system has been quite popular in France. This service was first offered on the French Teletel9 system in the mid-eighties, and then extended to the Internet. The use of these technologies is a way to provide its customer with accurate and up-to-date information and facilitate the reservation and purchasing of train tickets. SNCF has been eager to simultaneously reduce the manpower and facility cost of its sales network and the waiting time of its customers by providing online services and installing automated ticket distributors in train stations. Providing extensive high-speed train services towards the main destinations in France and neighboring countries, SNCF holds a large share of a market — particularly the business travel market — which would be served by airlines in other countries. In this respect, quality of service and customer care may be more crucial than for other railway companies. Due to the growing popularity of mobile data services, SNCF has launched new services based on SMS (Services SMS SNCF, n.d.). By sending an SMS+ with INFO and the train number, users receive an SMS informing them if the train is on time, late or cancelled. When customers make an on-line reservation, they can get the details of their reservation by SMS, including the reservation number in order to get the ticket. They also have the option to cancel their reservation by SMS. Customers can also personalize their service by creating a “preference account” online. For example, if they frequently travel from Paris to Lille, they can create a LILLE preference file. In this case, they can send an HORA LILLE message to get timetables for this destination or RESA LILLE to make a reservation.
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Consumer Portals There are several multimedia portals offered to French mobile users, three proposed by the incumbents (Orange World, SFR Vodafone live! and Bouygues Télécom). Four more are expected to be proposed by the MVNOs: Breizh Mobile, Debitel, NRJ and M6. All mobile operators’ portals are proposed around three main “categories”: tools, fun and information. All types of data services are proposed besides voice services: video call, SMS, MMS, WAP, chat, forum and mblog. The three incumbents propose similar services on their M-portal, available whatever the service solution used by the consumers. What differentiates them is the way they organize the services and the content in the portal and how they package and price services.
Business Portals Due to the international (and mostly European) positioning of Orange and its mother company, this new business was conceived from the start with an international focus. This international positioning is based on the cooperation between two subsidiaries of France Télécom: Orange and Equant, producing a global company aimed at international business customers. In this cooperation, the two subsidiaries put together their resources and expertise in mobile and data services respectively. Under the name Orange MIB (Mobile Internet for Business), a taskforce was created in February 2000 and the Orange MIB portal was launched in July 2000 in France. In June 2001, the joint venture Orange MIB was created. To the basic offer (Internet access, e-mail, diary, task planning, company directory, SMS and access to business applications), other services were added such as Lotus Notes access, geographical location and industrial applications. This is a specific feature of Orange, which offers:
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Road on line: a specific application for truck transportation to better manage logistics, for 1,000 euros plus 30 euro/month/line; and
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MIB City: aimed at local authorities to manage maintenance activities, for 1,000 euros plus 11 euro/month/line.
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Orange also introduced a partnership strategy, with two types of partnerships. The first concerns information providers that are accessible through portals (services such as news, weather reports and reservations). The second concerns companies such as software houses, computing service firms, equipment manufacturers, developers, integrators or consultants, for which a partner pack has been designed. The objective is to help partners develop mobile solutions and products by providing a test and demonstration platform, privileged access to new technologies, commercial and technical support and a development forum. In fact, the objective is twofold: to increase the number and variety of products and applications around its portal, and to benefit from the prescriptive power of the partners on the market (Vialle & Epinette, 2003). The partner pack is available for 2000 euros plus 8 euro/month/user. Under the name of PIM (Portail Intranet Mobile), SFR introduced a partial version of its portal in 1999, and the final launch occurred in September 2000. The services offered are similar to that of Orange. SFR also has a partnership strategy. To launch its portal, it proposed a trial offer “PIM découverte,” that allows customers to test some functions of the portal before adopting it. Bouygues Telecom launched its portal in September 2001. The content is similar to the others, but the presentation of services appears to be clearer and easier to understand. It has also developed a partnership program. In February 2002, the three companies announced the launch of their GPRS services (Vialle & Epinette, 2002). Apart from the increased bandwidth (with a real expected bit-rate of 30 to 50 Kbps), this technology allows billing according to the volume of information instead of airtime for plain GSM. They applied the package approach to data, which has spurred the diffusion of voice cellular services, and launched packages tailored for different market/usage segments, including an allowance of data volume. Two types of services are promoted:
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Portal services, or Intranet access; and Mobile office (Internet, e-mail and WAP/i-Mode).
With the introduction of UMTS, operators focus their promotion on PC cards, allowing GPRS/UMTS/Wi-Fi access to the mobile office or Intranet services, and launched specific call plans, ranging from 100 Mo to 2 Go.
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Viewing France’s Mobile Services in the CLIP Framework As was outlined above, there is little differentiation between the three main mobile operator’s portals, as competitive imitation tends to neutralize service differentiation. This phenomenon is also reinforced by cooperative initiatives such as Gallery or SMS+ association. Moreover, homogenization also takes place at the European and international levels, with powerful groups such as Vodafone and France Télécom/Orange, or alliances such as the i-Mode alliance or FreeMove. However, the CLIP framework presented in Chapter I proves itself useful to assess the general level of development of m-commerce in France. Concerning communications (C), the two main trends are increased bandwidth and integration. The increased bandwidth provided by networks allows services to be enriched, from the plain voice and text services to more advanced multimedia services incorporating image, music and video. Mobile communications in France must also be situated in a more general context of integration of fixed, mobile and wireless communication, such as the France Télécom’s initiative to provide video telephony across all its networks. Moreover, national telecommunications companies are cooperating in order to provide seamless European services. As shown above, this is supported by an expanding and innovative content enabling layer, allowing technical and marketing integration. Location (L) applications are scarce and not highly sophisticated. They are found at the level of specific services, such as maps and itinerary provision or city guides, and not at the level of an m-portal. The localization is determined by the operator’s network, identification of the cell where the user is located or manually by the user. More advanced services are currently being tested, such as navigation services for cars, using GPS technology. Information (I) and content services represent the most innovative and sophisticated type of services, as shown in the Musiwave and Cityneo cases. It is at this level, for example, that we find the most advanced services in terms of personalization, using large databases and profiling techniques. These services are often integrated with online Internet services, as they are either providing access to the same information in a different format or providing complementary services. For example, in the SNCF case, the mobile access is used to access or modify a file created online, or to get updated information. In the Musiwave case, online fixed access allows stable storage on a PC, whereas mobile access provides impulsive purchase and instant listening. Concerning payment (P), different options are available: on the operator’s bill, by e-wallet, by credit card or indirectly by SMS+. However, except for
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Table 2. Fixed and mobile service strategies Stand alone fixed or mobile service Mobile as complement to fixed SNCF
Fixed as complement to mobile; Cityneo, Musiwave and Orange Moblogging Homogenization; Videophony and PC Connect services
information services and downloads charged on the operator’s bill, m-payment is still underdeveloped. Only a few services using e-wallet systems can be found, for example for car park or bus ticket payments. From this assessment, it appears that m-commerce supply in France is still at an emergent stage. Advanced features such as location, payment and personalization are not sufficiently developed. For example, personalization is found essentially at the content provider level and not so much at the portal level. When such a feature is present, for example in the Orange World portal, it is determined manually by the user and not by profiling techniques. A certain level of integration is provided, but clearly not enough to generate the customer’s enthusiasm. For example, it is possible to know the theatre programs in your neighborhood, but not to click to make a reservation or pay for a ticket. To some extent, our observations are challenging the m-commerce concept. In particular, we question to some extent an “isolated” view of m-commerce. Our analysis identifies two concurrent trends of complementarity and homogeneity linking the fixed and mobile environments, giving rise to different service strategies (Table 2). Service providers tend to complement their main offering in respectively the fixed or mobile environment by offering a limited set of functions, or specific functions in the other environment. The functions offered in the other environment are conditioned by technical, security or specific use. This can be the case of originally fixed service suppliers, such as the SNCF, offering a limited set of functions corresponding to urgent use situations, as well as limitations due to the current GPRS mobile handsets and networks. On the other hand, Cityneo extended its pure mobile offering to a fixed service, complementing its “instant location” services on mobile with “anticipated location” services on the fixed Internet. Technological progress also facilitates homogenization between the fixed and mobile environments. The higher bandwidth available through 3G technologies and wireless Internet technologies (such as Wi-Fi and Wimax), as well as the availability of terminals with larger screens (Laptops, PDAs and other terminals), allow mobile users to benefit progressively from the same services as in the fixed environment. Communications services should first benefit from this trend, but information and entertainment services should follow the extended availability of mobile bandwidth and larger screen terminals.
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The Role of Content-Enabling Companies: Reducing Complexity for Users and Suppliers The content-enabling layer includes a wide range of actors that allow content to be delivered to networks and terminals, taking into account the specificity of mobile Internet. They assist the content providers to adapt content to a rapidly moving context of multiple terminals and interfaces. They also contribute to simplifying the users’ lives by providing easy access to services, from a technical or a marketing point of view. Sabat (2002) identifies five types of actors contributing to the development of wireless platforms and utility applications:
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Service bureaux, developing open platforms to convert and format all forms of data information (i.e., messaging, advertising, billing, location-based services, voice-enabled services and hosting);
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Middleware and content delivery applications providers, facilitating the transmission of content with different networks, operating systems and format (i.e., application platforms, content management, corporate data access, synchronization, network monitoring, data optimization and security applications);
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Portals, aggregating, presenting, navigating and delivering a wide range of communication, commerce and content services. A distinction can be made between Internet portals such as Yahoo!, general mobile Internet portals, such as mobile operators’ portals and specialized portals providing entertainment, streaming video or gaming services, as well as vertical solutions (financial, education, CRM and sales force management, IT management, transportation and logistics and field force);
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Systems integrators and consultants, specialists in the development of endto-end wireless Internet offerings, for operators, service providers or large business users.
These content enabling activities are all the more important as a rather high level of complexity characterizes the current situation. The provision of wireless services has to cope with three mobile operators, numerous Wi-Fi hotspot operators and five access-related technologies: GSM, GPRS, EDGE, UMTS and Wi-Fi. Moreover, the formatting of information must take into account various information access and display modes, such as:
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•
HTML, the current fixed Internet language for Web pages, and the new language XML;
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WAP (Wireless Application Protocol), specifically designed for mobile phones and using WML language or XML. It exists in different versions, especially for black and white or color screens;
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I-mode, developed by NTT DoCoMo, is provided on Bouygues Telecom’s network, and uses the C-HTML language; and
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SMS (Short Message Services), EMS (Enhanced Message Services) and MMS (Multimedia Message Services).
For the content providers, it means that the information must be adapted to the different languages, applications and screen sizes. For example, in the current situation in France, a content provider should offer at least seven different style sheets in order to be accessed by most of the terminals on the market.
Reducing Technical and Transaction Complexity: The Netsize Case A French company created in 1998, Netsize actually began its operations in 2000 as a wireless messaging operator. Its main activities are the development of customized mobile solutions in order to link its customers’ information systems to mobile terminals, with a strong focus on SMS, and now also on EMS and MMS. Starting with revenues of 0.6 million euros in 2000, Netsize has reached 62 million euros in 2003. Netsize operates a network of gateways connected with more than 60 mobile operators (essentially in Europe), allowing the provision of panEuropean messaging services and offering access to 500 million mobile users. Netsize has developed a network of 70 business partners, such as Microsoft, Oracle, Sun Microsystems and Atos Origin, and over 500 clients, mostly large businesses. It is now a small multinational with 200 employees, 17 subsidiaries in Europe and two in the NAFTA region. The company has extended its offer with innovative applications and platforms, allowing its customers to quickly implement entertainment, business or machine-to-machine services. Netsize was ranked as the second fastest growing technology in the 2004 Deloitte Technology Fast 500 EMEA. The company achieved its position on the basis of a five-year growth rate of 75.901 percent (Netsize Corporate Brochure, n.d.).
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Reducing Technical Complexity of Integrating Different Formats: The Atos Origin Case Atos Origin is a French company providing consulting, system integration, outsourcing and online services solutions. Atos Origin is the result of the merging or acquisition of significant IT services and consulting companies such as Axime, Sligos, Origin, KPMG Consulting (UK and The Netherlands) and the SEMA Group. With more than 5 billion euros of revenues, 45,000 employees and a presence in 50 countries, it is a large e-business and IT services provider in Europe (Atos, 2005). From its extensive experience in online services as an integrator and hosting provider, the company naturally extended its activities to include mobile Internet. It now has a multimedia platform offering access to all distribution channels, such as Internet, GSM, GPRS, UMTS, WAP, SMS, Videotex, satellite and voice systems for different terminals. Benefiting from an initially strong presence in the banking industry, it has developed m-banking and m-payment solutions.
Reducing Transaction Complexity: The SMS+ Association Case SMS+ is a premium SMS service allowing a payment for the content or service provider. The SMS + association is a non-profit organization set up in May 2002 by the three French mobile operators. It allows the provision of one-stop shopping services to service editors, a common tariff structure and a single 5digit number to mobile users, whatever the mobile operator concerned. It has four functions: to manage the available short numbers optimally for the service editors, to book a short number before editing it, to make sure that ethics are respected and to promote the use of SMS+. Two types of SMS+ services are offered: per act or per session. The per act payment option is adapted to the purchase of content from a single source, such as ringtones, icons, poll, weather forecasting or traffic forecasting. The persession option is aimed at services putting different participants in contact, such as games or chat. There are five tariff levels, allowing a service charge from 0.05 to 1.50 euros in addition to the standard SMS tariff. In 2004, 143 services editors reserved 500 short numbers (336 in 2003) of which 350 were open to services; the revenues amounted to 135,000 k € , more than twice that of 2003. The SMS+ offer generated 228,000,000 SMS against 137,000,000 in 2003, representing a growth rate of 66 percent. The three mobile operators are soon expected to offer a premium MMS service, called MMS+. The service is forecast to be as successful as the SMS+; since May 2004, new 2G devices can receive MMS, thus enlarging the potential user market (SMS+ Info, n.d.). Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Reducing Transaction Complexity: The Gallery Case The popularity of Minitel as an electronic content delivery channel is widely acknowledged. In 1994, the installed base of terminals reached 6.5 million, the number of services offered reached 24,000 and the total revenues were 6.6 billion French Francs (about 1 billion euros plus inflation), out of which 3.1 billion were given back to service providers (Steinfield, Caby, & Vialle, 1992). One of the main reasons for its success was the provision of a simple billing system and the sharing of a large portion of revenues with content providers (Vialle, 1998). The three French mobile operators have decided to team up in order to offer a similar system to Minitel for mobile users. Content providers can advertise their services directly to end users with a single access point and under a single brand, “Gallery,” adopted by the three French mobile operators. The service editor choosing Gallery is certain that any mobile user will access its service whatever the mobile operator he/she subscribed to, and does not need to advertise directly on their respective portals, such as Orange world. The mobile user will pay for the access communication (according to his tariff plan) plus a fee to Gallery, and his mobile operator will bill him according to his tariff plan (pay as you go or monthly plan). Depending on the service, five tariff formulas are proposed: free, day plan, week plan, monthly plan and per download. In the same way as SMS+, several tariffs are available to service editors. The revenues are shared between content providers and mobile operators.
Technological and Managerial Lessons from France’s Mobile Experience For the time being, the French market is not the most developed market for mobile use and mobile commerce. Concerning multimedia services, the bulk of the market concerns mainly messaging services and the download of ringtones and icons. However, the three mobile operators, content providers and an expanding content-enabling industry are paving the way for future market development. Infrastructures are being progressively upgraded with EDGE and UMTS technologies in order to provide more bandwidth, and thus more attractive and user-friendly services. A wide range of services and applications has been implemented for both consumers and businesses, and the innovation potential of the new network technologies, such as UMTS, is far from being fully exploited. What can also be observed is a general trend of integration at different levels: integration between fixed, mobile and wireless networks, provision of seamless European services, integration of Internet-based business and m-business by companies and content providers. Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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What lessons can be drawn from the French experience? First, that technology matters, and in the following different ways. There was a clear gap between the promises expressed in advertising and the limits and imperfections of the first systems. Only with EDGE and UMTS, and with the user-friendliness of the most recent services, could the full potential of m-commerce be revealed. Although the market is yet to achieve its full potential, one reason for current growth is the European and French approach of ex ante standardization and integration, ensuring compatibility between brands, services, devices and equipment at an early stage of development. Second, it is interesting to note that, while competition is heavily promoted, cooperation seems to be a key success factor for the development of m-commerce, and various players are engaged in a network of cooperative relationships. These partnerships can be vertical, such as the relations between equipment and device manufacturers, content providers and enablers and network operators. They can also be horizontal, such as the case of Gallery or SMS+. Mobile operators or alliances of operators seem to have achieved a powerful position because of their buying power and because they have the customers; payment via their phone bill for most current services puts them in a privileged situation. The respective success of these large mobile operators or alliances will also depend on their network-orchestration capability, that is to say, their capacity to influence a whole new business network (Möller, Rajala, & Svahn, 2005) However, innovative companies such as Musiwave or Netsize have also reached a key position because of their skills and their ability to reduce transaction complexity. Finally, organizations using m-commerce (or intending to do so) should carefully analyze the specificity of fixed and mobile telecommunications and design a synergistic strategy across the two media. Simultaneously, they should also anticipate the diffusion of new technologies and products that induce some form of homogenization between fixed and mobile services. In conclusion, we note the development of a very dynamic content provision and content enabling industry backed by national operators, one of which has a significant international dimension. From a national perspective, m-business appears to be an opportunity for France and other European countries to play a leading role compared to their laggard positions in Internet-related industries. We do not observe the same dominance of United States firms in the m-business economy, as in the fixed Internet economy.
Questions for Discussion 1.
How would you describe the opportunities for 3G in France?
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2.
Choose a type of company (e.g., automobile or banking) and design an mcommerce strategy for the French context. How would it complement the prevailing e-commerce strategies of such a company?
3.
Discuss the relative strengths, weaknesses, opportunities and threats for members of the m-commerce value chain in the French context: mobile operators, terminal equipment vendors, content-enablers and content providers.
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Vialle, P., & Epinette, O. (2001, July). The attitudes and perceptions of ICT managers of large firms towards m-business Internet adoption: Beyond the magic. Paper presented at the Conference on Telecommunications and Information Markets (COTIM), Karlsruhe, Germany. Vialle, P., & Epinette, O. (2002, Sept). Mobile Internet strategies of the French operators for business customers. Paper presented at the 13th European International Telecommunications Society Conference, Madrid, Spain. Vialle, P., & Epinette, O. (2003, Jan). The impact of demand for integrated solutions on distribution channel strategy and management :The case of France télécom. Paper presented at the 8th International Conference on Marketing and Development, Bangkok, Thailand. Vodafone live! (n.d.). Retrieved February 15, 2005, from http://www.sfr.fr/FR/ info_nouveautes/vodafone/index2.jsp
Endnotes 1
SMS+ are premium SMS that allow content providers to bill customers for the provision of ringtones and logos, or to participate in TV contests. The average price is 0.59 euros, to compare with 0.10 euros for a plain SMS message.
2
These figures are based on users’ assertions in a survey and not on traffic measurement.
3
When ISDN was launched in France in 1981, video telephony was envisioned as the ultimate achievement for ISDN based services.
4
Orange charges the same price for video telephony as for voice as a promotional offer only in 2005, and will charge the equivalent of two minutes of voice call from 2006.
5
Average number of SMS per month and per active customer. Active customers represent 98.4 percent of the total number of customers.
6
Dauphin Telecom and Outremer Telecom, operating in overseas departments and territories.
7
DoCoMo Java: a specific version of Java technology for mobile handsets that has been developed by DoCoMo and Sun Microsystems. Java-enabled handsets have a dynamic memory allowing them to download and store specific programs. In the case of Cityneo Plan, it allows a faster, more intuitive and precise use of this service.
8
Un SMS pour l’Asie.
9
More popular under the name of its terminal: Minitel.
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Chapter VII
Germany: From Chart-Topping Ringtones to 3G M-Commerce Timo Kehr, DaimlerChrysler AG, Germany Tobias Lührig, McKinsey & Co., Germany
Abstract This chapter introduces the reader to the German mobile telephone market. After describing the general economical context, the authors give a brief overview of the market itself. Selected cases — success stories as well as stories where success was elusive — are presented. Finally, the German market is analyzed using the CLIP framework.
Introduction to the German Mobile Communications Market Economic Context Despite an initial surge of the economy as a result of the reunification of East and West Germany in the late 1980s, German GDP growth has been below the
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European Union (EU) average over the past few decades. According to a survey of 511,000 people, 60 percent of Germans are happy to live in their country but only 28 percent expect to be happy in the next five to 10 years. Economical indicators reflect this perspective. According to the Association of German Banks, income has only risen annually by 2 percent throughout this century. Disposable income is only rising by 1.5 percent p.a., while individual government sponsored transfer income is climbing by an annual rate of 3 percent. Of all private income, 26 percent is based on government-sponsored transfers. Thus, private consumption is eroding. Retail revenue has declined by 15 percent since 2000. The average age of the German car fleet hit an all time high of eight years compared to around five years in the 1980s. Given this economic picture, price sensitivity has to be taken into account for new telecom service offerings. Major providers changed their strategy and introduced discount brands into the mobile market in 2005. Despite the overall tough economic situation, the German telecom sector is a success story. The number of companies providing communication services in Germany has risen from 1,066 at the beginning of 1998 to 2,304 in early 2005, which represents an annual growth rate of 12 percent. All these companies serving the German market are mainly based in Germany, where no clear communication cluster has evolved (see Figure 1).
Figure 1. Numbers and locations of German telecom companies Locations of German telecommunication companies
Number of German telecommunication companies
Hamburg
CAGR: Compound Annual Growth Rate
89
47
CAGR +12% 1876 1939
2045
2304
Bremen
Schleswig 33 Holstein MecklenburgVorpommern
89
2133
Berlin 106
89 Niedersachsen
1629 1355
NordrheinWestfalen
258
1066 76
67
51 Brandenburg
SachsenAnhalt
457
194
55 Thüringen
Sachsen
Hessen
RheinlandPfalz
Saarland 28
Outside 117
361 242
Bayern
BadenWürttemberg
1998 2003 2004 2004 2005 2005 1998 1999 99 2000 2000 2001 2001 2002 2002 2003
Source: Jahresbericht 2004 Die Regulierungsbehörde für Telekommunikation und Post (2004)
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Figure 2. Sources of revenue in the German telecommunication market Revenues of German telecommunication companies
Distribution of revenue 2004 In %
billion EUR
CAGR +6% 55,3 44,2
59,9
61,3
63,2
Misc.
64,4
48,1
19
Mobile 34
10
37
Land lines 19 98 1999 99 2000 2003 2004 2004 1998 2000 2001 2001 2002 2002 2003
Interconnection Services
Source: Jahresbericht 2004 Die Regulierungsbehörde für Telekommunikation und Post (2004)
German Telecom Market The German telecommunication market generated a total of 64.4 billion euros in 2004 and sales have been rising at an annual rate of 6 percent since 1998. Mobile operators accounted for more than a third of the overall telecom revenue in Germany (see Figure 2). Companies have been investing 4.4 billion euros a year in order to provide a network that can carry these rising loads (Jahresbericht, 2004). More than 52 percent of these new telecom investments are going towards the development of the mobile network. By 2004, such investment led to Germany having more than 71.3 million mobile phone lines compared to 54.6 million land lines. In fact, as early as 2001, there were more mobile phone lines than land lines in Germany (see Figure 3), indicating the competitiveness of the mobile phone industry. The German mobile phone market exhibits very high adoption rates. Statistically, 86 out of every 100 Germans were mobile phone users in 2004. Between 1990 and 1995 the annual growth rate of users was 69 percent, and it remained at a very high rate of 58 percent between 1995 and 1999. During the years 20002005, the growth rate declined to 25 per cent, but this is of course expected given the near-saturation levels of adoption (see Figure 4). Noteworthy is the dramatic increase between the years 1998 and 2000. This growth was due to the tremendous success of prepaid mobile phones that were advertised heavily during that time in the battle for market share. Based on these very high growth rates, providers realized that new customers would be harder to find in the future.
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Figure 3. Numbers of telecom lines in Germany 71
In millions 65 50 48
48
53
56
Mobile
59 54
54
55
Landlines
23
1999
2000
2001
2002
2003
2004
Source: Jahresbericht 2004 Die Regulierungsbehörde für Telekommunikation und Post (2004)
Compared to other European countries, the German mobile penetration is slightly lower, while its landline penetration is among the highest in Europe. The market is comprised of four dominant network providers. The leading market player is T-Mobile, a 100 % subsidiary of the former monopolist Deutsche Telekom. T-Mobile had a market share of 38.5 percent in 2004 and Vodafone, a close follower, had a share of 37.8 percent. E-Plus started as a low price provider and has now become a high quality net provider, capturing 13.3 percent of the market. The smallest player is O2, with a market share of 10.2 percent (see Figure 4). When we compare the earnings — expressed as Earnings Before Interest, Taxes and Depreciation Allowance or EBITDA — and the profit margins in different European countries we see that Germany has a 38 percent margin and this is slightly lower than the European average (see Figure 5). Compared to other industries, such as fixed telecommunications (34 percent) or electricity (29 percent), the mobile industry has a fairly high EBITDA margin. Due to the limited number of available licenses, no new network provider entries in the market are possible. The high investment needed to build a network has meant that regulators have had to limit access to the market in order to guarantee high quality customer service. They have also been obliged to maintain a fairly low level of competition to secure investments of the network providers. In addition to the four main mobile network providers, customers can also choose among 1,000-plus different phone tariffs. In 2004, 37.2 billion minutes were billed through such tariff plans, which is 9 percent higher than in 2003.
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Figure 4. Number of mobile phone users and market shares of network providers Number of Mobile Phone Users in Germany In ‘000
CAGR +25%
71.316
64.800 56.126 59.128 48.202
CAGR +58% CAGR +69%
273 532
23.446 13.913
5.554 8.286 953 1.768 2.482 3.764
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Market share of the four network providers in Germany 2004 In %
T-Mobile
Vodafone
O2
E-Plus
38.5
37.8
10.4
13.3
100.0
Source: Jahresbericht 2004 Die Regulierungsbehörde für Telekommunikation und Post (2004)
Figure 5. EBITDA margins in European mobile industry Percent
EBITDA : Earnings Before Interest, Taxes, Depreciation Allowance* Russia
48 47 46
Italy Sweden Spain/Czeck. France Norway/Switz.
44 41 40
Germany
38 35
Portugal UK
32 31
Austria/Nethlnds Denmark Asia/Pacific
23 ~ 36 ~ 30
U.S. US * Sample of countries Source: Merrill Lynch, CSFB, Deutsche Bank, EML, company reports, McKins
... also to other •compared • industrie Fixed telco • Electricity • Semiconductors • IT • Hardware
(34%) (29%) (23%) (12%) (9%)
European average ~40 ey analysis
Note: * Sample countries Source: Merrill Lynch, CSFB, Deutsche Bank, company reports, McKinsey analysis
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Figure 6. Development of new connections/new mobile users Number of new connections/new mobile users Millions 60
Gross new connections
50
•• ~ 20 20 million million annual annual gross new new connections tions per year year after after 2003 2003 •• Annual Annual net new connections connections went went down down below below 55 million million in in 2002 2002 and and are are forecasted forecasted to to further further decrease decrease
40 30 20 10
Net new connections
0 1999
Overall churn %
Churn related Churn related new connections connections
2000
2001
2002
21
21
22
2003 2004E 2005E 2006E 2007E 22
26
27
28
28
Source: ABN Amro (August 2003) Sources: ABN Amro (August 2003)
As the market matures and with an average contract length of around two years, the fight for retaining customers — already going on for several years — is likely to heat up as the overall market growth declines (see Figure 6).
Sources of Revenue As mentioned above, the contract structure is of two main types. Just fractionally over 50 percent of the contracts in year 2004 were “prepaid,” with customers buying “minutes” at gas stations, tobacco shops or via wire transfer. This represents a slight decline from the 54.6 percent prepaid level in 2000. These prepaid customers are known for their very low retention rate and are very price sensitive. In comparison to users with annual or longer contracts, it is quite hard to build a stable customer relationship with prepaid clients. The predominant sources of operators’ revenues — representing nearly twothirds of revenue — are voice calls. Yet the highest growth rates in Germany were observed in text messaging or SMS. On average, a service provider can charge 0.80 euros per megabyte for data traffic like e-mail while SMS-generated data traffic can contribute more than 800 euros per megabyte. Thus, on a permegabyte basis, SMS is a highly lucrative business. While German mobile phone users sent only 600 million SMS messages in 1998, the figure escalated to 20.6 billion SMS messages in 2004 (see Figure 7).
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Figure 7. Number of SMS text messages sent In billions 19.7
20.6
17.0 14.7 11.4
3.6 0.6 1998
1999
2000
2001
2002
2003
2004
Source: Jahresbericht 2004 Die Regulierungsbehörde für Telekommunikation und Post , 14.2.2005
Source: Jahresbericht 2004 Die Regulierungsbehörde für Telekommunikation und Post (2004)
Despite significant advances in mobile phone technology and the fact that nearly all the new mobile phones are equipped with digital cameras, customers have not taken advantage of the technology. If one walked around Berlin in 2005, one could observe many people taking pictures of the popular sightseeing attractions with their mobile phones, but only a small percentage of these people actually transmitted these pictures via their operator’s network. Merely 91 million Multimedia Messaging Services or MMS messages were sent in 2004. High-bandwidth mobile services are only at an introductory level. From a technological perspective, the third-generation (3G) UMTS infrastructure is quite well developed in Germany, with 70 percent network coverage at the end of 2004, and UMTS (3G) services were slowly being introduced by all mobile phone providers by the mid 2000s. Due to the very high capital expenditures and pressure from investment analysts, network players have focused their attention on UMTS. Until 2005, UMTS offerings and usage had not kept up with initial expectations. When 3G licenses were first sold in a public bid in 2000, the technology sector in general and mobile service operators in particular were experiencing substantial growth in Germany. This led to high expectations about the future. The sums bid for the 3G licenses therefore totaled €100 billion, breaking all records. This, however, also put great pressure on companies to achieve substantial returns on their investments. The pressure increased when the net coverage did not develop as fast as anticipated and the device technology was too slow to evolve to enable a strong start to the 3G services game.
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Figure 8. Waiting for a breakthrough mobile portal service
No fast-seller, but also no flop is a trialballoon for the future data services" M. Plica, CEO Chip Xonio Online, March 2003
i-mode gets the service right and the marketing wrong, Vodafone Life! puts a great message on top of weak services Forrester market research, March 2003
Mobile browsing will continue to under-perform both in term of usage and revenues. Deloitte Research's Mobile and Wireless Predictions 2004 Report
"Far from boosting ARPU, as was originally hoped, Live! s first anniversary was marked by stagnant - or in the case of Germany and Japan, falling ARPU. Archart, Dec 2003
World Despite a number of innovative data initiatives Orange appears to have lost some of its momentum
Active
"I am not convinced that imode technology will enjoy much success in Europe Declan Lonergan, Yankee Group, 2003
Ovum, March 2004
Source: Press search
The first phones with UMTS features did not enter the market until late 2004, and basic services were launched. Vodafone was the first mover here. At the end of 2004, the industry counted 250,000 UMTS users. With other WSPs following, analysts expected UMTS to take off in 2005 and to reach 2.5 million users by the end of the 2005. Hopes of generating substantial revenues with UMTS, however, had not materialized until 2005. As is already evident from the Japanese market, the ARPU (average revenue per user) can be expected to decline after the introduction of 3G technology, and analysts expect the same effect for Germany. Since WAP technology totally flopped in its initial phase, there was no real existing portal environment to start from, and almost no successful third party players had evolved by 2005. Although almost every mobile phone supported WAP technology, at the end of 2005 the use of WAP was very low in Germany. WAP had a difficult start due to technological problems: Transfer rates were slow, connections were unstable and navigation was difficult because of unsophisticated page designs and small screen sizes. This soon led to an extremely poor public image, which, in turn, made companies pull back from this technology and instead exploit the potential of text messaging (SMS). WAP had not yet recovered from this until 2005, although WAP technology had improved substantially by then. The 2.5G GPRS technology allowed for faster navigation
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and connections became much more stable before the 3G WAP could take hold. By 2005, Forrester Research predicted a late, second-time-around success of WAP technology, and there was some global evidence that this was happening in small ways. Regarding m-commerce Germany, up to the mid 2000s, this entailed mainly transmission between SMS-centered services and UMTS-based services. The high market expectations of the late 1990s did not materialize for the German mcommerce market. Until 2005, no so-called “killer application” for m-commerce had been seen in Germany (see Figure 8). Since 2000, all players had been focusing on the UMTS technology. The providers were counting on the high data transfer rates in order to offer multimedia services such as mobile video conferencing. Network providers were under pressure to convert current GSM users to UMTS users in order satisfy the high investments in their licenses and networks.
Successful Services in Germany’s Mobile Sector We now turn to four cases of mobile phone services in Germany. Two of them are very successful and two of them are not. Starting with the ringtone provider JAMBA, the first case illustrates how this company built a successful fastmoving service based on SMS technology, targeting the youth market. The second case tells the success story of the BlackBerry producer Research in Motion (RIM). Implementing a concept built on simplicity and reliability leads to success in Germany. A negative example is presented in case three, which refers to the mobile payment company Paybox. This company established a working mobile payment system, backed by a large pan-European bank, but failed due to acceptance problems. Case four describes an attempt to reach another dimension in the German mobile market by means of location-based services. The case elaborates on the technology but indicates the lack of promising business models that could turn this technology into a success story.
Ringtones: How a Frog Conquered the Music Charts In 2005, after SMS, the most successful non-voice service in Germany was the ringtone market. The total German market for ringtones generated €160 million in sales revenues in 2003. While small players dominated the market in the beginning, later on media companies and mobile network providers entered the
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game in full force. The market grew rapidly, and by 2004 more ringtones were sold than regular music singles. The growth continued in 2005, and ringtones accounted for 10 percent of the music industry’s revenues and became an important part of the music industry’s product portfolio, helping this industry recover somewhat from the heavy slump in singles and album sales. JAMBA emerged as the market leader for ringtones in Germany.
The JAMBA case Three German brothers founded JAMBA in 2000. They had previously established an Internet auction portal, which they later sold to eBay. At a time when mobile phones in Germany were no more than a flexible means of communicating and had only started to reach a wider customer base, these three brothers had already realized the potential of the mobile phone as a lifestyle element. By selling ringtones, JAMBA became one of the earliest companies to offer individualizing features for mobile phones. They pushed the door open to a new market in Germany. As the number one player from the beginning, JAMBA managed to develop a strong brand specifically for mobile phone features. After an extremely successful start-up phase, JAMBA soon extended its product base to include other features such as phone logos, game downloads and SMS information services. By 2003, JAMBA had already sold 10 million ringtones and 4.6 million games. JAMBA also expanded internationally to over 20 countries. JAMBA’s product portfolio comprises more than 50,000 products, supported by over 180 content providers. By 2005, JAMBA had even started generating content itself — and this it did extremely successfully. The famous German hit “Axel F” was remixed and a “crazy frog” comic figure was invented as the singer. The ringtone was sold 150,000 times in one week and the song became a number one single on the UK music charts. The emergence of a ringtone as a revenue-generating piece of entertainment represented the opening of a major opportunity in the mobile business space. By 2005, JAMBA content was sold via two main channels. First, content could be ordered by SMS. Secondly, JAMBA runs a straightforward website. The setup is easy to use and simple to navigate, and content can even be tailored to the mobile phone the visitor is using. JAMBA was flanking its sales efforts by heavy advertising, mainly via commercials on TV music channels, targeted at teenagers and young adults. While JAMBA continued experiencing extraordinary growth through 2005, the public image of ringtone sales suffered. These tones came to be regarded as a serious threat to the industry. Price and contract details were printed in
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extremely small fonts or shown just for a few seconds in TV commercials. Many teenage customers were tricked into paying for subscriptions with hidden costs instead of merely acquiring single ringtones. This led to youth and customer organizations blowing the whistle on these practices and legal issues came to plague the ringtone vendors. In 2004, the U.S. firm VeriSign, a provider of infrastructure technology for Internet and mobile networks, acquired JAMBA for 230 million euros. With this purchase, VeriSign aimed to benefit from the synergistic effects of technology and content.
The Next Step: Can JAMBA Keep Up the Pace? Given the faddish nature of the content, the market for individualizing mobile phone content was expected to stagnate by the late 2000s. Many players had entered the market and prices were under intense pressure; market saturation and industry shakeout were expected. Industry experts did not regard a strong position in the ringtone market by itself as a good basis for building a successful m-commerce portal capable of selling other value-added mobile services. The reason is the potential customer base: Ringtones were mainly sold to the SKIPPI (School Kids with Income and Purchasing Power) target group and, according to market analysts, there was extremely little potential for selling this kind of content to older users. A report by MBM Mobile Business Studies had shown that SKIPPIs were only barely interested in m-commerce services. Hence, mainline and sustainable m-commerce did not represent an easy product-line extension for a company like JAMBA. Given this, JAMBA started exploring ways to further expand the company’s product base. They were preparing to enter the mobile real-music market with full-length music downloads. The pioneers in Germany for real music downloads were mobile operators O2 and Vodafone. JAMBA would have to compete with these firms. Real music represented a logical expansion path for JAMBA for several reasons:
•
First, this service can be marketed quite easily to the SKIPPIs target group. This group had already been reached by the industry, and this demographic category used to be a strong customer base for the traditional CD music sales. By focusing more on this group, the existing brands and platforms could be leveraged.
•
Second, the business model of downloadable music had already proven to be successful in the Internet environment. Online music stores like i-Tunes
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(Apple), Musicload (T-Online) and several others had succeeded in the German market and showed considerable growth rates.
•
Third, mobile devices, home computers and Hi-Fi systems were being continually enhanced and integrated via new interfaces and cross-functional components. Entertainment for people on the move has been a successful concept for over two decades. Hence, the logical step for firms like JAMBA would be to transfer the concept of real-music sales to the mobile environment.
Many industry analysts, however, were skeptical whether the mobile real-music sales would turn out to be a success story similar to the ringtone story. Margins tended to be much lower for real music than for ringtones. A big part of the mobile device music business might, therefore, could be wrested from the start-ups like JAMBA by established giant media companies that own the content, or by mobile operators with deep pockets.
Research in Motion: How a Simple Berry Makes People Happy “Who would want to read and write e-mails on a PDA?” This skeptical query was raised when a small Canadian company called RIM (Research in Motion) introduced their PDA called BlackBerry in 1999. Combined with a mobile phone using GPRS technology, BlackBerry had a rather limited feature set compared to other available products. Palm dominated the market for PDAs after Apple failed with its Newton PDA device. Microsoft was pushing its Windows CE operating system in the PDA market. It seemed that the range of features a PDA could offer were becoming broader by the day. But RIM focused simply on the so-called e-mail push-technology instead of competing in functionality. Rather than just forwarding e-mail to a mobile device, this technology allowed people to manage their e-mails as if they were at their desks. One could zap a message on the BlackBerry and it would be deleted on the computer too. Also, the address book and calendar synchronize instantaneously with the desktop. While such remote synchronization using a mobile phone and a PDA was not new, RIM made such synchronization effortless and convenient. By 2005, large numbers of users waiting in airport business lounges or traveling by trains in Germany could be seen typing e-mails and accessing instant company data with their blackberries. What happened? RIM made its name supplying companies with everything they needed to send wireless e-mail s, from the software for handling e-mail s to the Blackberries themselves. By 2005, RIM had the capacity to produce three million devices Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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annually. Microsoft, Visto and other main competitors concentrated only on the software to handle wireless e-mail traffic, letting companies like Nokia and Motorola make the gadgets. RIM, on the other hand, provided a one-stop shopping solution for companies seeking a high-reliability mobile e-mail device. In the beginning RIM focused on the enterprise market, installing their software and hardware so that traveling employees could access e-mails. Later, RIM started offering the devices and services to individuals. RIM has three sources of revenue: (1) Selling hardware that it makes (60 percent); (2) providing services (30 percent); and (3) selling software (10 percent). James L. Balsillie, chairman and co-CEO of RIM, estimated that customers who used RIM devices paid a total of $120 to $130 a month to wireless operators. RIM collected $8 to $10 of that from the operator, and Balsillie argued that this was a nominal fee. “We’re making them [the mobile operators] great money,” Balsillie said of such revenue sharing arrangements.
Paybox: Post No Bills In 1983, the German government who then owned Deutsche Post — the predecessor of Deutsche Telekom AG — introduced a service called BTX. This was purely a text-based online service, including e-mail capability. A payment system was also introduced into this revolutionary system. Users could carry out single payments of up to about 5 euros (DM 9.99) per transaction. At the end of the month, the total amount due was settled via the monthly phone bill. This payment system did not survive, however, due to user acceptance issues. This was not the only innovative payment method that failed to be successful in Germany. Credit card usage is lower in Germany than in most other G7 countries. Another example is the Electronic Purse, supported by all major banks in Germany. Over 100 million cards were issued in 1999 alone. This system did not succeed as well, as people were distrustful of electronic cash. In Germany, electronic bank transfers are still the most popular means of payment. Credit card companies have been largely absent from the German mobile payment market. The last initiative of any significance was a system called Paybox. Hermann-Josef Lamberti, a Deutsche Bank AG board member, commented in 2000 that Paybox was a “revolutionary business idea” and announced that his bank had bought a 50 percent stake and would from then on help to promote this idea. Instead of providing a payment card, a Paybox user gave his or her mobile phone number to a participating retailer. Then he or she received a message with details of the transaction and confirmed it with a PIN, after which the money was debited from their bank account and transferred to the retailer’s account. In
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March 2002, Paybox claimed to have 750,000 users in Germany, Austria, Spain, Sweden and England, with plans to expand to the U.S. and Asia. But six months later, Deutsche Bank pulled out of Paybox and the service cut back operations in Germany. The concept failed. In reality, Paybox had developed a reliable and safe mobile payment service backed by one of the strongest financial institutions, but people just did not accept it.
Location-Based Services (LBS): Users Wanted Praised as the next category of “killer applications” in the mobile communications world, location-based services (LBS) have become a popular subject in research and media. But wherever one looked in the mid 2000s, location-based services did not seem to play significant roles in the mobile business space in Germany. There are few examples in Germany where services are location-based, but up to 2005, none of them seemed to have the potential for larger-scale business models. Most existing solutions require the user to enter the desired location when requesting the service or to request it beforehand, e.g., via a Website. Surveys indicate that people are generally interested in LBS, but not to the extent that a “must have” location application can be created. Simplicity is a core success factor. Complicated interactions with the mobile phone are an inconvenience most users are not willing to accept. Solutions with automatic location functions — that could substantially remove this obstacle — have been evolving very slowly and had not been particularly successful until 2005. The question remains: Why did LBS not take off, even as late as the mid 2000s?
Technology is Available A closer look at the technology reveals that basic location-based services are not necessarily bound to new technologies like UMTS. They also do not need technological extensions like GPS modules. The basic GSM standard already offers the technological basis for LBS. By interpreting the Cell ID from which a mobile phone is operating, the position of the user can be determined up to a few kilometers in rural areas and up to 300 meters in densely populated urban areas. Using technologies like LPM (location pattern matching), AOS (angle of arrival) or TDOA (time difference of arrival) which are based on smart algorithms, the accuracy can be narrowed down to 100 meters in GSM networks. With UMTS, accuracy can even be improved to 30 meters. Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Cell ID may not be enough for guiding a person through a shopping mall, but information like the closest gas station or the local weather forecast could, from a technological point of view, be offered easily with GSM. Cell ID is available with every mobile phone and in all mobile networks in Germany without additional equipment, and is therefore easy and cheap to implement.
Big Brother is Watching You: A Germany-Specific Challenge VIAG Interkom (today operating as O2), one of the big-four mobile operators in Germany, took a pioneering stance in the LBS arena and announced a “friend finder” service in 2001. This allowed users to locate friends, children, or colleagues via their mobile phone. When the technology was presented at the CEBIT technology fair, however, VIAG experienced a strong resistance to the service. Customers were afraid of being observed. “The Brits could not understand the difficulties we had, introducing the friend finder,” said Karsten Pawlik, LBS specialist at VIAG. “We are probably dealing with a Germanyspecific problem here.” VIAG did not, still has not launched the service, fearing its negative impact on their customer acquisition activities. Aral, one of the largest petroleum firms in Germany, was one of the first to offer LBS in the German market. In 2001, Aral teamed up with the i-Mode portal operated by E-Plus and offered a gas station finder. The free service guides the customer to the closest Aral gas station and also offers some additional services. “The usage frequency has not developed as we initially expected. Therefore, we have not further pushed the service,” an Aral representative commented on the consumer acceptance of this service. Since then, other companies have slowly followed the lead and now offer similar services. For example, T-Mobile provides assistance in locating WLAN hotspots. The focus of such location-based services, however, is mainly to provide “free services in an attempt to bind customers” rather than to act as standalone, revenue-producing business models.
Viewing Germany’s Mobile Sector in the Clip Framework Four cases were presented in the preceding sections. Two mobile services concepts were successful and two were not. In view of the four CLIP dimensions, these cases provide a comprehensive overview of the current situation in the German mobile communications market.
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RIM, with its BlackBerry devices and enterprise/corporate software, focuses on one specific technology — the push technology — a device which was conceived and produced by the company itself. The enabling technology is a GSM extension of GPRS, which is globally available. Two dimensions of the CLIP framework — Communication and Information — are integrated in a specific small device that is easy to handle and reliable. JAMBA is a fast-moving content provider for mobile phone ringtones. The success factor of this business model is to provide up-to-date content, advertise heavily and ensure payment for downloads. Using standard technology like GPRS, the ringtones are transferred to the customers (Communication and Information). Mobile phone manufactures are using standardized platforms, so tones can be easily played on different phone models. Content is easy to generate — a ringtone has a development time of less than a personweek — and the marginal costs beside royalties are minimal. Advertising has become a key factor for JAMBA, in targeting young people. The brand name is now very well established. Payments are settled via SMS or phone billing. The Paybox case showed that a perfectly stable technology using the standard GSM network and strong partners, in its own right, did not guarantee business success. Payment was processed through the regular banking system. The security level was high, but the system was rather complicated and did not offer any benefits to its users. Even the backing of one of the largest banks in Europe could not save this business model. The technology for locating (the L dimension in CLIP) a mobile phone user is well established in Germany. A small number of services are available, but so far this has not resulted in large, scalable revenue-producing applications. There are two kinds of location-based services: 1.
Static services such as weather reports, where one is required to sign up and enter a zip or postal code. On a regular basis or on request, one can obtain the latest weather report for the specified area. Yet this does not exploit the full capacity of the network; and
2.
Dynamic services allowing the location of the CLIP device and the content to be altered. This feature is available but has not yet conquered the German market. Privacy concerns seem to be a major barrier is some cases.
Lessons Learned The cases have shown that four factors have to be considered when developing m-commerce applications for the 3G arena. The first two factors are simplicity and reliability. Both factors are important for the success of a new application. Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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The next two factors are privacy and security. These two factors require special attention because of the high sensitivity of mobile phone users.
Simplicity The Paybox and BlackBerry cases show that simplicity is a vital element to conquer the German market. This is especially true when the application does not provide a significant end-user value like Paybox did. The payment procedure of Paybox was too complicated. On the other hand, the BlackBerry concept is sweet and simple, essentially providing less value than comparable devices and services but with a high convenience factor.
Reliability The experience with WAP technology has shown that the mobile technology needs to be reliable from the beginning. Employing the phone user in order to gain experience with a new technology does not pay off. The German market has not forgiven the first experiences phone users made with WAP. Therefore G3 technology needs to be stable and reliable from the first moment on.
Privacy The LBS scenario shows that privacy issues play an important role for German customers. The already installed LBS technology could not have been used because of rising privacy concerns of the mobile phone users. New applications need to take this into account. Tracking or localizing capabilities that are trigged by a network provider need to ensure privacy for the mobile phone user.
Security Security concerns killed the Paybox idea. Germans have been resistant to the idea of using a credit card for many years. Electronic Cash was also not a success story. Media reports showing that bankcards could be copied by criminals and used to withdraw money do not help. Such reports have shaken the trust foundation of the card system. Convincing a German to use his mobile phone to purchase big-ticket items would be a Sisyphean endeavor. Using premium SMS as a micropayment method has started to work. But expanding this without having a financial safety cushion, such as the no user-liability guarantee that credit cards offer, seems to be unrealistic.
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Questions for Discussion 1.
Why did the ringtone marketer JAMBA, despite its huge success with the “Axel F” remix ringtone, face a tough challenge in entering and growing in the mobile downloadable music market? Suggest ways for an innovative firm like JAMBA to compete effectively in a wider m-commerce competitive arena in Germany.
2.
What lessons can be learned from the experience of the mobile bill payment system Paybox? What needs to be done to create successful mobile payment systems in Germany and other major global markets?
3.
What technological, business model and consumer behavior barriers stand in the way of widespread adoption of location-based services (LBS) in Germany? What can be done to overcome such barriers?
References Attlfellner, R. (2003, June 27). Big brother war gestern (Big Brother was yesterday). Werben und Verkaufen, 22. Bauchmüller, M. (2004, Aug 12). Jugend in Deutschland: Was sie Kauft, was Sie Liest, was Sie Redet — und Warum Auch Wohlstand Eine Plage Sein Kann — Der Schein Zählt (Young people in Germany: What they buy, read, talk — appearances are deceptive). Süddeutsche Zeitung, p. 9. Dholakia, N., Dholakia, R. R., Lehrer, M., & Kshetri, N. (2004). Global heterogeneity in the emerging m-commerce landscape. In N.S. Shi (Ed.), Wireless communications and mobile commerce (pp. 1-22). Hershey, PA: Idea Group Publishing. Dholakia, N., & Rask, M. (2004). Configuring m-commerce portals for business success. In N.S. Shi (Ed.), Mobile commerce applications (pp. 76-94). Hershey, PA: Idea Group Publishing. Dubacher, J. (2005, June 9). Statt bar mit dem Handy. CASH Z1. Gasenzer, R. (2001). Mobile Commerce und Location Based Services: Positionsbasierte Leistungsangebote für den Mobilen Handel. HMD – Praxis der Wirtschaftsinformatik, 8. Graner, R. (2005, May 11). The new front end: Vendors extend apps to handheld platforms. Computer Reseller News, 19. Grote, A. (2004, Aug 4). Beischeid Wissen, Vorteile Nutzen: Handy-infodienste (Understanding, using advantages: Information services for cell phones). Süddeutsche Zeitung, p. 18. Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Handy-bezahlsysteme Gibt es Reichlich, Doch für den Durchbruch Fehlt es an Standards. (2004, Aug 19). (Many mobile payment systems, but no standards) Handelsblatt, 160, 15. Jahresbericht 2002 Die Regulierungsbehörde für Telekommunikation und Post. (2002). (Annual report 2002 regulatory authority for telecommunication and postal services). Retrieved May 1, 2005, from http://www.regtp.de/ imperia/md/content/aktuelles/jahresb2001.pdf Jahresbericht 2002 Die Regulierungsbehörde für Telekommunikation und Post. (2002). (Annual report 2002 regulatory authority for telecommunication and postal services). Retrieved May 1, 2005, from http://www.regtp.de/ imperia/md/content/aktuelles/jb2002.pdf Jahresbericht 2003 Die Regulierungsbehörde für Telekommunikation und Post. (2003). (Annual report 2002 regulatory authority for telecommunication and postal services). Retrieved May 1, 2005, from http://www.regtp.de/ imperia/md/content/aktuelles/jb2003n.pdf Jahresbericht 2004 Die Regulierungsbehörde für Telekommunikation und Post. (2004). (Annual report 2002 regulatory authority for telecommunication and postal services). Retrieved May 1, 2005, from http://www.regtp.de/ imperia/md/content/aktuelles/jb2004_050308.pdf Khodawandil, D., Pousttchi, K., & Wiedenmann, D. (2003). Akzeptanz Mobiler Bezahlverfahren (Acceptance of mobile payment systems). Retrieved January 11, 2005, from www.wiwo.de Kliger, M. (2000, Nov). M-commerce: Die Nächste Revolution im Handel? (MCommerce: The next revolution of trade?) Net-Business. Knüwer, T. (2004, May 27). Das Bunte Reich der Samwers (The colorful kingdom of the Samwer brothers). Handelsblatt, 102, 21. Kroker, M. (2001, Jan 18). BEZAHLEN / Handy als Geldbörse (Payment/ cell phones as e-wallets). Wirtschaftswoche, 004, 106. Langer, U. (2005). Die Handy WM in WELT Online. (The world championship in WELT online) Retrieved June 26, 2005, from www.welt.de Lührig, T. (2005). Risikomanagement in der Produktentwicklung der Deutschen Automobilindustrie. (Risk management in the product development of German car manufacturers). Darmstadt 2005, p. 17. N.N. (2000, March 16). Deutsche Bank Kauft Sich bei Paybox.net Ein. (Deutsche Bank buys into paybox.net). Handelsblatt, 054, 27. N.N. (2001). Ist M-commerce tot Oder ein Wunschtraum? (Is m-commerce dead or a dream?) Retrieved January 9, 2005, from www.contentmanager.de N.N. (2001, March 23). UPDATE Paybox noch mit Problemen (Paybox still experiencing problems). Handelsblatt, No. 078, 02.
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N.N. (2001, May 11).Unternehmen Zählt eine Viertelmillion Nutzer, die per Handy Zahlen / Paybox Strebt zum Industriestandard (Company counts a quarter millions users paying by cell phone/ Paybox striving for industry standard). Handelsblatt, No. 091, 27. N.N. (2003). eReport UMTS-handys. Retrieved March 5, 2005, from www.marketagent.com N.N. (2003). Intramundos GmbH. Über die Handy-gimmick-nutzer (About users of cell phone gimmicks). Retrieved March 18, 2003, from www.contentmanager.de N.N. (2003, Jan 24). Paybox Stellt Mobilen Bezahldienst Ein (Paybox discontinues mobile payment service). Handelsblatt, No. 017, 16. N.N. (2003, Feb 27). Paybox will Zweiten Versuch Starten. (Paybox makes 2nd attempt). Handelsblatt, No. 041, 18. N.N. (2004, June 6). Polyphone Orgie (Polyphone orgy). Focus Money, 14-17. N.N. (2005). M-payment – Nein, dDanke! (M-Payment – no, thanks!) Retrieved January 16, 2005, from www.campusmagazin.de N.N. (2005). UMTS – Technik, Chancen, Utopien (Technology, opportunities, utopias). Retrieved January 9, 2005, from www.teletarif.de N.N. (2005, May 17). Research in motion – Carriers getting more aggressive on pricing. The NBF Daily Bulletin. N.N. (2005). LBS (location based service). Retrieved April 3, 2005, from www.itwissen.de N.N. Intramundos GmbH. (2003). Klingeltöne und Handylogos Kein Einstieg in den M-commerce? (Ring tones and logos no entry into m-commerce?) Retrieved January 16, 2005, from www.contentmanager.de N.N. Pressetext. (2005, July 7). Paybox Mit E-commerce-gütezeichen Ausgezeichnet Bezahlen Mit Dem Handy Sicher und Kundenfreundlich (Paybox receives ecommerce award). N.N. Pressemitteilung eco forum e.v. (2004). Deutschland als Führender Entwicklungsstandwort für die Neuen Handydienste: Experten Bleiben Skeptisch. (Germany as the leading location for the development of new mobile services: experts remain sceptical) Retrieved January 9, 2005, from www.eco.de Paulick, S. (2005, July 8). Web-Zahlungssystem reduziert Preishürden für kleinere Händler (Web payment system lowers price barriers for small retailers). Wirtschaftsblatt. Pelkonen, T., & Dholakia, N. (2004). Understanding emergent m-commerce services by using business network analysis: The case of Finland. In N.S.
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Shi (Ed.), Wireless communications and mobile commerce (pp. 105-131). Hershey, PA: Idea Group Publishing. Rack, P., & Irion, R. (2003). M-commerce: Was Haben Wir Gelernt? (MCommerce: What have we learned?) Retrieved January 10, 2005, from www.wiwo.de Rosenbush, S., & Green, H. (2005, May 23). Looking to pick off BlackBerry. Business Week, 104. Samuelsson, M., & Dholakia, N. (2004). Assessing the market potential of network-enabled 3G m-business services. In N.S. Shi (Ed.), Wireless communications and mobile commerce (pp. 23-48). Hershey, PA: Idea Group Publishing. Scholz, J. (2005). Silbermond Statt Singende Küken. (Silbermond instead of singing biddies). Retrieved March 20, 2005, from www.teletarif.de Sieckmann, R. (2005, Aug 30). Das Mobiltelefon Macht dem Portemonnaie Konkurrenz (Cell phones competing with wallets). Handelsblatt online. Smith, B. (2005). Carriers find their Way to LBS. Wireless Week, 6(11) 11. Stone, R. W. (2004, Aug 19). Research in motion. Cowen & Co. Wall, J. K. (2005, May 23). Wireless is winning the loyalty test. The Indianapolis Star. Westhoff, A. (2005, Jan 9). Netsize aus Köln Treibt für Klingeltonanbieter das Geld ein, damit mit dem Handy auch die Kasse Klingelt. (Netsize collecting money for ringtone vendors). Welt am Sonntag, p. 90. Winter, M.-A. (2004). Jamba! Erwartet “Explosives Wachstum” bei Handydownloads (Jamba expecting explosive growth for cell phone downloads). Retrieved March 18, 2004, from www.teletarif.de
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Chapter VIII
India: The Awakening of M-Commerce Syagnik (Sy) Banerjee, University of Rhode Island, USA Mark M. Lennon, University of Rhode Island, USA
Abstract This chapter presents our perspective on the evolution of m-commerce in India, where the telecommunications sector was privatized in 1992 and further deregulated in 1999. The chapter introduces the leading mobile telecom players and relates them to the emerging trends. Intertwined with this narrative are descriptions of specific m-commerce cases which deploy SMS in just about every application. These cases are further analyzed using the CLIP framework, illustrating the Indian markets’ adaptive capacity to employ low-end technology to deliver high-end solutions. The chapter concludes with lessons drawn from the Indian experience, and outlines some directions for future research.
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Introduction Following the economic liberalization of 1991, the opening up of the telecom industry boosted the telecom subscriber base to 50 million users and 44 million fixed line users by January 2005. With 2.5 million users being added every month, industry watchers expect the subscriber base to cross well above 60 million by early 2006. In regard to the number of subscribers added in fixed line versus mobile, in the period of January 2004 to December 2004, fixed-line operators added 2.67 million subscribers, whereas the mobile operators added 19.5 million. From a nation that did not have any form of mobile communications until the mid 1990s, by the mid 2000s India transformed dramatically into a nation literally and figuratively “in tune” with mobile technology, as the following scenario about music downloads indicates (Das Gupta, 2005): Nineteen-year-old Siddharth Kohli is a dream mobile customer. The undergraduate student from Delhi changes his ringback tone every week with the latest Hindi film songs. On weekends, Kohli and his friends spend hours together exchanging singtones through their snazzy, bluetooth enabled handsets. He also changes his ringtone every fortnight (i.e., every two weeks]. Kohli now hopes to convince his father to buy him a Walkman phone on his birthday. “I think it is a cooler way to carry my favorite songs than the iPod,” he says, excitedly. Music is rocking the mobile world, thanks to customers like Kohli. Not convinced? Sample this: industry sources estimate that around 25 million ringtones and ringback tones are downloaded every month by mobile customers across the country. That figure is expected to double by the end of the year. Online stockbroker Share Khan predicts that sales of these two tones alone will generate over … Rs 8.8 billion [US$210 million] … by 2007. That’s staggering, given the fact that total music industry revenues actually fell by a third over the past three years to … Rs 6 billion [US$150 million] … thanks largely to piracy. Even in rural areas of India, mobile data applications were changing the lives of some people (see Box 1 “Fishing for Success, the Mobile Way”). Despite a decrease in average revenue per user (ARPU) by 17 percent in 2003-2004, the mobile telecommunications revenues increased by 30 percent. In January 2005 the industry revenues were Rs. 83 billion or US$1.9 billion. With the Indian
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Box 1. Fishing for success, the mobile way Father of India’s space program, physicist Vikram Sarabhai said his vision was to “connect the people, connect the world.” To this end, he urged and succeeded in establishing an active space program in India and the country now has several satellites in orbit. Decades after Sarabhai’s death, his efforts have had unforeseen and beneficial serendipitous results. The space program has developed good “remote sensing” technology, with satellites capable of sensing various elements on the earth’s surface. With the help of such remote sensing technology, fishermen in the southern Indian state of Kerala are receiving assistance from the space agency in their efforts to find dwindling schools of fish. Using state of the art technology, the locations of large concentrations of fish are determined via satellite imaging. This information is then relayed via the Internet to the fishermen’s mobile phones. Tapping into the global positioning feature of their mobile phones, the fishermen can sail their boats to the appropriate locations. This has greatly increased their efficiency and cut down on costs, as valuable fuel and time need not be wasted. Having a good catch by itself, however, did not ensure success. In the past upon coming ashore, fishermen had to accept the prices offered by the agents and distributors, who oftentimes colluded to keep prices low. But now equipped with mobile phones, fishermen can contact various distributors and exporters directly while still at sea. Fishermen can then determine where they should land to get the best prices. Mobile phones have thus greatly increased the returns from fishing.
Source: Based on news items from the India Tribute (tribuneindia.com) and BBC World News (news.bbc.co.uk), and author’s research
economy continuing to grow at a fast rate, increasing cashflow into the telecommunications sectors set the stage for a growing potential for commercial transactions to take place through the mobile phone interface. Before the advent of mobile telephony, there were attempts to integrate the business supply chains through combinations of rudimentary wireless and brick and mortar technologies. In highway transportation, for example, commercial vehicles were tracked through radio-wave transmitting machines. At many petrol stations, truck drivers would swipe individual vehicle cards in order to be tracked on the Internet. With the advent of mobile telephony and m-commerce, mobile telephones are now the preferred means for tracking trucks and other similar applications. Since mobile coverage is still spotty in rural areas, the backup fixed-line systems continue to be of value. However, with advances of mobile telephony, these organizations have repositioned themselves in their businesses from being data carriers to becoming data managers. With the advent of m-commerce, the revolution in information sharing and integration has led to a wide variety of applications developed to enter the market.
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Recent History of Telecom Policy and Industry Structure Until 1994, the Department of Telecommunications (DOT) had the three roles of licensor, regulator and service provider. From DOT, VSNL and MTNL had been created to act as International Long Distance (ILD) operator and to offer services in Delhi and Mumbai respectively. After NTP (National Telecom Policy) 1994 paved the way for privatization, in 1997 TRAI (Telecom Regulatory Authority of India) was set up in a regulatory role, the adjudicator role was given to TDSAT (Telecom Dispute Settlement Appellate Tribunal) and BSNL was created (from DOT) as a service provider of telephone and other related services. Between 1994 and 1998, DOT auctioned licenses to two CMSPs (Cellular Mobile Service Providers), requiring them to use the GSM technology. The next NTP (1999) allowed existing licensees in all telecom services: basic, cellular, paging and other value added services, to migrate to revenue sharing, effective August 1, 1999. Also, the government decided to levy the licensing and spectrum fees based on the adjusted gross revenue of each operator. In January 2001, the Telecom Regulatory Authority of India (TRAI) licensed “limited mobility services,” also referred to as “Wireless Local Loop,” in the 800 MHz spectrum. In effect, this introduced CDMA technology. In January 2003, some of the limited mobility licensees, notably Reliance Infocomm, introduced a call-forwarding mechanism that consequently functioned as an equivalent of roaming. This enabled full mobility on a par with that offered by the GSM-based CMSPs, and for the next ten months the CMSPs and basic service providers clashed with the TRAI over their claims of unjust discrimination of interconnection and license fees. By July 2003, amidst threats of legal action, the TRAI proposed “Unified Licensing for Basic and Cellular Mobile Services.” This would grant any operator the right to provide any access service using any technology. In the wake of unified licensing, competition among operators expanded to encompass previously separate services — landline, fixed wireless (WLL), limited mobility (WLL-M), broadband data and full mobility. Thus started a long journey of coexistence between different organizations with varying technology visions, fighting and collaborating for a share of this ever-expanding market.
India’s Mobile Service Providers Bharat Sanchar Nigam Limited (BSNL), the state telecom monopoly, dominated the telecom sector from the mid-nineteenth century to 1992. With deregulation, Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Table 1. Mobile telephone operators awarded licenses Major Mobile Operators in India Awarded Licenses Metro Region Operator Delhi Bharti Cellular Ltd. and Sterling Ltd. Mumbai BPL Mobile Communications Ltd. and Hutchinson Max Telecom Ltd. Kolkata Modi Telstraand Usha Martin Telecom Chennai RPG Cellular and Sky Cell Communications
Source: Telecom Regulatory Authority of India
Table 2. India’s main telecom players in 2004 Major Players as of late 2004 Service Provider Reliance Infocomm Bharti BSNL Hutchison Idea Cellular
Brand
Subsriber Base (Millions)
Percentage of Market Share
Reliance AirTel BSNL Hutch Idea
10.155 9.82 8.861 7.18 4.7
21.2 20.5 18.5 15.0 9.8
Source: TRAI consultation paper: The Indian Telecom Services Performance Indicators (October –December 2004, March 2005)
initially eight metro licenses were open to bidding, and GSM was the Department of Telecom (DOT) specified technology. Table 1 summarizes the metro regions and operators that were awarded licenses in 1994. Modi Telstra launched India’s first cellular service in Kolkata on July 31, 1995. What followed in the next few years was extreme confusion in terms of regulations, chosen technology standards, license fees and revenue sharing. Taking advantage of regulatory confusion, Reliance Infocomm introduced WLL (M) services — in competition to the officially approved GSM standard. By January 2003, Bharti launched a price war by slashing local and long-distance rates by 50 percent. 1 This triggered explosive growth of mobile communications across the country, despite BSNL matching those reduced rates in a few days on their fixed line services. Table 2 profiles the main telecom players as of late 2004. As depicted in Table 2, the percentage of market share is approximately the same (20 percent) for the three major players, Reliance, Bharti and BSNL. This is mostly due to the fact that they cover similar geographic areas and have similar offerings. This will be presented in more detail in the next section of this chapter.
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Costs and Coverage Another aspect of the mobile market in India is the greater number of prepaid customers than the postpaid. A major possible reason why prepaid is so popular in India is that the country lacks a nationwide financial infrastructure, such as electronic bank drafts or credit cards, to support countrywide postpaid plans. Regarding the lack of credit cards, the most salient reason for this is that, unlike in Japan and the Far East, United States and Western Europe, there is no welldeveloped credit rating service. Thus the mobile providers have great difficulty in examining the risk/benefit analysis to qualify consumers for postpaid eligibility. Tables 3 and 4 illustrate these points by comparing the number of users in different geographic circles. The term “Circles” refer to these geographic areas, with the letter designation of Circle A as the metro regions, Circle B as smaller cities and Circle C as the countryside. As shown in Table 3, the fastest growing market for prepaid phones is approximately 20 percent for both Circle A and Circle B. Nationwide, there are 19.4 million prepaid subscribers as of March 2004. By comparison, the postpaid phones have only 6.3 million users, demonstrating the prepaid popularity.
Table 3. Subscribers and growth rates in prepaid mobile users Circle
Number of Subscribers of Prepaid Phones Dec-03 Mar-04 % change
Circle A
5,498,728
6,631,645
20.60%
Circle B
4,683,655
5,737,577
22.50%
Circle C
738,046
813,107
10.17%
Metro Cities
5,592,366
6,202,288
10.91%
All India
16,512,795
19,384,617
17.39%
Source: COAI press release (November 8, 2004)
Table 4. Subscribers and growth rates in postpaid mobile users Number of Subscribers on Postpaid paid Phones Circle
Dec-03
Mar-04
% change
Circle A
2,273,041
2,720,634
19.69%
Circle B
1,308,286
1,633,171
24.83%
Circle C
158,307
249,373
57.52%
Metro Cities
1,403,457
1,739,723
23.96%
All India
5,143,091
6,342,901
23.33%
Source: COAI press release (November 8, 2004)
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Table 5. Monthly expenditures by user type and provider plans in Delhi Monthly Expenditures in Prepaid and Postpaid Plans in Delhi Region Prepaid Postpaid User Type Provider’s Plan Monthly Provider’s Plan Bill (Rs.) Low Users Tata Teleservices Limited 324 MTNL Cellular — Plan E — CDMA mobile Prepaid budget MTNL Cellular — Trump 330 MTNL Cellular — Plan F Traveler Economy MTNL Cellular — Trum — 550 Hutch — Talk Rent Free Keep in touch Idea — Chitchat (Recharge 550 MTNL Cellular — Plan A 550) (with STD pack) Idea — I-Card 550 Hutch — Talk Rent Free (with STD pack) Medium MTNL Cellular — Trump 550 MTNL Cellular — Plan F Users — Keep in touch Economy AirTel prepaid 699 MTNL Cellular — Plan E budget Idea — Chitchat (Recharge 1100 MTNL Garuda (Limited 1100) (with STD pack) Mobility) MTNL Cellular — Trump 1100 MTNL Garuda (Limited Afford Mobility) — Plan B Standard Idea — I-Card 1100 MTNL Cellular — Plan A High Users Idea — Chitchat (mobile 1100 MTNL Cellular — Plan F pack and STD pack) Economy MTNL Cellular — Trump 1100 MTNL Garuda (Limited Afford Mobility) — Plan B Silver AirTel prepaid 1102 MTNL Garuda (Limited Mobility) — Plan B Standard AirTel Friendz prepaid 1102 MTNL Cellular — Plan E budget Very High MTNL Cellular — Trump 2200 MTNL Garuda (Limited Users Power Mobility) — Plan B Platinum Idea — Chitchat (Mobile 3300 MTNL Garuda (Limited pack and STD pack) Mobility) — Plan B Gold Idea — I-Card (Recharge 3300 MTNL Garuda (Limited 3300) Mobility) — Plan B Silver AirTel prepaid 3306 MTNL Garuda (Limited Mobility) — Plan B Standard
Monthly Bill (Rs.) 288 331 331 343 359 331 418 451 456
473 580 663 669
690 1126
1195 1236 1266
Source: TRAI paper for Mobile Phone Tariff Comparison: Preliminary results of a research study (February 10, 2005)
Having said this, however, it should be noted, as shown in Table 4, that there is a larger percentage increase in postpaid phones, most notably the 57 percent increase in rural areas (Circle C). This should be taken with a caveat, though, as the number of users at 249,373 still lags well behind with 813,107 in Circle C prepaid phones.
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While the breakdown of the volume of prepaid and postpaid users is valuable, so is the understanding of prices of the providers; Table 5 illustrates this by examining user breakdown and prices in the Delhi region. Delhi was chosen because, as the Indian capital, the city has some of the most robust users with high penetration rates for mobile service. Table 5 summarizes the monthly expenditures base on usage providers’ plans. Table 5 offers further empirical evidence that prepaid plans are more popular than postpaid. In all the prepaid, heavy-user plans, the bill amounts of about Rs. 3,300 ($66) are relatively high when compared to only about Rs. 1,200 ($24) for comparable heavy-use postpaid plans. Interestingly, the heavier the user, the more prone he or she is to use prepaid, but in the lower and medium users, there is not as much a gap in monthly costs. This prepaid propensity by heavy users may indicate their desire to keep track of time expenditures when online, as opposed to the guesswork of possible overage charges in postpaid plans. Also of note, in every user plan offered in each user bracket, regardless of postpaid or prepaid, the amount of usage is approximately the same. This may indicate that the plans offered by each provider may be similar and substitutable. Given that the costs are also about the same for every provider to handle mobile usage, it is likely that the revenues generated (and corresponding profits) are also approximately equal. Therefore, providers must provide unique services to attract more users and greater overall usage. This leads us to our next section on VAS.
Transition from Voice to VAS Due to the aforementioned fierce competition amongst the mobile operators, the revenues from voice services declined markedly. Providers had no choice but to look for additional revenue sources as airtime tariffs in India are among the lowest in the world at $16 per month for a 300-minute basket. The battle took a turn for the worse when Reliance entered the market with its famous peg of national long distance (STD — subscriber trunk dialing) for Rs. 0.40 ($0.01) per minute. Although cellular operators responded in kind to the tariff war, the cellular subscriber base suddenly experienced slower growth. During 2002, ARPUs dipped from Rs. 871($21) to Rs. 522 ($12.42) in the April-June quarter to Rs. 516 ($12.28) in the July-September quarter of 2003. It was a clear signal to GSM operators that the time had come to change tactics and move the war to another realm — the focus on new services.
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Evolution of the Mobile Commerce Industry: VAS is the Right Word Focusing on value-added services (VAS) is an inevitable growth path for operators. The world over, voice revenues have tumbled, forcing operators to focus on non-voice revenues. In mature markets, operators have successfully positioned these as premium services. In Norway, for instance, premium mobile service revenue has grown over 50 percent in 2003 compared to 2002, with over 80 percent of Norwegians having purchased premium mobile services. Today, most operators base the success or failure of value-added platforms by revenues generated from these VAS. Prominent players like Airtel, Hutch and Idea generate revenues through their proprietary services. In the process they help nurture an ever-expanding business opportunity for entrepreneurs who manage, create and build derivatives around this exciting platform. Subscriber interest in the services is sustained through a variety of content in the form of quizzes, contests, tune-creation modules and being one’s own disc jockey, all of which are downloadable options. Examining the Indian market a few years back, operators had no choice but to look for additional revenue sources. Already fighting with their backs to the wall because of regulatory issues, the entry of the fourth cellular operator further shrunk the market. Although cellular operators responded in kind to the pricing war, cellular subscriber bases suddenly experienced slower growth. ARPUs dipped from Rs. 871($21) during the year 2002 to Rs 522 ($12.42) in the April-June quarter to Rs. 516 ($12.28) in the July-September quarter of 2003 (TRAI). It was a clear signal to GSM operators that the time has come to change tactics and move the war to another realm — focus on new services. In this backdrop, the market witnessed a sudden burst of activity as mobile operators swung into action promoting non-voice activities. The most famous is Bharti’s campaign on ringtones with AR Rehman. Bharti had ace musician Rehman compose exclusive tunes, which were offered to its subscribers as downloads. Idea Cellular followed suit with its Cellular Jockey campaign and Hutch launched its memorable campaign of cricket replays showing the scintillating batting by Rahul Dravid. Cricket updates, Bollywood gossip and even astrology became popular despite having to pay a premium on the content. Clearly Indian subscribers were game for paying for perceived value. Operators were thrilled to find that they could rake in 6-12 percent of their revenues during the second half of the year from non-voice services like SMS, ringtones, logos and other downloads. Service providers are targeting more than 20 percent of their revenues to come from data
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services. All operators are confident of at least reaching the global average of 15 percent of revenues from these services. This is achievable although some challenges have to be addressed in the right way. The best part is that these challenges do not call for huge investments — only a change in mindset, to some out-of-the-box thinking. While some challenges are unique to India, there are others that Indian operators can learn from the experience of mature markets. Growth in the ringtones segment has been exponential, almost doubling every quarter in every form of content — monophonic, polyphonic and messaging. Therefore, music labels too are eyeing the burgeoning traffic and are excited by this additional revenue stream to their bottom lines. With close to 200,000 downloads a day on monophonic tunes alone (priced at Rs 5-10 or $0.2 per download) across networks, the revenues are too large for anyone to ignore. Added to that is the revenue for the music labels. At a minimum of Rs 1.50 ($0.025) toward copyrights, the revenues add substantially to the label owners’ bottom lines too, sometimes even making the difference between operating in the red or the black. Yet service providers have not been able to leverage this exponential growth. What is missing is a differential pricing model within this premium content. Today, all ringtones are priced uniformly; the latest tunes are priced the same as the old, dead content; even the polyphonic tunes are priced the same as the monophonic ones. Probably the limitations to this are not at the operator billing software end as much as the sense of resistance which operators see from subscribers. Therefore, operators need to address this area as part of the market development activity and ensure fair revenue benefit for all stakeholders involved in the chain. Handset manufacturers and operators today offer far more exciting options — polyphonic tunes for over the air downloads, tune composers with multi-track notes within the handset, voice recordings added to pre-configured tunes as voice mail messages and ring-back tones over the network. Just around the corner are true tones available for download over the air on compatible handsets where the actual song or music clip can be played back on the handset as a ring tone.
Reliance Infocomm: The Early Innovator Reliance has a well-planned and comprehensive strategy on mobile applications. The company believes that both voice and data are critical as they provide a diverse set of applications that are rich in experience. Infocomm has mobile apps clubbed under five headings — information, entertainment, communications,
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commerce and enterprise applications. Presently, the content is available in eight Indian languages. The beauty of the mobile applications strategy is that it is applicable to all users, irrespective of handset type, be it black and white, color and/or PDA phones. Neither is it dependent on the educational, social or economic background of a user; thereby giving flexibility to the subscriber to use the service depending on his or her needs and requirements. This gives the user a lot of comfort in accessing services. The user is therefore not bounded because the applications are not developed solely in the English language. Entertainment is a big market for Indian users and Reliance has been focusing more on Bollywood (the Mumbai film industry) content like movies, songs and games through video-streaming, screensavers, wall papers, ringtones and contests. One can view trailers of new movies and download song videos. One can also view regularly-updated TV capsules of news channels like Aaj Tak and CNBC, all of which no doubt will be popular in the future. In the case of Infocomm, R World and R Connect are the two interfaces for mobile data applications. The R Connect is an installer-dialer combo that enables the phone to be used as a modem to connect to the net in addition to its voice capabilities. The R World is a virtual world created by Reliance that can be accessed through their phone, and several items can be downloaded or consumed through it. In the R World model, there are close to around 90 applications, and the company is working on increasing its number at regular intervals. Infocomm is even planning to provide e-mail access and instant messaging on these phones. Meanwhile, R Connect, which gives data-connectivity, has around 200,000 subscribers. As for commercial applications, users can conduct banking transactions, including paying the Reliance bill, using a credit card. It is a secure connection, approved by the bank and certified by Coopers and Lybrand. Presently, the transaction is specific to HDFC bank account holders but Reliance plans to join with other banks soon.
Developers: Crucial to Reliance’s Strategy Agreeing that content will be the main driver, Reliance Infocomm has invested a lot in generating India-specific content. For this, the company has a twofold strategy — internal as well as external. On the internal front, the company has its own applications and solutions group. Apart from this, for the gaming front the company has formed Paradox Studios, a 100 percent- owned subsidiary of Reliance. Presently, Paradox has a team of around 52 people, whereas the application and solutions group has about 90-plus in content development. On the external front, the company launched DADP (Dhirubhai Ambani Developer Program) on December 28, 2003. This created an ecosystem so that developers can become a part of Reliance Infocomm. Now that Qualcomm is also planning Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Table 6. Breakdown of VAS offerings by providers VAS by Providers Providers Java Games AirTel Yes
Videos Yes
Hutch
400+ games
Reliance Infocomm BPL mobile
Yes Yes
Exclusive like world cup cricket Not a priority — only free content available Yes
Idea Cellular
Only in Delhi
Only in Delhi
Email Access Supports POP3 and Web e-mails Hotmail, Yahoo! and MS Outlook Supports POP3 and Web e-mails Supports POP3 and Web e-mails Proprietary system, POP3 and Web e-mails
Internet Connectivity Restricted to GPRS coverage Restricted to GPRS coverage in main cities Rconnect — Best coverage and speed Only in Mumbai Only in Delhi
Source: Authors’ research
to set up a content development facility in India that will also provide content to all service providers, some excitement lies ahead. In the GSM model, handset manufacturers drive the content strategy, but in CDMA the service providers drive it. DADP is expected to hone the local talent, reduce the overall cost of application development and get more India-specific content. Out of the 90-plus applications presently available, so far only around 25 have been developed externally. In DADP, Reliance has got around 10,000 applications of which about 600-plus are from corporations. Here the company provides development kits, tools and a lab environment that can be used by developers to develop apps. To date, Reliance Infocomm has selected just two sets of developers. Under the Chartered Developer Program 1 (CDP1) conducted in March 2003, around eight companies were selected to develop about 20-plus applications. In CDP2, conducted in early November 2003, around six developers were selected and around nine applications have been assigned. Infocomm is looking at three models — outright purchase, outright licensing and revenue sharing. The revenue sharing part is presently not applicable as R World is a free service. Looking at its past strategies, it seems Reliance Infocomm is planning a nominal monthly subscription for its mobile content. With a large number of subscribers, the company can think of earning a fair percentage of revenues from non-voice services. The theory running in Infocomm is that if the pricing is proper and the services have value, people will use it in the long run. Table 6 gives a listing of some of the VAS that the providers are operating to increase usage. Table 6 again demonstrates the commonality of VAS offerings by each provider. These companies are attempting to differentiate themselves, however, by fulfilling market niches. This is particularly true in the mobile video offerings,
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Box 2. Jet Airways: Mobile checking of flight status Flying on Jet Airways from Mumbai to Kolkata is a relatively short affair. For two and a half hours, passengers enjoy superb service and some of the best inflight Indian food. Imagine though, three quarter of the ways into the flight that the plane has to start circling the Kolkata airport for an hour or more. Or even worse, the plane turns around and flies back to Mumbai! This is an endemic problem in India on the morning flights, especially in winter, because dense fog is a common occurrence at the airports. The fog can decrease visibility to the point that the pilot is prevented from landing. This causes confusion for those waiting on the ground to receive their friends and relatives, or to catch another flight on the aircraft that is expected to land. Jet Airways has addressed this problem with JetMobile service. Using the relatively low tech SMS, Jet Airways has come up with a solution to solve this high tech problem. People waiting can send an SMS to Jet Airways, and get an automatic real-time response about the flight status, including exact whereabouts and landing plans. While this system does not solve the fog problem, it does facilitate the smoother operation of the flight, as people need not waste time hanging around the airport. This in turn increases customer satisfaction.
Source: Jet Airways Web site, news reports, and author’s research
Table 7. Breakdown of SMS traffic SMS Applications and Percentage of Usage Application Percentage of Total SMS Usage P2P (Person to Person) messaging 84% Downloading Ringtones 5% Cricket (during peak season) 7% Assorted (movies, astrology, Railway info) 4%
Source: Authors’ research
where exclusivity of content is sought. Hutch is a good exemplar for this desire for uniqueness in two VAS categories. In the mobile video, Hutch is the sole provider of the World Cup cricket. Likewise, in Java Games, this provider is also the predominant leader due to its wide range (400+) of different offerings. Even with all the wide variety of VAS offerings, though, there is a commonality as many of them rely on an enabling technology, SMS (short message service). The next section of this chapter will explore this phenomenon in detail.
SMS: The Killer App A startling aspect of Indian mobile commerce is the wide spread proliferation and deployment of the relatively simple technology of SMS (see Box 2 “Jet Airways
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Table 8. Overview of SMS applications
Industry Banking Insurance
Sales and service
Travel and tours
Retail shops
Multiplexes Education Media and entertainment Application service providers Public service and utilities Manufacturing Hotels Hospitals Call centers Stock exchanges
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Various SMS Enabled Applications Application Type Alerts to customers on credits/debits Customers request for bank balances Tracking of transactions Alerts to customers on insurance premium due dates Customers request for premium amounts Alerts to service engineers on customer calls E-mail alerts to the sales managers Request for stock information, material dispatch details, payment Information by employees, partners and customers Alerts to corporate members on ticket/hotel booking confirmations Customers/partners requests for information on tariffs for package tours Customers requests for details on festival offers and discount sales Alerts to membership customers on prizes and special offers Partners exchange information on payment receipts, material dispatch details, stock information, etc. through SMS from any part of the country Alerts to membership customers on new movie releases and ticket booking Management requests for information on payment collections Access to exam results and information Class scheduling and room locations Viewer polls and feedback Promotions/contests Information access and alert services (news, astrology, sports and stock information) Alerts for electricity and telephone bill payment reminders Emergency alerts on national highways of accidents and driving conditions Access to partners/customers for payment receipts, material dispatch details, spares/stock information, etc. from any part of the country Check hotel room availability through SMS from any part of the country Alerts for messages left for guests Emergency alerts to doctors and maintenance staff Customer requests for doctor availability Alerts on customer call statistics/key performance indicators Access of workforce information by call center managers News updates about the markets and stocks Pricing alerts for stock prices
Source: Authors’ research
— Mobile Checking of Flight Status”). Interestingly, only less than half of the consumers used SMS because it was cheaper than voice and voicemail services. This substitution of SMS in lieu of voice is illustrated in Table 7 wherein 84 percent of SMS traffic is person-to-person messaging. Another growing component of SMS usage is downloading ringtones (5 percent), which are second in popularity, of which 750,000 are downloaded by Reliance users and 350,000 by AirTel users per day (Indranil Chakraborty, 2005). Because of the overwhelming popularity of SMS, a wide variety of applications has arisen, as summarized in Table 8.
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As seen by these examples, a trend for the integration of other mobile commerce applications using SMS has arisen, which will be discussed in more detail in the next section of the chapter through a series of case studies. In each of these cases it should be noted that without the SMS platform, the m-commerce applications would not exist. Additionally, the cases are examined through the CLIP framework. In each case, the integral components (be it cost, location, etc.) are also identified, with further analysis given.
Case Studies Gaming Other than laptop connectivity on the move, the only other reason why anyone would bother with GPRS at all, apparently, is to be entertained through games and video downloads. Paid downloads of mobile games are approximately 300,000 a month.2 The third most prolific gamer on Hutch’s GPRS service is a bored housewife who is in her 50s. After her husband, a real estate broker, leaves for work, she racks up monthly bills of Rs. 4,000 to Rs. 5,000 ($100-$125) a month zapping away at her handset. The explosion of Java-enabled handsets has led to mobile gaming becoming the new craze. At Rs. 50 to Rs. 200 ($1.25-$5) a game, operators like Hutch and AirTel are milking it for what it’s worth. Hutch has exclusive access to downloads such as the World Cup cricket replays and Miss Universe downloads. R World has NDTV’s Apsara awards. One of the major providers for gaming services is Indiagames, which was acquired by TOM Online, as of February 24, 2005. 3
Music SMS also supports the interactions necessary to select and download ringtones and music files. As found in other mobile markets, these services are quite popular. The variety of ringtone types is quite widespread, as cellular operators targeted the youth and the urban population. Ringtones became an instant hit amongst youngsters with downloads reaching a peak of 200,000 a day across networks (Phoneytunes estimates) by the end of 2003 (Voice & Data, February 2004). The current daily figures, however, have by far surpassed the million mark.
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Many operators like AirTel started off with free ringtones and some still do, but all operators will charge eventually, with everyone in the chain getting a small share. In ringtones and caller ring-back tones, three parties have to cooperate to provide the service. The music companies provide the content or the ringtones themselves; aggregators take care of issues like copyrights and formatting the music and finally the phone company. Handset manufacturers are expected to become the fourth partner soon, what with Ericsson aligning up with Napster and Motorola planning to offer the iTunes music service. 4 “Mobile music now contributes around 5% to the existing music industry. It is expected to grow to nearly 23% by 2010,” says KPMG India associate director, corporate finance, Anindya Roychowdhury. 5
Customer Management: Banking In April 2004, ABN Amro India launched its Mpower mobile banking and payments platform as a way to better serve its customers and build valuable relationships with wireless operators, banks and merchants. 6 Given the popularity of SMS in India, the bank found initial pilots of the SMS-based Mpower service attracting over 40 per cent of its client base. A selling point is the ability of consumers to make mobile payments at merchants equipped with Mpower terminals, with the bank validating the transaction data before sending the customer a return SMS message with approval for the payment. The bank’s use of a single phone number (8877) for mobile payments limits the potential for fraud, and the validation SMS sent to the customer contains the merchant’s name, transaction total and ABN Amro’s transaction reference number, according to the Express Computer Weekly. After the customer validates the transaction by keying “MPA” and the PIN into their phone, the funds are transferred to the merchant’s account and a confirming SMS is sent to both parties. In short, the Mpower system is suited to payment at physical retailers, for pizza deliveries or for the “remote” purchase of cinema tickets. ABN Amro ensures the security of mobile payments via its Mpower service by assigning a unique PIN to the mobile phone number registered at the bank by the consumer. This way, even if a phone handset is lost or stolen, the PIN is deactivated after five attempts, which means that a third party who manages to compromise both the PIN, and the account number, will have difficulty in making a transaction. Mpower also promises to reduce ABN Amro’s operational costs in that payments take just 40 seconds, versus a minute-and-a-half for a credit or debit card, for which the bank has to give a 2 percent discount fee.
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Customer Management: Insurance AVIVA Plc. Is the UK’s largest, and the world’s seventh largest, insurance group. AVIVA has a joint venture with Dabur, one of India’s oldest and largest group of companies, with annual sales in excess of Rs. 1,350 crores, or $32 Million. 7 The company had a number of requirements that could be satisfied with mobile applications, including automated reminders for premium payments, a complementary system to existing customer-related voice systems and providing critical information to the mobile work force (e.g., sales leads, policy renewal dates, etc.). SMS has been able to fulfill these needs by improving the CRM. As a benefit, there are timelier premium collections and higher customer satisfaction. Through the providing of real-time data to sales personnel, productivity has been enhanced greatly. SMS has therefore streamlined the operations, resulting in numerous cost savings which, in turn, contribute positively to the bottom line. This increase in profits has justified the creation and implementation of the SMS system.
Sales Reporting: Industrial Materials ICI Paints 8 is a leading manufacturer and marketer of paints. With employee strength of about 1,200, ICI India’s manufacturing sites, business and sales offices and distribution network span large geographic areas. The firm required a reliable method for sending dynamic MIS/Sales data to their mobile sales force. Through the integration of an existing SAP system, an SMS-based system has been put into place to automate both a query system and the sending and receiving of sales reports for year/month and day. This mobile automated system has allowed the sales personnel to keep apprised in real time of both sales and inventory data. By the collection of this, sales forecasting has been greatly facilitated, as emerging patterns of where ICI paint products are most needed are readily apparent. This has resulted in costs savings for inventory management and transportation as product is only sent and stored in the place it is required. In addition to these tangible benefits, the use of SMS has encouraged communication between the disparate members of the ICI workforce. Contacts between sales and home office personnel are fostered, leading to increased communication. SMS has thus enabled ICI employees to coalesce in order to operate effectively. Through the use of SMS, all the employees can receive messages that are pertinent to them. Through this sharing of data, a more uniform system of management is achieved, thereby increasing efficiency that from the various costs savings increases profitability. Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Table 9. Integral CLIP aspects for each case Integral CLIP Aspect of Case Studies Communication Case C Gaming Music ABN Amro India Integral
Location
Information
Payment
L
I
P Integral Integral
(Customer Management)
Aviva Plc. Ltd.
Integral
(Customer Management)
ICI Paints
Integral
(Sales Reporting)
HP
Integral
(Order Fulfillment)
Source: Authors’ research
Order Fulfillment: Consumer Products HP is a technology solutions provider to consumers, businesses and institutions globally. The company’s offerings span IT infrastructure, personal computing, access devices, global services and imaging and printing. In the Indian countryside and urban areas, HP offers a Dial-a-Cartridge service wherein a customer can call up a toll free number and order a cartridge. 9 Through integration with its call center, the order is instantly placed with the nearest dealer. An order message is generated and sent via SMS to the customer and dealer. This system greatly expedites the entire order process. The local dealers know exactly where the product is to be delivered, and the customer too knows the location of the local dealer in case further assistance beyond the delivery is required, such as technical support. An added bonus to this system is the effect it has had on inventory forecasting and expenditures. By centralizing the order process, HP distribution centers know exactly where the cartridges are most needed, and can plan accordingly. This has resulted in significant cost savings in both storage and transportation, for no longer is too much (or too little) product sent to the dealers. These savings have then been passed onto the dealers as the unit costs of the cartridges have decreased, thereby increasing their profit margins. This has had significant impact on the small dealers in the countryside who no longer need to keep large amounts of inventory in stock.
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Analysis Using the CLIP Framework In this section of the chapter we examine the CLIP framework as it applies to the various cases described above. Each case is scrutinized according to the four dimensions of CLIP, and the relative importance of each for the four aspects is analyzed. To a degree all four aspects of CLIP apply to every case (e.g., information). In our analysis, however, we have selected just one of the four aspects in each of the cases, as we view this assigned aspect as integral to the particular mobile commerce application. Table 9 summarizes these findings.
Communication Given that this is the point of using mobile devices, communication is applicable to all the cases. However, in some cases it is more salient than others. In the customer management cases (Banking and Insurance) it is critical that there be a flow of accurate data between the company and the consumer. Due to the importance of correctness in the financial transactions of ABN Amro (India) and AVIVA Plc., precise communication is imperative, for without which use of mobile communications and mobile commerce could have a greatly adverse effect on the operations of these firms.
Location Location is also ubiquitous to all the cases, as it is inherent in the capabilities of mobile technology and commerce. Some of the cases though are more influenced, and have a need for, this aspect of CLIP than others. The consumer products case of HP’s order fulfillment application is a prime example. If the company, while interacting with its customers and dealers via mobile technology, was unable to pinpoint the locations of each, use of the mobile system would be moot, for there would be little added value in automating its systems. Location-specific data engenders the productivity of the firm to more rapidly and accurately serve its stakeholders, thereby increasing efficiency and resultant profitability.
Information Inherent to mobile communication and commerce systems is the transferring back and forth of data. This data, however, can be termed information when it
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has been processed and becomes value added for both the consumer and producer. Certainly, to a degree, all the cases cited can fulfill this requirement, but once again some more so than others. Sales reporting of industrial materials by ICI Paints is an excellent exemplar of the importance of information. In their system, real-time, raw MIS/sales data are collected in the field and then transmitted to the home base. From there it is converted into useful and value added information, which is then re-transmitted to all the participants in the mobile commerce application. Therefore, a powerful ability of mobility to gather data has been deployed.
Payment The majority of the cases used in this chapter have been for services either internal to a company or provided gratis to its consumers, so the payment portion of CLIP is not prevalent. On the other hand, however, are the providers of content for the handsets of the mobile users. In this situation, payment is the primary CLIP component, as without it the mobile commerce applications would not exist. In the music (be it songs or ringtones) and gaming cases, payment is the enabling technology. The content would not be available to end users without some type of monetary exchange. Due to the neophyte structure of financial systems in the mobile commerce arena (such as low use of credit cards), Indian mobile providers have developed unique ways to fulfill the payment requirements. By deploying SMS in a rather clever manner, the payment mechanisms have been put into place. When selling new content, Indian mobile providers will first send an SMS to users, offering the new material. If the user then desires, he or she can respond with an SMS and the content is then sent to the user’s handset. The payment for this is then added to the mobile subscriber’s monthly bill, thereby obviating the need for ancillary systems such as credit cards or direct electronic withdrawals from bank accounts.
Reflections on the Indian Experience Not only is the population of India large in size, the way in which the Indian society is structured also contributes to its increasing demand for mobile telecommunications. It is a land of great cultural and social diversity, which
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makes it behave like a series of concentric spheres that contain different kinds of fluids in them. The number of languages varies from fifteen to two thousand, where fifteen are different languages altogether and two thousand includes the local manifestations and dialects. Unlike an organization that is fully transparent, the Indian society is better symbolized by one which has its share of bureaucracy, layers and intra-layer communications, where inter-layer communications are restrained by a set of protocols. So as a result, there is a multiplier effect in the number/types of communications that do take place. It is this opening up of communication barriers that have resulted in a vast growth in diverse demand. Unlike other countries where communications is a means of information exchange, in India it is also a purpose in itself. Social roles, rituals, culture and tradition have grown as a result of this diversity and the evolving mobile sectors’ value added services, like short messaging services, video and other multimedia messaging have only fitted this diversity better to further enrich their values. With liberalization, advent of the Internet and otherwise western influences, a lot of the communication barriers have fallen, and this has further triggered a burst of communication activities.
Lessons Learned In this chapter, we have reviewed the Indian Mobile Telecom industry — its historic antecedents, government policies and listing of providers. We then presented and analyzed the Indian mobile market via examining such factors as the number of users, monthly costs and subscriber growth rate. From this we have concluded that the Indian consumer is more likely to use prepaid phones for a variety of reasons, including the lack of supporting financial and technological infrastructure. The lesson here is that alternative forms of payment (in lieu of the more common postpaid systems in other markets) can be created. Next we described in some detail the use of SMS, the “Killer App.” This widespread usage has been able to surmount the obstacles faced by the lack of m-commerce enabling infrastructure. The clever use of this older SMS technology is then illustrated by a series of case studies. In each firm, the lesson here is that simple technology can enable a wide variety of applications. Another lesson we can take away is equally remarkable. Specifically, that it is possible, even without a well-developed physical infrastructure such as electronic networks, credit cards, etc., to have real-world transactions. Indian mobile carriers have been able to deploy an elegant solution to m-commerce services through the use of the relatively more simple technology of SMS. This is a
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valuable lesson in that it may be applicable in other developing nations as well, and may be a contributing decision-making factor when global mobile carriers seek to internationalize their products and expand overseas. Within the analysis of the case studies, we also applied the CLIP framework. We identified the integral elements of the framework (e.g., cost, location, etc.) for each individual case. This enables us to learn that some aspects of CLIP are more prominent than others in each individual m-commerce application. This extension of the CLIP framework could therefore be used in the analysis of other m-commerce situations. As the Indian marketplace matures, and newer technologies such as MMS and graphical access to the Internet become available, it will be fascinating to see how these technological developments impact the use of mobile phones and mcommerce in the Indian economy. Given India’s prominence in the community of nations, and as a preeminent player among developing nations, such a study will be time well spent.
Questions for Discussion 1.
Identify the factors that are unique to India that may contribute, positively or negatively, to the proliferation of m-commerce applications.
2.
Given the widespread use of SMS and low levels of ARPU, could Indian mobile operators face the danger of “commoditization”? What strategies might they deploy to overcome cutthroat price competition and commoditization?
3.
From the perspective of the CLIP framework, discuss the implementation of m-commerce applications. Which factors, both currently and in the future, are most prominent in the Indian market?
4.
Suggest business opportunities for third-party mobile service providers to take advantage of the Indian consumers’ fascination with musical tunes and tones.
References Chakraborty, I. (July 2005). Ringtones decibel increases for cellcos. The Financial Express. Retrieved from http://www.financialexpress.com/ fearchive_frame.php
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COAI. (2003). Presentation to Shri Arun Shourie the honorable Minister of Communications, IT and Disinvestment. Retrieved from http://coai.in/ Das Gupta, S. (2005). Why music’s rocking India’s mobile business. rediff.com. Retrieved from http://inhome.rediff.com/money/2005/sep/22spec.htm Dhawan, R. (2004, July). And you can also talk. Business World India. Dhir, K.S. (1992). The challenges of introducing advanced telecommunications in India. In Palvia, Palvia, & Ziegler (Eds.), The global issues of information management. Harrisburg, PA: Idea Group Publishing. Dholakia, N., & Kshetri, N. (2003). Electronic architectures for bridging the global digital divide: A comparative assessment of e-business systems designed to reach the global poor. In S. Nansi (Ed.), Architectural issues of Web-enabled electronic business (pp. 23-40). Hershey, PA: Idea Group Publishing. Edejer, T.T-T (2000). Disseminating health information in developing countries: The role of the Internet. British Medical Journal, 321, 797-800. Eggers, I., & Siefken, S.T. (2000). Four countries connect. UN Chronicle XXXVII (2). Retrieved from http://www.un.org/Pubs/chronicle/2000/issue2/0200p32.htm Enos, J.L., & Par, W.H. (1988). The adoption and diffusion of imported technology: The case of Korea. Croom Helm. Falling through the net. (2000). The Economist print edition. Retrieved Sept ember 21, 2000, fr om http ://www.economist.com/s urveys/ displayStory.cfm?Story_id=375645 Gupta, R. (2005). Are you banking more on your mobile? Times of India. Retrieved February from http://timesofindia.indiatimes.com/articleshow/ 1013140.cms http://www.businessworldindia.com/july0504/indepth02.asp Jain, R. (1993). Review of the policy changes in the Indian telecom sector: Implications for decision makers. Journal of Global Information Management, 1(3), 33. Pradhan, P. (2005). Telecom sector update: December 2004. India Infoline. Retrieved from http://www.indiainfoline.com/nevi/tede.pdf TRAI. (2005). The Indian telecom services performance indicators Jan-March’05. TRAI Performance Indicators, Quos and Survey Reports Retrieved from http://www.trai.gov.in/report17jun05.pdf Unknown Author. (2003, Nov). Indian portals call cellular users for profits. Express Computer Online. Retrieved fr om http://www.express computeronline.com/20031117/coverstory01.shtml
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Endnotes 1
http://india-cellular.com/News-Oct-Dec-2001.html
2
http://www.gamespot.com/news/2005/04/25/news
3
http://www.gamedev.net/community/forums/topic.asp?topic_id=304132
4
http://coai.in/docs/COAI%20News%20Flash-%20Music%20on%2 0Mobile.pdf
5
http://www.moconews.net/?p=2148
6
h t t p : / / w w w. ep a y n ew s . co m/ in d ex . c gi ? s u r v ey = & r e f = b r o ws e& f=view&id=1083237870622215212&block
7
http://www.aviva.com/
8
http://www.ici.com/ICIPLC/divisions/Paints.jsp
9
http://welcome.hp.com/country/in/en/welcome.html
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Chapter IX
Japan: Keitai Krazy, From the Web to the Wallet Mark M. Lennon, University of Rhode Island, USA
Abstract Japan is a world leader in the development and deployment of mobile communications and m-commerce. The country maintains this position by both staying on the cutting edge of technologies and catering to a user base eager to embrace new mobile technologies. Mobile commerce has developed beyond just data transmissions between the handset and the Web. The handsets can now serve as an “e-wallet” for conducting physical, real world transactions. In the course of this chapter, we will explain briefly the historical advances in mobile technologies which have enabled and engendered m-commerce appli cat ions of increasing co mplexity. Concurrently, we will present a series of micro-cases about m-commerce and give analysis of these cases from the CLIP framework. Finally, we will draw conclusions and lessons learned that might be applicable in other mcommerce markets.
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Introduction: Mobile Communications in Japan Known as “Keitai,” mobile phones in Japan are ubiquitous. In a country of 120 million people, there are over 80 million users. 1 In order to understand the Japanese mobile commerce landscape, it is necessary to examine two of the key players in the industry. These firms are the two largest mobile carriers in Japan, NTT DoCoMo and KDDI, with over 60 percent and 20 percent market share respectively.2 This understanding is crucial in comprehending this business arena because as new generations of technologies become available, so do new mcontent and m-commerce applications. NTT DoCoMo and KDDI compete actively to launch innovative new mobile communications services and mobile commerce applications (see Box 1 “Manabi — Cramming for Tests on the Go”). For purposes of our analysis, and to place the chapter in context, the narrative is broken into successive technological generations in mobile technology. As
Box 1. Manabi — Cramming for Tests on the Go In the hectic urban life of Japan, even schoolchildren often have commutes of up to 45 minutes using public transit methods such as trains and city buses. In 2005, Japan’s second largest mobile operator launched the Manabi program under its AU mobile service label. Manabi literally means “to study.” Targeted at school students, Manabi allows subscribers to get access to study kits and test themselves using onscreen multiplechoice questions that that flash on their mobile phones. Students can use Manabi to brush up on various academic subjects while commuting to and from schools and after-school tutorial centers. In addition to cramming for major academic tests such as college entrance exams, Manabi users can learn English idioms, hone their foreign language skills, improve knowledge of Japanese proverbs, or just to bolster their vocabulary. To promote this service, KDDI allowed the users to take practice versions of Japan’s equivalent of SAT tests for free for the first few months. KDDI partnered with textbook companies such as Shueisha and Nichinoken to offer a wide range of study programs. There was even a Manabi version for mothers of preschool children preparing for entrance exams into some of the country’s most exclusive and competitive elementary schools. In this toddler version, mothers read out questions to their children and feed them the right answers! KDDI pointed out that its service not only allows users to get access to information but also test their own knowledge and see how they fare on the go. In a major city like Tokyo, where most commuters take the train and many have long rides, such a service can be particularly attractive. Using the Manabi service, high school student Midori Kashiwagi found out that her approximate SAT-type score made her a borderline candidate for her college of first choice. She felt that if she kept using Manabi, she would improve her score enough to get into her top-choice college.
Source: News item at Physorg.com, KDDI Web site and author’s research
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each level of technology arose, corresponding forms of m-commerce were deployed, each form becoming more sophisticated than the previous ones. This chapter is further separated into two major sections, entitled “The Web” and “The Wallet,” each representing m-commerce applications that transitioned from the virtual, Web-based implementations to the use of mobile handsets as a “Wallet,” enabling interactivity in the real, physical world to purchase goods and services. To comprehend the current-day state of m-commerce in Japan, it is necessary to first examine the historic background that led to the creation and adoption of mobile technologies. The following section, adapted from Steinbock (2003), briefly summarizes these factors.
National Technology Policy With the downfall of the luddite Tokugawa Shogunate and the restoration of the Emperor Meiji and his progressive government, telecommunications was targeted as an essential technology needed by Japan if it were to stave off the threat of economic domination or even colonization by the Western powers, as was occurring in other parts of Asia, most notably in China. In order to rapidly industrialize, efficient communication was deemed integral to these efforts and so the creation of a telecommunications industry was mandatory. Applying the same practice of adoption of foreign technology through foreign direct investment and joint ventures as it had successfully done in other industries, as early as 1881 the United States-based Western Electric, the supply chain of the United States-based Bell system, began production of telecommunication equipment via a joint venture with NEC (Nippon Electric Company). Like its progress in other technologies, Japan sought to quickly shed the dependence on foreign sources of technology and finished products. The Japanese government was unwilling to trade access to their markets in exchange for foreign technologies. The challenge therefore was to produce all the necessary telecommunications equipment domestically. In response to this challenge, reverse engineering of the equipment was attempted under the guidance of the Ministry of Industry (the forerunner of MITI – Ministry of Trade and Industry) with no success. This failure can best be attributed to the fact that the Japanese lacked the ancillary equipment and technical knowhow for production of equipment.
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Realizing the futility of further reverse engineering attempts, the government sent experts to foreign nations to observe overseas production and acquire the needed skill sets and technology to develop domestically manufactured telecommunication equipment. In 1885, the newly formed Ministry of Communication assumed the responsibility for telecommunications from the Ministry of Industry. The Ministry of Communications gave NEC a virtual monopoly for the development, creation and commercialization of telecommunication equipment in Japan. Even with the monopolistic powers of NEC, by 1944 there were only approximately one million telephones in Japan. This was because of the destruction to infrastructure due to intense bombings by the Allies during the World War II, by the end of which the telephone user base dropped to 400,000. Post World War II, the occupying Allied forces, recognized the imperative need for a reliable telecommunications system in order to successfully rebuild Japan. Modeled on the United States-based AT&T Bell system, a new public firm, NTT (Nippon Telephone & Telegraph), was established. Its mission was to create infrastructure and maintenance for domestic telephone calls. NEC was charged with the task of producing the necessary equipment (e.g., handsets, switches, etc.) to support this new network. Concurrent to these actions, an additional public firm, KDD (Kokusai Denshin Denwa — the International Telegram & Telephone) was established to support overseas calling. To assure KDD’s success, NTT was forbidden to enter the international telephone call market. This duopoly of domestic and foreign calls continued until the early 1980s, when the Japanese government heavily deregulated and privatized the telecommunications sector.
Telecommunications Regulations Through the passing of the NTT Corporation Act and the Telecommunications Business Act between 1982 and 1984, NTT was partially privatized in order to promote competition. One important result was that consumers were no longer required to lease their telephone equipment (e.g., the handsets). Instead, they could buy them outright, thereby reducing significantly the cost of having a phone. The demand for these phones promoted competition, driving down the prices and increasing the features.
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1G and 2G: Analog and Digital Voice In the first, or 1G, era of mobile communications (analog voice), NTT launched a cell-based service in 1979. It was a dismal failure, as by 1989 this service had attracted a mere 200,000 subscribers, which translated into a market penetration of 0.14 percent. There were several reasons for the failure, including high usage costs and the proprietary technology used which shut out competition. It was in response to this low rate of mobile penetration by global standards and other domestic consumer pressures that the aforementioned NTT Corporation Act was enabled.3 By the close of the 1980s, and with the development of 2nd generation (2G) digital mobile telecommunications technologies, NTT cast an eye on the proliferation of mobile telecom in Europe and the U.S. and realized the opportunity for profit. In 1991, NTT created a wireless division known as NTT DoCoMo, short for “Do Communications Over the Mobile Network.” It was the creation of this firm that created a mobile revolution in Japan: The DoCoMo subsidiary of NTT charged ahead to become the dominant mobile player in the Japanese 2G market. 4
M-Commerce: The Web 2.5G: The Rise of i-Mode The story of the development of NTT DoCoMo is a rich one, but can be summarized by recounting of the actions by NTT DoCoMo’s CEO and President, Mr. Kouji Ohboshi. In the early 1990s, a paging system was more popular than the analog voice services, and was the most profitable endeavor by NTT DoCoMo, with three million subscribers. With the worldwide rapid rise and growing use of available content on the Internet, Japanese consumers too had great pent up demand for Internet access. Mr. Ohboshi sought to fulfill this by creating the first Internet accessible mobile communications system. In order to be first to market, he shrewdly decided to leverage off of NTT DoCoMo’s existing resources by deploying the pager network as the carrier for mobile traffic. While in theory this seemed like a good idea, there was a major potential problem. The network had a very limited bandwidth of a mere 9.6 Kbps. Rather than be stymied by this, Ohboshi embraced it (Kodama, 2001). Given this constraint, a graphically rich Internet experience would not be possible. Rather, NTT DoCoMo created a simple menu-ing structure that could
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be displayed on the small confines of the handsets’ screens. The service was called “i-Mode,” standing for “Internet Mode.” Following the love of puns by the Japanese, the sound “i” was identical to the Japanese word “ai,” meaning love (Kodama, 2001). This strategy was therefore emergent rather than deliberate (Mintzberg, 1985). A major characteristic that made i-Mode unique was its method to connect to the Internet. Unlike the U.S. system of needing to dial into a modem, i-Mode instead — like broadband — is always “on,” which helped facilitate the development of m-commerce applications. Not only was this revolutionary technology, it was also a unique business model. In lieu of selling airtime in minutes to consumers, NTT DoCoMo charged a nominal monthly fee, approximately 300 Yen (under $3) a month and then charged for each data packet downloaded and uploaded from the handsets. These packets could be either voice or digital data from i-Mode compatible Websites, which can run from free to 10 to 100 Yen for a specified number of data packets, depending upon the content provider (Ratliff, 2002). Launched in February 1999, the i-Mode service became an instant hit. Within 18 months of its launch, it had attracted over 10 million subscribers and 20,000 available sites. By October 2001, the number had increased threefold to over 30 million users5 . Critical to the success of such a service was the rapid creation of m-content to attract consumers. The alacrity in m-content and m-commerce construction for the i-Mode platform can be attributed, though the use of the CLIP model, to two major factors: the ease of programming (thus, lots of “I” or information content) and a ready made billing system in the form of the monthly bill from NTT DoCoMo (thus, one-stop “P,” or payment mode). These forces contributed to the widespread proliferation of the 2.5 G i-Mode Websites. With the debut of i-Mode, there emerged new forms of C (Communication) and I (Information) systems. Developers could use a simple programming language, cHTML (compact HTML), that allowed regular e-commerce Websites to be readily converted to mobile accessible sites. This language was far easier to use than the standard WAP (Wireless Application Protocol) and WML (Wireless Markup Language) that had been the de facto world standard. From this developer-friendly communications platform, I (Information) from existing Websites was now made available to i-Mode users (Ratliff, 2002; Kodama, 2003; Lindmark, Bohlin, et al., 2004). In the CLIP framework, another major factor in the i-Mode success was the P (Payment) method in the form of a ready made billing system. Through the menuing system of i-Mode, the Japanese users are able to access Internet-based content. Usage is encouraged through the pricing mechanism. In lieu of the “pay by the minute” system as found in the United States, with chances for large overage charges if the contracted number of minutes is exceeded, NTT
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DoCoMo instead has a metering system wherein the user is charged by the amount of data packets transmitted, be they voice or data. The “Pay for Play” (Lennon & Dholakia, 2004) system has several advantages for both producers and the consumers. By centralizing the billing system, content providers need not go to the time and trouble of creating a billing system and ancillary support structure in their respective companies. Therefore, content providers can concentrate on their core competencies (Prahalad, 1990) of creation of content. In this manner, time to market is cut down and the rapid creation of product is enabled, thereby increasing the likelihood of gaining market share (Buzzell, 1975). Consumers, too, benefit greatly from a convenient, centralized billing system. They are not confronted with myriad of bills from all the various Websites that they visit. Also, the charges for using the i-Mode system are better known, and the consumer can budget accordingly. From NTT DoCoMo’s perspective, this system is advantageous, as through its nine percent processing fee, a continuous revenue stream is created that can then subsidize future research and development of newer technologies, such as the 3G and 4G offerings discussed later in this chapter. This promotion of content development also serves NTT DoCoMo well, for it increases the overall worth of the i-Mode system. For as new services and data sources proliferate, the perceived value of the system increases, thereby promoting further adoption of the i-Mode technology by both consumers and producers (Schilling, 2003). Figure 1 illustrates the “Pay for Play” business model. In the example shown in the illustration, the content provider is Bandai Corporation, which markets downloadable ringtones and pictures of popular “Manga” (cartoons). One of the reasons for i-Mode’s widespread proliferation and adoption is an aspect of day-to-day living which is unique to Japan, as compared with Europe and North America. In Japan, the average worker uses public transportation (e.g., buses, trains, etc.) extensively, with an average commute time of 1.5 hours, often times changing modes of transportation. How this affects mobile usage is that voice calls are forbidden in these confined spaces. Rather, for distraction Japanese turn to i-Mode to download content and to send instant messages and e-mail. This has led to interesting impacts on society. This communication back-and-forth, especially amongst the young, has created virtual communities. A group-dominated society, the Japanese are able to expand their circles of friends by increasing exponentially their number of personal contacts. So prevalent is this practice, that there is even a Japanese slang word — “oyayubi zoku,” or “thumb tribe” — referring to the rapid pressing of the thumb on the mobile phone’s keypad. Another major contributory factor in the success of i-Mode is the lackluster Japanese economy. For the past ten years Japan has been wallowing in
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Figure 1. Pay-for-play model — a conceptual representation Content Provider
Customer Order
•
“Always on” feature allows i-Mode instant access to web
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Menu driven system selects Content Provider (Bandai Corporation)
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Chooses desired content to download
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Bandai transmits desired content to i-Mode user’s handset (cartoon characters and ring tones)
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Invoices NTT DoCoMo for data packet transfer
Order Fulfillment
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i-Mode Consumer receives content from Bandai and downloads it into handset
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Content can be accessed “offline” without incurring additional charges
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i-Mode customer pays NTT DoCoMo
NTT DoCoMo
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Use of cHTML promotes rapid development of Bandai’s HTML based website
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Receives invoice from Content Provider (Bandai)
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Bills i-Mode customer for data packet transfer
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Creates continuous revenue Stream from 9% service fee
recession. Dubbed the “Gold Recession” due to the high rate of savings, these monies have ameliorated some of the recession’s negative effects. The savings form a discretionary account to purchase essential goods and services. Naturally, however, there is the desire by the Japanese (especially the young) to purchase luxury products. I-Mode, with its metering practice of charges for downloaded data packets, has proved to be a relatively inexpensive luxury item. These 2.5G i-Mode sites also manifested another aspect of CLIP, Location, though in a more limited way than the other three. While the majority of the iMode applications were geographically nonspecific, some consumer-oriented services embraced the Location feature. A typical application was the sending of coupons for restaurants when the user was in the proximity. These 2.5G Web sites proved immensely popular with the Japanese, and all types of m-commerce applications arose. From the personal (e.g., dating services) to the professional (e.g., stock brokerage), the ease of development and content creation created a boom in i-Mode-available m-commerce. These m-commerce sites concentrated on content providers. Table 1 summarizes some of the more heavily used applications. These 2.5G i-Mode sites can be seen as the pioneers in m-commerce. I-Mode has grown so popular in Japan that it is a phenomenon unique to the world mobile commerce market. The situation can be summarized by a quote from Eurotechnology, an online mobile e-zine:
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Table 1. Popular 2.5G m-commerce sites Popular NTT DoCoMo i-Mode M-commerce Services SMS (Short Messaging Service) Banking Stock Quotations Games Ringtones Music snippets Manga (cartoons) Ticket purchasing Travel Advisory
Source: Authors’ research
i-Mode is also a whole multi-billion dollar eco-system, and it is part of Japan’s social and economic infrastructure. About 30% of Japan’s population use i-mode about 10 times or more often per day, sending about 10 emails per person per day, booking train tickets, checking the weather or doing other daily routines via i-mode. Most businesses and individuals in Japan are affected in one way or another by i-mode. (quoted from http:/ /www.eurotechnology.com/imode/faq-gen.html) NTT DoCoMo has strived hard to make i-Mode technology as friendly as possible to various user segments. For example, to make i-Mode appealing to the large and growing senior-citizen segment in Japan, even the i-Mode phones have been redesigned with features that make the phone use comfortable and appealing to the seniors (see Box 2 “Keitai for the Young at Heart”).
M-Commerce: The Wallet Advent of 3G Japan is the first country to introduce widespread use of 3G (high speed digital) communications. Building upon its success with 2.5 G i-Mode service, in May 2001 NTT DoCoMo introduced in a limited testing area their 3G FOMA (Freedom of Multimedia Mobile Access) service. This was followed by the
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Box 2. Keitai for the young at heart With an aging population, Japan has become one of the oldest countries in the world in demographic terms. Already, over a third of the Japanese population consists of senior citizens and this proportion is expected to keep rising. For the senior segment, mobile phones have become quite popular. While the average ARPU for seniors at 3,000 Yen (US $35) is in the low range of ARPUs in Japan’s mobile markets, the senior segment is still a significant revenue producer. Recognizing this market potential, NTT DoCoMo has released handsets that are designed specifically for use by seniors. To make operations easier, the display screens are larger and the menu choices simpler. Larger icons make it easier to select among i-Mode menu options. Other features include a pedometer and an emergency 90-decibel alarm. Another unique feature is speed converter technology for incoming calls. For the benefit of the listening senior, the caller’s voice speed is slowed down by about 30 percent, making the dialogue seem slower and more comprehensible.
Source: Based on news items from “WirelessWatch Japan” and “Ewireless News”, and author’s research.
release of FOMA to the general public in October 2001. Unlike the paltry transmission rates of the original i-Mode system, 3G bandwidth increased to speeds rivaling ISDN, reaching as high as 384 Kbps in download transmissions (Lindmark, Bohlin, et al., 2004). For NTT DoCoMo, the initial rollout of 3G service with FOMA enabled developers to create more robust and graphically rich applications. By using JAVA, content providers could also release many more interactive software applications to be used in conjunction with their downloadable content. An example of this was the popularity of games. With the addition of other enabling technologies, such as the introduction of Flash-Lite, a version of Macromedia’s popular Flash technology in 2003, sophisticated information services have been developed. Early examples of this are the popular graphic-rich weather Websites, where real-time data (e.g., temperatures, storm patterns, etc.) are dynamically updated on zoomable maps. 6 This is not to say that NTT DoCoMo was the only source of 3G content. Realizing the futility of entering the 2.5G market due to NTT DoCoMo’s formidable market share with its i-Mode service, KDDI did a technological leapfrog and debuted its own 3G technology (Schilling, 2003). Dubbed “KDDI/au,” this 3G service provides graphically rich access to the Internet. There are also very popular built-in applications and value added services from KDDI. The “ChakuUta” (music and ringtones) downloads have proved to be especially popular. Currently there are over 17 million subscribers to this 3G au service. 7 One of the causes of KDDI/au’s success has been the introduction of flat rate, “all you can use” data transmissions, instead of i-Mode’s data packet volume charges. Implementing the Location factor of CLIP, a major selling point for KDDI/au is
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its real time navigation application. By deploying the GPS capability of the mobile phone, real time locations and maps can be displayed on the handsets. A major difference between KDDI/au and NTT DoCoMo is that the former does not provide a ready-made payment system, which has retarded the growth of mcommerce applications.
i-Mode FeliCa and EZ Wallet: A Tool for Daily Living Five years after the debut of i-Mode, due to market saturation and declining revenues because of the introduction of a flat rate system in response to KDDI/ au’s pricing plan, NTT DoCoMo mobile phone entered a period of even greater transformation. Rather than just offering a device capable of accessing Internet based m-commerce applications, NTT DoCoMo wanted their handsets and services to become a part of everyday life. To do this, they created a host of technical and business partnerships, most notably with SONY. 8 Renowned as the pre-eminent Japanese electronics innovator, SONY was chosen to develop an IC (integrated circuit) chip that could be placed inside 3G NTT DoCoMo handsets. Known as i-Mode “FeliCa,” these new handsets could interact with real world infrared sensors to access and enjoy m-commerce goods and services. What was needed was some method of payment. Dubbed “Osaifu Keitai” (translation: wallet mobile phone). SONY and NTT DoCoMo created a cashless system of “Edy” e-cash, which could manage the financial outlays for the consumer. 9 The Edy e-cash JAVA-based application is a prepaid IC card already installed on all FeliCa enabled phones. Through the creation of this prepaid card, whose value can easily be augmented at cash registers or Edy-specialized kiosks, the billing mechanism is again made transparent as far as the FeliCa goods and services vendors are concerned. Instead, these goods and services vendors merely provide infrared sensors to detect and then subtract monies from the handsets via the Edy e-cash chips. 10 The following part of the chapter presents mini-case studies on the more popular m-commerce EZ Wallet applications.
E-Wallet Case Studies Case 1 — Shopping: Am/Pm Japan Co., LTD. 11 Am/Pm is a major nationwide convenience store in Japan, with over 1,400 outlets throughout the country. Each store’s registers accept the “Edy” e-cash payment system from 3G NTT DoCoMo FeliCa handsets. Shopping is made quite easy for
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the consumer, as all that is required at checkout is to wave their handset in front of the infrared reader/writer, and have the appropriate amounts deducted from their balance. In addition to this service, similar to shopping cards used in the U.S., a record of purchases are tracked and stored on the handset’s IC chip. With each purchase, award points are accumulated which the shopper can then use for other purchases. By tracking the products being bought, the chainstore is able to pinpoint purchasing patterns with greater accuracy, and can make specific product offers to targeted consumers.
Case 2 — Shopping: Coca-Cola Japan12 In September 2001, Coca-Cola (Japan) Company, NTT DoCoMo and Itochu Corp. jointly launched the Cmode service. This new prepaid membership-based consumer service links i-Mode mobile phones with Cmode information terminal vending machines from Coca-Cola with built-in computers, displays, speakers and printers. In addition to buying drinks with an i-Mode mobile phone, subscribers can make cashless purchases of standby screens, ringing melodies and other i-applications and i-Mode content. They can also print out hard copies of coupons and other items. From September 2004, i-Mode FeliCa-compatible Cmode machines even allow users to make purchases by simply waving their i-Mode FeliCa terminals in front of the machine. With approximately one million machines in their Japan-wide network near pedestrian traffic spots (typically at travel points such as train or bus stations), these automated vending machines are particularly suited for communications with consumers. While vending machines are available 24 hours a day, 365 days a year, customer interaction is limited to just payment, product selection and then pushing a button to receive the drink. Through the intertwining of i-Mode FeliCa technology and the existing Coke machine network, a complementary platform and win-win situation is created for consumers, NTT DoCoMo and Coca-Cola Japan.
Case Study 3 — Transportation: All Nippon Airways13 All Nippon Airways introduced i-Mode-based check-in services for international flights. By navigating to their Web site using the handset-based browser, passengers can reserve seats, purchase their air ticket and even go through “precheck in” online. All the “e-Pre-Check” information is then stored on the IC chip on the i-Mode FeliCa handset. Upon arrival at the airport, a passenger can then receive a “boarding pass” by waving the handset across an automatic check-in
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machine. This generates a screen on the handset that can then be shown to the airline personal as the passenger boards the aircraft. In addition to these features, All Nippon Airways offers new mileage services exclusively for i-Mode FeliCa users. Combined with the pre-installed Edy emoney transaction services, the new mileage service tallies card usage at restaurants, hotels, airport shops and other Edy-affiliated facilities. Therefore, the passenger can accumulate mileage points for each transaction, and All Nippon Airways collects valuable purchasing pattern data.
Case Study 4 — Tickets: PIA Corporation14 PIA Corporation is a major ticketing agency, offering a diverse product line including music concert tickets, golfing expeditions, hotel bookings and travel related services. PIA has recently started a FeliCa-based payment and entry system. By reserving tickets through the online Web site, customers have the price for the products deducted from the Edy account in the IC card in their handset. When customers actually attending the event, entrance can be gained by use of the handset. Additional features offered by PIA include coupons targeted to the consumer based on historic purchasing patterns.
Case Study 5 — Tickets: TOHO Corporation15 TOHO Corporation is a premier nationwide cinema complex which has adopted the i-Mode FeliCa-based ticket issuance service. An early adopter of ecommerce technology, previously the cinema complex had offered ticket purchases on their Web site, with a printable paper ticket to be shown at the theater. With the i-Mode system, purchase can be made using the Edy e-cash system, with ticket information then stored on the IC chip. Upon entering the cinema, the consumer simply waves the handset over an infrared reader and gains entrance. Through this service, cinema ticket issuances and purchases are streamlined, thus simplifying the experience of moviegoers to something easier and more convenient.
Case Study 6 — Membership Cards: DaiIchiKosho Co16 DaiIchiKoSho is the market leader in management of Karaoke rooms, and also operates a commercial karaoke equipment sales business. Through use of the iMode, FeliCa handsets and infrared readers in the Karaoke rooms, customers
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can pay for the rental time via the Edy e-cash system. At the same time, the selection of musical tunes is recorded on the IC chip. When visiting the next time, the infrared reader can access this list and pre-load the favorite songs.
Case Study 7 — Membership Cards: GEO Corporation17 GEO, a major video rental chain, has instituted the Mobile GEO service, which allows i-Mode FeliCa mobile phones to authenticate membership by using infrared readers at the stores. Similar to the karaoke application, lists of rented titles and recommendations of suggested movies are available to the consumer. Similar to the airline application, reward points are also tracked, providing coupons for future purchases.
Case Study 8 — Electronic Key: Hayakawa Estate Inc.18 Hayakawa Estate Inc., a major apartment complex firm, uses the 3G handset as an electronic key to open apartments, the complex’s front door and other areas accessible only to residents. In addition to these abilities, further security information in the form of records of entrance and exit times, limited time uses on keys and the issuing of spare keys via e-mail are available. In each of these eight mini-cases, the tenets of the CLIP framework hold true, but with differing emphasis than the 2.5G m-commerce applications. Whereas in the 2.5G i-Mode service, the “L” dimension (Location) was not a major contributory factor to the success of the service, in 3G, it is. The very concept of creating a “tool for daily living” is indicative that the m-commerce applications are geographically diverse and connected. As for Communication (C) and Information (I), the 3G system is radically different than the 2.5G system. In the case of 3G, the handset itself is used as a communications device to interact with real world infrared scanners. The importance of Payment (P) is one aspect that is common throughout NTT DoCoMo’s 2.5G and 3G offerings. In both cases there is a readymade payment system. In 3G FeliCa there is the electronic wallet, in 2.5G, the NTT DoCoMo billing management system. In both cases, in lieu of a billing system maintained by the m-commerce vendor, an enabling technology has instead been created. In 3G electronic Wallet, it is built directly into the handsets.
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Japan: Keitai Krazy, From the Web to the Wallet 171
The Future of Mobile Commerce in Japan Currently the Edy system has only been implemented in NTT DoCoMo 3G handsets. KDDI/au has not come out with an alternative electronic wallet service. To remain competitive, however, KDDI is bound to introduce its own version of the e-wallet. Greater competition will naturally lead to decrease in costs, increase in convenience and more widespread use of the electronic wallets. As the strategies used thus far in the implementation of m-commerce have been successful, it is highly probable that the firms will stick to these tried and true courses of action. Both KDDI and NTT DoCoMo have followed a continuous strategy of improvement (in Japanese, “kaizen”) which is typical of Japanese corporations, but especially true in the high technology industry (Nonaka, 1988; Wolff, 2001). This has enabled them to avoid the mortality that is predicted for some high technology firms and allowed these Japanese mobile firms to gain the lion’s share of the market (Barnett, 1988). NTT DoCoMo and KDDI have been able to build upon the latest permutations of telecommunications technology (3G) to create new possibilities for m-commerce and m-content applications (Kim & Kogut, 1996). In the case of NTT DoCoMo, by using the i-Mode platform, especially with its easy cHTML programming and ready made payment systems, NTT DoCoMo has been able to encourage a plethora of third parties to create m-commerce and m-content applications (Meyer, 1993). This has been a shrewd move by NTT DoCoMo, as it allows the firm to concentrate its resources and core competencies on research and development of newer telecommunication standards (such as 4G) and their concomitant commercial uses (Prahalad, 1990). NTT DoCoMo illustrates Teece’s (1994) contention that a firm should focus on a resource-based strategy and should attempt to acquire valuable technology and intellectual property in order to take advantage of market opportunities. Through strategic partnerships, such as with SONY and Edy for the e-wallet, NTT DoCoMo has been able to deter competition, allowing it to enjoy continuous healthy streams of revenue (Gallini, 1984). Through such competitive dominance, NTT DoCoMo has been able to overcome the hazard of technological lockout as described by Schilling (1998) and has avoided the possibility of not developing other profitable technologies (Leonard-Barton, 1992). The danger that NTT DoCoMo faces, however, is that users have become so accustomed and pleased with the performance of the earlier technology (the 2.5G i-Mode) that they will be unwilling to switch to the newer offerings. In this
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case, NTT DoCoMo will have to cannibalize its market share and, in the words of Nault (1996), “eat its own lunch” in efforts to get consumers to switch over. Regardless of the potential drawbacks, however, it is imperative for NTT DoCoMo to continue to develop 3G technologies or face the problem of technology lockout (Schilling, 1998). A major driver to continue the development of more sophisticated mobile phones and their corresponding mobile commerce applications is economic. Due to competition between KDDI and NTT DoCoMo, the average revenue per user (ARPU) for both firms has been declining. To counter this trend and to remain profitable, both firms will need to offer services that are enticing to the consumer and will encourage him or her to spend their yen. Masao Nakamura, president and CEO of NTT DoCoMo, is unequivocal in her views: We will continue to offer and promote new services aggressively, such as video communication and i-Mode FeliCa [DoCoMo’s mobile wallet service]. I am optimistic that this will open up new sources of profit. (quoted in Wieland, 2005)
Conclusions From the Japan experience, it is clear that it is possible for a major mobile operator to transition from one generation of technology to the next and still make profitable mobile commerce across generations. The success of earlier implementations, especially with the establishment of a consumer base, can be a launching point for the rollout of newer technologies and applications. To encourage the emergence of m-commerce in a mobile market, there are several critical factors: 1.
Carriers should provide a user-friendly environment. NTT DoCoMo’s 2.5G and 3G services and KDDI/au services meet the criterion of user friendliness. In both cases, the use of the device is simple and straightforward. The technology adoption is therefore accelerated, as it is unnecessary to train the consumer in the use of the device.
2.
Leverage off of existing resources. The use of a preexisting, limited bandwidth pager network greatly accelerated the birth of the 2.5G i-Mode system. By making the process of converting existing Websites to wireless sites uncomplicated, NTT DoCoMo could tap into an existing market and provide immediate goods and services to the nascent m-commerce consumer.
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Japan: Keitai Krazy, From the Web to the Wallet 173
3.
It is imperative to partner with third party software and hardware developers. 3G real world “e-Wallet” applications have arisen through the cooperation with electronic manufacturers and customers to create robust mobile applications.
4.
Offer value added services, especially financial, to developers. A major factor for NTT DoCoMo’s 2.5G and 3G successes has been the creation of ready-built payment systems. By providing these arrangements, it speeds the creation of mobile commerce as it allows developers to concentrate on the core competencies of development rather than on the hassles of financial and payment systems.
5.
Encourage innovation by continuing the process of technology development. As new technology emerges, so, too, do more mobile commerce applications — NTT DoCoMo and KDDI have kept the treadmill of innovation going at a fast pace.
By following these strategies, Japan has become the preeminent mobile commerce market in the world. Their dominance will continue due to their head start versus other nations. A challenge to all players in the mobile commerce arena, however, is the potential saturation of the market. It remains to be seen whether consumers will actually desire or use the new features constantly being developed. But given Japan’s long history of innovation, new technologies and attendant applications will inevitably continue to arise.
Questions for Discussion 1.
Given the saturation of the market by Keitai mobile phones, what hurdles will Japanese mobile operators face to expand their market shares? What incentives can mobile operators offer to promote development of mcommerce applications and m-content?
2.
Discuss the importance of factors in the CLIP framework for various generations of mobile communications: I (Information) in 2.5G applications to L (Location) and P (Payment) in the emerging 3G applications.
3.
Identify some of the core competencies of Japanese mobile operators. What resources have they been able to leverage in migrating from one technological level to the next?
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References Anwar, S. T. (2002). NTT DoCoMo and m-commerce: A case study in market expansion and global strategy. Thunderbird International Business Review, 44, 139. Barnett, W. P. (1988). Organizational mortality in a technological system. Academy of Management Proceedings, 155-159. Buzzell, R. D. G., & Bradley T. (1975). Market share—a key to profitability. Harvard Business Review, 53(1), 97. Gallini, N. T. (1984). Deterrence by market sharing: A strategic incentive for licensing. American Economic Review, 74, 931. KDDI Factbook. (2004). KDDI Corporation. Kim, D-J. & Kogut, B. (1996). Technological platforms and diversification. Organization Science, 7(3), 283. Kodama, M. (2001). Innovation through strategic community management: The case of NTT DoCoMo and the mobile Internet revolution. Creativity and Innovation Management, 10, 75. Kodama, M. (2003). Strategic community-based theory of firms: Case study of NTT DoCoMo. Journal of High Technology Management Research, 14, 307. Leonard-Barton, D. (1992). Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13 (Special Issue), 111-126. Lindmark, S., Bohlin, E., et al. (2004). Japan’s mobile internet success story — facts, myths, lessons and implications. Info, 6(6), 348-358. Meyer, M. H., & Utterback, J. M. (1993). The product family and the dynamics of core capability. Sloan Management Review, 34(3), 29-47. Mintzberg, H. W., & James A. (1985). Of strategies, deliberate and emergent. Strategic Management Journal, 6(3), 257. Nault, B. R. V., & Mark B. (1996). Eating your own lunch: Protection through preemption. Organization Science, 7(3), 342. Nonaka, I. (1988). Toward middle-up-down management: Accelerating information creation. Sloan Management Review, 29, 9. NTT DoCoMo Annual Report. (2004). NTT DoCoMo. Prahalad, C. K. (1990, May/June). The core competence of the corporation. Harvard Business Review, 68(3), 79-92.
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Japan: Keitai Krazy, From the Web to the Wallet 175
Ratliff, J. M. (2002). NTT DoCoMo and its i-mode success: Origins and implications. California Management Review, 44(3), 55. Schilling, M. A. (1998). Technological lockout: An integrative model of the economic and strategic factors driving technology success and failure. Academy of Management Review, 23, 267-284. Schilling, M. A. (2003). Technological leapfrogging: Lessons from the US video game console industry. California Management Review, 45(3). Steinbock, D. (2003). Wireless horizon: Strategy and competition in the worldwide mobile marketplace. New York: AMACOM. Teece, D., & Pisano, G. (1994). The dynamic capabilities of firms: An introduction. Oxford: Oxford University Press. Wieland, K. (2005). NTT DoCoMo: Services, services, services. Telecommunications - International Edition, 39, 12-14. Wolff, M. F. (2001). Japanese firms display technological strength — And a different business vision. Research Technology Management, 44(5), 2.
Endnotes 1
KDDI (2004). KDDI Factbook, KDDI Corporation.
2
NTT DoCoMo (2004). “Annual Report 2004.”
3
D. Steinbock, (2003). Wireless horizon: Strategy and competition in the worldwide mobile marketplace. New York, AMACOM, page 155.
4
Ibid.
5
Ibid.
6
Sour ce: Macr omedia Inc., htt p://www.macromedia.com/mobile/ news_reviews/special/docomo_flashlite.pdf
7
Source: MobileMediaJapan.com, http://mobilemediajapan.com
8
NTT DoCoMo (2004). NTT DoCoMo Annual Report.
9
Source: Edy Japan, http://www.edy.jp/edy_mobile/index.html
10
Ibid.
11
Source: http://www.ampm.co.jp/home.html
12
Source: http://www.nttdocomo.com/corebiz/alliances/cmode.html
13
Source: http://www.ana.co.jp/asw/index.jsp
14
Source: http://www.pia.co.jp
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15
Source: http://www.toho.co.jp
16
Source: http://www.dkkaraoke.co.jp
17
Source: http://www.nttdocomo.com
18
Source: http://www.nttdocomo.com
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Chapter X
New Zealand: M-Commerce Beyond the Basics, Adopting Added-Value Services Chadinee Maneesoonthorn, University of Canterbury, New Zealand David Fortin, University of Canterbury, New Zealand
Abstract This chapter provides a review of the emerging patterns of m-commerce in New Zealand. We apply the four core CLIP functionalities: communications (C), locatability (L), information (I) exchange and payment (P) facilitation — on which m-commerce systems and services are based and provide key cases and applications in a New Zealand context. The New Zealand mobile market is fairly unique due to its s relatively small size and its duopoly market system with Telecom and Vodafone. It is therefore critical for operators in New Zealand to be more creative and innovative in their delivery of increasingly sophisticated mobile services. The challenges lie in stimulating demand for add-on services while differentiating offerings from the competition and controlling costs.
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Introduction: Mobile Communication in New Zealand New Zealand’s mobile telephony penetration was about 75 percent in 2004, and still has a way to go in order to catch up with some of the countries in the AsiaPacific basin (as high as 85 percent) according to the Waikato Times (Dec. 11, 2004). Currently in New Zealand around 1.2 million people have access to a WAP-enabled phone (iStart Q3, 2004b). In line with international trends, prepaid accounts are extremely popular in New Zealand, and are being adopted by 70 percent of the country’s 2,959,000 mobile subscribers (Mobile commerce, 2005). New Zealanders now send more than seven million text messages each day (Management Magazine, 2004). Ownership of a mobile phone and regular use of text messaging (SMS) is no longer considered the domain of teenagers with OOS thumbs (Management Magazine, 2004). According to Telecom NZ’s Hippislet, 25 percent of New Zealanders aged between 40 and 50, and 14 percent between 50 and 59 have entered or thought about entering SMS competitions. In an interview with Steve Shearman from Touchpoint, a company that specializes in the use of mobile technology as a marketing channel in New Zealand, he claims that mobile commerce is one of the big trends; however, he believes the rest of the world has taken off while New Zealand has been standing still (Stock, 2004). He blames New Zealand’s limited advances on too little competition between mobile providers, but he predicts that within three years payments in stores using a mobile phone will be possible and that in five years mobile commerce will be as ubiquitous as using EFTPOS (electronic funds transfer at point of sale). Budde (2004, as cited in Waikato Times, Dec. 11, 2004) expects the total Telecom NZ market in New Zealand to grow five percent in 2005, from $8.1 billion to $8.5 billion NZD (about $6 B USD), boosted mainly by data and mobile growth. Overall Telecom NZ accounts for 65 percent of the total telecommunication market, Vodafone 14 percent and TelstraClear 9 percent. The $200 M growth in the mobile market would go almost all to Vodafone, an aggressive player in the Telecom NZ market. The current mobile market is a duopoly of Vodafone New Zealand and Telecom NZ Mobile (M2 Presswire, 2004). Vodafone took the number one spot in mobile subscribers in New Zealand last year and in late 2004 had 56.3 percent of the subscriber market following a gain of 150,068 mobile phone users in the six months prior to September 2004 (see Figure 1). It now has 1.757 million customers (Mobile Business, 2005b), and almost 80 percent of them are prepaid customers (Vodafone, 2004a). The company said growth in prepaid customers had been particularly strong, with prepay average revenue per user (ARPU) in
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Figure 1. Mobile subscriber numbers in New Zealand
Number of subscribers
1,600,000 1,400,000 1,200,000 Vodafone cellular customers
1,000,000 800,000
Telecom cellular customers
600,000 400,000 200,000 2 00
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Source: IDC (2003)
the 12 months prior to September 2004 rising to $349 M NZD, compared to $324 for the previous year. ARPU for customers with contracts, or “On Account,” was slightly down from $1,855 to $1,817 M NZD. Overall, the total ARPU fell 0.7 percent to $661 M NZD (Vodafone, 2004c). Telecom NZ dominates the broadband service provider market with a number of players offering some resistance, including iHUG, TelstraClear, ICONZ and Wave Internet (M2 Presswire, 2004). Competition is derived mainly from the resale of Telecom NZ’s ADSL services. In late 2004, there were 165,000 broadband subscribers in New Zealand, and approximately 10,000 of these are broadband-capable subscribers. True competition in broadband services still remains problematic as most Telecom NZ competitors are merely retailing their ADSL service. The CBDs (central business districts) of the major centers — Auckland, Wellington and Christchurch — are well served by a variety of broadband technologies but there is limited service outside of these geographical areas.
Structure of this Chapter We begin by providing a background and historical overview of the mobile communication industry and key technologies used in New Zealand. Then, we present a review of the service operator adoption of new technology, 3G, and
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their associated business plans. The availability of mobile phone handsets, price structure and pricing plans of mobile phone airtime are examined. We further describe mini-case studies of successful mobile telecommunications and mcommerce services in New Zealand reflect ing the CLIP framework functionalities: C-Communication, L-Location, I-Information and P-Payment. Consumer texting behavior and attitudes toward permission-based mobile advertising are also briefly discussed. Additional factors and problems slowing down the growth of the telecommunication industry in New Zealand are reviewed. Finally, we reflect on key elements that service operators of m-portals should pay attention to, and conclude with an overview of the country perspectives for the future.
Background and Historical Overview Bland (2005) provides an insightful summary of the New Zealand mobile phone competitive history. Telecom NZ introduced the first mobile phone network in New Zealand with an analog AMPS network (Advanced Mobile Phone System). This was upgraded eventually to a digital AMPS network and in 2001 Telecom NZ added a CDMA (Code Division Multiple Access) digital network. CDMA is a broad-spectrum technology able to provide up to 10 or 20 times the capability of analog equipment and up to three times the capacity of other digital networks. In 2002, Telecom NZ added 1XRTT technology to its CDMA mobile network; this supported more users and increased mobile data speeds to around 153 kilobits per second (Kbps). Telecom NZ branded this service as Mobile Jetstream and supported it in mainstream media. Meanwhile, back in 1992, a Telecom NZ network rival had arrived in the form of BellSouth. BellSouth, later purchased by the British owned Vodafone in 1998, offered New Zealanders the GSM (Global System for Mobile) mobile network platform and later the GPRS network (General Packet Radio Service) for mobile data. GPRS networks use a packet-switching protocol, which means users can be charged for the amount of data sent rather than on the basis of connect time. 2G GPRS data speeds are typically 20 or 30 Kbps, but can be up to 53 Kbps. By Christmas 2004, Telecom NZ said it would offer its 3G network, called T3G, but which is technically CDMA 1×RTT with EVDO (Evolution Data Optimized) technology. In the first quarter of 2005, Vodafone planned to offer a rival 3G network — “GPRS” — but with state-of-the-art UMTS (Universal Mobile Telecommunications System) technology.
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3G in New Zealand Telecom NZ, New Zealand’s largest telecom provider, is looking for an edge over Vodafone New Zealand, the Kiwi arm of its global rival at whose hands it has taken a battering in the past six years (Steeman, 2004). The scale of Vodafone’s technology and the diversity of handsets and applications it is able to offer customers has seen its New Zealand subsidiary blossom from being a market minnow in 1998 to top dog with 55 percent of the Kiwi market in 2004. More than half the new growth here — new customers and new spending — is being captured by Vodafone, and Telecom NZ has to wrestle with this and try to remain competitive. Its much-hyped new offering, 3G, is the next level of telecommunication wireless technology and is still in its infancy worldwide. Telecom NZ hopes its first mover advantage will strike a blow at Vodafone, whose “3G” network was not expected to “go live” until mid 2005. Telecom NZ argues that the top speed for its 3G service may be about 2000 kilobits a second and with an average speed of more than 500 kilobits a second. McLaughlin (2004a) argues, however, that Vodafone’s 3G network is based on EV-DV Evolution, Data/Video technology, different from Telecom NZ’s new 3G network that used EV-DO technology Evolution, data only. Russell Stanners, a Vodafone director of business markets, suggests that video calling — a mobile voice call that includes video — will be only available to Vodafone customers because it uses a different technology. Steeman (2004) also argues that Vodafone’s initial top speed on its 3G network is expected to be 384 kilobits. The Telecom NZ and Vodafone battle in New Zealand is as much one of competing technologies as competing companies. Telecom NZ uses a family of technology called “CDMA” and Vodafone has “GSM” technology, which has far greater penetration with 1.2 billion mobile phone users worldwide compared to CDMA’s 200 million. Upgrading to its present 3G level is costing Telecom NZ $40 million NZD, only a 10 th of the cost of the expected price of Vodafone’s new 3G network (see Table 1 for a comparison of technologies).
Table 1. Introduction of new mobile networks in NZ Telecom NZ 3G network from late 2004 Cost $40 million CDMA technology standard, used in the U.S., parts of Asia and NZ and has 200 million users worldwide.
Vodafone 3G network from mid 2005 Cost about $400 million GSM technology standard, used in Europe, U.S. and Asia and has 1.2 billion users worldwide.
Source: Summary based on Steeman (2004)
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Telecom NZ launched its 3G network before the end of 2004 in three main centers: Auckland, Christchurch and Wellington, and some holiday hotspots. According to Vodafone director of business markets, Russell Stanners, Vodafone’s network will initially be available in those three center areas as well, and it plans to have about 80 percent of the country covered by 2009 (McLaughlin, 2004a). McLaughlin (2004b) suggests that the next 3G player to step up to the plate in New Zealand will be TelstraClear, which indicated in 2003 that it wanted to build a network of its own, rather than reselling Vodafone services. Telecom NZ also laid out a Wi-Fi wireless network to provide an alternative means of wirelessly accessing the Net from roughly 200 locations, such as hotels, Starbucks coffee outlets and selected McDonald’s restaurants (Pullar-Strecker, 2004a).
3G Promotion Vodafone customers had a double holiday treat with a range of popular Vodafone Live! Services that were available free until the end of March 2005 (including news, reports, movie listings, UV index reports, etc.) for the NZ summer as well as the removal of browsing charges for Vodafone Live! (Vodafone, 2004a). Vodafone launched this promotion in an effort to keep Vodafone Live! customers and counteract Telecom NZ’s introduction of T3G.
Mobile Phone Products, Pricing and Service Plan Options As the availability of mobile phone handsets increases, this seems to put a downward pressure on retail prices for these units. Mobile phone handsets compatible with Vodafone Live! represent a good example. When Vodafone Live! first launched in April 2003, the lowest priced handset was $999 NZD for a Sharp GX10 model. In January 2005, the lowest price handset on the market had come down to $299 NZD for a Sagem MY-V55 model, which is less than a third the price charged a year previously. Similarly, when it first launched, two or three handset models were compatible with Vodafone Live!, whereas now 14 different models are available. This provides a good indication of the usability of 3G technology as Vodafone announced that most devices for Vodafone Live! will be able to upgrade to 3G. The price of mobile services will eventually
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decrease as they become adapted to new uses in mobile Internet application services. For example, Vodafone recently launched a “Motormouth” pricing plan allowing their customers to call at 49 cents per minute 24/7, a sizeable discount compared to 89 cents per minute with a prepaid anytime plan. Telecom NZ also promoted a “$10 TXT” for 500 texts to any mobile in New Zealand, which can be as low as 2 cents per text message sent. As prices of mobile phone handsets and services decrease and quality of transmission and coverage increases (from 3G), New Zealand has the potential to succeed with the expansion of next generation mobile services.
E-Mail to Mobile In 2004, almost every new mobile handset on the market in New Zealand is email capable to some extent, and the easiest way to explain it is to cover the subject by phone company—first Telecom NZ and then Vodafone (iStart, 2004a). Telecom NZ “027” mobile phones in New Zealand are e-mail capable, which contrasts with the first generation “025” series. It can launch a WAP browser, which is specifically developed for viewing and navigating the mobile Internet. The WAP browser opens on Xtra’s (www.xtra.co.nz) WAP homepage. iHUG, ICONZ or hotmail accounts (or any other ISP mail account) are not an option for receiving e-mail using a Telecom NZ mobile WAP browser. Telecom NZ currently only sells two phone models with an e-mail client — the Falcon PDA, which runs the Microsoft Pocket PC as its operating system (OS) and the Kyocera Smartphone, which runs the Palm OS. For the most part, getting e-mail to a Vodafone phone can be done in two ways — via WAP or via the phone’s in-built e-mail client — and one advantage that Vodafone has is that almost all its phones come with an e-mail client (15 mobile phone listings). To access e-mail using a Vodafone live! handset, you can simply select PXT and Email in the Live! menu and select WapMail from the dropdown list. Vodafone live! customers can select the host of the e-mail from a range of ISPs including ClearNet, Paradise, iHUG and seven other options. Vodafone phones using WAP, however, cannot access Xtra e-mail. There is a note, however, that for both Telecom NZ and Vodafone, accessing e-mail via a phone’s WAP browser does not allow for the download of file attachments.
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Successful Services in New Zealand’s Mobile Sector C-Communication WAP Business: Resene Paints This firm is New Zealand’s largest privately-owned paint manufacturing company adopting mobile Internet to provide its customers with access to company information and services while they’re on the move. Resene developed their mobile Internet presence in conjunction with WordDial, an Auckland-based organization leading the development of new applications in the mobile Internet arena. By providing a mobile Website, customers literally carry the Resene shops around with them and can access information and services anywhere there is mobile coverage. For example, if a customer is out shopping for curtains or other furnishings, he/she can download and view color swatches on their mobile phones for matching reference or product information for compatibility.
SMS Marketing Brink (2004) suggests that New Zealand is still in its infancy when it comes to the utilization of the SMS channel for marketing purposes, and Gautier (2003) states that New Zealand companies are currently unsure where the so-called “pester threshold” lies in permission-based SMS marketing. But according to the Telecom NZ Website (www.telecom.co.nz), some of New Zealand’s biggest brands — 31 brands all together — have begun using texting to interact with their customers, with some incredible results (Telecom NZ, case studies 2004). The Primo TXT campaign, the latest in SMS, and McDonald’s McText, claimed as the most successful SMS campaign, are discussed here as examples below.
Primo TXT Results for NZ Dairy Foods In December 2004, New Zealand Dairy Foods called on advertising agency Saatchi and Saatchi and Run the Red to run a TXT campaign in the form of a virtual game show, to promote its flavored milk brand, Primo. The objectives were to increase overall awareness and stimulate and invigorate interest in Primo milk. A TV campaign screened during youth targeted programming stimulated the registration process. This marketing channel set the scene for the
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game-show concept and invited the user to text in the Primo short code to become a virtual contestant in a game designed as a multi-choice quiz, with the player required to text A, B or C for what they thought was the correct answer. Bonus points were awarded for answers selected that showed true “Go With The Flow” attitude (Primo’s advertising catch phrase). After a player texts in their answer, they receive an SMS from the system alerting them to the number of points won. This campaign ran for six months using “Run the Red’s RED-Play” solution. A mobile gaming engine, RED-Play, had been specifically developed to manage large volumes of messages and turn armchair fans into gaming participants. Ultimately, the Primo Flowtime campaign generated 225,000 text messages from a player base of 15,000, and NZ Dairy Foods said the goals of increasing overall awareness of Primo milk and strengthening the brand’s market positioning were comfortably achieved.
McText Arguably New Zealand’s most successful text marketing campaign to date, the McDonald’s McText promotion, broke the 1.5 million text message barrier in 5 weeks (from Dec. 26, 2002 to Jan. 31, 2003), awarded close to 300,000 prizes and had approximately 15 percent of respondents opt in to receive future promotions via text messaging (Touchpoint, 2005a). The campaign provided an access code to customers who bought a McDonald’s combo meal. Those who entered the code into their mobiles were promised that one in five who sent off a text message would win an instant prize. McDonald’s marketing manager, Jason Paris, revealed that 25 percent of people who own a mobile phone in New Zealand had a go at this promotion. The campaign increased customers’ average spend by encouraging them to splash out on a combo deal to get their text code ticket, and now McDonald’s has a database of tens of thousands of McDonald’s customers to re-market to.
L-Location With location functionality, due to its high-speed connection in the business sector, Telecom NZ overtakes Vodafone in this area. In a mobile business case, Telecom NZ supplied cookie manufacturer Cookie Time with Kyocera 7135 Smartphones running over Mobile Jetstream on Telecom NZ’s 027 network and the distribution team is now equipped with a fully mobile invoicing system that speeds up the entire sales distribution process (iStart, 2005). The adoption of mobile business capability by Cookie Time proves to be successful according to
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Chris White, Cookie Time IT Manager. He testifies that because data transmitted over Telecom NZ’s 027 network seamlessly integrates with the head office accounting and information systems, they have an end-to-end sales tool that gives the head office access to high-value sales data for immediate analysis and action. This gives them the flexibility to quickly target their marketing and sales effort where it’s needed the most — whether by distribution rep, location, customer or product. GeoSmart, one of the country’s biggest suppliers of mapping data, offered service to 021 mobile customers with Vodafone Live! handsets called SmartFIND. GeoSmart released in August 2004 on Vodafone LIVE. It aimed to get non-stop access to maps and the ability to find shops, restaurants, ATMs, pubs, businesses and much more over all of NZ. It also includes street directions on how to get anywhere in NZ (Geosmart, 2005). However, some have termed it a flawed beast (The New Zealand Herald, 2004). The first problem is the medium — a mobile phone connecting over a low-speed data network and trying to display detailed maps on a small, low-resolution screen. The SmartFIND maps turn into a pixilated mess when taken to a high level of detail, and the service can be frustratingly slow, especially when you must navigate through several screens. Another issue is that SmartFIND will only ever be as good as the data underpinning it, and the data at the moment are patchy. Searching for businesses turns up more misses than hits. The introduction of 3G in the near future is claimed to hopefully improve the level of this service.
I-Information The adoption rate of using mobile phones for information in New Zealand is slightly lower than for using the Internet. For example, Stock (2004) states that text messaging for access to bank account balances has taken off at Kiwibank (Kiwibank, 2005) saying that 14 percent of its customers have used the service in the three months since launch, only 2 percent less than usage for its Internet banking service. Although an expected 20 to 25 percent of Vodafone revenue to come from data services by 2004 couldn’t be met (only 16 percent in actual fact) Tim Miles, a Vodafone New Zealand managing director, suggests that mobile phone operators hope 3G will boost revenue from data services to help offset anticipated falls in voice revenue as it will enable users to surf the Internet at high speeds, watch high quality video, shop and download music. Delays in the availability of 3G-enabled handsets and customers’ slower than anticipated uptake of pre-3G data services have withheld Vodafone’s 3G launch until now (Vaughan, 2004). Two cases studies of mobile information services are examined next.
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The Auckland Regional Council (ARC) successfully launched its “Text Updates for Service Delays” campaign in May 2004 (Touchpoint, 2004b). This campaign is the first ever SMS text messaging service keeping Auckland rail commuters up to date on train service delays and received the BearingPoint Innovation award in the local government category. Costing only 20 cents to join, commuters are able to register by texting a simple code. Once subscribed, all text messages received are free. By August 2004, over 1,900 individual customers had subscribed to the service, representing 17 percent of potential users in the area. The Wellington Institute of Technology (WelTec) is the first tertiary training provider to sign up to use text messaging as a faster and more convenient way to communicate with students. The text system is developed in partnership with an Auckland-based company, The Hyperfactory, and is not universal but permission-based. The students need to volunteer their contact numbers and indicate the type of information they’re interested in. According to Gary Hartley, WelTec marketing manager, informal surveys with students suggest they would be willing to pay a small amount to have their exam results texted to them early, and for the full diary management (any changes to classes they have; reminders of important assignment deadlines, etc).
P-Payment Vodafone has three offers for m-payment: TXT-a-Park, mTicket and Fastnet mobile, while Telecom NZ has two offers: mTopUp and Fastnet mobile.
Mobile Banking The two main service providers, Vodafone and Telecom NZ, appear to focus increasingly on mobile banking as their business strategies. Cooperating with ASB bank, both offer Fastnet Mobile service which lets their customers check the balance of their ASB bank accounts and credit cards, see the last ten transactions for each account and credit card and transfer funds between their ASB bank accounts. Both charge their customers 35 cents per transaction. Fastnet Mobile service is now available to any ASB Bank customer 15 years of age or over who is connected to Telecom NZ’s CDMA 027 or Vodafone’s network with an approved WAP-enabled mobile phone (ASBbank, 2005). Users can transfer funds using Fastnet Mobile.
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Telecom NZ mTopUp and Vodafone HotLink™ ASB Bank and Telecom NZ launched their first application of an m-payment service, which is also the first collaboration of its kind between a major telco and a bank in New Zealand (ASBbank, 2005). The m-payment solution reaches the customer’s mobile phone directly with their bank account, unlike micro-payment solutions that simply charge costs to the customer’s mobile phone account (Advancesolution, 2005). ASB Bank and Telecom NZ have engaged the services of M-Com (Mobile Commerce Ltd.) to assist in the creation of the technical and commercial aspects of the Telecom NZ prepaid top-up service or mTopUp. The service allows Telecom NZ mobile prepaid customers with an ASB bank account to pay for airtime credits on their Telecom NZ prepaid mobile phone from their ASB bank account via text message, and is available to customers since March 2004. It lets Telecom NZ users top up in $20 increments with a limit of two mTopUps per day (Telecom, 2005). Initially and currently, the service enables customers with a Telecom NZ prepaid mobile phone and an ASB Bank account to top-up their phone credit from their bank account via an SMS text message. In the future, consumers will be able to purchase any number of goods and services in situations where they are not in front of the merchant or do not have access to traditional payment method of cash, EFTPOS or credit card. The battle lines between different banks and telcos for control of the nascent mobile payment market are being drawn, with BNZ and Vodafone laying down a long-foreshadowed challenge to Telecom NZ and ASB bank (Pullar-Strecker, 2004c). BNZ and Vodafone will launch a service called “Vodafone HotLink™” in 2005 that will let Vodafone customers top up their own or other people’s prepaid accounts or pay their monthly mobile phone bills directly from a BNZ bank account (Vodafone, 2004b).
TXT-A-Park Another example of m-payment is TXT-A-Park, which is a cashless parking system that allows mobile phone users to pay for parking via text messaging (Jacobson, 2004). It was developed by Cash Handling Systems, Synergy International and Vodafone New Zealand, in conjunction with the Wellington City Council (Wellington Government Website, 2005). The Cash Handling Systems has integrated a GPRS (General Radio Packet Service) dial-up modem into the new generation machines that communicate directly with Synergy International’s application. With TXT-A-Park, parking charges — plus a 50cent transaction fee — are debited from users’ prepaid phone balances or added to their phone bills if they’re on a Vodafone plan (Pullar-Strecker, 2004). In a six-
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month trial that kicked off in January 2004, the council installed 18 parking machines and reported that it has been a huge success (Bathgate, 2004). The council therefore started replacing 1,300 parking meters with 300 pay-anddisplay machines that can accept payments from mobile phones or credit cards at the end of August 2004. According to a survey conducted for the council by AC Nielsen (as cited in Bathgate, 2004), 65 percent of Wellingtonians are aware of the TXT-A-Park service and 35 percent — including half of those in the 1524 age group — said they would be likely to use it if it were available to all mobile phone users. With these promising prospects, the council plans to replace its nontext capable pay-and-display machines with TXT-A-Park units over the course of the next five years, and there will be about 530 TXT-A-Park machines in place in Wellington at that time. The Vodafone mTicket launched three years ago and developed a strong following from tech-aware students buying tickets to dance parties and concerts. Short-code text services to make donations to charities have also been a growing feature of life in New Zealand. For example, recently World Vision New Zealand has partnered with leading mobile applications developer, The Hyperfactory, to conduct a text messaging campaign as part of its massive boxing-day tsunami appeal. Telecom NZ and Vodafone subscribers could make a $3 donation by texting “Donate” to short code 883. On the first day of service, over 6,500 mobile subscribers used the text application to make a $3 donation, raising nearly $20,000 NZD in 24 hours. World Vision New Zealand’s tsunami appeal reached $2.04 million NZD on January 13, 2005 after receiving a big boost from text message donations from mobile phones (World Vision New Zealand, 2005).
Additional Reflections on New Zealand’s Mobile Sector New Zealander’s Texting Behavior and Attitude towards Permission-based Mobile Advertising Maneesoonthorn and Fortin (2004) investigated the patterns of consumer texting behavior and measured general consumer attitudes towards SMS advertising and permission-based advertising via mobile phones in a New Zealand context by conducting an online survey among University students. They found that respondents have a fairly lukewarm attitude towards the use of advertising in SMS. However, most users wished to have the ability to control text advertising
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Table 2. Started using SMS How long have they used SMS? More than 2 years
160 (64%)
Between 6 months and 2 years
62 (26.8%)
Less than 6 months
26 (10.4%)
Table 3. Types of SMS users Types of Users Light users
118 (47.2%)
Moderate users
92 (36.8%)
Heavy users
40 (16.0%)
Note: Light users send/receive SMS less than 5 messages per day; Moderate users send/receive SMS between 6 and 15 messages per day; Heavy users send/receive SMS more than 15 messages per day
Table 4. Products willing to buy via SMS Products willing to buy via SMS Cinema, theatre and event tickets
45.6%
Others
14%
Books, CDs, DVDs and games
12.4%
Information services, newspaper and magazine
10.0%
received and supported the concept of permission marketing. Results also indicate that across user groups, heavy users showed a significantly higher need for controlling text advertising received compared with light users. Of the 295 respondents, three quarters reported that their phones could not send/ receive PXT (picture with text); however, approximately half of them intended to upgrade their mobile phones within twelve months. This suggests some potential for the growth of multimedia message service (MMS) and an optimistic vision for 3G in New Zealand. On SMS usage, out of 295 respondents, 250 (84.75 percent) were SMS users. More than 64 percent of them had been using SMS longer than two years (see Table 2) and almost half of them self-reported as light users (sent/received SMS less than 5 per day) (see Table3). Of the 250 SMS
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Table 5. Types of products/services willing to receive SMS coupons/ discounts for Types of product/service willing to receive SMS coupons/discounts Petrol station
38.0%
Cinema
21.2%
Retail store
16.0%
Restaurant/café
5.4%
users, 44.8 percent are used to receiving SMS ads, and only 4.4 percent have ever purchased products via SMS. Products that SMS users were willing to buy via SMS are shown in Table 4, and types of products/services that SMS users were willing to receive SMS coupons/discounts for are shown in Table 5. Most of the SMS users did not have negative attitudes toward receiving coupons/ discounts via SMS and 96 percent of them had a neutral to positive attitude overall. More than 80 percent of the SMS users had a high need for controlling text advertising received via mobile phone, and 92.5 percent of the respondents had a positive attitude towards permission marketing. Although respondents showed a fairly neutral general support for text advertising, New Zealand mobile marketers should be delighted that there appears to be strong support for permission-based mobile marketing efforts. The mobile user attitudes might be improved over time if the permission concept is put efficiently into practice.
Problems Two challenges for the development of New Zealand mobile commerce include a high termination rate and a lack of mobile portability. According to a Ministry of Economic Development report, New Zealand mobile phone calls are the second most expensive in 30 surveyed countries (Mymobile, 2004). According to the Waikato Times (Oct. 19, 2004), a draft report from the Commerce Commission says mobile operators have abused their dominant position in the market in keeping the cost of calling a mobile phone unreasonably high. Mobile termination rates are higher than overseas and are blamed for New Zealand being one of the most expensive countries in the Organization of Economic Cooperation and Development (OECD) to make voice calls to and from a mobile phone (Bathgate, 2004b). Both Vodafone and Telecom NZ charge about 28c NZ a minute to terminate a call. The New Zealand commission found the overseas range for termination costs is about 6.6c to 16.2c.
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New Zealand is the only country in the OECD without both fixed-line and mobile number portability, not allowing phone users to take their phone number with them when they change service provider (Vaughan, 2004). New Zealand director Tex Edwards (as cited in Pullar-Strecker, 2004b) states that African telco Econet Wireless, who paid $13.2 million for a 20-year license to use the radio spectrum suitable for launching a 2.5G or 3G phone network in New Zealand in March 2001, won’t progress its plan to build a new mobile phone network in New Zealand until outstanding regulatory issues such as mobile number portability are resolved. He further mentions that New Zealand is the only country in the OECD not to have number portability, nor commercially viable cell site co-location protocols, which would let it install its equipment on rival cell phone towers. According to the Telecommunications Carriers Forum, an organization representing New Zealand telcos including incumbent mobile network operators Telecom NZ and Vodafone, it doesn’t expect mobile number portability to be implemented until 2007 (Pullar-Strecker, 2004b; Telecom worldwide, 2004) — meaning Econet’s Maori backers could be in for a very long wait to see a return on their investment (Pullar-Strecker, 2004b).
Technological and Managerial Lessons from New Zealand’s Mobile Experience This chapter introduced the mobile communication and commerce situation in New Zealand. It then developed an overview of the background and history of the New Zealand mobile Telecommunication sector that led to the introduction of 3G in New Zealand. Mobile phone products, pricing and service plan options were then reviewed and discussed. The next section presented several case studies in New Zealand reflecting diverse aspects of the CLIP functionalities. Consumer texting behavior and attitude towards permission-based mobile advertising were discussed, and key barriers to the development of the industry are identified. As the chapter clearly pointed out, the New Zealand market has faced a duopolistic market for many years, which has somewhat slowed down the progress it could have made in a more competitive environment. But the market is now expanding and new competitors are entering the marketplace. As the prices of mobile phone handsets and services decrease and the variety of mobile phones and the quality of the transmission rate expands, New Zealand has the potential to successfully develop the market for mobile commerce. Although mobile service operators’ revenue, like Telecom NZ and Vodafone, will likely shrink from basic services, they should be able to extend their revenue generating
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base to other segments, such as revenue sharing with content providers through advertising, banking and revenue-sharing with mobile businesses acting as gatekeepers. The redefinition of a transaction-based business model with key commercial partners appears to be the most promising area of development based on the cases reviewed in this chapter.
Questions for Discussion 1.
How should New Zealand business implement future mobile solutions? And which key technology would be best to support these solutions?
2.
How would you describe the opportunities for 3G in New Zealand? Will Telecom, as a pioneer in this technology, have a sustainable competitive advantage over Vodafone?
3.
Discuss the effects of competitive duo-market dominance on consumer mobile services.
4.
What are the market opportunities for vendors of mobile, hardware, service providers and solutions integrators?
5.
How can permission based-mobile marketing be implemented in New Zealand? Be specific here.
References Advancesolution. (2005). ASB Bank and Telecom NZ develop innovative mobile payment solution. Retrieved February 2, 2004, from http:// www.advancedsolutions.co.nz/desktopdefault.aspx?pageid=175&itemId=7 ASBBank. (2005). New mobile payment solution goes live. Retrieved January 2005, from http://www1.asbbank.co.nz/asb/report14.asp?idMessage=3782 Bathgate, A. (2004, Aug 23). TXT-to-pay parking gets green light. The Dominion Post, p. 6. Bathgate, A. (2004b, Oct 19). Cellphone operators in “abuse.” The Press, p. 6 Bland, V. (2005, Quarter one). 3G: What’s in it for business? Mobile Business Magazine, 6-9. Brink, B. (2004). SMS Marketing in New Zealand-attitudes and implications. Unpublished bachelor’s thesis, Massey University, Auckland, New Zealand.
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CIT. (2005). WelTxt messaging keeps students in touch. Retrieved January, 2005, from http://www.cit.ac.nz/weltxt.htm Edition 2. (2004a, Oct 19). Crackdown call to mobile phone operators. Waikato Times, p. 13. Edition 2. (2004b, Dec 11). Growth steady: Teleco expert. Waikato Times, p. 4. Gautier, A. (2003, July 22). The Pester Factor. NZ Marketing Magazine, p. 39. IStart. (2004a, Quarter Four). How to: Get email on your mobile. iStart: technology for business, 22-25. IStart. (2004b, Quarter Three). The word is mobile. iStart business in electronic, p. 4 IStart. (2005). Cookie time deploying sales force mobility. Retrieved July 2005, from http://www.istart.co.nz/index/HM20/PC0/PVC197/EX22902/ CS25365 Jacobson, J. (2004, Jan 24). Text-message parking here. The Dominion, p. 8. Management Magazine (2004, Sept). TECHNOLOGY-e-channel aid-new technologies deliver for marketers. Management Magazine, p. 58-62. Maneesoonthorn, C., & Fortin, D. (2004, Dec). An exploration of texting behavior and attitude towards permission-based mobile advertising in New Zealand. Proceedings of the 2004 ANZMAC Conference, Wellington, New Zealand. CDROM. McLaughlin, K. (2004a, Oct 1). Vodafone offers first taste of speedy 3G. The National Business Review. Retrieved from www.factiva.com McLaughlin, K. (2004b, Oct 29). 3G New Zealand: Watch this space. The National Business Review. Mobile Business. (2005a, Quarter one). Primo TXT results for NZ dairy foods. Mobile Business, p. 36. Mobile Business. (2005b, Quarter One). Vodafone’s market share up. Mobile Business, p. 2. Mobile Business. (2005c, Quarter One). WAP delivers For Resene. Mobile Business, 10-11. Mobilecommerce (2005). M TopUp case study: Telecom NZ New Zealand and ASB bank. Retr ieved Ja nuar y 200 5, fr om http:// www.mobilecommerce.co.nz/Downloads/MTopUpCaseStudy.pdf Mymobile. (2004, Dec). Polish-like pricing. Mymobile, p. 8. M2 Presswire. (2004, Dec 21). Research and markets: The telecom market in New Zealand is expected to grow by 5% from $8.1 billion in 2004 to $8.5 billion in 2005. M2 Presswire.
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New Zealand Herald. (2003, April 11). Vodafone goes live-at a price. New Zealand Herald — technology — general. New Zealand Herald. (2004, Sept 17). Phone-a-map loses direction. New Zealand Herald-technology-reviews. Pullar-Strecker, T. (2004, March 8). High take-up for TXT-a-park during trial. The Dominion Post, p. 2. Pullar-Strecker, T. (2004a, Nov 10). T3G network ready to go. The Dominion Post, p. 10. Pullar-Strecker, T. (2004b, Nov 22). Econet sits tight till conditions improve. The Dominion Post, p. 7. Pullar-Strecker, T. (2004c, Dec 6). Banks and telcos vie for position. The Dominion Post, p. 9. Scoop. (2005). Tsunami appeal boosted by text donations. Retrieved January 2005, from http://www.scoop.co.nz/stories/PO0501/S00094.htm Steeman, M. (2004, Nov 6). Technology giants duel over 3G services. The Dominion Post, p. 1. Stock, R. (2004, Oct 10). The future is coming to a cell phone near you. Sunday Star Times, p. D5. Telecom. (2005). mTopup. Retrieved January 2005, from http://www.Telecom NZ.co.nz/content/0,3900,204012- 203187,00.html Telecom. (2005). mTopup questions and answers. Retrieved January 2005, from http://www.Telecom NZ.co.nz/content/0,3900,204013-203201,00.html Telecom NZworldwide. (2005, Dec 20). New Zealand mobile operators team up on number portability. Telecom Website. (2005). Case Studies. Retrieved January 2005, from http:// www.Telecom NZ.co.nz/content/0,3900,202615-201909,00.html Touchpoint. (2005a). McDonald’s mctext and win. Retrieved January 2005, from http://www.touchpoint/case-studies/mcdonalds-mc-txt.html Touchpoint. (2005b). Text updates for service delays. Retrieved January 2005, from http://www.touchpoint.co.nz/case-studeis/arc-txt-service-delays.html Touchpoint. (2005c). Touchpoint Txt engine helps Auckland passenger rail service steamroll innovation award. Retrieved November, 2004 from, http:/ /www.touchpoint.co.nz/news/media-releases/2004/2004-11-03-arc-innovation-ward.html Vaughun, G. (2004, July 14). Vodafone explains its 3G mobile strategy. The Independent, p. 6.
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Vodafone Media Release (2004a). Vodafone Gives Prepay Customers Early Christmas Bonus. Retrieved January 2005, from http://www.vodafone/ co.nz/aboutus/media_releases/20041203.jsp Vodafone Media Release (2004b, Nov 29). Vodafone and bank of New Zealand leap into mobile commerce. Retrieved January 2005, from http:/ /www.vodafone/co.nz/aboutus/media_releases/20041129.jsp Vodafone Media Release (2004c, Nov 17). Strong growth for Vodafone NZ great news for customer. Retrieved January 2005, from http:// www.vodafone/co.nz/aboutus/media_releases/20041117.jsp Wellington Government Web Site. (2005). TXT-a-park. Retrieved January 2005, from http://www.wellington.govt.nz/innovation/details/txtapark.html Worldvision. (2005). World Vision takes up texting in tsunami appeal effort. Retrieved January 2005, from https://worldvision.org.nz/appeal_2/news/ 20050222_01.asp
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Chapter XI
South Korea: Vision of a Ubiquitous Network World Jounghae Bang, Penn State University Mont Alto, USA Inyoung Choi, Georgetown University, USA
Abstract Koreans envision a world in which anyone can access information and the tools to explore it anytime, anywhere. Korea has been one of the leaders in the mobile industry and this chapter explores the past, present and future of mobile technology and markets in Korea. Starting with background and a brief overview of the current situation, this chapter uses the CLIP framework to describe mobile services in Korea. The chapter concludes with a brief discussion of challenges and future strategies.
Introduction: Vision of a Ubiquitous Network Society Koreans are dreaming of and reaching for a ubiquitous network society, or an environment where information and the tools to explore it are “always” available
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to “everyone” (Reynolds, Kelly, & Jeong, 2005). Along with advancing technology, Koreans’ enthusiasm and efforts have brought Korea closer to this vision. High-speed Internet service has become increasingly popular since May 1998, when it was first introduced to Korea (Jin, 2003). In that year, it was not widely used due to the high monthly fee of US$77. However, by 2001, 13.9 percent of Korea’s total population subscribed to high-speed Internet, and by 2002, that number had increased to 19.2 percent, the highest among the member countries of the Organization for Economic Cooperation and Development (OECD) (OECD, 2002). By 2004, more than 75 percent of Korean households were connected to the Internet via high-speed lines, the highest broadband penetration rate by a large margin around the world (Reynolds, Kelly, & Jeong, 2005). In 2005, Korea maintains some of the cheapest and fastest residential connections at the lowest prices in the world (Jin, 2003; Reynolds, Kelly, & Jeong, 2005). In addition to leading the world in fixed-line Internet services, Korea has also emerged as a world mobile leader (Reynolds, Kelly, & Jeong, 2005). Relative to broadband Internet, mobile service got off to a slow start in 1984 due to the high expectations of customers — low cost and high quality (Jin, 2003). By 1999, however, mobile phone subscribers outnumbered fixed-line phone subscribers (Park, 2000). Korea became one of the first countries in the world to offer IMT2000 (3G) services and CDMA services (Reynolds, Kelly, & Jeong, 2005). Moreover, Korea’s mobile phone manufacturers, Samsung and LG, had the world’s second and fifth largest market share in the third quarter of 2004, respectively (Goasduff, 2004). In this chapter, the past, present and future of mobile technology and markets in Korea will be explored. We will first provide detailed background regarding broadband Internet and mobile markets in Korea. Next, we will describe some successful applications of m-commerce in Korea. After that, we will outline the Korean m-commerce sectors using the CLIP framework. Lastly, we will suggest some key lessons regarding technology, policy and stakeholder strategy.
Historical Overview The Korean mobile market is well known as one of the most advanced in the world and boasts nearly 100 percent coverage across the peninsula. In this section, we will address the evolution of Korean mobile technology and its dynamic market. According to Reynolds, Kelly, and Jeong (2005), mobile technology in Korea has passed through three distinct phases:
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1.
Introduction of analog cellular service in Korea (1984-1994): In March 1984, the analog mobile phone was introduced and mobile telecommunication services began (Park, 2000). Up until 1991, mobile phone subscribers were no more than 0.37 percent of the total population. The mobile phone was perceived as a luxury product, available only to highclass customers (Lee, 2003).
2.
Strong CDMA era (1995-2000): Digital CDMA voice services (IS95A) were launched in 1996 (Park, 2000). By October 2000, Korea had gone through IS-95B (1999) to CDMA2000 1x, which was launched that month (Reynolds, Kelly, & Jeong, 2005). Along with this advance of technology, the mobile phone market expanded noticeably (Lee, 2003), and the penetration rate grew rapidly to more than 50 percent.
3.
Focus on mobile data applications (2001 to date): As the markets for phones and basic service have become saturated and subscription rates have slowed, focus has shifted to the development of technology that can enable mobile data applications (Reynolds, Kelly, & Jeong, 2005). Since 2002, Koreans have been enjoying third generation, IMT-2000, which has been the cornerstone of the broadband telecommunication and high-speed network (Park, 2000). In May 2002, a nationwide CDMA 2000 1x network was completed and EV-DO mobile data services were launched, and in 2004, services in the IMT-2000 2.1 GHz band and CDMA2000 1x EV-DV services were launched (Park, 2000; Reynolds, Kelly, & Jeong, 2005). WiBro services have been licensed and are ready to commercialize (Reynolds, Kelly, & Jeong, 2005).
As these technologies have evolved, the mobile market has expanded accordingly. Both the number of subscribers and the sales volumes in the mobile market have been growing. Figure 1 shows the trend in: (1) the number of mobile phone subscribers, (2) the number of mobile Internet subscribers and (3) the percentage of mobile phone subscribers who also subscribe to mobile Internet service. First, the number of mobile phone subscribers has been continuously increasing. As shown in Figure 1, the penetration rate was slow during the first several years after mobile phone service started. By August 1999, however, mobile phone subscribers exceeded 20 million, and by 2002, they exceeded 30 million, about 70 percent of the population in South Korea. This number means that almost all citizens except small children and the elderly own a cellular phone. The mobile phone has become the necessary and popular means of communication for people on the move. In September 2002, mobile phone subscribers outnumbered fixed-line phone subscribers (Jin, 2003). Korea was one of the first 15 countries worldwide to make this transition (Reynolds, Kelly, & Jeong, 2005).
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96% 90% 91% 82% 61%
80% 60% 40% 20%
Percentage
100%
40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0
0%
Ye a 19 r 84 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03
No. of Subscribers (1,000)
Figure 1. Mobile phone subscribers vs. mobile Internet subscribers
Year Mobile phone subscriber Percentage
Mobile Internet subscriber
Source: Author’s integration of data from Ministry of Information and Communication, Republic of Korea (2002), and Jin (2003)
Second, mobile Internet service launched in 1999 and has become more and more popular, fueled by advanced mobile handsets and devices that are equipped with color LCD and digital cameras and allow for easy mobile Internet access (Jin, 2003). Figure 1 indicates the number of mobile Internet subscribers each year since 2000. In 2000, the number of mobile Internet users was around 16,460,000. By December 2004, the number had reached 35,016,000 (Jin, 2003). Third, relative to the increase in mobile phone subscribers, the increase in mobile Internet service subscribers is noticeable. The number of mobile Internet subscribers accounted for only 61 percent of total mobile phone users in 2000. However, by 2004, the number of Mobile Internet subscribers was 35,016,000, accounting for 96 percent of mobile phone users. Along with the increase in the number of mobile service subscribers, the sales volume of mobile Internet service has been continuously increasing (Jin, 2003). Korean mobile communication service providers saw a drastic increase in the ARPU (Average Revenue per User) for wireless Internet, from 1,104 won at the end of 2000 to 2,261 won in 2001. This increase shows that the number of users and the number of use times in the wireless Internet market are growing explosively (MIC, 2002). Sales volume increased from 587.4 million won (5.7 percent of total mobile phone service sales) in 2001 to 1,168.4 million won (8.7 percent of total mobile phone service sales) in 2002 (Jin, 2003).
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Figure 2. Mobile data service market forecast
Sales amount (Billion Won)
2,500.0
2,200.0
2,000.0 1,500.0
2002 2007
850.0
1,000.0
550.0 336.5
500.0 124.0
60.0
100.0
76.3
LBS
Commerce
Game
Broadcasting
Source: Korea IDC (2003)
Korea IDC (2003) suggests that ringtones, wallpaper, character downloading, games, adult contents, Location Based Service and the multimedia messaging service have been popular applications among mobile Internet users. As shown in Figure 2, among the applications, LBS is expected to have expanded its market from 124 billion won in 2002 to 850 billion won in 2007. Along with Internet and e-commerce, m-commerce is expected to have expanded its market from 60 billion won in 2002 and 123.1 billion won in 2003 (Jin, 2003) to 2,200 billion won in 2007 (Korea IDC, 2003). In sum, Korea has been able to develop new technology and to commercialize it. As the Korean mobile market has become saturated, data applications, rather than market penetration, have realized greater importance. The next section describes some successful mobile applications that have become everyday necessities in Korea.
Successful Services in South Korea For Koreans, a misplaced mobile phone means not only “lost a handset,” but also “lost a lot.” The “a lot” could include a Web browser, game console, e-wallet, house key, video camera, still camera, MP3 player and organizer, all in one (Reynolds, Kelly, & Jeong, 2005). These various mobile services have been provided successfully and have penetrated so deeply into daily life that Koreans cannot imagine a second without their cell phone in their hand.
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Among many stories about successful m-commerce applications, two cases will be presented in this section, and other successful application cases will be briefly addressed in the following CLIP framework section. In this section, the first case demonstrates how m-banking and m-payment services are provided to individual consumers, and the second case shows how businesses have used mobile services for their advertising campaigns to successfully create new business opportunities. The section concludes with a discussion of barriers to overcome for future growth.
Case 1: Consumers — SKT Moneta (M-Payment and M-Banking) The following two stories demonstrate how cell phones and PDAs have affected daily life in Korea. Like many others, Mr. Lee uses his cell phone every single minute. Even when he wants to buy a snack in a convenience store, he checks his cell phone before he pays for it, because he may find a discount promotion code through his phone. When he finds one, he downloads it and shows the bar code to the store clerk. The discount coupon, in the form of a mobile bar code, is scanned and Mr. Lee can utilize the promotions. (Tao Ai Lei, 2002) Ms. Kim realizes that today the bill for her son’s school is due. However, at that very moment, she is mountain climbing with her friends. She is worried because of the high late fee, but she realizes that she has her cell phone, with which she can access a mobile banking service. Via that service, she pays the fee in one minute. (Cheil Economy, 2004, 01-02) Even though these stories have been simplified, they demonstrate that mobile commerce is no longer in the future; it exists right now. All three mobile operators in Korea offer m-payment and banking services to bring m-commerce into daily life. We will address these services by looking at Moneta (m-payment) and Nemo (m-banking), both services of SK Telecom (SKT). 1.
Overview of SKT: SKT is one of the largest mobile operators in Korea. It has 18 million subscribers, with a market share of 54.3 percent in September 2003 (IT Korea, 2003). SKT’s sales have been increasing dramatically. In the first quarter of 2003, SKT’s mobile Internet service
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sales were 26.5 billion, which was 8 percent higher than same quarter of 2002 and accounted for 13 percent of SKT’s total mobile phone revenue (Jin, 2003). 2.
Overall services provided by SKT: Their services include sweepstakes, online bulletin boards, security/stock information, humor/gossip and online games under the brand name n.Top (Park, 2000). Additionally, they offer 2G, CDMA 2000 1x and EV-DO services under the brand name June (Jin, 2003). SKT was the first in the world to offer mobile data services over its standard CDMA network (IS-95). In October 2000, it launched its CDMA2000 1x service under the brand name Nate (Reynolds, Kelly, & Jeong, 2005). A prepaid card service called GuideCell, which offers phonebased translation of English, Japanese, Chinese and French, has been also available for tourists and visiting business delegates (Rao, 2000).
3.
SKT’s MONETA service (Reynolds, Kelly, & Jeong, 2005; SK Telecom, February, 2002): Since 2002, SKT has consistently introduced new services under the brand name MONETA. For example, the “Mobile Wallet Service” has more than 470,000 terminals around the country. Each terminal, which can be found easily next to a cash register, accepts payments via RFID chips embedded in mobile phones. Users simply wave their phone in front of the Moneta receiver, and the purchase is assigned to the mobile user. Similarly, mobile phones can be used to pay for public transit: People simply scan their mobile phone over the receiver and the money is debited. This service has over one million subscribers. Refreshments from vending machines is no exception. A cellular handset can be waived in front of a vending machine to pay for drinks or snacks. Tolls can be paid automatically by just putting a mobile phone on the toll sensor (www.sktelecom.com). Without complicated procedures or approvals, customers can buy and check a lottery ticket through their mobile phone. They simply enter the lottery Website through their cellular phone connection, then download the lottery ticket instantly, and check for winning results.
4.
SKT’s NeMo (Network Money) service (SK Telecom, 2001): This service utilizes multifunctional smart chips to store online banking information securely, and allows users to transfer money through mobile settlement banks in an almost real-time transaction (Reynolds, Kelly, & Jeong, 2005).
5.
Competitors: “K’merce” service, offered by Korea Telecom Freetel (KFT), has over 500,000 subscribers as of 2005 (Reynolds, Kelly, & Jeong, 2005). In February 2002, KTF launched a mobile payment system and mobile coupon services. Subscribers can download a mobile barcode as a payment interface and receive discounts from various merchants in Korea. In the same year, 657,000 of their 11 million customers signed up for the
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K’merce initiative, with 13 services including K’merce-stock, K’mercebanking, K’merce-ticketing and K’merce-lottery (Tao Ai Lei, 2002). LG telecom offers m-commerce transaction and payment services under the brand name “Zoop.” LGT is also quickly expanding its services (Reynolds, Kelly, & Jeong, 2005). 6.
Market situation: Since September 2003, most Korean banks have been providing basic mobile banking services such as money transfer and account inquiry through mobile telecommunication devices like mobile phones or PDAs (Cheil Economy, 2005). Korean mobile users checked their balances and made banking transactions 2.56 million times in December 2003, more than double the 1.1 million times they did so in December 2002 (Korea Herald, 2004). The number of mobile banking transactions during December 2004 was reported at 6.28 million, 145.4% greater than in December 2003 (Electronic News, 2005).
As shown in Table 1, the number of Internet banking subscribers in December 2004 was 24.271 million, up 6.7 percent from 2003 (Kim, 2005). Among those subscribers, there were 23 million individual users and 1 million business users. These numbers increased by 6.2 percent and 17.5 percent respectively between 2003 and 2004. Meanwhile, there were 894,000 mobile banking users in 2004, up from 189,000 in 2003. Table 2 indicates the number of transactions via Internet banking and mobile banking services. Among the mobile banking transactions, there were 5,013,000 inquiries and 1,269,000 money transfers, up from 2003 by 130 percent and 227.6 percent, respectively. Internet banking service accounted for 29.3 percent of total banking services in 2004, a similar percentage to branch usage, and 27.6 percent greater than CD/ATM usage (Kim, 2005). Along with the increase in Internet banking usage, the mobile banking services market is expected to reach 1,000,000 subscribers in 2007 (Cheil Economy, 2005). However, the different operating systems offered by each mobile phone carrier cause redundant efforts by content developers. This issue must be resolved for further growth.
Table 1. Internet banking and mobile banking users (Unit: 1,000)
Internet Banking
Individual Company Total
Mobile Banking
2003 21,752 1,061 22,754 189
2004 23,094 1,177 24,271 894
Source: The Bank of Korea (January 27, 2005)
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Table 2. Internet and mobile banking transactions (Unit: 1,000)
Internet Banking
Mobile Banking
Inquiry Transfer Apply Loan Total Inquiry Transfer Total
2003 6,159 1,055 5.0 7,219 2,173 387 2,560
2004 7,501 1,492 2.3 8,996 5,013 1,269 6,281
Source: The Bank of Korea (January 27, 2005)
Case 2: Businesses — Mobile Advertising Not only do customers use mobile services successfully; many companies also use mobile services to satisfy customers. As mobile telecommunication technology has evolved, m-advertising has become an increasingly important communication tool in marketing. M-advertising is defined as any paid message sent over the mobile channel medium by a business to encourage specific people to buy products and services and to influence their attitudes, intentions and behaviors (Interactive Mobile Advertising Platform, 2003; Leppaniemi & Karjaluoto, 2004; Lee, 2003). The increasing use of mobile phones creates an opportunity for mobile advertising agencies. Some companies have established their own sub-companies, while others have invested in shares of mobile advertising companies. Various studies have found that mass and target advertising, interactive and immediate response, time-based marketing and location-based services are the key features of mobile advertising (Barnes, 2002; IMAP, 2003; Yunos et al., 2003). Here, starting with an overview of key players in m-advertising in Korea, the madvertising cases of KTF and SKT are introduced, followed by an overview of the market situation. 1.
Key Players in m-advertising: Key players have included advertisers, m-advertising companies, media owners, traditional advertising agencies, network operators/carriers, technology providers and customers. Korean m-advertising has been driven mainly by common carriers such as SKT, KTF and LG Telecom.
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2.
KTF’s advertising campaign
3.
a.
Overview of KTF: KTF has 11.5 million mobile phone subscribers. With its brand Fimm (Park, 2000), KTF has been experiencing a continuous increase in its percentage of annual revenue per unit (ARPU) derived from mobile Internet. Relative to existing 2G or 1X black and white devices and 1X color devices, FIMM 1x and FIMM EV-DO devices have created higher ARPU because consumers can use these color LCD devices to enjoy more content that requires large size data transferring, such as real-time broadcasting, movies or music videos (Jin, 2003).
b.
KTF’s Campaign for “Anycall Land”: This campaign took place from August 30, 2002 to September 13, 2002, and advertised the launch of “Anycall Land,” which is a Website for Anycall (one of the popular cell phones from Samsung) users and prospective users. KTF sent SMS messages to their 15 to 39-year-old customers who used Anycall brand handset devices, such as Anycall X4200, X5900 and X7000 phones. Message content and sending time varied according to the targeted recipients. In total, 56,021 messages were sent and only 250 messages were refused. Total respondents were 24,140, or 43.09 percent of targeted customers. This figure is higher than the clickthrough ratio for high-speed Internet. The success of this campaign resulted from pinpoint marketing targeted to the individual customers (www.kmobile.co.kr).
AirCROSS and SKT advertising campaign: AirCROSS, a mobile marketing company previously known as mAdnet, is a pioneer in mobile advertising, and has provided various advertising campaigns for SKT through SMS and cell broadcasting. AirCROSS has had many successful campaigns for companies such as L’Oreal, Coca-Cola, TGIF, Lotte and OB beer (www.aircross.com). One of the successful advertising campaigns was for L’Oreal Korea. L’Oreal Paris launched a new product in Korea and decided to advertise it through mobile messages. AirCross, on behalf of L’Oreal Korea, sent short messages to targeted consumers. This case has been charted in Figure 2. The target consumers were women, aged 20 to 25, living in Kang-Nam, a relatively rich place in Seoul. Respondents of the text messages visited the TTL store, an SKT retail shop and gave a specific password to receive a free gift. Additionally, they were able to rush to the L’Oreal retail shop and receive free samples of a brand new two-way cake product. One hundred thousand people responded to the campaign messages. Among them, 28,840 people (28.8 percent) agreed to participate in the event and 21,600 of the participants (74.9 percent) accessed WAP. This
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Figure 3. M-advertising process of AirCross Receive S MS
L ’O R E A L G ift even t New L’OR EAL Two -wa y C ake to the winner!
Participate Ev en t
1. 2. 3. 4. 5.
Tw o-w ay C ake AirW ea r S am p le Crista l Shi ne L’O real M ode l L’O real S umm er Look
Visit Te l. sto re / input password
Vis it T TL store a nd input password. Th en, you can ge t free sa m ple of tw oway Cake till Ma y/30/20 02
Source: http://www.Kmobile.co.kr
campaign aimed to get the L’Oreal brand recognized, to provide consumers with an opportunity to try a new product and to acquire a list of potential customers. 4.
Market situation: The worldwide mobile advertising market was expected to grow rapidly, from $13 million in 2001 to $17 billion in 2003. This figure is 19.7 percent of total Internet-based advertising (OVUM, 2001). Jeil Advertising, a major advertising agency in Korea, forecasts that the Korean fixed-line Internet advertising market has been increasing by 45.1 percent per year and will be worth 620 billion won in 2005, up from 140 billion won in 2001 (Lee, 2003). Meanwhile, the mobile advertising market in Korea has been increasing 125.6 percent annually and will be worth 336.7 billion won in 2005. The percentage of mobile advertising out of the total Internet advertising market has also been expanding, from 8.5 percent in 2001 to 35.2 percent in 2005 (Lee, 2003). The first mobile campaigns were mainly delivered by SMS-based technology. However, with color phones becoming more popular and various representation technologies developing, MMS is expected to become a “killer application” in the mobile advertising market. MMS can deliver color pictures, spectacular sound and even moving pictures. This technology, which is complemented by location tracking and customer relationship management (CRM) technology, can enlarge the advertising arena. Additionally, EMS and moving pictures will become prominent means for mobile advertising (Barnes, 2002; IMAP, 2003; Yunos et al., 2003).
5.
Issues: Mobile advertising is still in its beginning stages. Even though the effectiveness of mobile advertising is widely understood, random advertising transmission can cultivate the perception that mobile advertising is spam. Thus, users should approve advertising message transmission before
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it actually takes place. Incentives can play an important role in inducing that approval. A survey conducted by Ovum (2000) showed that 70 percent of respondents would accept mobile advertising once an incentive, such as an event invitation, free drink or meal coupon, is offered. Another barrier for mobile advertising is that advertising agents and advertisers may not realize returns on their investments. This is because revenues from madvertising are still relatively low, and investment in m-advertising, as well as the numbers of the major agents, is still relatively small. Consequently, the quality of m-advertising content has been low and the market has grown slowly. Once the potential growth becomes more certain, more players will participate in madvertising, and the market will grow quickly (Yoo, 2001). Privacy is another hurdle to overcome before mobile advertising can expand. The reason that mobile phone users are reluctant to expose their telephone number is mostly to prevent privacy intrusion and increased spam messages. Since users are exposing their telephone number directly to the content providers, content providers or carriers can easily access the user’s personal information and are able to give or sell this information to others. Regulation and policies can ensure privacy protection and thus can induce more users (Yoo, 2001).
Viewing Korea’s Mobile Sector in the CLIP Framework Korean mobile operators and handset manufacturers, along with the government, envision a society where mobile phones replace keys, wallets, credit cards and remote controls for all the users’ appliances (Reynolds, Kelly, & Jeong, 2005). Starting with SKT’s Nate service, many of these replacement services have become available over the 3G network in Korea, taking one step further toward the ubiquitous network society. M-commerce sectors can be categorized under the CLIP framework: Communication, Locatability, Information exchange and Payment. In this section, each category in Korean mobile services is discussed.
Communications (C) In South Korea, wireless instant messaging, one of the main services offered by mobile Internet providers, has played an important role in the expansion of communication. Messaging services have evolved from Short Message Service Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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(SMS) to Enhanced Message Service (EMS) to Multimedia Message Service (MMS). SMS is the second most popular service, following voice service, among cell phone services. The increasing use of SMS and instant messaging has created new business opportunities like mobile advertising (as shown in the previous section). Mobile messaging service companies such as Mfreei, Sure.com and Mobitel organize SMS advertising campaigns. Advertisers can directly request mobile advertising through these companies, or can indirectly advertise by partnering with traditional advertising agencies (Ahn, 2003). Furthermore, people can get discounts by presenting coupons they downloaded on cellular phones using SMS from the Websites of affiliated stores or restaurants. Mobile message services have expanded the range of communication in South Korea. Messages can be sent and received among peers, friends and sweethearts at anytime and anywhere, but recently it has grown to include parents and other elders. Youngsters use SMS to contact their parents who live in other cities and send their regards in that way. It has created a new mobile culture for members of the younger generation, who are called “Thumb Talkers.” They spend a large part of their daily life pressing the cellular phone buttons with their thumbs. The speed of button pressing can be as fast as or faster than high speed typing on a PC keyboard. It is hard to believe that some “Thumb Talkers” can press the buttons 300 times per minute (MIC, 2002). Now, even professors use SMS to give assignments and carry out simple communications with students. Currently, an average 64 million per day, 1.9 billion per month and 23 billion per year of SMS messages are floating through the air (MIC, 2002). Mobile phones have become important communication tools in South Korea.
Locatability (L) The locatability of the mobile phone can be utilized in many ways. A locationbased service can immediately locate a user’s mobile handset within 10 meters of boundaries using a Global Positioning System (GPS) if the user presses a button on the mobile phone. Customers can use their phones to seek the best and shortest way to a desired destination, and can also be provided all kinds of traffic information through the mobile Internet. They can also get help in an emergency by calling the police on patrol nearby. This service can also help to search for lost children and to protect the elderly. SKT provides the “Finding Friends” service (SK Telecom, July 2002), which for 80 won per service shows the exact location of a subscriber. Since this service began in 2000, 1.44 million users have subscribed to it. LG telecom has a similar service, which sends the registered requester’s location as a text message over certain time intervals.
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Location-based services can be combined with other services to generate a synergy effect. These services can complement mobile advertising, which has enjoyed higher rates of response when combined with location-based services. For example, electronic coupons can be sent to people who are hanging around a specific store or store department. Additionally, information on insurance policies can be sent to people who have just arrived at an airport (Ahn, 2003). According to Ahn (2003), in addition to friend-finding and coupon distribution, telematics has received a lot of attention. Koreans are keenly interested in telematics, or the merger of automobile and mobile communication technologies (Reynolds, Kelly, & Jeong, 2005). Automobiles have become prominent mobile e-service platforms, and telematics has been applied to new services such as remote door locking systems, remote diagnosis and emergency message delivery, in addition to the original positioning and navigation functions. Using Global Positioning System (GPS), navigation services with basic functions like emergency rescue will evolve into dynamic navigation services that will allow users to determine their exact location by providing maps, road guides and information on regions (Ahn, 2003). Several Korean car manufacturers already have been building telematic systems into their new models (Reynolds, Kelly, & Jeong, 2005). Renault-Samsung has started installing its SM5 telematic technology into its vehicles, while Hyundai Kia has been selling luxury cars such as the Grandeur XG, EF Sonata and Regal with telematics systems preinstalled. These systems have become standard features on mid-range cars in 2005. In Korea, the telematics market is expected to grow 30 percent every year through 2006. Telematics systems are expected to increase from 4,300,000 in 2000 to 22,130,000 in 2006. The devices market is expected to grow an average of 28.4 percent per year, from 5,310,000 in 2000 to 25,320,000 in 2006. In terms of related services, basic navigation systems have expanded their market from 2,360,000 in 2001 to an expected 4,640,000 in 2006. Although these numbers indicate an average increase of only 14.4 percent per year, dynamic navigation systems, on the other hand, expect a 43.9 percent average increase rate per year, and multifunctional multimedia is expected to increase 37 percent per year (Ahn, 2003). SKT, KTF and LGT have declared their entry into telematics (Reynolds, Kelly, & Jeong, 2005).
Information (I) Mobile services can put information about the stock market, personal bank accounts, current events and movies in the palm of your hand. For example, before deciding which movie to see, people can check their PDAs or cell phones
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first to browse schedules, theater locations and movie lists, and can even purchase tickets for the movies they choose. In a 2002 survey, people who did not use mobile Internet responded that they wanted to use mobile Internet services for travel/traffic information, news searches, information regarding their current location and destination and location information for other people (KRNIC, 2002). The usage rate for information searches via mobile Internet was around 10 percent in 2002, while the usage rate for entertainment such as character, melody downloading and games was 60 percent in 2002. However, information exchange on location, traffic, travel, banking, the stock market and e-books has been increasing while usage for entertainment has been decreasing proportionally (Korea Internet Information Center, 2003). New applications include enhanced messaging service (EMS) and multimedia messaging service (MMS), which enable users to download images, streaming video and data files. By using the IMT-2000 network, users can enjoy the vivid and clear picture of a DVD player through the cellular phone. Moreover, large volume data such as music videos, cartoon movies and mp3 music files can be sent and received at a high-speed.
Payment (P) Mobile phones have become new tools for payment. Mobile phones can be used not only to purchase products online or offline, but also to pay for mobile transactions. Moreover, account inquiry and money transfer services are also available through cell phones. The Korean mobile payment market is expected to be 120 billion won in 2007 (see Table 3). High-speed data networks, such as 2.5 and 3G, with more sophisticated dataenabled wireless devices, have the potential to transform payment. Color screens, greater bandwidth and more compelling content are converging to create an environment where consumers feel more comfortable transacting on the move. Mobile payment (m-payment) is expected to improve customers’ convenience enormously and to expand the online commerce market by providing mobility and accessibility. M-payment, a new payment system, has huge potential to displace a considerable portion of the current payment system (Kim, Yoo, & Oh, 2003). M-payment can be used not only for online transactions but also for any transaction at a brick-and-mortar retailer. Procedures necessary for m-payment, such as user identity confirmation, delivery of transaction information and transfer of payment itself, are administered either partly online or completely online. M-payment service has been made available in the following ways: (1) adding the payment amount to mobile service bill; (2) buying prepaid m-payment
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Table 3. Mobile payment market forecast (2002 ~ 2007) (Unit: 10 billion won) Year 2002
2003
2004
2005
2006
2007
GAGR
Mobile payment
230
490
810
1,329
1,798
2,120
55.9%
Mobile data market
1,330
2,260
3,643
4,797
6,024
6,998
39.4%
Ratio
17.3%
21.7%
22.2%
27.7%
29.8%
30.3%
Source: IDC (2003)
products; and (3) connecting the payment service to the credit card company (Kim, Yoo, & Oh, 2003). Overall, Korea’s mobile industry has been reviewed based on the CLIP framework, and in each category, technology and its applications have been reviewed. In each category of the CLIP framework, it was found that Koreans have been utilizing m-commerce services and technologies. Furthermore, many m-commerce services involve a combination of the C-L-I-P features: communication, locatability, information and payment. Further opportunities for mcommerce services can be generated and developed by investigating the combination of the CLIP features.
Additional Reflections on South Korea’s Mobile Sector In this section, some additional issues will be discussed, including the role that government can play for fast growth of mobile communication technology, and the social and cultural changes that have resulted from the emergence of this technology. Also, a spin-off of the advanced mobile technology will be addressed. The Korean government has identified Information Technology, especially mobile telecommunications, as a key strategic industry for the coming decades. In December 1994, the Ministry of Post and Telecommunications (MPT) was expanded in size and administrative function to become the Ministry of Information and Communication (MIC). Newer wireless technologies including Wi-Fi are also spreading as a result of the Korean government’s “u-Korea” (or ubiquitous Korea) project (Yang, 2003; Castells et al., 2004). The government’s most important contributions have been its liberalization of the market and its
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encouragement of experimentation with new technologies and services. Currently, the government is also planning “m-government,” which aims to allow people to access administrative materials and obtain public services through mobile services (Castells et al., 2004). The spread of mobile phones has also strengthened traditional networks in South Korea, such as families, friends and co-workers. Yoon’s study of “mainstream” high school students in Seoul argues that mobile phones help reinforce the traditional Confucian notion of affinity among teenagers. Therefore, mobile communication keeps them within the existing structures of family, school and peer groups (Yoon, 2003). At the workplace, large conglomerates use mobile technologies to control their distributed workforce, from salespersons to truck drivers. One example is the n-Zone service in use in Samsung Electronics, where workers get automatic forwarding of fixed-line phone calls to their mobile phones when they are away from their desks. To reach their colleagues, they only need to dial the last four digits on their handsets as if they were using traditional wired intra-organizational networks. Samsung Electronics and KTF jointly developed this mobile work phone system. Workers subscribing to n-Zone can call their coworkers and use wireless Internet with no limitation, and the cost is merely $1 per month. While this service is still in an initial stage of development, it is becoming popular among corporations due to its potential to improve work efficiency at low costs (Ha, 2002; Castells et al., 2004). As shown previously, m-commerce and networks penetrate deep into daily life, everything seems to be linked, and m-commerce services can become more personalized. Even though technology and m-commerce services have moved closer to the vision of a ubiquitous networked society, these services have posed some problems, especially privacy invasion. Since the Internet has become popular, customers have become more concerned about privacy (Krishnamurthy, 2000; Johnson, Bellman, & Lohse, 2002). The number of unwanted text messages and phone calls via mobile phones in South Korea surpasses that of desktop spam mail. Korea Information Security Agency (Kim, 2004) reported that the amount of mobile spam is exponentially growing from 4,864 cases in 2002 to 36,013 in 2003 and 244,151 in the first 10 months in 2004. The unwanted messages cost computer users precious time and effort, and usually carry sexual content, fanning concerns about the influence on youth. In addition to the messages that are sent, the collection of customer information without customer consent generates concerns. In particular, m-commerce services, which can generate customer location information in real time, can be threatening to customers. Therefore, permission-based marketing will be essential (Ahn, 2003). Sending out commercial messages to, or collecting data about, customers with neither their permission nor the right targeting will turn existing customers against the businesses. Newell (2003) argues that the businesses
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should let customers manage the relationships, rather than try to manage customers. Thus, mobile Internet and m-commerce offer great potential, but further investigation and careful strategy will be required.
Technological and Managerial Lessons from Korea’s Mobile Experience The Korean mobile Internet market has entered a growth stage, as the total market value of Korean m-commerce is expected to reach over 4 trillion won in 2007 (IDC Korea, 2003). Many mobile applications such as m-payment, mbanking, m-trading and m-advertising have succeeded as described. The main reason for the dramatic growth of mobile commerce in Korea has been the highspeed mobile network infrastructure. Korea already has begun to provide service for CDMA 2000 1x, CDMA EVDO, 2G network bandwidth and IMT2000. This telecommunication infrastructure makes it possible to provide various mobile services. Sooner or later, CDMA 1X EVDO service, which has been provided as “June” or “Fimm,” will be able to provide the same services as wired Internet. However, several issues still remain unresolved and Lee (2002) has raised some issues for further development..
Network Openness The mobile network becomes an important technical goal for enlarging the mobile commerce industry. Mobile contents, including mobile portal, gateway and payment systems that were previously dominated by mobile network carriers such as SK Telecom, KTF and LG Telecom, will be provided by mobile content providers as well as Internet content providers. Thus, SK telecom begins to allow content providers to use their mobile network in 2003 (Song, 2004). It is expected that Internet portals like Daum or Yahoo!, mobile information service providers or content providers (CP companies) will enter the network market and compete with existing mobile telecommunication providers. Furthermore, a greater variety of mobile content can be provided to the users. However, network openness has a negative aspect. Some unwanted messages that have been blocked by telecommunication providers may be transferred to mobile phone users, especially to adolescents (Lee, 2002).
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Wireless Standardization For mobile commerce, technology such as platforms, LBS, keypads and so on must be standardized. For example, without a standard application platform, content providers have to develop different versions of content depending on the telecommunication device. The Korea Wireless Internet Standardization Forum and Electronics and the Telecommunications Research Institute have developed a standard for mobile device interoperation. This standard, known as “Wireless Internet Platform Interoperability,” was developed based on technology acquired from network providers, contents providers and device makers. In May 2002, the Telecommunication Technology Association enacted this standard. Standardization provides great benefits to all stakeholders. For network providers, various contents can be provided and can lead to higher customer satisfaction. Device makers can decrease the time and effort to develop new devices. Furthermore, content providers can spend less time and effort creating mobile content and can supply one format of content to every network provider (Lee, 2002).
Mobile Certification Payment through mobile telecommunication requires mobile certification for the payer. SKT started the first worldwide mobile public certification service, which was co-developed with Korea Securities Computer Co. in August 2004 (SK Telecom, 2004). It offers public certification only available online through the mobile Internet. This service is expected to strengthen the reliability, usefulness and security of mobile services such as public documentation, insurance contracts and payments. Since mobile certification service will start with the Korea Information Certification Authority, which is a licensed certification authority, the mobile market will grow (Lee, 2002).
Government Support Positive government commitment to support mobile commerce is required because many technical issues are closely related to governmental policy and strategy. For example, the Korean government has hosted a formal meeting with carriers and banks to discuss standards, and has proliferated mobile commerce by developing public m-payment systems for taxes and other public charges. Additionally, the government has invested a lot of money to support the research and development of mobile Internet telecommunication networks, telecommuni-
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cation devices, contents and solutions. Its investment amount increased from 2.7 billion won in 2000 to 20 billion won in 2001 (Lee, 2002). Even though Korea’s mobile commerce frontier has been growing by leaps and bounds, many issues remain, such as pricing, contents and policy. To develop more creative and lucrative business models, the cooperation of related stockholders is required.
Questions for Discussion 1.
What factors were responsible for South Korea’s rapid emergence as a top mobile communications and m-commerce country?
2.
“Moneta” and “Nemo” were profiled as two mobile payment and mcommerce services that are already successful in South Korea. What factors account for the success of these? Are such successes transferable to Western mobile telecom markets? Why or why not?
3.
What barriers and problems stand in the way of further development of mcommerce in South Korea? What steps do you recommend to overcome these barriers and problems?
References Ahn, J.H. (2003). Issues of Mobile Business and Tele Communication Technologies. Seoul, Korea: Seoul National University Electronic Commerce Resource Center. AirC ross Homepage. (2005). Retrieved July 20, 2005, from http:// www.aircross.com Barns, S. J. (2002). Wireless digital advertising: Nature and implications. International Journal of Advertising, 21, 399-420. Castells, M., Fernandez-Ardevol, M., Qiu, J. L., & Sey, A. (2004). The mobile communication society: A cross-cultural analysis of available evidence on the social uses of wireless communication technology. University of Southern California Press. Cheil Economy. (2005). Digital innovation: Banking service series part 2. Jung, S. Retrieved January 15, 2005, from http://www.jed.co.kr/SITE/data/ html_dir/2005/01/02/200501020039.asp
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Electronic News. (2005, Jan 27). Increased Internet banking usage. Electronic New. Retrieved from http://www.etnews.co.kr/news/detail.html?id=200501260143 Goasduff, L. (2004). Gartner reports worldwide mobile phone sales grew 26 percent in the third quarter of 2004. Retrieved June 10, 2005, from http:/ /www.gartner.com/press_releases/asset_115121_11.html Ha, J. Y. (2002, Jan 16). Diffusion of the use of cell phones as internal office phones (in Korean). Joongang Ilbo. International Cooperation Agency for Korea IT (2003, Nov). Data bank. IT Korea Journal, 4. Jin, J. Y. (2003). Strategy for Korea mobile market promotion — Based on Chasm theory. Korea Association for Telecommunication Policies, 15(13), 2-32. Johnson, E. J., Bellman, S., & Lohse, G. L. (2002). Defaults, framing and privacy: Why opting in-opting out. Marketing Letters, 13(1), 5. Kim, H. S., Yoo, K.J., & Oh, K.H. (2003). Trends in mobile payment market and issues in policy. Korea Information Strategy Development Institute ISSUE REPORT 3-19. Kim, M. J. (2005, Jan 27). Fast growing mobile banking. Digital Times. Kim, T-G. (2004). Mobile spam outnumbers desktop’s. The Korea Times. Retrieved July 20, 2005, from http://times.hankooki.com/lpage/200412/ kt2004122116324753460.htm Kmobile News. (n.d.). Retr ieved February 15, 2005, from htt p:// www.kmobile.co.kr Korea Herald (2004). Mobile banking transactions doubled in 2003. Retrieved February 2005, from http://www.koreaherald.co.kr Korea IDC. (2003). Korea mobile data service market forecast and analysis 2002-2007, p. 5. Korea Internet Information Center. (2003). Survey on wireless Internet usage. p. 8. Korea Network Information Center (KRNIC). (2002). Survey on the usage of wireless Internet (summary report). p. 9. Krishnamurthy, S. (2000). Permission marketing: Turning strangers into friends, and friends into customers. Journal of Marketing Research, 37(4), 525. Lee, S. M. (2002). Direction of the policy for m-commerce. Retrieved February 22, 2005, from http://agent.itfind Lee, Y. J. (2003). Understanding m-commerce and analyzing its services. Seoul, Korea: Seoul National University Electronic Commerce Resource Center (ECRC).
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Leppaniemi, M., Karjaluoto, H., & Salo, J. (2004). The success factors of mobile advertising value chain. E-Business Review, (IV), 93-97. Ministry of Information and Communication (MIC). (2002). IT Korea Guide. Retr ieved Ju ne 2005, fr om ht tp :// www.mic.go.kr /eng/r es/ res_pub_itk_2002_dec.jsp OECD. (2002). Working party telecommunication and information service policies: Broad-band access for business. OECD. Retrieved from http:// www.olis.oecd.org/olis/2002doc.nsf/43bb6130e5fc1269fa005d004c/ a963ab2ca9617affc1256c85005d7190/$FILE/JT00136306.PDF Ovum. (2000). Wireless Internet: Opportunity and threat. London: OVUM. Ovum. (2001). OVUM Forecast: Global Mobile Markets 2001-2005. London: OVUM Ltd. Park, K-Y. (2000). A study on the competition strategies on m-commerce in Korea. Global Commerce and Cyber Trade, 3(1), 25-43. Rao, L. (2002). South Korea aims for global leadership in wireless, broadband Internet markets in information age. Retrieved February 2005, from http:/ /www.inomy.com Reynolds, T., Kelly, T., & Jeong, J-K. (2005, April 6-8). Ubiquitous network societies: The case of the republic of Korea. ITU New Initiatives Programme, Geneva. SK Tel ecom. (2001). Retr ieved Novemb er 5, 2001, fr om http:// www.sktelecom.com/kor/cyberpr/press/1183403_3261.html SK Telecom. (2002, February). Retrieved February 4, 2002, from http:// www.sktelecom.com/kor/cyberpr/press/1183603_3261.html SK Telecom. (2002, July). Retrieved July 29, 200 2, fr om http:// www.sktelecom.com/kor/cyberpr/press/1188252_3261.html SK Telecom. (2004). Press release dated August 3. Retrieved July 25, 2005, from http://www.sktelecom.com/kor/cyberpr/press/1194806_3261.html Song, W. J. (2004). Press release dated February 15. Retrieved July 25, 2005, from http://www.zdnet.co.kr/news/network/0,39031016,10067682,00.htm Tao, A.L. (2002). KTF takes on m-commerce with e-coupons. Retrieved January 2005, from http://www.asiatele.com/printarticle.cfm?artid=15534 Yang, S. J. (2003, Jan 20). Korea pursuing global leadership in info-tech industry. The Korea Herald. Yoo, J.-K. (2001). Current status and implication of mobile advertising, information, and communications policy report, 13(14). Korea Information Strategy Development Institute.
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Yoon, K-W. (2003). Retraditionalizing the mobile: Young people’s sociality and mobile phone use in Seoul, South Korea. European Journal of Cultural Studies, 6(3), 327-343. Yunos, H. M., Gao, J. Z., & Shim, S. (2003). Wireless advertising’s challenges and opportunities. IEEE Computer, 36(5), 30-37.
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Chapter XII
United Kingdom: Current M-Commerce Developments and Future Prospects Savvas Papagiannidis, University of Newcastle upon Tyne, UK James Carr, University of Edinburgh, Scotland Feng Li, University of Newcastle upon Tyne, UK
Abstract This chapter provides an overview of the current development of mcommerce in the UK and explores its future prospects. A number of minicase studies are drawn from a diverse range of business and government sectors. Although m-commerce is still in its infancy in the UK, there are many rapid developments taking place that suggest strong future growth.
Introduction On January 1, 1985, the UK’s first mobile phone conversation took place between St. Katharine’s Dock, London and Vodafone’s headquarters in Newbury. By the year 2002, 76 percent of the UK’s population owned a mobile phone and
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7 in 10 (67 percent) of the “young communicators” said they could not live without their mobile phone (Mori, 2002). By 2004, the UK mobile phone penetration rose to 82 percent (Mori, 2004). Telecom operators have recognized the potential of investing in 3G licenses, which cost them £22.5billion, with bids vastly outstripping predictions made. The auction winners were Vodafone, BT Cellnet, Orange and One2One and WIA. The conditions of these licenses dictate that each operator must have built a 3G network covering 80 percent of the UK population by December 31, 2007 (Wearden, 2002). Serious concerns have since been raised over the effect that the vast sums paid for licenses will have on the long-term development of the industry (Strategis, 2003), which is crucial for the development of more advanced m-commerce applications. This is reflected by the cautious strategies that most UK companies are employing in their attempts to deal with the uncertainty surrounding the mcommerce arena. Lack of customer demand and unproven business models (Computerweekly.com, 2005) have so far prevented the progress of m-commerce. According to the Strategis (2003) report, the “UK m-commerce bonanza is likely to start once the technology savvy consumer has been convinced that the networks and content providers can deliver on their promises of quality content and acceptable data rates.” This chapter provides an overview of the current development of m-commerce in the UK and explores its future prospects. A number of mini-case studies are drawn from a diverse range of business and government sectors. Although mcommerce is still in its infancy in the UK, there are many rapid developments taking place that suggest strong future growth. The first section of the chapter examines the evolution of mobile communications in the UK, presenting some background statistics and an overview of recent developments. The section following presents a diverse range of mini-case studies to provide a flavor of recent UK m-commerce developments across different organizational types. The third section applies the CLIP framework to the UK experiences and the case studies, examines issues for successful mcommerce adoption and considers current UK consumer demand for mcommerce services. Finally, the last section reflects on the evolution of the UK m-commerce sector before the fifth section closes with the conclusions of this chapter.
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Mobile Communications in the United Kingdom The UK mobile phone market is more than 20 years old. The mobile phone network infrastructure in the United Kingdom has been put in place by the five operators, listed in Table 1. Each of the operators provides detailed maps of their coverage for the different types of services they offer. The operators cover the United Kingdom extensively when it comes to voice services, but 3G services are only available in the big cities. In 1999, in response to the Independent Expert Group’s recommendation on Mobile Phones, the government asked the Radio Communications Agency (now Ofcom, UK’s communications industry regulator) to set up and manage a national database (www.sitefinder.radio.gov.uk) giving details of all mobile phone base stations and their emissions. The database provides the exact location of operational transmitters in England, Scotland, Wales and Northern Ireland along with details like the height of the antenna, the frequency range and transmitting power. Mobile phone ownership in the UK is pervasive — it spans all genders, ages and social classes. What was once the toy of the young and rich, often the size of a “brick,” is now the “thing” that people, along with their keys, never fail to pick up when they leave the house. It is almost no surprise that in 2003, seven in ten (67 percent) of the “young communicators” said they could not live without their mobile phone (Mori, 2002). By December 2004, results from the eMORI tracker service survey (Mori, 2004) “Who is online?” indicated that 82 percent of the UK population used mobile phones, compared to 56 percent who use the Internet anywhere and 56 percent who use digital TV. The survey revealed some other interesting statistics: by gender the split is 54 percent male and 46 percent female; by age the split is 15-24: 17 percent; 25-34: 29 percent; 35-44: 29 percent; 45-54: 19 percent; 56-64: 12 percent; and 65+: 7 percent. In addition, social grade figures for mobile phone usage indicated a relatively uniform usage across all social grades.
Table 1. Mobile operators in the UK Operator Hutchison3G O2 UK (formerly BT Cellnet) Orange T-Mobile (formerly One2One) Vodafone
Web Site http://www.three.co.uk http://www.o2.com/ http://www.orange.co.uk/ http://www.t-mobile.co.uk http://www.vodafone.co.uk
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In terms of the ways in which UK citizens use mobile phones, Mori’s report (2002) revealed the following statistics:
• • • • •
65 percent use text messaging 64 percent store phone numbers on their handsets 34 percent of people use their mobiles as an alarm clock 21 percent use the calculator function 18 percent play games on their mobile
As mobile phone owners use their phones for a number of different activities in addition to voice calling, which was originally seen as the primary function, the adoption of m-commerce solutions looks promising. The unexpected success of text messaging since 1992, when scientists at the British technology company Sema sent the UK’s first text message (“Merry Christmas”) to the Vodafone headquarters in Newbury, is a good example of an application that became very popular almost immediately. According to the Mobile Data Association (2004), 30 billion text messages will be sent during 2005, which translates to mobile phone owners sending 75 million text messages on a typical day across the four UK GSM networks. Special days and events can trigger spikes in the number of SMS sent. For example, in December 2002, 1.6 billion text messages were sent in Britain making seasonal text more popular than the traditional Christmas card. More recently, over the 24 hours from midnight on December 31, 2004 and midnight on January 1, 2005, 133m text messages were sent in the UK (Text.it, 2005). This is the highest ever daily total recorded by the Mobile Data Association, representing an increase of 20 percent compared to the previous year’s figures (BBC, 2005). It is no surprise that many TV programs capitalized on the success of SMS to interact with the viewers and create new revenue streams. For example, text voting figures for the final of the television program “Fame Academy” on December 13, 2002 reached 6.9 million. Other TV programs, such as “Strictly Come Dancing” and “Big Brother” generated millions of pounds worth of revenues for charities and the various companies involved, mainly through premium rate text messaging (as well as premium rate phone-based voting). Today, even the government acknowledges the significance of SMS as a communication medium. On November 25, 2004 the Rt. Hon. Tony Blair MP became the first UK Prime Minister to use text message technology to talk directly to members of the public, answering questions submitted in advance by text message from UK citizens. Answers were also provided in real-time,
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transmitted live from No. 10 Downing Street, in a mobile phone chat-room (Text.it, 2005). As people gain more confidence with their mobile phones, as the mobile devices become more sophisticated and, most of all, as the 3G networks are gradually rolled out in the UK, other services are increasingly being promoted by the network operators and handset makers to generate revenues. For example, camera phones are now very popular with the younger generation, and users are sending a large number of picture messages (as well as text messages) via their mobile phones. The mobile phone is increasingly dubbed as a digital camera and video recorder as illustrated in recent TV advertisements. Some new mobile phone handsets also have built-in MP3 players, which enable the downloading of full music tracks in stereo. Other services being explored include 3D games with better graphics and sound; color maps for location-based services; video calling so callers can see and hear each other; and video streaming, which includes televisions, films, news and sports clips. The mobile phone itself is also used as a payment device for these services, with costs taken off the credits on the handset or added to next month’s phone bill (Budden, 2004). Before moving to the next section it is interesting to note that many services currently being promoted — music downloading, 3G games, color maps, video calling, video streaming and so on — are targeting the consumer rather than the business services market. This is clearly reflected in the 3G strategy of Vodafone, the UK-based, largest mobile operator in the world (Pesola, 2004). In the next section, some current examples of m-commerce in action in the UK will be illustrated.
UK M-Commerce Case Studies The six diverse cases presented in this section are selected to provide evidence of recent developments in UK m-commerce applications. The organizations considered are Tesco, the National Lottery, London Taxis, Concord Logistics, Toni&Guy and Cambridgeshire County Council. As m-commerce is still in its infancy, only limited information is currently available. More time and in-depth research are clearly needed to explore how these services have evolved, but the following examples do provide a flavor of current UK m-commerce developments.
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Tesco The UK’s biggest e-commerce retailer, Tesco.com, has added a 24/7 wireless portal to its online store, launched in conjunction with Microsoft (LookSmart, 2001). The portal can be accessed from Pocket PC devices and Smartphones. The site has won retail awards for its design and usability. Features include ongoing express shopping lists and a complete list of goods ordered over the previous few months. In addition to groceries, the site also offers books, CDs, videos, clothing and electrical goods not otherwise available in the stores. John Browett, CEO of Tesco.com, was enthusiastic about the launch of the wireless commerce portal: “Before this, customers were restricted as to where they could do their shopping. Now, if they own a Pocket PC device, they’re able to shop on the move, from anywhere and for delivery in the UK” (LookSmart, 2001). Tesco.com has overhauled the entire structure of its site through allying itself closely with Microsoft’s .Net platform to take advantage of emerging access devices such as PDAs. Jon Higgins, Tesco.com head of e-commerce development, explains the reasoning behind this strategy: “Tesco.com found itself in a position where it was producing multiple and essentially redundant pieces of code to facilitate multiple platforms. Our reuse was really poor; we implemented many solutions to the same problem. …What we decided a while ago was that we wanted a model that would support multiple clients, affiliates and our own Web site, which all had requirements for the same kind of data. …We could implement the Web service once and then the Web service would be ultimately reusable by any of those clients and indeed anything that happened in the future” (ZDNet, 2003). Tesco.com is the UK’s biggest e-commerce company and also the world’s largest online grocery retailer, and this move to m-tailing is likely to be monitored closely by major B2C companies (LookSmart, 2001). Overall, Tesco sales for the half year ended August 14, 2004 were up 12.2 per cent to £16.5bn with pretax profit up 24.4 per cent to £822m. The UK business accounted for much of this with sales up 11.5 per cent to £13.1bn and operating profit up 13.3 percent to £707m. Tesco continues to lead the UK retail market online and Tesco.com sales grew by 27 per cent to £307m and profits increased by 95 per cent to £15m (Silicon, 2004). However, it has been unclear as to the extent to which mcommerce contributed to these figures, and Tesco has been reluctant to reveal details on the actual take-up of m-commerce by its customers, which is mostly likely to be minimal. Moreover, many such customers usually have fairly “small shopping baskets” compared with other customers and are therefore not profitable to Tesco. It remains to be seen how this service will evolve in the future.
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National Lottery National Lottery players can now buy tickets through their mobile phones (BBC, 2004). Consistent with this strategy of driving sales by providing greater access for players, Camelot (2004) announced the launch of the National Lottery Play by Text on October 13, 2004. This m-commerce strategy is part of a pledge made by Camelot when it won back its license to run the lottery to employ interactive media to sell tickets. It currently sells some £1.5m worth each week through the Internet and interactive TV (through Sky Digital) and now players can send their numbers via a text message to enter the Lotto, EuroMillions and Daily Play games. Players register online or over the telephone and are required to provide debit card details, with payments then deducted from a player’s personal account (BBC, 2004). Camelot claims that the National Lottery Web site is the biggest online sales point for a single product. Over 600,000 people have registered to play online and sales average £500,000 a week. The launch of the mobile phone service coincides with figures showing ticket sales for the last six months increased by 4.7 percent. Ian Milligan, commercial director of Manchester-based mobile phone lottery Million-2-1, hopes that Camelot will develop the new scheme to include interactive games as another way of increasing profits. A former director of Camelot, Mr. Milligan believes that the issue of security is critical to the success of such developments through the use of a credit card registration system combined with databases with age checks. He also sees an acceptance of decreased margins by mobile phone operators as another important issue: … At the moment, mobile phone operators take more than 30 percent of the take, if you like, after VAT …. We’d hope to see the mobile operators give on that and make sure it’s a level playing field, for both the National Lottery but also other types of lottery operators as well. (BBC, 2004)
London Taxis Application developer, The Location Network, has launched London Taxi Point (Netsize, 2003a). This enables customers with a mobile phone to locate the nearest available black cab and book it using SMS text messaging. The service employs “Taxi Points” — actual signs that use a unique four-digit code for identification of an exact location within central London. Customers text the location code to the London Taxi Point short code (83220). The service uses GPS
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tracking to identify and book the nearest taxi and then sends a confirmation SMS and alert when the taxi is approaching. The cost to the customer is £1 and Taxi Point signs are being posted in locations such as public and private buildings, theatres, restaurants and bars. Venues can become a London Taxi Point free of charge and there are plans to create more than 5,000 in a three year time-span. The scheme ties in with Transport for London’s objectives to ensure safe, reliable transport for London’s residents, workers and visitors and is likely to be particularly useful for tourists unfamiliar with the city. London Taxi Point differs from existing mobile taxi booking services in that they rely on Cell ID technology to locate a handset within the network.
Concord Logistics Concord Couriers has cut costs and improved control room efficiency and customer service levels by implementing a new mobile data solution (T@lecom, 2003). The company investigated the m-commerce market extensively before choosing the new solution. T@lecom Limited’s reseller, CMC, secured the contract to supply Concord Couriers with its Wireless Delivered technologies. The implementation provided the 45 field drivers with the capability to send and receive live POD and signature information on XDA devices connected to the O2 GPRS data network. Each driver now has an XDA device from O2 that is both a data terminal and mobile phone. This provides a low cost solution and retains voice communication if required (T@lecom, 2003). This solution includes satellite navigation for drivers and vehicle location visibility in the control office and is comprised of a GPS antenna with one-minute updates on vehicle location (Mlogistics, 2004). Managing director Gary Daniel says: “It saves me money and my customers love it” (Mlogistics, 2004).
Toni&Guy Toni&Guy, the international chain of hair salons, has a long history of investing in technology to develop its marketing and brand awareness campaigns (Netsize, 2003b). Toni&Guy has now furthered its online and mobile marketing strategy, which includes interactive Web sites, online newsletters and SMS campaigns, by launching a MMS service for customers. Customers can now download hairstyles from the company Web site to their handsets. Users access the MMS composer, enter their handset and network information and then select the hairstyle they wish to be forwarded to their MMS-enabled phone (Netsize, 2003b).
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The service developer is mobile specialist Sprite Interactive, with cross network MMS connectivity and billing supported by Netsize (2003b). “Having a ‘cool’ logo on your phone is now a necessary fashion accessory among many mobile phone users,” claims Alex Michael, managing director of Sprite Interactive, although he adds that such a seemingly trivial gimmick does have a practical aspect: “Mobile phone marketing allows us to pinpoint people within regions and talk to them on a one-to-one basis.” He believes that mobile phone marketing is “a trend that is here to stay.” He also believes that advances in technology will enable increasingly sophisticated mobile marketing campaigns: “At the moment mobile marketing is quite limited, due to restrictions placed on us by the actual mobile phone handsets themselves … However, as the technology improves and we begin to see full color mobiles that can display movies becoming commonplace, there will be a whole new extra level of flexibility in developing promotions and marketing strategies for the mobile space. Current opportunities include permission-based mobile marketing directly to customers with special offers and automatic reminder SMS messages when customers are due for a haircut” (MaxPC, 2005).
Vodafone Live! Vodafone Live! is a collection of interactive services provided by Vodafone, one of the largest mobile phone networks in the world. Exploring the services is free. The customer only pays for downloads and subscriptions to his preferred services. Among the services provided are:
•
Video calling: Customers can see the person they are talking to and they can be seen by them, while on the phone.
•
Video messaging: Customers can record up to 12 seconds of video and send it to any Vodafone mobile phone, even if it is not a video mobile, on any network. Customers can also send video messages to e-mail addresses so that they can be watched on a PC.
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Full-track music downloads: The service provides access to thousands of high quality full music tracks that can be downloaded in less than one minute each. The customer can also download music video clips and access charts, reviews, gossip and breaking news.
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Games: Customers can download games that fall in one of the following categories: action, arcade, casino, sport, over 18, football and puzzle and strategy.
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Video clips: Customers can download clips of the latest films, sports action and news or weather reports. These include 60-second music video clips
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from chart acts, a selection of promos and trailers of the latest releases, 6090-second ITN news clips of breaking news and breaking news or roundups from top events from Sky Sport.
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Find and seek: The service allows the customer to locate places of interest like entertainment venues, restaurants, clubs and cinemas that are nearby his or her current location. Once a location is selected, the service can also provide a map to help the customer reach it.
The enhanced services of Vodafone Live! with 3G are only available whilst within a 3G service area. Outside of a 3G service area, the customer automatically gets switched to the GSM network, which means that many, but not all, of the services are still available at lower speeds. Also, customers will need handsets that support the above services in order to access them.
Cambridgeshire County Council Project Nomad (http://www.projectnomad.org) is a national e-government project sponsored by the UK Office of the Deputy Prime Minister, dedicated to mobile computing in local authorities. The objective of Project Nomad is “to create, under one umbrella, a comprehensive set of deliverables that should enable any local authority wishing to establish a mobile computing operation to do so with ease and confidence.” The Project Nomad Web site provides an upbeat image of the potential for mobile technology with front line local authority staff: The deployment of mobile technology as a way of enabling the local authority to make best use of front line staff is taking off. The technologies available right now have matured over the last few years and can provide robust, manageable and cost effective solutions. Imaginative use of mobile technology will not only allow key professionals to spend more time from the office doing the real job but can open up new ways for individual staff members to work across several traditional service boundaries. An interview with Alan Shields, the Nomad Integration Workstream Leader for the Mobile Working Demonstrator Single Assessment Process (SAP) project at Cambridgeshire County Council, reveals some important insights and key lessons learned. The project started about three years ago, derived from the social services-led Department of Health Single Assessment Process (SAP) for elderly members of the community. The idea was to reduce the duplication of
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assessments carried out when elderly people required services from both health and social care services, and to “collect data once, use it many times.” This would allow the development of a single assessment process that other professionals can use, although there is an issue of trust in this regard: Obviously there is a cultural aspect there of trusting someone else’s capabilities and especially trusting someone that is not part of your organization, for example healthcare people have to trust social work people. The proof of concept for the project is based around tablet PC, 3G, total online access and linking in social care, primary care (doctors) and secondary care (hospitals), expandable to other services such as housing repair and the Citizen’s Advice Bureau (CAB). The integration hub is BizTalk. The actual data hub will be BizTalk and Sequel Server; Sharepoint may be used (a collaborative tool to allow people to make decisions based on data collected from different sources). VF and 3G will also be employed and smartcard authentication is being considered seriously. The back office systems “are whatever they are.” Shields thinks that one of the “real wins” from the project is getting a number of suppliers working together — Microsoft, Fujitsu, Annite, Vodafone, VisionWare and SolidSoft — and points to a number of key lessons learned from the project:
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The biggest issue with mobility is usability — the technology has got to be very robust and user friendly.
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Understand your data and what its requirements are, e.g., how timely is it, how immediate does it need to be and what level of security is required; where is it going, who needs it? One size does not fit all.
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Effective data sharing issues such as organizational culture and the “preciousness” some people have about data they hold are a more difficult challenge than the technology itself.
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Do not underestimate the size of the task — draw the map before you undertake the journey.
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The more you integrate back office systems to feed mobile devices, the greater are the business benefits (for example Vodafone saved a fortune by putting information onto BlackBerries for their field agents).
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Learn from failure and share this information with other local authorities undertaking similar projects. This ties in with the importance of the notion of social learning developed by Van Lieshout et al. (2001) in their study of university e-learning initiatives.
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CLIP Framework Applied to the UK’s M-Commerce Experience and Reflections on UK’s Experience The cases presented in the previous section were selected to demonstrate that although m-commerce in the UK is in its infancy there is evidence of what future applications will be able to deliver. More complex and advanced applications and services have started making an appearance in addition to the traditional content-oriented services, such as downloading ring-tones or games, or receiving news updates. These m-services include m-payment applications (like the National Lottery), m-marketing (like Tony&Guy) or m-tailing (like Tesco.com). Wide deployment of services will only become possible when networks evolve to become fast and reliable. Also, there is some way to go with the development of dynamic strategies that combine elements of personalization, permission and specification of content to create portals for CLIP devices (the Tony&Guy example appears to be the most developed in this regard). Evidence for location-based services is still virtually non-existent. The London Taxi case, although the location is not automatically determined by the network, and the Vodafone Live! Find and Seek service presented above could be seen as the first steps towards location-based services. The evidence gathered in the previous section would seem to indicate that current UK m-commerce initiatives are at present CIP rather than CLIP systems. Our final case, although it may not strictly fall under the heading of m-commerce, owing to the absence of monetary transactions, was included to demonstrate the scope and potential of mobile applications across different sectors and types of use. This helps to illustrate that there is a lack of a commonly agreed definition of m-commerce. For some researchers, m-commerce is defined as any monetary transaction conducted directly or indirectly via a mobile telecommunications network (Barnes, 2002; Muller-Veerse, 1999). However, this is a particularly narrow and restricted definition, and other researchers often include other transactional forms such as products, services, information and social exchange within a process of interaction (Ford, 2002). It can therefore be argued that a formal conceptualization of m-commerce is of prime importance to its development; if we do not arrive at a common definition, economic, financial and behavioral boundaries will be unclear and the development of m-commerce theory and research will be impeded (Balasubramanian, Peterson, & Jarvenpaa, 2002). To this end, Woolfall (2003) proposes a working definition of mcommerce as: “the means in which multiple actors conduct discrete exchanges of economic or social value via a wireless network.” The latest evidence seems
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to suggest one of the fastest growing m-commerce areas is the use of mobile data communications within organizations, rather than using mobile devices for monetary transactions between organizations.
M-Commerce Adoption and Consumer Demand in the UK Many UK firms are likely to be deterred from entering the m-commerce arena due to an understandable caution about new technology investment among many UK companies: M-commerce is in its early days and the innovators are out there, bravely trying to encourage the rest of us to use this wonderful technology. For those of us who have yet to deliver our e-commerce solution, the mcommerce version can wait. Get the e-commerce correct first. The step from e- to m- is still a large one, since applications and processes must be put in place or changed. The benefits will appear; the question you have to ask is how much opportunity are you missing today? Despite all the hype, the e-commerce sales still only represent around 5% of all sales made in the UK. (Ecominfo, 2005) A survey (Lewell, 2000) conducted for e-business Expo 2000 Computer Weekly and Compaq of 500 UK companies indicates that 62 percent are adopting a “wait and see” policy towards m-commerce, citing a whole range of reasons for this cautious approach. Twenty percent of the companies felt that m-commerce is an unproven technology, 19 percent cited lack of budget as a contributory factor, 18 percent cited skills shortages and 17 percent felt there is a lack of support for mcommerce at the top level in their companies. Not surprisingly, a large proportion of companies (31 percent) reported that they were concentrating on other issues. However, there appears to be a large amount of evidence that even those companies that could benefit from m-commerce in the long-term are not currently taking steps towards implementation. Mike Johnston, director of new economy business at Compaq UK and Ireland, feels that the approach to m-commerce should be similar to working in the Internet space — “try it, fix it, analyze it.” Owing to the fast moving nature of the marketplace, he does not believe that businesses can work in the “traditional plan, plan some more, implement and adjust model” and warns about the danger of UK businesses waiting for the technology to mature before they take action (Lewell, 2000).
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Another survey (Qpass, 2004), this time of UK consumers, appears to lend weight to Johnston’s remarks. Eighty two and one half percent of consumers said that they would be prepared to purchase items via their mobile phones, but only 12.6 percent had ever done so to their satisfaction. Mobile phone users seemed agreeable to the idea of the convenience and potential of a mobile phone as a payment mechanism: 78.1 percent said that they would use a mobile phone to pay for parking, 56.3 percent for a newspaper or magazine and 53.0 percent tickets for public transport. Furthermore, 22.4 percent of mobile users would be prepared to spend more than £2 per month on mobile subscription services whilst 45.4 percent said they would be prepared to pay £1 to £2. Over three times as many phones users have made purchases via the Internet rather than with their mobile phones, with 61.7 percent being Internet shoppers versus 20.2 percent for m-commerce. Ringtones (62.2 percent) and information services (43.2 percent) proved to be the most popular mobile purchases. For those mobile phone users who had completed a mobile transaction, the experience was mixed: 18.9 percent failed to receive the product, 16.2 percent received multiple SMS text messages for a single purchase while 2.7 percent did not understand the item when it appeared on their mobile phone bill. (Qpass, 2004)
Reflections on the Evolving UK M-Commerce Market If the development of m-commerce requires significant changes to current ecommerce strategies, then one could argue that mobile initiatives do not have to follow e-commerce initiatives. For example, a company should not wait to start trading via a Web site before it starts trading through mobile applications. In fact, one could expect many emerging players to focus solely on m-commerce. In order to develop successful m-commerce strategies, firms need to recognize the driving forces behind m-commerce (Senn, 2000) and the need for new business models: M-commerce entry compels the forging of radically different business models than those that prevail in many industries today. M-commerce is a new business paradigm that requires organizations to transform their marketing orientation from physical marketplaces to ubiquitous marketspaces. (Woolfall, 2003)
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In support of this view, Nohria (2001) believes that companies entering mcommerce will need to know how mobility fits within people’s daily lives as well as developing an understanding of how market, customer and technology dimensions interrelate. Carlsson and Walden (2002) warn that companies are likely to be unsuccessful if their m-commerce products and services lack real substance. Leppävuori (2002) argues that issues of regulation, standardization and business cooperation are key issues for the successful growth of m-commerce services. Similarly, Hayward (2000) suggests that to meet consumer needs, co-operation between firms operating in horizontal and vertical markets will be necessary, often in the form of a partnership involving two or more of the principal players within the value chain. In a similar vein, Schleuter and Shaw (1997) and Tapscott (1995) claim that success requires collaboration amongst a diverse group of industries. Additionally, functional specialization and selection of the organization’s position within the m-commerce value chain is necessary (Buellingen, 2002; Dholakia & Rask, 2002; Figge, 2002). In the UK there is considerable uncertainty regarding the time scale for delivery of m-commerce services and also the price the end user will have to pay. There is also the usual “hype” that tends to surround the arrival of any new technological paradigm, as was the case with the emergence of e-commerce, e-learning and e-government. Uncertainty and “hype” are characteristics of major innovations, particularly those requiring significant organizational change (Freeman, 1997), so we should not be surprised or phased by their appearance. Technology implementation is a complex, uncertain and time-consuming socio-technical practice (Williams & Edge, 1996). Smaller businesses in particular are being advised by some commentators to adopt a cautious approach (Ecominfo, 2005). Other commentators warn of complacency (Lewell, 2000) in the face of new business opportunities and pent-up consumer demand. However, it appears that the majority of UK businesses are currently adopting a “wait and see” approach. Mobile financial services are expected to be one of the key services driving the UK m-commerce market. In particular, mobile brokering is predicted to be one of the new “killer applications,” with its potential to push real-time share data out to users. Other applications that are likely to be successful are those that take advantage of increased mobility, time-constrained decision-making and locationbased decisions. In terms of business applications, fleet management, logistics, sales force automation and Intranet and access to corporate databases are all expected to contribute heavily to the profits of network operators (Strategis, 2003). However, until working m-commerce applications become reality, it is difficult to make predictions about UK market size and who will emerge as the successful players. According to the Strategis report (2003), the companies best placed to
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exploit the opportunities, at least initially, are the mobile phone service providers. They have the strongest links to the consumer and the additional advantage of being able to pre-configure phones to ensure a direct link to their own portals and to those operated by strategic partners. How such m-commerce strategic partnerships are established and managed is likely to be a key issue (Woolfall, 2003) and one which is worthy of further research. According to Interforum (2001), delivering m-commerce effectively will require partnerships and cooperation across the value chain to leverage business’ core competencies. These services must be delivered to the customer when requested, at a low price and be aggressively marketed. Business success will rely on coordination, flexibility and speed (Interforum, 2001). The key to m-commerce success in the UK and other countries is likely to be easy-to-use, secure services, personalized to each customer’s lifestyle and flexible enough to adapt to lifestyle changes: The m-commerce revolution is driving new business models with the potential of world-wide distribution and instant 24 hour, 365 day service. As the geographical location of the business becomes irrelevant, the service utility and customer experience become key. The killer application will be the highly personalized mobile device, rather than a specific computer application. (Interforum, 2001)
Conclusions In this chapter, we provided a brief overview of the current development and future prospects of m-commerce in the UK. Today, both the mobile networks and the mobile devices continue to develop rapidly; and people are increasingly prepared to make financial transactions via new technologies. The huge investments already made by mobile network operators mean they have to actively encourage new services in order to generate sufficient new revenues, and in order to do this, other players need to be invited to the table for new ideas and new services. So far, m-commerce in the UK has primarily focused on informational rather than transactional services — so it is strictly m-marketing rather than mcommerce. This is mainly due to the limited capabilities of both the networks and the handsets, and is likely to change in the near future as people increasingly use mobile devices to make small payments, and as the technologies and infrastructure continue to develop. The potential for m-commerce remains huge, and it is not inconceivable for some consumers to use the mobile phone as their “credit card” for an increasing range of products and services. New business applica-
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tions may also develop which will enable new ways of working. However, there are still enormous uncertainties and continued research is clearly needed to monitor progress and identify new, novel, innovative applications.
Questions for Discussion 1.
In your opinion did the high prices paid for the 3G licenses in the UK have a negative or a positive effect on m-commerce in the UK? Why?
2.
What effect can location-based services have on marketing?
3.
Why do you believe companies in the UK do not attempt to capitalize on the first mover’s advantage and adopt a waiting stance instead?
References Balasubramanian, S., Peterson, R. A., & Jarvenpaa, S. L. (2002). Exploring the implications of m-commerce for markets and marketing. Journal of the Academy of Marketing Science, 30(4), 348-361. Barnes, S. J. (2002). The mobile commerce value chain: Analysis and future developments. International Journal of Information Management, 22(2), 91-108. BBC. (2004). Mobile lotto phone plan unveiled. Retrieved January 29, 2005, from http://news.bbc.co.uk/2/hi/business/3738482.stm BBC. (2005). New year‘s texting breaks record. Retrieved January 29, 2005, from http://news.bbc.co.uk/1/hi/technology/4148899.stm Budden, R. (2004, Nov 11). Vodafone expects ‘payback time’ from world wide 3G onslaught. Financial Times, p. 23. Buellingen, F. a. M. W. (in press). Development perspectives, firm strategies and applications in mobile commerce. Journal of Business Research. Camelot. (2004). National Lottery ticket sales up by more than £100m as The National Lottery goes mobile. Retrieved January 30, 2005, from http:// www.camelotgroup.co.uk/media/press2.jsp?hp=1&y=2004&s=finresult &article=national_lottery_ticket_sales_up_131004 Carlsson, C., & Walden, P. (2002). Mobile commerce: A summary of quests for value-added products and services. Paper presented at in Proceedings of 15th Electronic Commerce Conference, Bled, Slovenia.
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Computerweekly.com. (2005). M-commerce: A false start? Retrieved January 30, 2005, from http://www.computerweekly.com/Article118638.htm Dholakia, N., & Rask, M. (2002). Dynamic elements of emerging mobile portal strategies: M-commerce is all about personalization, permission and marketing. University of Rhode Island: Research Institute for Telecommunications and Information and Marketing. Ecominfo (2005). M-commerce and the SME. Retrieved January 25, 2005, from http://www.ecominfo.net/ Figge, S. (in press). Situation-dependent services — A challenge for mobile network operators. Journal of Business Research. Ford, D. E. (2002). Understanding business marketing and purchasing (3rd ed.). London: International Thomson Business Press. Freeman, C. (1997). The economics of industrial innovation (3rd ed.). London: Pinter. Hayward, C. (2000). The outlook for mCommerce: Technologies and applications to 2005. London: Datamonitor PLC. Interforum. (2001). M-Commerce: E-business without boundaries. White paper number eight. Retrieved January 29, 2005, from http://www.interforum.org/ _documents/InterForum-white-paper-08.pdf Leppävuori, I. (2002). Analysis of the Finnish mobile cluster — Any potential in mobile services? Helsinki: Ministry of Transport and Communications. Lewell, J. (2000). Mobile commerce “on hold” in U.K. says survey. Retrieved January 29, 2005, from http://www.internetnews.com/bus-news/article.php/ 490421 LookSmart. (2001). M-commerce boost as Tesco.com goes mobile. Retrieved January 29, 2005, from http://www.findarticles.com/p/articles/mi_m0BKU/ is_2001_July/ai_77806503 MaxPC. (2005). A case of cut and dried marketing. Retrieved January 30, 2005, fr om http://www.maxpc.co.u k/featur es/ defa ult. asp?pa getypeid= 2&articleid=10425&subsectionid=735&subsubsectionid=605 Mlogistics. (2004). Concord drivers ‘love mobile solution.’ Retrieved January 30, 2005, from http://www.mlogmag.com/magazine/11/concord.shtml Mobile Data Association. (2004). Text messaging in February breaks previous years record. Retrieved July 18, 2005, from http://www.mda-mobiledata.org/ MDA/Page_Resource_PressRooom_Release_2004_Mar2.asp Mori. (2002). The British mobile communications survey. Retrieved January 29, 2005, from http://www.mori.com/polls/2002/pdf/vodafone.htm Mori. (2004). MORI - Technology Tracker. Retrieved January 29, 2005, from http://www.mori.com/emori/tracker.shtml Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Muller-Veerse, F. (1999). Mobile commerce report. London: Durlacher Research Limited. Netsize. (2003a). London taxi point: Black cabs at your fingertips. Retrieved Ja nua r y 29 , 2005, from http: //64 .78 .24 .13 1/MDA/ r esource/ memberCaseStudies/taxipoint_smstaxiordering.pdf Netsize. (2003b). Toni&Guy: Hairstyles on the move. Retrieved January 29, 2005, from http://64.78.24.131/MDA/resource/memberCaseStudies/ toni&guyMMSservice.pdf Nohria, N., & Leestma, M. (2001, Spring). A moving target: The mobilecommerce customer. MIT Sloan Management Review, 104. Pesola, M. (2004, Nov 11). Latest 3 products great for kids but not for business. Financial Times, p. 23. Qpass. (2004). European m-commerce survey. Retrieved January 29, 2005, from http://www.qpass.com/info/Qpass_Brief_Consumer_Survey.pdf Schleuter, C., & Shaw, M. J. (1997). A strategic framework for developing electronic commerce. IEEE Internet Computing, 1(6), 20-28. Senn, J. A. (2000). The emergence of m-commerce. Computer, 33(12), 148150. Silicon. (2004). Tesco boosted by telecoms and web shopping. Retrieved Ja nuar y 30, 200 5, fr om http://networ ks.s ilicon.com/t elecoms/ 0,39024659,39124185,00.htm Strategis. (2003). M-commerce in the UK. Retrieved January 29, 2005, from http://strategis.ic.gc.ca/epic/internet/inimr-ri.nsf/en/gr-77058e.html T@lecom. (2003). Case: Concord couriers. Retrieved January 29, 2005, from ht t p :/ / 6 4 . 7 8 . 2 4 . 1 3 1 / M D A/ r es ou r c e/ memb er C a s eS t ud ies / taxipoint_smstaxiordering.pdf Tapscott, D. (1995). The digital economy. New York: McGraw-Hill. Text.it. (2005). Fast text facts. Retrieved January 29, 2005, from http:// www.text.it/mediacentre/default.asp?intPageID=132 Van Lieshout, M., Egyedi, T. M., & Bijker, W. E. (2001). Social learning technologies: The introduction of multimedia in education. Aldershot: Ashgate Publishing. Wearden, G. (2002). UK keeps firm line on 3G licenses. Retrieved January 29, 200 5, fr om http://news. zdnet. co.uk/communications/3ggpr s/ 0,39020339,2121073,00.htm Williams, R., & Edge, D. (1996). The social shaping of technology. Research Policy, 25, 856-899.
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Woolfall, D. (2003, 23/24 June). Partnering in m-commerce business networks: Analysing the actor game in the context of the “prisoner’s dilemma.” Paper presented at the m>Business 2003 meeting, Vienna, Austria. ZDNet. (2003). Tesco.com cuts development costs with Web services. Retrieved January 30, 2005, from http://insight.zdnet.co.uk/internet/ webservices/0,39020460,2137918,00.htm
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Chapter XIII
United States of America: Renewed Race for Mobile Services Mats Samuelsson, Mobio Networks, USA Nikhilesh Dholakia, University of Rhode Island, USA Sanjeev Sardana, Mobio Networks, USA
Abstract Somewhat behind in the mobile telephony adoption than leading European and Asian markets, the U.S. market caught up in the 2000s. While simple types of mobile data services — such as messaging and downloads — had made some headway, the preexisting popularity of PC-based Internet made the U.S. users somewhat resistant to m-commerce offerings that did not match the richness of PC e-commerce. By the mid-2000s, however, network and technological capabilities were in place to usher in rich, new mcommerce offerings in U.S. markets. By taking advantage of new technologies, the U.S. mobile industry had the opportunity to become an innovator in m-commerce offerings.
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Introduction: Mobile Commerce and Data Services in the United States After a late start, by mid 2000s the United States’ mobile phone market quickly caught up with the rest of the world and started undergoing the same consolidation experienced in all other major markets of the world. From a field of six major service operators — Verizon, Cingular, Sprint, AT&T Wireless, T-Mobile and Nextel — at the beginning of 2005, there were four major carriers left at the end of 2005: Cingular acquired AT&T Wireless, and Nextel acquired Sprint. At the same time, the U.S. market reached the 70-80 percent mobile phone penetration level common in all industrial countries around the globe. The year 2004 represented a breakthrough in terms of wide introduction and deployment of data services based on GPRS and CDMA by U.S. operators. Initial plans for data volume-based pricing (dollars per MB) were quickly abandoned in favor of flat data rates and unit service charges for messaging. In late 2005, these charges settled around $5/month for mobile phone Web browsing and $20-$30/month for unlimited mobile data access for handheld PDAs and laptop computers. Initial hope for mobile data services was high, and AT&T Wireless introduced a U.S. version of the Japanese i-Mode called m-Mode. Except for e-mail and
Box 1. Mobile phones as m-wallets in Boston The Super 88 Market, Infusion Tea Spa, Paris Café and Marty’s Liquors — these stores in Boston’s Allston neighborhood accept the MobileLime payment system developed by Vayusa, a startup company from the Boston area. Super 88 customers save up to five percent when they buy with MobileLime. To purchase items, MobileLime users dial a toll-free number. The customer’s account is linked to either a credit card or to a prepaid account. A PIN number is required to authorize purchases. The cash register at the store also connects with MobileLime and receives the sale approval information. An e-mail sent to the customer verifies the transaction. Bob Wesley, who joined Vayusa as its CEO after many years with financial services firms such as American Express, realizes that not everyone is likely to jump on the m-wallet bandwagon. There would, however, be a segment that would find it convenient not to carry credit cards and just use the phone as a payment device.
Source: Based on Jette (2005), Pickering (2003) and authors’ research
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some WAP browsing, however, the m-Mode service uptake was disappointing and m-Mode was practically shelved when Cingular acquired AT&T Wireless. On-demand services did not fare much better. The most successful examples of such services were downloadable ringtones that generated about $217 million in 2004, followed by mobile games at $72 million. These accounted for about 10 percent of the non-access data revenues for mobile carriers. Messaging — SMS and MMS — accounted for 65 percent of about $3 billion in data service revenues circa 2005 that were not associated with data access fees. As MP3capable handsets began entering the market during 2005-06, downloadable MP3 tunes held the promise of being the next large download service, although there were no clear mobile business models developed to effectively compete with Apple Computer’s successful iPod/iTunes. The future for mobile services continues to be driven by the critical areas of handset technology, network technology, business models and service innovation. Current mobile data services in the U.S. have taken advantage of some of the developments in these critical areas (see Box 1 “Mobile Phones as M-wallets in Boston”), but there is a potential to do a lot more. In Japan, South Korea and some European markets, the mobile data and m-commerce envelope has been pushed a bit further than in the U.S. Because of the very large user base and the “ecosystem” of rapid innovation in the U.S., however, there exist real prospects for spawning many new mcommerce applications and services in the American setting. This chapter reviews the current mobile data and m-commerce business models in the U.S., examines some international business models briefly and finally offers suggestions for fresh and innovative approaches towards 3G and higher-generation mcommerce for the U.S. and global markets.
Service Overview: Current Status By 2005, the U.S. market for mobile communications had characteristics similar to other major global markets. A range of fairly popular services was available, and some services had been tried without much success.
Messaging SMS and MMS messaging continue to gain ground in the U.S. market, particularly messaging from camera phones. Interoperability between all U.S. mobile operators is now in place so the market is expected to grow substantially.
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Web Browsing As in the rest of the world, WAP has failed to achieve large usage in the U.S. market. Low speed and cumbersome user interfaces have kept WAP from developing any substantial usage.
Downloads: Ringtones and Games Downloading ringtones has turned out to be a huge success, with yearly service revenues growing from zero in year 2000 to $300 million in 2004, part of the surprisingly large $4 billion worldwide market for ringtones. As with many other data services, such as SMS, ringtones became an unexpected success for the mobile industry. Some optimistic voices even claimed that ringtones had become a music category on its own and were a potential future savior of the music industry as well as an advertising medium (Scott, 2005). 1 Downloading games was slower to catch on in U.S. compared to markets such as Japan and South Korea, mostly because of fierce competition with handheld and console game-players such as Game Boy and PSP from Sony. In the U.S., downloadable mobile games remained at a disappointing market level of under $100 million in 2005.
Tried and Failed: Payments Till 2005, mobile payments — micropayments using the mobile phone — had failed to take off in the U.S. market despite numerous attempts. While the notion of turning the mobile handset into a mobile wallet is a powerful idea, this idea has pitted mobile operators and banks against each other in the marketplace. These two industries have not been able to agree on any common approach and have parted ways over issues like security, information stored in handsets and ways of sharing profits. Failed attempts have included proposals for dual-chip handsets with encrypted customer information. One of the business challenges is also the mobile phone bill — operators are loath to load up the bill with third-party related purchase charges for customers used to fixed-rate 500-minute plans. This quite different than, for example, Japan, where mobile phone customers are quite used to seeing all manner of third-party service charges on their monthly mobile communications bills.
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Future With the positive experience of downloads, the industry was looking for the next natural service and revenue opportunities. Eyes were cast at the booming MP3 download market (iPod, Napster, etc.) as well as video clip success stories from South Korea. Despite strong initial successes, the long-term prospects of some of these services were less than clear. The iPod already had a strong hold on the market and the video clip as a stand-alone service was yet to be proven by compelling content that could be viewed on the small mobile phone screen.
Current Business Models Over and above the revenue from voice calls, mobile operators have gradually developed other sources of data communications-based revenues.
Transactions and Transport: E-Mail, SMS and MMS Driven by the huge international success of SMS, data services provided as transactions continue to be a way to charge premium prices for bandwidth. Mobile operators need revenues from services in addition to mere voice telephony to justify the very substantial investments in upgrading the mobile network for data services. The unfortunate reality has been that apart from modest success with MMS in the U.S., most volume usage of data has been in the form of flat rate plans with unlimited usage — many targeted at business users. Given competition from Wi-Fi offerings (that often make Internet and data services available at low or no costs at locations such as coffee shops, hotels and airports), the most successful mobile data applications have been e-mail driven, initially offered over separate data networks but migrating toward GPRS and EDGE. In the foreseeable future, our view is that transaction-based business models will continue to have their relevance in the mobile space, but will be under constant pressure from flat-rate transport “needs.”
Portals and Downloads: Yahoo and Google WAP represented the first attempt to mimic the Internet business model in the mobile space. Unfortunately it turned out that traditional Internet content had become optimized for the PC with its good graphics, a mouse and, most
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importantly, a full keyboard. WAP-enabled mobile Internet content, by comparison, was of poor quality and was unappealing — especially to American users who had been used to rich desktop and laptop Internet content for years. After initial failures of WAP portals, mobile portals again started receiving attention in the mid 2000s as both Google and Yahoo announced efforts in this area. It is clear that success of these would depend on either simplicity of user interface (no text input required), or very specific transaction-oriented usage. The Internet itself needs to become mobile-friendly — content modified to fit the mobile handset (screen size and numerical input only) and enrich the experiences of users on the move — before widespread Internet usage over mobile phones would take off. This means that mobile portals would have to be dramatically improved before they could become a viable service revenue source (see the first chapter in this volume, also Rask & Dholakia, 2004).
Mobile Operator Service Aggregators: m-Mode, t-Zones, Media Net At one stage of the mobile technology evolution, service aggregation was viewed as the next savior of mobile data services, moving such services beyond the message-oriented revenue models of SMS and its multimedia MMS sibling. Most service aggregation approaches were modeled after Japan’s NTT DoCoMo iMode approach (see the Japan chapter in this volume, also Lennon & Dholakia, 2004) and this Japanese operator made a big investment in AT&T Wireless in the late 1990s, a key part of which was to bring the i-Mode approach to the U.S. The USA i-Mode variant, dubbed m-Mode, never took off in the U.S. and the AT&T-Wireless’s implementation was in a state of limbo until the acquisition of AT&T Wireless by Cingular. By the mid 2000s, there were no signs of m-Mode activity in the U.S. market. Instead the state of mobile operator service aggregation in 2005 can be represented by excerpts from a Website of a leading U.S. mobile operator (see Figure 1). As can be seen from this offering, service aggregation has become a collection of disjoint services with one or two providing the great majority of content aggregation revenues. The other services have failed to get traction beyond small segments of the user market. Furthermore, the service aggregation model is being challenged in the U.S. market by an ever-increasing number of Webbased, third-party providers of ringtones and games that completely bypass the operator portal. Thus, this business model continues to be under pressure as suppliers operating outside the loop are challenging existing revenue successes.
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Figure 1. Example of mobile service aggregation in the U.S., circa 2005 MEdia Net brings Web sites, e-mail, messaging, downloads, and more to the mobile phone. Mail & Messaging: Check Yahoo! Mail, MSN Hotmail, and chat with friends with Yahoo! Messenger and Upoc. Sports: Get the latest scores from CBS SportsLine and ESPN. Ringtones, Games & Graphics: Personalize the phone by downloading favorites. News & Finance: Stay informed with round-the-clock headlines from CNN. Entertainment: Get local movie times and reviews, dining recommendations, and more. Weather & Travel: Check forecast from The Weather Channel, get flight times, and traffic reports. And much more! Start browsing today and discover what MEdia Net has to offer. And be sure to visit What’s Hot! where you'll find the latest and greatest MEdia Net content.
Source: https://www.cingular.com/media/media_net and authors’ research
Business Model Issues: Operator vs. Third Party Revenues, Transport vs. Content One of the most challenging issues for mobile data services in the U.S. is associated with business models, in particular revenue sharing aspects of such services and the notion of charging for transport or content. With the early lead of Internet-based business models, U.S. mobile operators have had to adapt to the preexisting Internet models rather than create new data services models as in the rest of the world. An example of this is data usage pricing. Early ISPs tried this approach but it quickly fell by the wayside in favor of flat rate monthly access fees. In the U.S., early attempts to only offer fixed quantities of data download service plans for mobile data services quickly gave way to flat rate plans. This was not the case in Japan, for example, where NTT DoCoMo’s i-Mode succeeded in the late 1990s by charging according to the size of the data packets downloaded — the Japanese users, not addicted to flat-rate Internet like the U.S. users are, were quite willing to pay such charges (see Bradley & Sandoval, 2002; Lennon, Dholakia, & Dholakia, 2004). While usage pricing still exists in the U.S. mobile markets, it will most likely disappear as mobile data usage increases. Similarly, attempts by ISPs to share transaction revenues with service or content providers have failed for several reasons. The Internet model easily lent itself to direct interaction between user and Website, and any intermediary introduced unnecessary complexity without any obvious value. American users have therefore come to regard the ISPs — the fixed-line data service providers — as just communication providers and not as value-adding services. In the mobile
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markets, these same expectations have spilled over and attempts by mobile operators (WSPs) to act as value-added service providers have generated no enthusiasm among mobile users. The early lead of the Internet (and other existing business models) will continue to be a challenge for new data services. A good example of this is the next expected set of killer data services: MP3 downloads. MP3 playback capability is already available in high-end handsets and is expected to migrate downward following the path set by the color screen and camera phones. The problem for mobile operators is that iPod has already laid claim to a substantial part of this market with a carefully crafted terminal, distribution and content relationship model. At $0.99 per song, there is little room outside this model for additional revenue sharing with mobile operators. Further complicating the matter is the issue of digital rights, solved in the iPod’s “closed and proprietary” model but unresolved in the open world of mobile phones. Ringtones show that it is possible to create a major service revenue success when the mobile technology and service firms are able to participate in the creation of the business models and be critical components of the early service deployment models. Even with this business model, however, the “proprietary ownership of content” days are numbered as more and more ways become available for users to bypass the operator and download directly to their phones or via the PC. The mobile data services business thus faces the challenge of operating at the crossroads of the fixed-rate Internet business models and usage-based (and mainly non-U.S.) models created from within the mobile business. This will continue to challenge suppliers as they try to create successful mobile-specific business models.
Evolving Consumer Needs Voice Calls Voice communications continue to be the core of the mobile business and will continue to be the main reason why people carry and use mobile phones. Most voice services remain stuck in the same domain as traditional fixed line services but as VoIP enters the mobile domain (in the form of IMS) it is clear that the same easy-to-use call features, configurations and services that are available in the fixed-line world will become available in the mobile domain. It is easy to envision the same types of profiles that are available for ringtones — conferencing,
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forwarding, messaging and automatic dialing — all in one integrated profile invoked at the push of a button.
Handset as Gadget This is probably the most underestimated part of the mobile market — the constant ability of the handset to add new functions and capabilities. With 700 million handsets shipped globally in 2004, the mobile phone is becoming one of the largest consumer electronic categories around. It is second only to the television set in terms of availability, and exceeds even the TV set because the mobile phone is a personal rather than a family device. In the developed world, the majority of these sales are in the form of replacement phones. It is therefore critical for the suppliers to keep enhancing their phones with features, capabilities and designs that appeal to existing customers and provide reasons for switching. As with all advanced consumer product markets, there is constant fragmentation of tastes and finer re-segmentation of markets; and the numbers of phones, types and suppliers keep increasing. The “gadget competitive envy factor” forces a combination of features and designs and other trends. Future design “innovations” would no doubt continue to replace recent successes, such as the craze for flip-the-lid type “clamshell” phone designs.
SMS/IM/E-Mail It is difficult to envision further evolution of SMS, IM and e-mail needs with the exception of ways to restrict junk messages and improvement of user interfaces. Keyboards are standard on high-end handheld devices and this feature will no doubt migrate downwards to popularly priced handheld and palmtop device models.
MMS “Fun with Photos” can be expected to increase in popularity as cameras get better and ways of sharing pictures and experiences improve. Good video and true multimedia will provide the next natural evolution once bandwidth restrictions are removed (in 3G and later 4G networks) to allow for transfers of large data files at blazing speeds.
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Data Services in General Data services remain an area of untapped growth potential for U.S. mobile operators. With steadily increased usage of the various services described so far, data revenue is becoming a larger share of the U.S. mobile operators’ average revenue per user (ARPU). Hindering wider adoption of mobile data and mcommerce in the American mobile markets are a couple of challenging factors:
•
Overly complex user interfaces (number of clicks to take a picture with a mobile camera phone and send it to a family member or friend is often 1015 instead of 2-3); and
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Business models have to evolve to meet existing customer needs (ease of use and convenience) as well as new ones (impulse use, content download, payment, location-specific services, etc.).
Handset Evolution Phone, Display, Camera, Media-Player and User Interface In looking at the most sophisticated contemporary phones, it is difficult to see any dramatic evolution in feature sets and capabilities. What can be expected is some major innovation in user interface, away from today’s complexity and more oriented toward specific usages at any given time. The desktop and laptop PC Web browser has evolved into a very versatile interface for supporting nearly any type of Website in an effective manner. The same cannot be said for the mobile phone. The mobile interface needs to evolve to become as versatile and convenient as the desktop Web browser.
Processing Power, Memory, Platform and Software Several underlying supply-side technological forces are driving the evolution of mobile data services and m-commerce. These forces include an increase in processing power (100-400MB clocking) and memory (64-256MB and beyond), improving the performance of existing platforms (Symbian, MS-Mobile and BREW), and allowing for new software (such as games) to perform at acceptable levels (comparable to desktop performance levels).
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Network Evolution 1G, 2G, 3G and IMS, have evolved as networks from 1G to 2G and 3G; we have experienced increases in data speeds from 9.6 Kbps to 56Kbps and 200Kbps and beyond. These are the advertised rates and it will take some time for network buildouts and improvements before the 3G data speeds are commonly available to all users of 3G phones (Samuelsson & Dholakia, 2004). The introduction of IMS promises to dramatically improve these speeds into the 1Mbps domain and fully integrate voice as an IP service. From the perspective of the mid 2000s, it appears that IMS will suffer the “3G syndrome” — considerable hype and talk for a number of years before it is suddenly implemented on a widespread basis, as it becomes clear that it offers substantial service revenue opportunities to mobile operators. It is clear that this is not the case in 2005.
Operators’ Dilemma With a high level of service penetration in the U.S. market, mobile operators are facing a stagnating market — not so much in terms of market size increase but certainly in terms of growth of ARPU. The initial reaction to this has been a consolidation of the market with the number of U.S. mobile operators reduced to four, the largest with 60 million subscribers and the smallest with 20 million. At the current time, these operators are facing a key problem. There is little differentiation amongst service providers, and this is leading to price-based competition and no operator loyalty. Adding to this problem are the following ongoing issues and changes:
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Need for continued high network investments: Building and maintaining wireless networks, while less expensive than building wired and fiber-optic networks, is nonetheless a high cost proposition. This is especially the case in geographically vast and dispersed national markets such as the United States. Large user bases sustained over long periods are needed to justify such investment;
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Impending and costly migration: 2G è 2.5G è 3G è IMS;
• •
Challenges posed by new radio spectrum availability, coverage area issues; Intense competition, often leading to price wars and declining ARPUs (multiple competitors in every market — four in the U.S., more and often bigger mobile operators globally);
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•
Marketing (customer acquisition and retention) costs remain at high levels and are unabated. Coupled with stagnant or declining ARPUs, these high marketing costs create major drags on the finances of mobile operators;
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Handset subsidies (U.S. consumers are hooked on “free” handsets as part of service plans);
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High channel costs (reaching new or existing customers for new services is difficult and expensive);
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Voice revenues eroding (marginal rates are under 5 cents minute in the U.S.);
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Data and other service revenues are relatively small (in the mid 2000s, these varied between 2-6 percent in the U.S.);
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Business models changing in unfavorable directions: Consumer preference for, and industry migration toward, flat-rate pricing models that can be sustained only with huge user bases; very limited emergence of usagebased, segmented, value-adding and specialized service models that could boost average revenue per user (ARPU);
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Stagnant messaging services models (SMS and MMS not growing fast enough); and
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Uncertain transaction ownership and revenue sharing models (not clear who owns specialized content/services and how to share their revenues and transaction costs. Mobile operators, banks, content providers and special third-party applications providers often do not get along very well).
Potential Solution: Offered Services Mobile communications and m-commerce markets in the U.S. have to move from this state of non-differentiation, intense competition and stagnant/declining ARPUs into a stage where there is clearer differentiation through unique product and service attributes. Only those differentiation points that offer meaningful and appealing differences to individual and business users have a chance of supporting successful new business models. In technological and competitive terms, it is imperative for the United States to have such new and growing business models that can support the ongoing business and technology evolution of mobile networks and services. What are some of the potential differentiators available to mobile operators? The following lists the main ways that mobile offerings need to create differentiation:
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Networks: Difficult for users to feel the difference; Handsets: Scale economies of manufacturing these devices work against significant differentiation;
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Customer Service: Some differences, but all operators are deemed unsatisfactory by most users; and
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User Experience (Offered Services): Difference in voice services tied mainly to network quality attributes; data and other applications can be meaningfully differentiated (e.g., i-Mode in Japan).
Out of these, “Offered Services” is the only category that offers meaningful differentiation opportunities and it is data services in particular that have the potential to create new services that could jolt individual and business users to snap out of their inertia and take notice. To date, successful “Offered Data Services” differentiation has come in two basic forms: i-Mode or customized enterprise applications. These have very different product attributes, operator participation and varying results.
The i-Mode Way The success of NTT DoCoMo’s i-Mode service in Japan was based on a number of key attributes. While these attributes worked well in Japan, it should be noted that it has proved difficult to transport this business model to other settings. The factors responsible for i-Mode success in Japan include the following:
• • •
Essentially an m-commerce platform;
• •
Offers subscription and consumption-based (usage-based) pricing models;
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Handset-based, simple-to-download services were the main offerings available on i-Mode (ringtones, stock quotes, horoscopes, etc.);
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Qpass and many other players have similarly succeeded with limited simple-to-download transactions like ringtones, fortune cookies, etc.; and
A closed system, run by NTT DoCoMo; Micropayments aggregated, billed and collected with subscriber’s telephone bill by NTT DoCoMo. In turn, NTT DoCoMo retained a substantial chunk of these micropayments as a fee for doing all this work; Generally limited to information services that can be delivered to the specialized m-commerce platforms;
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Third parties providing such services via NTT DoCoMo’s i-Mode platform were basically acting as application servers for mobile applications (Web download/browse model).
The Enterprise Applications Way These are business-oriented mobile data services. The key attributes of successful mobile enterprise applications include the following:
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Stovepipe Solutions: Single application services developed for a specific purpose such as sales-call scheduling;
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Hosted behind the firewall, weakly linked to the network: Stovepipe solutions tend to depend on transport services only, connecting a handset application with a corporate server behind the corporate firewall. The mobile operator’s network adds little or no value beyond providing connectivity;
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Custom solutions with little leveraging across applications, hence expensive to build and operate: Each service tends to be custom and different services are not integrated (for example e-mail, order entry and repair tracking are three different applications — they remain distinct in the mobile environment);
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High ROI hurdle: The low adoption rate of enterprise services creates an impossible-to-cross return on investment (ROI) hurdle.
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Most success in field service applications (for large fleets): UPS, FedEx or repair fleets tend to be the main users of mobile enterprise applications;
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Mobile e-mail most desired but usually limited to subset of employees: Corporate e-mail security issues and limitations prevent the use of fullfledged mobile e-mail applications for enterprises;
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Little operator participation: User experience is “carrier agnostic.” As can be expected from a service that only uses data transport, one mobile operator can be substituted for another without any loss of functionality or features; and
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Does not create loyalty or branding benefits for the mobile operator since the operator provides just plain vanilla transport of data.
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Implications for USA Mobile Operators As can be seen, both of these approaches have had limited success, if any, for operators in the U.S. It is clear that enterprise applications have provided operators with substantial contracts for data services. Unfortunately, these have occurred without any branding or other operator advantage.
Need for a Fresh Approach Given the overall vitality of the mobile communications industry with its strong operators and strong supplier infrastructure, as well as its strategic position smack in the middle of the mobile devices, entertainment and Internet industries, there are plenty of opportunities ahead. But in order to address these opportunities, there is a need for a “fresh approach,” an approach that capitalizes on new and evolving network/Internet technologies and provides mobile operators with sustainable advantages. A critical part of this is a reinvention of the user interface and a service delivery platform approach. Such reinvention should aim to reduce the time and effort to develop new services and integrate these with new network and handset capabilities as well as the emerging area of enterprise Web services. Such integration would enable mobile service providers to reach almost every conceivable content and business transaction. Some key attributes of this new approach are:
• •
Operator “ownership” of user experience is critical (similar to i-Mode);
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Platforms need to provide a richer handset experience by taking advantage of the newer smartphones that are becoming pervasive. These handsets can render user-friendly user interfaces with images and usage directions;
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Platforms need to integrate fully with Web services, the rapidly evolving standard for access and delivery of enterprise applications and content;
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Reusable rich capability sets, residing in the network-based applications servers, would reduce the third party/enterprise cost of applications development and thus economically enable the creation of additional services. The challenge is to have service platforms that can serve a wide variety of applications;
Platforms need to be closely tied to newer network capabilities like presence and location in addition to the critical control channels and protocols allowing for full usage of all network services;
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•
The new applications and services need to be parts of existing and evolving mobile network cores (2.5/3G and IMS). If services are part of the evolving infrastructure, they can begin introducing new features and services as soon as the supporting capabilities are introduced in the network; and
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Integration with existing and evolving Web-based business/enterprise computing (Web/XML).
In order to accomplish this, a new and different platform approach is needed, a platform that can provide a unique, easy-to-use user experience for a large number of different data services and allow operators to create and package horizontal services working with business partners providing content, information and other capabilities.
Scenarios of New Services The following service scenarios provide a flavor of what can be expected in the United States mobile markets with greater integration of network capabilities, mobile device features, content provider offerings and third-party technologies: Bob is driving along the highway and sees a billboard advertisement that his favorite country artist is coming into town six weeks from now. He presses the music button on his mobile phone and punches 7322 (the first name of the star). A large menu pops up: “Tickets, Music, Both or All.” He selects all by hitting the “0” button. A $37.45 price tag flashes on the screen and Bob hits “OK” to accept this charge. One minute later the MP3 version of the singer’s latest hit starts playing on the mobile phone music player. An electronic ticket to the concert, with premium seating, has been sent to Bob’s mobile phone and a T-shirt announcing the tour and city is in the mail. As Bob walks into the arena six weeks later he receives a personal greeting from the artist and as he leaves the concert, the final number, just played at the concert for the first time ever, is already available on his mobile phone. Suzie wants to meet up with some friends after work. She presses the dinner button and selects her first friends list. Two minutes later the screen shows that Rick, Steve, Pamela and Carol have accepted her invitation. She is at the same time told that the preference of three of these four is for Italian food and a list of nearby Italian restaurants is displayed, one with an offer of free desserts for a party of five. With a click of a button a table is reserved
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for 6:30 and a message, with directions, is generated to all the invitees. On the way to the restaurant, knowing her friends’ preferences, Suzie selects the initial glasses of wine — three Frascatis and two Chiantis. When she walks in to the restaurant, she is greeted by name and shown to a table where her four friends are waiting with their respective wines in front of them. And by the way, at the end of the dinner Suzie presses pay and the bill shows up on each person’s cell phone split in 5 parts according to what was ordered! A simple acknowledgement by each person settles the bill and as a compliment, a five-dollars off discount coupon to the nearby dance club flashes on each screen. Tomorrow, however, is a working day so each person drives home listening to the same music that played in the background in the restaurant, downloaded to his or her mobile phone.
Towards a Fresh Marketing/Business Model By the mid 2000s, technological developments as well as market sophistication levels in the U.S. had advanced enough to where services portrayed in the scenarios for the consumer markets above — as well as comparable enterprise applications — could be launched successfully. To do so, the mobile telecom sector needs to think carefully and innovatively about the CLIP functionalities: how to take the ubiquitously available communication (C) devices, seamlessly and securely integrate location (L) and payment (P) functions by taking full advantage of device and network capabilities and then deliver compelling information (I) content that users would gladly pay premium prices for.
Summary Mobile data services are at a crossroads between past successful offerings, such as messaging, e-mail and downloadable services on the one hand, and newer, richer capabilities offered by evolving network and handset technologies supported by new types of service platforms. This approach, married to evolving Internet technologies, has the potential to revolutionize the future of data services, not just in the United States, but globally.
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Questions for Discussion 1.
Why did mobile payment systems not have much success in the U.S. mobile markets until the mid 2000s? Offer some recommendations to create robust, secure and appealing mobile payment options for the U.S. market.
2.
The chapter argues that the Internet itself needs to become “mobile friendly” for m-commerce applications to take off in a big way. Offer a set of recommendations to make the Internet more “mobile friendly.”
3.
How is the “fresh new approach” to mobile commerce discussed at the end of this chapter different from existing business models as well as international business models such as Japan’s i-Mode?
References Bradley, S.P., & Sandoval, M. (2002, Spring). Case Study: NTT DoCoMo — The future of the wireless Internet? Journal of Interactive Marketing, 16, 80-96. Jette, J. (2005). Ka-Ching! Mobile commerce gets closer, HBS Working Knowledge. Retrieved from http://hbswk.hbs.edu/pubitem.jhtml?id=4631&t =special_reports_convergence2005 Lennon, M. M., & Dholakia, N. (2004, May). Pay-for-play: The Japanese way to m-commerce success. Paper presented at the 2004 IRMA: Information Resources Management Association International Conference, New Orleans. Pickering, M. (2003). Vayusa turns cell phones into store discount cards. INDIA New England Online. Retrieved November 1, 2005, from http:// www.indianewengland.com/media/paper549/news/2003/11/01/Business/ Vayusa.Turns.Cell.Phones.Into.Store.Discount.Cards-537154.shtml Rask, M., Dholakia, N., & Dholakia, R. R. (2004). Configuring m-commerce portals for business success. In Nan Si Shi (Ed.), Wireless communications and mobile commerce (pp. 76-94). Hershey, PA: Idea Group Publishing. Samuelsson, M., & Dholakia, N. (2004). Assessing the market potential of network-enabled 3G m-business services. In Nan Si Shi (Ed.), Wireless communications and mobile commerce (pp. 23-48). Hershey, PA: Idea Group Publishing.
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Scott, A. O. (2005, Aug 7). Post-popism. New York Times Magazine, Section 6, 11-X.
Endnotes 1
See also http://www.msnbc.msn.com/id/8348206/
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It’s an M-World After All 259
Chapter XIV
It’s an M-World After All: Lessons from Global Patterns of Mobile Commerce Nikhilesh Dholakia, University of Rhode Island, USA Morten Rask, Aarhus School of Business, Denmark Ruby Roy Dholakia, University of Rhode Island, USA
Abstract In this concluding chapter, we gather together the lessons emerging from the patterns of mobile commerce evident in the preceding chapters. Mobile applications, commercial and others, are based on four core CLIP functionalities — communications (C), locatability (L), information (I) exchange and payment (P) facilitation. How these capabilities are deployed depends on resources, corporate imaginations, market development and cultural and personal preferences. The chapter authors, based on their close first-hand contextual observations as well as conceptual insights,
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find a variety of patterns of personalization, permission and specification of m-commerce service formats and content.
It’s a Small, Small M-World By 2005, there were nearly two billion mobile phone users in the world. Of these, 20 percent — 400 million by late 2005 — were in China. Counting shared usage of mobile phones in the developing nations, the actual user base could be nearly twice as big as the base of paid mobile subscribers. Next to the television, mobile communications clearly represent the most pervasive modern technology to affect our world. Mobile commerce, or m-commerce, when construed narrowly as monetary transactions conducted via mobile telecommunications and devices, is still merely a tip of the mobile communications iceberg. In broader terms, seen as a constellation of ways to generate revenue beyond just voice calls, m-commerce covers a larger and submerged portion of the mobile communications iceberg. In the various case studies, our authors expose many of the not-so-visible ways in which mobile applications create revenue streams. Understanding the emerging and constantly evolving landscape of mobile communications and mobile commerce requires a global approach. The traditional approach for understanding the worldwide diffusion and impact of a new technology was to look at a “lead country” — in most cases the United States — and then to project how the rest of the world would follow suit. Such is not the case with mobile commerce. For a variety of social, economic, regulatory and technological reasons, different countries of the world have taken leadership in specific aspects of mobile communications and are following distinctive trajectories. For example, the United States — the world leader in Internet usage — and China — the world leader in mobile communications — were beginning to exhibit different trajectories with regard to mobile communications by the mid 2000s (see Box 1).
Structure of This Chapter We begin with four sections that summarize the collective insights of the preceding chapters along the four core m-commerce dimensions: communications (C), locatability (L), information (I) provision and payment (P) facilitation. We then review the challenges and progress towards integration of such capabilities. In particular, we review the challenges of personalization, permis-
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Box 1. Mobile communications: Trajectories of China and the U.S. The China Pattern •
With over 360 million mobile phone users by mid 2005, China’s mobile phone user base was 3.6 times the size of the country’s Internet user .base.
•
China’s mobile phone user base in 2005 was the size of the mobile user bases of U.S., Japan and Germany combined — the nations with the next three biggest mobile user bases.
•
Relative to countries with much higher income levels, the Chinese were heavier users of mobile data services.
•
Unlike the West, a very substantial proportion of Internet access in China was over mobile devices rather than via PCs.
•
Chinese companies such as KongZhong and TOM Online had figured out ways of charging money for mobile content well before similar U.S. firms.
•
Striking a deal with MTV, China Mobile — the world’s biggest mobile operator — became the first company to distribute MTV content using mobile phones.
The U.S. Pattern •
The Internet user base of the U.S. in the mid 2000s was equal to the sum of the Internet user bases of the next three nations.
•
In 2005, well over 90 percent of mobile usage as well as mobile revenue in the U.S. came from voice communications only.
•
Unlike Europe and Asia, prior to 2001 mobile data communications such as SMS and mobile personal Web pages were hardly used by U.S. mobile consumers. In 2004, U.S. users sent about 3 billion SMS text messages a month compared to nearly 18 billion a month in China.
Source: Adapted from MacManus (2005), Sinrod (2005) and authors’ research.
sion and specification of m-commerce service formats and content. Corporate and users’ interests sometimes coincide and at other times diverge in delivering the desired formats and content. In the final and concluding section of this chapter, we cast an eye on the future in terms of technologies, applications, behaviors and research requirements.
Overview of the Country Studies We examined 12 important countries from North America, Europe and Asia in the form of the “country chapters” in this book. These countries were chosen keeping in view multiple criteria: the demographic or economic size of the country, the absolute or percentage size of the mobile phone user base, leadership in terms of technologies or applications, variety in terms of applications and potential to provide a glimpse into the future of mobile communications and mobile commerce.
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Of course, there are many more countries — besides the 12 featured in this book — that are important from the perspective of understanding global patterns of mobile commerce. Given time and space constraints, however, only a few countries could be featured in detail in the book. To give the reader a flavor of mobile communications and mobile commerce in countries other than the ones focused in this book, after the list of references at the end of this chapter we have included an Appendix. This Appendix features some mini-cases about mobile communications and mobile commerce from a few countries that did not receive chapter-length treatments in the book. Let us turn now to the patterns we observe in the 12 country chapters. As seen in Table 1, an overview table for the various country chapters, most of the countries examined in this book (with Canada and the U.S. as exceptions) had experienced a high usage of communication related SMS-messaging. Some trials on location-based services can be found in many countries. France stands out as one of the most experienced countries in general. Japan, with its extensive experiences with location-based advertising, seems a leader in terms of mcommerce business models that make money for the service providers. Information-related services are found in almost all countries. France and UK, however, also had experiences with services based upon sophisticated personalization. Payment features are found in many countries as well. Denmark had experienced many types of these features, although without a solid universally accepted solution. Only in Japan a universally available payment solution was effectively made available to the users as well as third party service providers. This was because only the wireless service provider handled payments — the users received a single monthly bill from the mobile service operators and the third-party service providers received aggregated periodic payments from the mobile operator after the deduction of a commission.
The Communications Aspect It is clear from all the country chapters that the primary motivation for acquiring mobile communication devices and for subscribing to mobile telecom services is the human desire to communicate while being on the move. In fact, in most countries — ranging from the very low-income market of India to the very highincome market of Germany — prepaid mobile communications have proved to be popular. One reason for this is that prepaid service providers make it very easy for consumers to acquire and start using a mobile phone. Even the rudimentary types of mobile data services — the first stages of mcommerce–are represented by communication-oriented services such as SMS
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Table 1. Global CLIP experiences Canada
Communication Voice and e-mail; the native BlackBerry dominates, especially where SMS and MMS messaging is less popular
Locatability Locating taxies, roadside assistance, maps, etc. together with multiplayer games are the few examples of locatability features that lack popularity Developing rapidly
Information Entertainmentoriented content
Payment Parking payment
Entertainmentoriented content
M-banking and e-wallets utilized by provision through WSP and SMS M-banking and e-wallets utilized by provision through WSP, SMS and voice response systems
China
SMS is very popular
Denmark
Non-sophisticated solutions are in use
Finland
SMS is very popular as person-to-person communication and as a content medium Virtual communities
France
SMS is popular
Maps and city guides utilized by network cell identification and GPS
Germany
SMS is popular
Weather reports
India
SMS is very popular
Japan
SMS is very popular
Location-based advertising
New Zealand
Maps and location-based services
South Korea
SMS is very popular as person-to-person communication and as advertising medium together with e-mail SMS, EMS and MMS are very popular
Extensive use of locationbased services
Entertainment and travel-oriented content
UK
SMS is very popular
Although it is nonexistent, locating taxis is an example
USA
SMS and MMS messaging continue to gain ground, particularly messaging from camera phones
Entertainmentoriented content with sophisticated personalization features Downloading ringtones
Entertainment, news and business professional-oriented content Entertainmentoriented content Entertainment and travel-oriented content with sophisticated personalization features Entertainmentoriented content Entertainment and business-professional oriented content Entertainment and business-professional oriented content
E-wallets utilized by provision through WSP and SMS
E-wallets utilized by provision through WSP and SMS M-banking and e-wallets utilized by provision through WSP and SMS One-stop payment utilized by provision through WSP M-banking and e-wallets utilized by provision through WSP and SMS
M-banking and e-wallets utilized by provision through WSP and SMS — also in relation to brick-and-mortar firms M-ticketing
Micropayments using the mobile phone — had failed to take off
Source: Compiled from the various country chapters
and MMS. Innovative and appealing m-commerce applications, such as “mobile ticketing,” can be offered even with simple SMS messages, provided the users agree to use specified and secure payment methods (see Box 2, “Mobile
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Ticketing Applications”). It is clear, therefore, that m-commerce success would have to keep the core communication capability of mobile networks in the center, build larger circles of data communication capabilities around it and finally begin adding the outer layers of value-adding, content-rich information and locationbased services. In August 2005, Google introduced the Google Talk free software with communications–instant (or text) messaging, voice calls and email — at the core. Industry watchers expected Google to build a series of value
Box 2. Mobile ticketing applications Several technological solutions are being developed to use the mobile phone as a ticket purchasing or ticket-validating device. Some of the solutions and systems are already being offered in various parts of the world: §
The Swiftpass mobile ticketing system automatically selects among SMS, EMS, MMS or WAP, the best format for ticket delivery depending on the preferences and capabilities of the end user, the handset and the mobile operator’s network. At the point of use — such as a box office or entry gate — the users recall their message on their phone and hold it over one of the Swiftpass scanners. Using Wi-Fi, Bluetooth or GPRS wireless technology or a wired local area network, the Swiftpass scanner instantaneously verifies the ticket by referri ng to a Web database. Once validated, the user can access the services or the performance.
§
In 2004, the City of Hamburg in Germany started offering mobile ticketing services to people going to soccer games or musical performances. For example, at the soccer match between FC St. Pauli and Hertha BSC Amateure, users were able to avoid long lines at ticket booths by displaying their mobile phones with a message containing a bar code, which was scanned at the gate. The same service was also available to those attending the musical “Dance of the Vampire,” or live music performances in several bars in Hamburg’s famous Reeperbahn red light district!
§
Mobile ticketing applications in Europe are offered by providers such as Matrix or Teltix. In the PicTicket by Matrix, customers can either purchase their tickets online by going to the PicTi cket Website or calling the automated PicTicket call center. They must provide both their mobile phone number and information about the type of phone. Customers pay either by credit card or direct debit. Once payment is verifi ed, the ticket is sent electronically to their handset as an SMS (Short Message Service) text containing an encrypted code that can be scanned.
§
In the Teltix service, customers show SMS information to an agent at the gate. Teltix customers in Germany must be registered users of T-Mobile’s Mobile Wallet payment program.
Source: Based on Swiftpass Web site, http://www.swiftpass.com/mobile_ticketing.aspx, Blau (2005), and authors’ research
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adding information- and location-based services around this core, perhaps first getting the users familiar with the services in the desktop environment and then migrating to mobile devices.
The Locatability Aspect In all countries, the locatability aspect of m-commerce has proved to be the most difficult to implement and progress has been slow. In part, this is because the technologies of location determination, such as GPS or Cell IDs, either remain expensive or not very reliable. Also, there are growing concerns about privacy — location-based services (LBS) could prove to be unnerving and creepy in some instances, in the fashion of a watchful electronic “Big Brother.” Providers of LBS and related services would have to allow users to specify their privacy preferences in clear and often detailed manner (Godin, 1999), before such services could take off.
The Information Aspect Like the computer-based e-commerce that preceded it, the first step in the mcommerce ladder has been the creation of m-portals that provide a variety of information to the user. In some countries, such as Japan, South Korea and parts of Europe, users have become accustomed to looking at information content on mobile screens. Improving color displays and screens of mobile devices have encouraged consumers to use the mobile devices for activities such as photo sharing, playing games and even watching video content. Such devices are relatively expensive, and would take time to penetrate deeply into large but nottoo-affluent markets such as China and India. Also, in the U.S. there is considerable satisfaction with the rich, multimedia content available over broadband desktop or laptop Internet connections. Users in the U.S. therefore are reluctant to switch to mobile devices with small screens and poorer displays and sound capabilities. Device capabilities and richness of mobile information content would have to increase by a substantial margin to interest U.S. consumers in such content.
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The Payment Aspect Three main approaches seem to have emerged globally to deal with payment issues in m-commerce: 1.
Processing of payments to third-party service providers via the regular monthly mobile phone bill. The mobile operator becomes a billing agent for a specified commission. This is the method used by NTT DoCoMo for its i-Mode service (Bradley & Sandoval, 2002; Hamilton, 2000).
2.
Preloading the mobile device with electronic cash and then using the device as an electronic wallet to pay for services on the spot.
3.
Linking the mobile device to a bank account, in the manner of a debit card, and then making payments via the device.
All three methods have had limited success. Until credit card-type universal acceptance and security against loss and fraud is available in mobile payment systems, users are likely to remain somewhat wary of mobile payment systems.
Challenges of Functional Integration in M-Commerce Successful m-commerce offerings of the future would need to be highly integrated, not merely on the CLIP dimensions but also in the following major ways:
•
M-commerce platforms would need to be closely tied to emergent 3G network capabilities like presence and location, to emergent smartphones capable of offering rich mobile browsing experiences and to externally available Web services that deliver enterprise applications and content “on the go” (Samuelsson & Dholakia, 2004).
•
Close integration would be required among disparate types of organizations such as mobile operators, media and content providers, third-party applications and services firms, banks and finance firms, various enterprise extranets and vibrant startup firms constantly inventing new mobile offerings.
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Looking Ahead: M-Commerce in the Near Future As with other Information and Communications Technologies (ICTs), it is very difficult to foresee the long-term future. For example, science fiction has fictionalized about universal wristwatch communicators for a long time, but these are still not a reality. On the other hand, hardly anyone foresaw the possibilities of massive e-mail, interactive media and e-commerce. In some ways, mobile communications and mobile commerce are already altering life as we know it — and the stream of changes unleashed by mobile communications can be expected to continue well into the future. Box 3 lists
Box 3. Some issues arising from pervasive mobile technologies Behavioral Issues •
How do/would people behave in WLAN environments, i.e., when they are operating in corporate or campus wireless dat a environments or in public “wireless hotspots” such as those provided in many airports, coffee shops and bookstores?
•
How do/would people behave in Bluetooth environments — when they receive short-range signals acknowledging the presence and recognition of their Bluetooth devices?
•
How do/would people behave in wireless environments when their devices “recognize” dozens of other private wireless device s around them?
Strategic Issues •
Given the fact that wireless access methods are multiplying (mobil e cells, satellite connecti vity, office/campus WLAN, public hotspots, Bluetooth devices, etc.), what strategic options exist for various types of service providers?
•
How should basic infrastructure/connectivity providers as well as third-party service providers analyze and select among strategies? How will they ensure strong and successful implementation of chosen strategy?
Technical and Regulatory Issues •
Can seamless connectivity b e ensured among different wireless methods?
•
What issues of technical standards, privacy, security, legal rights, politic al and organizational boundaries, social propriety, etc. arise in such linked, Webbed, overlapping wireless environments?
•
What happens when criminal acts are committed/spotted in wireless environments?
Source: Authors’ research
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some of the challenges that arise for users, industries, technologists and regulators as mobile communications become pervasive. Given the hazards of long-term prognostication, we want to attempt to peer only into the near term prospects of m-commerce. Based on the insights offered by various contributors in this volume, we can reasonably expect the following:
•
Continued rapid growth of mobile communications globally, especially in the emerging and developing nations where telecom availability levels are low.
•
With almost all new mobile connections equipped with data capabilities, the continued growth of at least rudimentary m-commerce (such as SMS based systems) in almost all global markets.
•
Steady improvements in mobile networks — higher speeds, lower costs — would continue to open up new m-commerce opportunities.
•
Mobile content — in fact the whole “Internet experience” available to users of data-enabled mobile devices — would have to improve in terms of multimedia richness to entice users.
•
Some of the CLIP dimensions — particularly locatability (L) and payment (P) — would continue to pose challenges in terms of economics, technology, quality, ubiquity, user friendliness, trust, reliability, security and privacy. A steady stream of new solutions can be expected to address these problems.
•
Successful m-commerce applications and services would depend on how well integration and interworking of device, network, external parties, enterprise activities and users’ lifestyles are accomplished.
•
Strong and mutually supportive interorganizational linkages among mobile operators, media and content providers, third-party applications and services developers, banks, enterprise networks and technology innovators would be needed to build appealing m-commerce solutions that can capture large markets.
References Blau, J. (2005). Hamburg city pushes mobile phone ticketing. The Industry Standard. Retrieved April 4, 2005, from http://www.thestandard.com/ internetnews/000662.php
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Bradley, S.P., & Sandoval, M. (2002, Spring). Case study: NTT DoCoMo – The future of the wireless Internet? Journal of Interactive Marketing, 16, 8096. Godin, S. (1999). Permission marketing: Turning strangers into friends, and friends into customers. New York: Simon and Schuster. Hamilton, E. (2000). Japan mobile Internet case study: NTT DoCoMo i-Mode (Pr esentation). Washington, DC: T he Strategis Group. http :// www.strategisgroup.com/press/pubs/docomo.pdf MacManus, R. (2005). Mobile phones are more than just phones in China. ZDNet Blogs. Retrieved September 21, 2005 from, http://blogs.zdnet.com/ web2explorer/?p=15 Pelkonen, T., & Dholakia, N. (2004). Understanding emergent m-commerce services by using business network analysis: The case of Finland. In Nan Si Shi (Ed.), Wireless communications and mobile commerce (pp. 105131). Hershey, PA: Idea Group Publishing. Samuelsson, M., & Dholakia, N. (2004). Assessing the market potential of network-enabled 3G m-business services. In Nan Si Shi (Ed.), Wireless communications and mobile commerce (pp. 23-48). Hershey, PA: Idea Group Publishing. Sinrod, E.J. (2005). Exploding growth in mobile messaging. USA Today. Retrieved January 12, 2005, from http://www.usatoday.com/tech/columnist/ericjsinrod/2005-01-12-sinrod_x.htm
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Appendix: Additional Countries Australia: Three 3G Services by 2005 In late 2005 after a month-long trial, Australia’s main telecom company, Telstra, launched a new type of commercial 3G mobile communications and mobile data service, using the 3G W-CDMA technology. This was the second 3G service from Telstra. Earlier in 2005, Telstra had launched a 3G service using the CDMA2000 1x EV-DO network. For Australia, however, both these Telstra services were not the pioneering ones. In 2004, Hutchison had launched its pioneering 3 service (see Chapter IV on Denmark for a review of the Hutchison 3 service in that country). This service signed on over 240,000 Australian subscribers by mid 2005, with a high level of ARPU. Like the Hutchison 3 service in Denmark, the Australian 3 service deployed a “walled garden” approach — proprietary content available only to subscribers. Given the early success of Hutchison’s 3 service, Telstra took a quiet and lowkey approach. The focus of the marketing effort in 2005 was on content rather than on the sophistication of the technology. Video diaries from Australian Idol contestants were made available on Telstra’s W-CDMA 3G service. Such new 3G content joined the 2G/2.5 G type content that Telstra already offered via its 200 i-Mode sites and 50 WAP content sites on the “Telstra Active” mobile portal.
Brazil: Large User Base, Cutting-Edge Technology Trials With a population of over 170 million, Brazil was Latin America’s largest and one of the top ten mobile communications markets in the world. In fact, in Brazil, and in Latin America in general, the mobile subscriber base was growing at a nearly 100 percent annual growth rate in the early 2000s. By mid-2000s, about 30 percent of Brazilians were mobile telecom subscribers. Mobile commerce applications started appearing in Brazil in the early 2000s. For example, from 2001 the InfoSpace service from Algar Telecom Leste (ATL) provided locallanguage wireless services, SMS and information alerts delivered directly to the mobile handsets, mobile e-mail and mobile means to manage one’s personal calendar events. Also in 2001, in collaboration with the U.S. firm SmartTrust, Pulso, a Brazilian mobile technology firm started offering the technology to Brazil’s mobile operators to enable mobile services such as stock quotes, weather data, m-payment methods, ways to transfer money between accounts
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and location-based services. By the mid-2000s, many Brazilian locations were in technology trials at the cutting edge of mobile communications. For example, Mangaratiba — a city in Brazil — was part of about a dozen global cities where in 2005 Intel started installing and testing citywide Wi-Fi networks. After the trials are successful, wireless cities like Mangaratiba will provide users equipped with Wi-Fi capable phones and devices with ubiquitous access to mobile data and communications, bypassing the mobile phone operators.
Chile: Deregulation, High Mobile Penetration and 3G Following early privatization and deregulation of the telecom sector, Chile developed the most advanced telecommunications infrastructure and regulatory system in Latin America. Mobile phone service commenced in 1989 and expanded rapidly. With over 50% penetration, Chile had more mobile lines per capita than any other country in Latin America. The main mobile operators in Chile were Entel, Telefónica Movil, BellSouth Chile and Smartcom. By 2005, Chile had a 3G network built by Smartcom, an affiliate of Spain’s Grupo Endesa. This network employed the CDMA2000 1X technology from Nortel. Originally serving just the capital city of Santiago, the network was extended in late 2005. It provides advanced mobile services like high-speed Internet access, e-mail with attached files, image and video downloading and video streaming to 3G mobile telecom subscribers throughout Chile.
Italy: In Love with Mobile In many ways, the country that is most in love with mobile communications is Italy. This country of 58 million people has 56 million mobile telephone lines. Mobile phone penetration rate in Italy exceeds the rate in countries such as Sweden and Finland, generally regarded as mobile communications pioneers with very heavy use of mobile phones. Italians have thoroughly integrated mobile phones into their lives. For example, about 2 million Italians performed banking transactions via SMS in 2004, a 37 percent jump over 2003. Telecom Italia, Hutchison, Vodafone Omnitel and Wind were the main providers of mobile telecommunications services in Italy. By mid-2000s, all the main mobile telecom operators in Italy offered 3G services. Hutchison’s 3 Italia was the pioneer in offering 3G services and had nearly 5 million 3G users by the end of 2005. All the popular multimedia and mobile data services were available in Italy, including video telephony using mobile handsets. Besides the advanced services offered domestically, Italian mobile operators also took some steps to meet the needs of Italians traveling abroad. For example, in 2005 Telecom Italia signed an
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agreement with NTT of Japan so that subscribers of each company — while traveling — could use the other company’s Wi-Fi “hotspots,” and still be billed domestically for such usage.
Mexico: Expanding Range of 3G Services By the later part of the 2000s, almost 30 percent of Mexicans were users of mobile telecommunications. Five mobile operators provide nationwide mobile telecom coverage in Mexico. Telcel dominates the Mexican mobile telecom sector with almost 75 percent share of the market. Of Telcel’s nearly 25 million subscribers, over 20 percent paid for more than basic voice telephony: they subscribe to some of the value-added services through the Telcel GSM network. Telefonica Moviles (TEM) is the second largest mobile operator in Mexico, with nearly four million subscribers. The mobile operator Grupo Iusacell is the pioneer in the 3G arena in Mexico. In 2003, Grupo Iusacell started the first commercial 3G voice and high-speed data network based on CDMA2000 equipment, software and services from Lucent Technologies. A year later, the 3G network was expanded and enhanced to provide easy download of multimedia content such as ringtones and games. Services such as mobile e-mail, mobile text chat, photo transmission and sharing of video clips using mobile phones also became available.
Poland: Growing Foreign Interest in Mobile Services PTK Centertel — the main mobile telecom operator in Poland — was a joint venture of France Telecom and Poland’s state-owned telecom company. It offered services under the brand name Orange, owned by France Telecom. By late 2005, PTK Centertel was upgrading its network with technology from Germany’s Siemens to start offering 3G services. Earlier in 2005, competitor PTC had already launched Blue Connect, a WCDMA-based 3G service, for some of its business enterprise customers in the Warsaw area. Several mobile commerce services were available to Polish users by the mid-2000s. By 2005, at a price comparable to that for polyphonic ringtones, mobile operator PTC offered a service enabling full song downloads to mobile handsets. Customers could download and play any of about 6,000 songs. PTC also partnered with McDonald’s to offer WLAN access hotspots at about 100 McDonald’s restaurants in Poland. As the mobile phone market became larger, foreign mobile service companies (besides the already established France Telecom) made attempts to enter Poland. Britain’s Vodafone and Danish TDC, for example, sent out feelers to the shareholders of mobile operator Polkomtel with an eye to possible acquisition of this Polish mobile service company. Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Russia: Europe’s Giant Mobile Market By the mid-2000s, according to some reports, half of Russia was using mobile phones, with mobile phone penetration approaching nearly 100 percent in cities like Moscow and St. Petersburg. Some industry watchers predicted that, given the astronomical growth rate of mobile phones in Russia, the subscriber base could touch 115 million by early 2006, making Russia the largest mobile market in Europe and the third largest in the world (after China and the USA). Mobile commerce applications had started appearing in the Russian market by the early 2000s. For example, by 2001 Vimplecom offered an SMS location-based directory service. Vimplecom subscribers could type in the name of a subway metro station in a city like Moscow and the type of service they were seeking— pharmacy, gas station, etc. Address and contact information for the nearest pharmacy, gas station, etc. would then appear on the mobile phone screen. With a strong base of software professionals, Russia was also a center for the development of mobile software applications. PlayFon — a Russian company with operations in the United Kingdom, Sweden, Russia and Ukraine — was a significant developer in the gaming industry with over 600 titles, many available for play on mobile phones. PlayFon was the first content provider in Russia to introduce mobile video and realtones in MP3 format.
South Africa: Live Soccer Action on Mobile Phones Of all South African households, 32 percent had mobile phone connections by the mid 2000s, compared to only 24 percent of households with fixed line connections. By 2005, mobile communications in South Africa had moved well beyond just voice calls. Consider, for example, the world’s most watched sporting event — the World Cup of soccer. In late 2005, MTN South Africa — the leading mobile operator — had mobile telephony rights to the 2006 FIFA World Cup in Germany. The deal gave MTN the right to broadcast — to its South African subscribers — about four minutes of “near live” video clips for all the 64 World Cup matches. In addition, MTN could offer longer coverage of games via mobile phones in a delayed fashion. MTN also had access to all the archival video materials of the 2002 World Cup.
Sweden: Mobile Pioneer and 3G Test Bed Along with neighboring Finland, Sweden was a global pioneer in mobile communications. The long and narrow North-South geography of Sweden, stretching from the North Sea well into the Arctic Circle, together with the small and Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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sparsely spread population, made it imperative to develop means of telecommunications that did not require extensive laying of wired telecommunications lines. In the 1970s, the first generation (1G), and in the 1980s the second generation (2G) of mobile telephony, were conceived and developed in Sweden by the technology leader Ericsson. By the 2000s, Sweden was well into the deployment of 3G technology, services and applications. Sweden was ahead of most European countries in terms of wireless penetration and usage. By 2001, mobile phone penetration rates had reached levels close to 80 percent. By the mid 2000s, Hutchison 3, TeliaSonera and Vodafone provided virtually nationwide 3G coverage in Sweden. Mobile Web browsing and mobile e-mail were used routinely in Sweden. Many users had access to sports event telecasts, video clips, songs and even video telephony with mobile phones. Because of this, not only was Sweden a pioneer in 3G mobile commerce services and applications, the country had become an attractive test bed for large mobile operators from the United States and other countries wanting to try out new mobile data applications.
Thailand: Poised for 3G Mobile users in Thailand rose sharply in the early 2000s: from 3.6 million in 2001 to almost 30 million in 2004. Already by 2001, a few banks in Thailand had started offering access to some banking services via mobile phones. The number of banks and the range of financial services available via mobile devices expanded rapidly thereafter. Thailand’s own mobile operators, AIS and DTAC, started facing competition from foreign mobile operators Orange and Hutchison by 2003. By the mid 2000s, many Thai mobile users were accustomed to fast downloads of content over 2.5 G networks. With neighboring Singapore, Malaysia and the Philippines already offering 3G services, Thai operators were poised to launch 3G services in late 2005. Leading Thai mobile operator DTAC, with over 6 million subscribers, had put the advanced 3G switching equipment made by Nokia into place, and the upgraded network was ready to offer IP-based multimedia services via mobile devices.
Vietnam: Mobile Sector on a Growth Path With mobile phones available to only four percent of its population of over 80 million in 2005, Vietnam could be regarded as a backwater of mobile communications and mobile commerce. Such an assessment would be a huge mistake! The mobile communications market in Vietnam was growing at the blazing rate of almost 35 percent a year. By 2005, for the handset maker Samsung, Vietnam
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had become the fastest growing market for its mobile handsets. Dalink, a startup company in Vietnam established in 2004, was named to sound like the English word “darling” — to appeal to the younger generation. By going to the Dalink mobile Website, users could download ringtones, logos, wallpapers, animated gifts, picture messages and games on their mobile phones. Using the mobile phones, Dalink users could also request messages and receive funny stories, famous sayings, fun quizzes and connections to potential new and existing friends. Dalink also included an English dictionary, a phone directory and an e-mail service via mobile phones. Other mobile services included lottery tickets and subscriptions to the contents of magazines. Dalink also developed partnerships with media companies. While watching TV, viewers could use Dalink to forecast the results of sporting events, vote for the “most valuable player” or their favorite hit. In addition to the growing range of mobile services, Vietnam was also a center for mobile technology development. With a vibrant software industry staffed by highly trained engineers working at salaries far lower than those in advanced countries, Vietnam was being used as a location for the development of mcommerce software applications by some global ICT firms.
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Glossary
Glossary of M-Commerce Terms
1G: Refers to first generation mobile phones and networks. Available since the 1970s, these mobile phones were bulky devices that used analog radio transmission. 2G: Refers to second generation mobile telecommunications. 2G standards, such as GSM, are digital compared to the older analog 1G standards. 3G: Refers to third generation digital mobile telecommunications, capable of data speeds high enough to support video transmission. 3GPP: third Generation Partnership Project. Established in 1998, 3GPP is a collaboration agreement among major standards-setting bodies active in mobile communications: ETSI (Europe), ARIB/TTC (Japan), CCSA (China), ATIS (North America) and TTA (South Korea). The goal was to develop 3G specifications within the scope of the International Telecommunications Union’s (ITU’s) IMT-2000 project. 4G: Refers to fourth generation digital and multimedia mobile telecommunications. With transmission speeds of up to 20 megabits per second (20 Mbps), 4G communications are expected to support high-definition TV on mobile devices. 4G devices will also have seamless interoperability with other media and devices.
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The Japanese and South Koreans have announced the introduction of 4G networks and devices several years ahead of the international target date of 2010 for 4G rollout. Adds: Additions. The number of subscribers a mobile carrier adds within a specified period (monthly, quarterly and/or annually). Typical measurement is in Net Adds (number of adds minus number of churns) or gross adds (total additions for the period). Aggregation: The process of collecting charges for a variety of transactions and combining them into a single bill. Charges are usually aggregated when the processing cost of the individual transactions is more expensive than the profit that could be gained from those transactions (see micropayments). AMPS: Advanced Mobile Phone Service: more commonly known as cellular. It operates within the 800 MHz frequency band. AMPS service is available in North America, Australia and several other countries. ARPU: Average Revenue Per User. ARPU is used to measure average monthly operating revenues of a mobile telecom service on a per user basis. ARPU is calculated by dividing operating revenues from wireless services by the number of active subscribers to the relevant services. Since the late 1990s, as basic voice mobile telecommunications became cheaper, ARPU has been falling for most mobile operators worldwide. ASP: Average Selling Price. Also, in the Internet context, ASP can mean Application Service Provider, referring to a company or server that provides software applications using the network to a user or client. Bandwidth: A measure of the capacity of the communications channel and how much frequency is available to a system. The wider the bandwidth, the greater the data rate for any given protocol. Bluetooth: A short-range radio technology aimed at simplifying communications among devices and between devices and the Internet. It also aims to simplify data synchronization between Internet devices and other computers. Products with Bluetooth technology must be qualified and pass interoperability testing by the Bluetooth Special Interest Group prior to release. Bluetooth
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founding members include Ericsson, IBM, Intel, Nokia and Toshiba. Mobile phones and devices that are Bluetooth enabled can not only communicate with the cellular networks but can also be recognized by and communicate with Bluetooth enabled devices, usually within a 10-meter (30-foot) range. BREW: Binary Runtime Environment for Wireless. A proprietary technology developed and launched by Qualcomm in 2001, BREW is software that can download and run small programs for playing games, sending messages, sharing photos, etc. The main advantage of the BREW platform is that the application developers can easily port their applications across all the Qualcomm ASICs (Application-specific Integrated Circuits, i.e., semiconductor chips that are devoted to specific applications). Applications developed for BREW have to be tested and approved by Qualcomm; once approved, these can be made available on mobile networks. CDMA: Code Division Multiple Access. This is a method of multiple access that does not divide up the channel by time (as in TDMA), or frequency (as in FDMA), but instead encodes data with a certain code associated with a channel and uses the constructive interference properties of the signal medium to perform the multiplexing. Qualcomm has pioneered digital cellular telephony systems making use of this multiple access scheme. In many major mobile telecom markets, CDMA-based mobile networks have emerged as the main competitor to GSM-based networks. Cellular Network: A radio network made up of a number of radio cells (or just cells), each served by a fixed transmitter, normally known as a base station. To cover a wide geographical area, such an area is divided into contiguous and overlapping cells, each with its own radio transmitter (base station, also called “tower”), that — taken together — provide radio coverage over the entire area. Each cell site has coverage of 3 to 15 miles. As the user moves across the geographical area, the radio transmission is “handed over” seamlessly from one cell (base station/transmitter) to another cell. Sometimes the signal is “dropped” during such handovers and the transmission and reception are truncated. Cellular networks are the most common, though not the only, means of providing mobile phone services. cHTML: Compact Hypertext Markup Language. A special, abridged version of HTML suitable for developing simplified Web pages viewable on the screens of mobile devices. By using cHTML, NTT DoCoMo, the Japanese mobile service provider, was able to launch its 2.5G i-Mode data service even before the availability of 3G networks in Japan. Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Churn: The amount of customer turnover. Customers are said to have “churned“ when they cancel their mobile service with a mobile wireless service, and may or may not switch to another provider. Churn is usually measured on a monthly basis. To calculate the total churn for any given period (typically quarterly or yearly), the monthly churn percentage is multiplied by the number of months in the period being measured. For example, a carrier with a 2 percent churn per month would have a quarterly churn rate of 6 percent, and an annual churn rate of 24 percent. D-AMPS: Renamed as TDMA. Dual Band/Dual Mode: Refers to phones that have the ability of using two different frequencies of the same technologies. For example, a TDMA or CDMA phone that can use either the 1900 or 800 MHz band. Triple Band phones in GSM markets support 1900, 1800 or 900 MHz. Dual band phones also enable callers to access different frequencies in the same or different geographic regions, which gives their phones wider coverage. EDGE: Enhanced Data for Global Evolution. EDGE is an extended and enhanced version of GPRS. It is backwards compatible with GPRS, which is widely supported by a variety of mobile data devices. EDGE data speeds are two to three times faster than those of GPRS. Edy: Electronic money system used in NTT DoCoMo’s FOMA and FeLiCa systems. Monies can be added to the handset at designated kiosks. Purchases can be made at infrared-based POS where the cost of the goods or service is deducted from the Edy amount. EMS: Enhanced Messaging Service. EMS is an enhanced version of Short Messaging Service (SMS) and usually seen as an evolutionary step toward Multimedia Messaging Service (MMS). An EMS message is comprised of several text messages that are clustered together. EMS provides capabilities for rich messaging features such as sending/receiving ring tones and other melodies/ sounds, pictures and animations, and modified (formatted) text. Furthermore, all such items can be sent or received as one integrated message for display on an EMS-compliant mobile device. EMS is designed to work with any network that already offers SMS, using the same store-and-forward infrastructure . One of the operational issues of EMS is how to bill. Many operators may prefer to charge for the combined message rather than charge for each individual
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message comprising the EMS. It is possible that MMS would gain popularity so rapidly that EMS, the intermediate step between SMS and MMS, would fail to make much headway. EV-DO: Evolution-Data Optimized (EV-DO) is a high-speed wireless data connection on a CDMA network. The technology allows users to access highspeed Internet through portable devices such as mobile phones, laptop computers and handheld PDAs. EZ Wallet: Name for the Japanese system of electronic money (Edy) stored on NTT DoCoMo’s FeLiCa handsets. FCC: Federal Communications Commission, the governing body for radio spectrum in the USA. FDMA: Frequency Division Multiple Access. Division of the frequency band allocated for mobile cellular telephone communications into 30 channels. Each of these channels can carry voice conversation. With a digital service network, each channel can also carry digital data. FDMA is a basic technology used in the analog AMPS the most widely installed mobile phone system in the United States in the early years of mobile telephony. With FDMA, each channel can be assigned to only one user at a time. The D-AMPS also uses FDMA but adds TDMA to get three channels for each FDMA channel. With D-AMPS, the number of calls that can be handled on a channel are three times that of AMPS. FDMA technology can also be deployed in fixed-line telephone networks. FeLiCa: A contactless IC (integrated circuit) card technology developed by Sony in conjunction with NTT DoCoMo. As the name stemming from the word “felicity” suggests, the system was born to make daily living easier and more convenient. The card is difficult to forge/reconstruct, and allows the user to send/receive data at high speed and with high security. The system is also environmentfriendly, since the card can be used over-and-over, virtually forever by rewriting the data. It also features ultimate user-ease, as there is no longer any need to retrieve and put away the card for every use. FOMA: Freedom of Multimedia Mobile Access. A 3G telecommunications service developed and launched by NTT DoCoMo in the Japanese market; now being licensed to wireless carriers in other foreign markets.
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Frequency Band: The portion of the radio spectrum set aside for a particular use. For example, most wireless LANs presently use the 2.4 to 2.48 GHz band, although 5 GHz products are under development. A frequency band is typically divided into two channels. GIF: Graphics Interchange Format. Along with JPEG, GIF is a very popular format for graphics images on the World Wide Web. Unisys owns the compression algorithm for GIF, and commercial usage of GIF requires a license from Unisys. An Internet committee has developed a patent-free replacement for the GIF, the Portable Network Graphics (PNG) format, and major browsers support it or soon will. Many models of mobile handsets are able to receive still and animated GIF files. GPRS: General Packet Radio Service. A non-voice value added service that allows information to be sent and received across a mobile telephone network. Data speeds of up to 171.2 kilobits per second (kbps) are achievable in a GPRS network. A GPRS-capable network is usually regarded as a 2.5G network — more advanced than a 2G voice-based network but not quite as advanced as a fully data-capable 3G network. GPS: Global Positioning System. Developed by the United States Department of Defense, GPS is a satellite navigation system used for determining one’s precise location and providing a highly accurate time reference almost anywhere on Earth. It uses a constellation of at least 24 satellites. It can be used by anyone, free of charge. A GPS receiver decodes time signal transmissions from multiple satellites and calculates its position by trilateration. GPS-enabled phones are available from operators such as Nextel. Palm-held devices such as HP iPAQ hw6515 Mobile Messenger combine GPS navigation, Bluetooth short-range wireless, infrared and quad-band GSM/GPRS/EDGE for voice and data. GSM: Global System for Mobile Communications. GSM was developed jointly by European telecom service providers to succeed the previous analog mobile telecom standards. It was launched in 1991. Deployed in over 200 countries, GSM is the most popular standard for mobile phones in the world. In GSM countries, international roaming is easy via “roaming agreements” among operators. GSM is a 2G digital network: Signaling as well as speech channels are digital, resulting in higher voice quality and also allowing low-cost text messaging.
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HDML: Handheld Device Markup Language. A proprietary language developed by Openwave, HDML is used to format content for Web-enabled mobile phones. HDML preceded the open, global standards of WAP and WML. Hotspot: A specific geographic location in which an access point provides public wireless broadband network services to mobile visitors through a WLAN. Hotspots are often located in places with heavy traffic, and where people either have to, or prefer to, wait. Locations include airports, train stations, libraries, marinas, conventions centers and hotels. Hotspots typically have a short range of access. Hotspots accessible by laptop computers and PDAs usually allow free usage of the wireless Internet connections. Hotspots that link to specific mobile phone services often charge for usage. HTML: HyperText Markup Language. Similar to SGML, this authoring language is used to create documents on the World Wide Web. HTML defines the structure and layout of a Web document by using a variety of tags (formatspecification commands) and attributes (characteristics or properties associated with a part of a document or data field). Mobile handsets and devices that are data-enabled are usually able to view special HTML Web pages developed for wireless transmission. HTTP: HyperText Transfer Protocol. This is the underlying protocol used by the World Wide Web. HTTP defines how messages are formatted and transmitted, and what actions Web servers and browsers should take in response to various commands. When a Web site address is typed in a browser window, this actually sends an HTTP command to the Web server directing it to fetch and transmit the requested Web page. The secure, encrypted version of this protocol is identified by “https://.” ICT: Information and Communication Technologies. In many international documents, such as those from the United Nations, the ICT abbreviation is used rather than the IT abbreviation popular in the U.S. and some other countries. IEEE: Institute of Electronic and Electrical Engineers. The IEEE is a nonprofit, technical professional association that promotes electronic ideas and standards, including standards for wireless communications, both in the United States and worldwide. IEEE 802.11: See Wi-Fi.
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i-Mode: Internet Mode. The mobile Internet system developed by the Japanese firm NTT DoCoMo. Uses a cascading menus interface to access cHTML-based customized Web sites. The “i” sound is also a pun on the Japanese word “ai” or love. IMS: IMS stands for the IP (or Internet) Multimedia Subsystem. IMS standards enable the creation of an operator-friendly environment for real-time, packetbased mobile calls and services. Such services not only preserve traditional carrier (i.e., mobile operator) controls over user signaling and usage-based billing, but also generate new revenue via deep-packet inspection of protocols and content. In other words, IMS-equipped mobile services can “peep inside” data packets, determine the nature and value of the packet content, and charge the user accordingly. IP: Internet Protocol. The four numbers in an IP address are used in different ways to identify a particular network and a host computer or device on that network. With explosive growth in the Internet, there is a need for billions of additional IP addresses, and a gradual transfer to a six-number IP address system (termed IPv6) is under way. ISP: Internet Service Provider. A company that provides access to the Internet. For a monthly fee, the service provider gives the users a software package for Internet access, a username, a password and access to the Internet via a phone line, a cable TV line or a wireless link. JPEG: Joint Photographic Experts Group. JPEG (pronounced jay-peg) is a commonly used standard method of “lossy” compression for photographic images. The file format which employs this compression is commonly also called JPEG; the most common file extensions for this format being .jpeg, .jfif, .jpg, .JPG, or .JPE. Many multimedia 3G mobile devices are able to send and receive JPEG photo files. KDDI/au: 3G mobile service offered in Japan by mobile company KDDI. LAN: Local Area Network. A network that covers short distances, such as within a building. LBS: Location-based services (LBS) are services that exploit knowledge about where an information/communication device user is located. For example, the Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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user of a wireless-connected smartphone could be shown ads specific to the region that the user is traveling in. Location-based services rely on technologies such as Global Positioning Systems (GPS), or the location-identification properties of wireless networks. Either network-based or handset-based locationfixing technologies can be employed. Adoption of LBS could raise concerns about individual privacy and wireless “spam” messages. Location-based Commerce: Location mobile commerce refers to commercial transactions that are in some way dependent upon the physical location of the consumer or the physical location of a business. Micropayments: Small payments (from US$.01 to $2) that are usually aggregated by an m-wallet or other payment processor. MIDI: Musical Instrument Digital Interface. An industry-standard protocol that defines each note precisely and concisely, allowing electronic musical instruments and computers or digital phones to exchange data: “talk” to each other. The MIDI standard was first proposed by Dave Smith in 1981 and published in August 1983. MIDI is employed as a format for mobile ring tones as well as for music files sent via mobile telecom devices. By the mid-2000s, some tunes developed specifically for ring tones had become popular enough to hit the top positions in music charts. MMS: Multimedia Messaging Service. A method for sending and receiving, using mobile communications devices, short “presentations,” such as animated postcards, pictures, screen savers, greeting cards, maps, cartoons and business cards. Messages can include text, images, and sound. MMS transmissions require higher data speeds than available in plain 2G GSM networks. GPRS or 3G/UMTS networks are needed for MMS. MP3: Short for “MPEG-1 Audio Layer 3,” MP3 is a popular digital audio encoding and “lossy” compression format invented in 1987 by the Fraunhofer Institute for Integrated Circuits in Germany. It was designed to greatly reduce the amount of data required to represent audio, yet still sound like a faithful reproduction of the original uncompressed audio to most listeners. Some mobile phones are designed to play MP3 music. MPEG: Moving Picture Experts Group (MPEG). A working group of ISO/IEC with over 350 members from companies and universities. MPEG (pronounced
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em-PEG) develops video and audio encoding standards. MPEG has standardized many different formats for audio and video compression, transmission, recording and content categorization and labeling. In 2005, the latest MPEG-4 standard, with its Digital Rights Management (DRM) system, was of interest to 3G mobile operators for delivering video content over mobile handsets, but the license fees demanded by the MPEG licensing body were seen as too high. MSP: Mobile Service Provider. Another term for Wireless Service Provider (see WSP) or mobile operator. M-Wallet: Mobile wallets that are software applications holding a user’s sensitive financial and personal information, such as credit card numbers, bank account information, passwords and Personal Identification Numbers (PINs). Most m-wallets are server based. This is theoretically a more secure method than placing data onto mobile devices, where there is possible memory and processor constraints and also the likelihood of the data being stolen and misused. NTT DoCoMo: Originally the mobile telephone subsidiary of Japanese telephone carrier NTT (Nippon Telephone & Telegraph). Now an independent company, NTT DoCoMo was the developer of i-Mode, FeLiCa and FOMA. “DoCoMo” is the Japanese word for “anywhere” and the acronym for the English ‘‘Do Communications Over the Mobile Network.” Number Portability: Refers to the ability by consumers to retain their phone numbers when switching wireless carriers. Packet: A unit of transmission over a network. The data to be sent are split into packets, which are then transmitted individually over the network. PCS: Personal communication service (PCS) is a second-generation or 2G mobile communications technology. It is also referred to as digital cellular. This digital service works over CDMA, GSM and TDMA interfaces. It operates at the 1900 MHz frequency range and can be used internationally. PDA: Personal Digital Assistant. A handheld device that combines computing, telephone/fax, Internet and networking features. A typical PDA can function as a mobile phone, fax sender, Web browser and personal organizer. Most PDAs began as pen-based devices, using a stylus (pen-like tool) rather than a keyboard
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for input. Many have handwriting recognition features, and some PDAs have voice recognition technologies. Later models have keyboards as well. POS: Point of Sale. POS terminals could be anything from cash registers to retail-location devices capable of communicating with handsets via infrared signals, Bluetooth transmissions or other means. Ringback tone: A customized audio clip that callers hear when they dial a mobile phone number, instead of the usual ringing sound. Offered by most mobile operators in some markets, such as India. Ringtone: The sound that a mobile phone or device makes when receiving an incoming call. Roaming: Roaming refers to the ability to move between cells of the same network. For the subscribers of mobile communications services, roaming is the ability to use a cellular phone outside the home service area of one’s provider. Typically, providers setup Roaming Agreements with other providers in different geographic locations. A roaming agreement enables a caller to seamlessly make calls in a wide geographic area. Originally incurring extra charges, US cell plans typically no longer charge additional fees for roaming. SGML: Standard Generalized Markup Language. Developed by the International Standards Organization (ISO) in 1986, SGML was used widely to manage large documents that are subject to frequent revisions and need to be printed in different formats. The emergence and growth of the World Wide Web rekindled interest in SGML because HTML, the popular authoring language for Web pages, defines and interprets tags (format-specification commands) according to SGML rules. The rise of mobile communications and commerce is also increasing interest in SGML because XML and XHTML, languages for authoring content for wireless devices, also rely on the structure and methods of SGML. SIM Card: Subscriber Identity Module card. This removable card is the chip inside a GSM mobile phone with information such as the user’s phone number, phone book as well as other information related to the subscriber. SIM cards are particularly useful in “prepaid” mobile phones — subscribers can simply “load money” into their SIM cards and use the phone until the money runs out.
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Singtone: A ringtone in the form of a song clip, typically of 15-30 seconds duration. While most of the songs are licensed from popular music charts, some songs — such as some of the tunes developed by JAMBA — are specifically composed for mobile phones, and then perhaps hit the popular music charts. SIP: Session Initiation Protocol. A signaling protocol used for establishing, managing and terminating interactive communication sessions between users in IP networks (Internet, Intranets and mobile data networks). Such sessions include voice phone calls, multimedia conference sessions, instant messaging chats, interactive games, click-to-dial Web page links and voice-enriched ecommerce. SIP is similar in structure to two other data communications protocols: HTTP and SMTP. SMAF: SMAF stands for “Synthetic music Mobile Application Format,” and is a data format developed by Yamaha for multimedia content to be used on handheld portable devices, such as mobile phones and PDAs. The most common application of SMAF is the creation of ringtones for mobile phones; however, the full SMAF specification defines support for graphics also. SMIL: Synchronized Multimedia Integration Language, pronounced “smile.” An XML-based protocol, SMIL permits the creation and transmission of PowerPoint-style presentations with mobile devices. With SMIL, the user can control the timing, order, animation, text directions and the display qualities of images. This makes the experience of viewing MMS messages a lot more TVlike, rather than viewing a series of images that the user has to scroll through. SMS: Short Messaging Service. The method of sending text messages from and receiving text messages in a mobile communications device. With appropriate adaptations, landline phones, as well as computers, can send and receive SMS messages. In most countries, SMS rates are substantially lower than the rates for voice phone calls and for multimedia and data services. Speech Recognition: A type of software that can understand human voice, be it for content or software commands. TDMA: Time Division Multiple Access. TDMA enables the sharing of a medium, such as airwaves in radio networks. It allows several users to share the same frequency by dividing it into different time slices. Users transmit in rapid
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succession, one after the other, each using their own time slice. This allows multiple users to share the same transmission medium (frequency) and consume only a part of the available bandwidth. TDMA is used in GSM, PDC and iDEN digital cellular standards, among others. UMTS: Universal Mobile Telecommunications System. Also referred to as 3GSM, UMTS is a third-generation (3G) mobile telecommunications technology designed to achieve data speeds of up to 2 Megabits per second (2 Mbps). UMTS is being developed by the 3GPP international partnership. This 3G successor to GSM utilizes the W-CDMA air interface and GSM infrastructures. In the mid2000s, data speeds were in the 384 Kbps range, although in some experiments in Japan, speeds of nearly 3 Mbps were reported. Videotone: A video clip that plays when a mobile device is receiving an incoming call. These types of video-enabled ringtones were in the process of being launched by some global mobile operators in 2005. VoIP: Voice over IP. Also called Internet Telephony or IP Telephony. These terms refer to devices, software and services that use the Internet as the transmission medium for telephone calls. For users who have free or fixed-price Internet access, Internet telephony software essentially provides free telephone calls anywhere in the world. Fixed and mobile telecom operators also use VoIP systems to route voice traffic over the Internet. WAP: Wireless Application Protocol. An open international standard, developed mainly by European telecom firms, for applications such as Internet access from a mobile phone. WAP was designed to provide services equivalent to a Web browser with some mobile-specific additions, being specifically designed to address the limitations of very small portable devices. During the initial years of its launch, WAP had many limitations, was criticized by media and shunned by mobile telecom companies. Later versions of WAP overcame such limitations. WCDMA: Wideband Code Division Multiple Access. Also abbreviated as WCDMA. This is the main technology behind third-generation (3G) mobile networks that are UMTS (3GSM) networks. W-CDMA was developed by NTT DoCoMo as an air interface for their 3G network called FOMA. Later NTT DoCoMo submitted this specification to the International Telecommunications Union (ITU) as a candidate for the international 3G standard known as IMT2000. ITU eventually accepted W-CDMA as part of the IMT-2000 family of 3G
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standards. Later, W-CDMA was selected as the air interface for UMTS, the 3G standard that was launched as successor to the 2G GSM standard. In a technical sense, W-CDMA uses the CDMA multiplexing technique. Earlier, in 2G communications, Qualcomm employed the CDMA multiplexing technique in its proprietary CDMA2000 and cdmaOne standards. W-CDMA, however, is not a property of Qualcomm. It is a global standard of ITU for 3G telecommunications, and is not compatible with Qualcomm’s proprietary CDMA-based standards for 2G communications. Wi-Fi: Short for wireless fidelity, Wi-Fi refers to a class of IEEE standards for 802.11 wireless local area networks (WLANs). These include 802.11b, 802.11a, 802.11g, etc. The term is promulgated by the Wi-Fi Alliance. Products tested and approved as “Wi-Fi Certified” by the Wi-Fi Alliance are interoperable, even if they are from different manufacturers. A user with a “Wi-Fi Certified” product can use any brand of access point with any other brand of client hardware that also is Wi-Fi certified. Mobile devices such as Wi-Fi enabled PDAs can access the Internet when near a Wi-Fi access point (also called hotpoint). Future mobile devices are expected to switch seamlessly between available mobile cellular networks and Wi-Fi or wireless local area networks. WiMAX: A popular way of referring to the IEEE 802.16 standard, also sometimes referred to as the WirelessMAN or the Air Interface Standard. This is a fixed wireless standard that permits very high bandwidth communications in a metropolitan area network that can stretch up to 30 miles. WLAN: Wireless Local Area Network. WLAN uses radio waves to provide a wireless last link with the users in the coverage area. Coverage areas may range from a single room to an entire campus. The backbone network usually employs cables, and one or more wireless access points (“hotpoints”) are provided to connect the wireless users — using laptop or mobile palm-top devices — to the wired network. WML: Wireless Markup Language. An XML language used to specify content and user interface for WAP devices. Almost every mobile phone browser around the world supports WML. WML pages are requested and served in the same way as HDML pages. WSP: Wireless Service Provider. Terms such as mobile operators or cellular service providers are synonymous with this term.
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XHTML: Extensible HyperText Markup Language. XHTML is a hybrid of XML and HTML. The use of standardized “modules” enables XHTML pages to be read by many different platforms. A device designer, using these standard building blocks or modules, will specify which elements are supported. Content creators will then target these building blocks — or modules. Because of standardization of modules, XHTML layout and presentations stay true-to-form over any compatible platform. XHTML-enabled pages can be viewed easily over many multimedia-capable mobile handsets. XML: Extensible Markup Language. XML allows software designers to create their own customized tags (format-specification commands), enabling the definition, transmission, validation and interpretation of data across applications and organizations. Because the tags are customizable, XML applications can be a lot more creative and context-sensitive than HTML applications. Many of the MMS applications, as well as an increasing numbers of m-commerce applications, are written in XML.
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About the Authors 291
About the Authors
Nikhilesh Dholakia is professor of marketing, e-commerce and international business in the College of Business Administration at the University of Rhode Island (URI) (USA). Dr. Dholakia’s research deals with technology, innovation, market processes and consumer culture. He has published extensively in the fields of marketing, e-commerce, and consumer culture. Among his books are New Infotainment Technologies in the Home: Demand-Side Perspectives (Lawrence Erlbaum Associates, 1996) and Worldwide E-Commerce and Online Marketing: Watching the Evolution (Quorum, 2002). Dr. Dholakia has won the Charles Slater award from the Journal of Macromarketing. He has also chaired doctoral dissertations that have won the MSI/Clayton and ACR/ Sheth Foundation awards. Dr. Dholakia holds a BTech in chemical engineering from the Indian Institute of Technology, an MBA from the Indian Institute of Management, and a PhD from the Kellogg School of Management at Northwestern University. Morten Rask is an associate professor of international business, marketing and e-business in the Department of Management and International Business Studies at the Aarhus School of Business, Denmark. He has been a visiting scholar at the University of Rhode Island (URI). Dr. Rask has been doing research on the organizational use of the Internet for international marketing since 1995. His PhD dissertation was about global B2B e-commerce. His current research is on m-commerce, e-business and e-marketplaces. He has published in the fields of global marketing, e-commerce and m-commerce. He is a contributor to Electronic Markets, European Journal of Purchasing & Supply Management
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292 About the Authors
and Management and Business Economics (in Danish). Among his books are: Organizing for Networked Information Technologies — Cases in Process Integration and Transformation (Aalborg University Press, 2001) and EMarketplaces for Exporting (Samfundslitteratur, 2002, in Danish). Morten Rask has won the Tuborg Foundation Business Economist 1999 Award given to PhD students for excellent performance. Morten Rask holds an MSc in international business economics and a PhD in international business from Aalborg University in Denmark, and has practical work experience in Silicon Valley. Ruby Roy Dholakia is professor of marketing and e-commerce in the College of Business Administration, University of Rhode Island (URI) (USA). She is also the director of the Research Institute for Telecommunications and Information Marketing (RITIM) at URI. She has taught at the Indian Institutes of Management, Calcutta and Ahmedabad; XLRI, Jamshedpur, India; and Chuo University, Tokyo, Japan. Her research interests are in the areas of market acceptance of technology products and services, marketing strategy for technology products and services and consumer socialization processes. She has been a seminar leader and keynote speaker in business and academic conferences and workshops in the U.S., Europe, Asia and Latin America. Her consulting experience has entailed conducting empirical studies on organizational and household adoption behaviors regarding telecommunications and information technology products and services sponsored by companies such as AT&T, NYNEX, Motorola, Telecom Italia and Unisys. Her recent publications include: Worldwide E-Commerce and Online Marketing: Watching the Evolution (Quorum, 2002), Multichannel Retailing: A Case Study of Early Experiences, Journal of Interactive Marketing, 2005; Interactivity and Vividness Effects on Social Presence and Involvement with a Web-based Advertisement, Journal of Business Research, 2005; and Mobility and Markets: Emerging Outlines of MCommerce, Journal of Business Research, 2005. *** Syagnik (Sy) Banerjee is a PhD student in the marketing area, College of Business Administration, at the University of Rhode Island, USA. His research interests are in transformations of consumer behavior with rapidly changing technological environments. He holds relevant industry experience in fastmoving consumer goods with Eveready Industries, in logistics tracking and freight exchange solutions with the Venture InfoTech Group and telecommunications services with Bharti Telecom Group (AirTel brand). He has completed his undergraduate (BSc) (Hons) in economics from Presidency College Calcutta,
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About the Authors 293
MBA in marketing from International Management Institute New Delhi and a certified training program on discrete choice analysis from MIT. Jounghae Bang is an assistant professor of marketing at Penn State University, Mont Alto, USA. Her research bridges the areas of marketing and MIS. Her research interests are customer relationship management, relationship marketing, online marketing, data mining and e-commerce. She also studies luxury branding and service marketing. She was involved in several IS projects as an IT consultant at Deloitte Consulting in Korea and as a researcher in Ewha Center for Informatization Strategy (ECIS) at Ewha Womans University in Korea. She holds an MA in management information systems and a BA in business administration from Ewha Womans University in Korea. David L. Bourgoin has instructed management and marketing for the University of Hawaii (USA) and economics, communication and law for the universities of Maryland (Europe and Asia), Thomassat (Thailand), Chaminade (HI) and Hawaii Pacific (HI). His research focuses on international business with emphasis on telecommunications, media, computers and trade. Dr. Bourgoin is also a business consultant specializing in marketing. He maintains an active law practice specializing in international business, intellectual property, real estate and trusts. Other pursuits include TCR Productions — a multimedia company active in TV productions with several theatrical movie projects. He also has a real estate brokerage company, a trading company, several environmental nonprofits and is developing an Internet business portal for networking and data mining. Dr. Bourgoin received his JD from the USD, his MBA from UCLA, an accounting degree from St. Peter’s (NJ), and has attended various doctoral courses at the University of Hawaii (economics) and Arizona State University (business administration). His teaching career required living in some 15 countries ranging from China to England, with travel experiences in some 150 nations around the world. Pro bono services include SCORE, ELAN and HOFA. James Carr is a research fellow at the University of Edinburgh Management School and Economics (Scotland). Dr. Carr’s research examines the social shaping of e-learning and e-government initiatives, e-learning implementation for the small business sector, organizational leadership in the Information Age, eand m-business, e-portfolios and e-health. James has a keen interest in innovative approaches to online teaching and learning and has been involved in the design, implementation, evaluation and e-moderation of several e-learning projects in the higher education and healthcare sectors in the UK and Canada. Dr. Carr holds an Open University Business School certificate in e-moderation, a BSc (Hons) degree in agricultural economics from the University of Aberdeen
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294 About the Authors
and an MBA and PhD in e-learning from the University of Edinburgh Management School and Economics. Inyoung Choi is a postdoctoral research fellow at the Imaging Science and Information Systems Research Center at Georgetown University (USA). Her research interests include information strategy planning (ISP), strategic use of information technology (SUIT) and knowledge management. She has over 10 years of experience in information technology strategy development, system implementation planning and evaluation, including four years of experience as an IT consultant at Ernst and Young Consulting. Dr. Choi received her PhD, from Ewha Womans University in management information systems. Olivier Epinette is associate professor of marketing at the Institut National des Télécommunications in Evry (France), member of the Groupe des Ecoles de Télécommunications. Dr. Epinette’s main research domains are information and communications technology, business-to-business marketing, and service innovation. He has published several articles, book chapters and communications in the field of marketing and is the director of the final year major in “e-business” at the Institut National. He has participated in and managed various research projects dealing with the adoption and the use of ICTs by organizations. He was previously assistant professor for the Franco-Polish School of New Telecommunications and Information Technologies in Poland. Dr. Epinette holds a BA in economics, an MSc in business administration (DEA) and a PhD in business administration from the University of Angers. David Fortin is an associate professor in marketing and a member of the Department of Management at the University of Canterbury in New Zealand. He has a PhD in marketing from the University of Rhode Island and several years’ experience in product management for an international food manufacturer and advertising management as an executive for a medium-sized Canadian advertising agency. His dissertation proposal received an Honourable Mention in the Marketing Science Institute (MSI) Clayton Doctoral Dissertation Proposal Competition and was also a Finalist in the Southern Marketing Association Competition. Dr. Fortin’s research has been published in outlets such as the Journal of Advertising Research, Journal of Business Research, Psychology & Marketing, International Journal of Entrepreneurship and Innovation Management, Telematics & Informatics, AMA Summer and Winter Educators Proceedings, Academy of Marketing Science Proceedings and Marketing News, amongst others. He is the director of the Online Experimental Consumer Research Project, “Web-Lab,” funded in part by the University of Canterbury. His research focuses on the area of interactive marketing and e-
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About the Authors 295
commerce, consumer research on the Web, advertising effectiveness, research methodology, genetically modified foods and attitude change and formation. Timo Kehr works for the Mercedes Car Group of DaimlerChrysler AG in Stuttgart, Germany in central sales planning. His functions at Mercedes-Benz comprise global volume planning and several logistic optimization projects in the areas of supply chain management and flexibility management for the South African DaimlerChrysler plant. Recently he took over project responsibility for a major strategic redesign project at the Mercedes Car Group. Timo holds Master of Engineering and Master of Business degrees from Technische Universität Braunschweig and a Master of Business Administration from the University of Rhode Island. Nir Kshetri is an assistant professor at Bryan School of Business and Economics, the University of North Carolina at Greensboro (USA). Nir holds a PhD in business administration from the University of Rhode Island, an MBA from Banaras Hindu University (India) and an MSc (mathematics) and MA (economics) degrees from Tribhuvan University (Nepal). Nir’s works have been published in journals such as Foreign Policy, IEEE Software, Electronic Markets, Small Business Economics, Pacific Telecommunications Review, Journal of Asia Pacific Business and International Journal of Cases in Electronic Commerce. He has also contributed chapters to several books including: Encyclopedia of Information Science and Technology (Idea Group Publishing, 2005), Indian Telecom Industry — Trends and Cases (the ICFAI University Press, 2005), The Internet Encyclopedia (John Wiley & Sons, 2004), Wireless Communications and Mobile Commerce (Idea Group Publishing, 2003), The Digital Challenges: Information Technology in the Development Context (Ashgate Publishing, 2003), Architectural Issues of Webenabled Electronic Business (Idea Group Publishing, 2003) and Internet Marketing (2nd edition, Stuttgart, Germany: Schaeffer-Poeschel, 2001). Nir’s works have been featured in Foreign Policy, a publication of the Carnegie Endowment for International Peace, and in Providence Journal. Nir was the runner up in the 2004 AMA/TechSIG dissertation competition and the winner of the 2001 ACR/Sheth Foundation dissertation award. He also won the first place in the Pacific Telecommunication Council’s Essay competition in 2001 and second place in the same competition in 2000. Mark M. Lennon is a doctoral student in international business at the University of Rhode Island (USA). With extensive academic and professional experience in Japan and East Asia, his research concentration is in mobile commerce and communications in Asia. In his recent writings, he has explored
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296 About the Authors
topics such as dominant design and patterns of development in the proliferation of mobile communications and m-commerce in the Indian, Chinese and Japanese markets. Feng Li is a professor and chair of e-business at the University of Newcastleupon-Tyne Business School, UK. Previously he lectured at Strathclyde University Business School. For many years his research has focused on the interactions between information systems and emerging strategies, business models and organizational designs. He is the author of two books and many journal articles; he speaks regularly at international conferences and to business executives from both private and public sectors. He has worked closely with companies in banking, telecommunications, manufacturing, retailing and electronics as well as in the public sectors. Professor Li is the winner of the Blackwell Prize for EBusiness and Technology Management at British Academy of Management (BAM2002). He is the chair of the E-Business and E-Government Special Interest Group (SIG) in BAM. His work on Internet banking and on the evolving telecommunications value networks and pricing models has been extensively reported on in the Financial Times, Daily Telegraph, Guardian Weekly, Sky News and the BBC. Blackwell will publish his book, Strategic Innovation and Organisational Transformation through ICTs in early 2006. Tobias Lührig is a senior business consultant at McKinsey & Co. in Berlin, Germany. He received a doctorate from Technische Universität Darmstadt. Dr. Lührig holds a Masters of Engineering and a Master of Business from Technische Universität Braunschweig and a Master of Business Administration from the University of Rhode Island. His research deals with product development and with the relationship between suppliers and original equipment manufacturers in the automotive industry. Besides his professional interests, he is a passionate private pilot and a marathon runner. Chadinee Maneesoonthorn is a PhD candidate in the Department of Management, University of Canterbury, New Zealand. Maneesoonthorn’s research interests include e-commerce, m-commerce, permission-based and e-mail marketing, consumer behavior and consumer culture. Maneesoonthorn holds a BCom in business administration from Chulalongkorn University, Thailand, and a BCom (Hons.) and MCom in management from the University of Canterbury. Savvas Papagiannidis graduated from the Physics Department, University of Newcastle-upon-Tyne, UK. Upon completion of his PhD, he joined the Business School of the same university. His research interests include high-tech entrepre-
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About the Authors 297
neurship, management of small businesses and management of Internet and emerging technologies. Savvas has started a number of e-business ventures and also worked as a freelance Internet developer. Tommi Pelkonen is a doctoral student at the Helsinki School of Economics, Finland. In his professional career he works as a management consultant specializing in mobile telecommunications, internationalization and business strategy formulation at Satama Interactive (www.satama.com), a European digital services firm. He has worked on multiple mobility-related business projects and currently focuses on interactive television solutions at Satama Amsterdam. Prior to Satama, Tommi Pelkonen worked as project manager and senior researcher at LTT-Research Ltd. (www.ltt-tutkimus.fi), analyzing the developments in the Finnish interactive service provision markets. This topic also forms the theme of his doctoral dissertation. Pelkonen holds an MSc (Econ.) and has authored several publications on the Finnish and European digital media landscape. In addition, Mr. Pelkonen has worked as IT-project supervisor and lecturer in the Information Technology Program (ITP) at the Helsinki School of Economics (itp.hkkk.fi). Mats Samuelsson is co-founder of Mobio Networks (USA), a Silicon Valley startup focused on mobile data services. Prior to this he has held a variety of management positions in startups and established telecommunications suppliers focused on mobile, broadband and fixed telecom carriers in all key world markets. Mats holds an MS in EE/CS from The Royal Institute of Technology in Stockholm, Sweden, an MEng in manufacturing from Boston University and an MBA from the Wharton School. Sanjeev Sardana is co-founder of Mobio Networks (USA), a Silicon Valley startup focused on mobile data services. Prior to this he has held a variety of management positions with mobile carriers, financial services, telecom equipment and operator companies. Sanjeev is a graduate of IIT, New Delhi and holds an MS in computer science from Washington State University and an MBA from Columbia University. Pierre Vialle is a professor of marketing at Institut National des Télécommunications in Evry (France), member of the Groupe des Ecoles de Télécommunications. He is director of the final year major in marketing for the School of Management. His main research areas are the strategies of IT, telecommunications and media companies and the marketing of related services, with an evolutionary, resource-based and industrial network perspective. He has
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298 About the Authors
published several articles, book chapters and communications on these subjects, as well as a book called Stratégie des Opérateurs de Télécoms (Hermès, 1998). Pierre Vialle graduated from Ecole Européenne des Affaires (EAP) and holds an MSc in business administration (DEA) from Paris I University. Nicholas Williamson is an associate professor at the Bryan School of Business and Economics, the University of North Carolina at Greensboro (USA). He also works closely with the faculty of the Department of Clothing and Textiles, School of Human Environmental Sciences at UNCG. Dr. Williamson received his AB, MBA and PhD from the University of North Carolina at Chapel Hill. His research focuses on global marketing strategies. Detlev Zwick is an assistant professor of marketing in the Schulich School of Business at York University, Toronto, Canada, where he teaches courses on interactive marketing and marketing of (high-) technology. He has also taught at the Kogod School of Business at American University, Washington, DC. His research currently focuses on cultural aspects of consumer behavior in electronic, mobile and high-tech markets. In addition, he analyses the role of database technologies in the social and linguistic construction of marketers and consumers. His work has been published in several journals, including European Journal of Marketing, Electronic Markets, Journal of Macromarketing, Journal of Computer-mediated Communication, Consumption, Markets and Culture and Journal of Consumer Behavior. He has contributed to a number of books on Internet marketing in Germany and the U.S. His dissertation, The Speed of Money: Investing as Consumption in the Age of ComputerMediated Communication, won a national award from the Marketing Science Institute for best research proposal. He received his PhD from the University of Rhode Island, USA.
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Index 299
Index
Symbols 1G 50, 161 1XRTT 180 2.5G 3, 17, 28, 50, 92, 119, 164, 170, 2.5G GPRS 50, 92, 119 2.5G i-Mode 164, 170 2.5G m-commerce 170 2G 3, 161 3G 3, 48, 92, 163, 170 3G electronic wallet 170 3G FOMA (freedom of multimedia mobile access) 165 3G handset 170 3G UMTS 78, 92 3GPP 36 3GSM4 (W-CDMA) 35 4G 3, 163
A Aaj Tak 143 ABN Amro 117, 148 AC Nielsen 189
Adcore 85 ADSL 179 AirCROSS 206 AirG 21 AirTel 139 AIS 274 Algar Telecom Leste 270 aliant mobility 16 All Nippon Airways 168 allies 160 Am/Pm Japan Co. 167 AMPS network 180 Annite 230 Antenna Hungaria 84 Anycall 206 AOL 98 AOS (angle of arrival) 125 Apple’s iTunes 148, 80 Aral 126 Archart 119 ART 95 artificial intelligence (AI) 25 ASB bank 187 Asia-Pacific basin 178
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300 Index
ASP 39 assisted GPS roadside 28 Association of German Banks 113 AT&T 17, 160, 241 Atos Origin 105 AU Mobile 158 Auckland 179, 187 Audiovox 8450 or 8455 25 Australia 270 average revenue per user (ARPU) 94, 119, 134, 200, 250 AVIVA Plc. 149 Axel F 121 Axime 106
B Bandai Corporation 163 BearingPoint 187 Beijing 37 Bell 16, 159 Bell Canada 19 Bell Mobility 16, 21, 25, 28 BellSouth 50, 180 BellSouth Chile 271 Bharat Sanchar Nigam Limited (BSNL) 136 Bharti Cellular Ltd. 137 Big Brother 223 BizTalk 230 BlackBerry 11, 23, 120 Blair, Tony 223 Blister Entertainment Inc. 25 blogger 97 blog 97 Blue Connect 272 Bluetooth 3, 267 BNZ 188 Bollywood 141 Boston 241 Bouygues Télécom 92 BPL Mobile Communications 137 brand-driven mobile solutions 76
Brazil 270 Breizh Mobile 95 BREW 249 BSNL 136 BT Cellnet 221 BTX 124 business network 76 byair.com 39
C C-HTML 105 CAGR 116 call push architecture 23 Cambridge Positioning Systems (CPS) 41 Cambridgeshire County Council 224 Camelot 226 Canada 16 Car Wash Club 60 cash handling system 188 cashless parking system 188 CBB 49 CBS SportsLine 246 CDMA 3, 16, 136, 180, 198, 241 CDMA 1X 17 CDMA 1xEV/DO 17 CDMA2000 36 CDMA2000 1xRTT 17 CDP2 144 CEBIT 126 cell broadcast 12 cell ID technology 227 cell tower technology 29 cellular 3, 136 cellular mobile service provider (CMSP) 136 Cellular Jockey 141 Chaku-Uta 166 charity 97 Chartered Developer Program 1 (CDP1) 144 Chile 271
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Index 301
China 36, 40, 261 China Mobile 39 China Unicom 39 Chip Xonio 119 Christchurch 179 cHTML (compact HTML) 12, 162 Cingular 241 Circle A 138 Circle B 138 Circle C 138 Citizen’s Advice Bureau (CAB) 230 Cityneo 96 clamshell phone designs 248 CLIP 4 closed and proprietary model 247 CMC 227 CMG interoperability 21 Cmode service 168 CNBC 143 CNN 246 COAI press release 138 Coca-Cola (Coke) 168, 206 Coca-Cola Japan 168 color LCD device 206 commoditized 30 Compaq UK and Ireland 232 competitive local exchange carrier (CLECs) 19 complement 103 complementarity and homogeneity 103 complementary platform 168 Concord Couriers 227 Concord Logistics 224 continuous-loop personalization 7 COO 12 Cookie Time 185 Coopers and Lybrand 143 Copenhagen Stock Exchange 56 core assets 76 crazy frog 121 Creanor 85 Cricket updates 141
CRM 104, 149, 207 Czech Telecom 84
D Dabur 149 DaiIchiKosho Co. 169 daily play 226 Dalink 275 Dance of the Vampire 264 Danish Financial Supervisory Authority 56 Danish Shell 52 Datang 36 Daum 214 Debitel 95 Deloitte 105, 119 Denmark 46 Department of Telecommunications (DOT) 136 Deutsche Post 124 Deutsche Telekom 115 Deutsche Telekom AG 124 device convergence 30 Dhirubhai Ambani Developer Program (DADP) 143 Dial-a-Cartridge service 150 Digia 82 Digital Chocolate 82 direct-to-home 16 DoCoMo 97, 161, 170 DoJa 97 DOT 136 downloadable music 122 DR 55 Dravid, Rahul 141 DTAC 274 dual mode UMTS/GPRS handsets 94 duopolistic market 192 DVD player 211 dynamic services 127
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302 Index
E e-cash payment system (Edy) 167 e-go 57 e-money 169 E-OTD 12 E-Plus 115 e-wallet 102, 157 EasyPark 23, 56 eBay 121 EBITDA 115 Econet Wireless 192 ecosystem 242 EDGE 12, 17, 92, 107, 244 Edy-affiliated facilities 169 EF Sonata 210 EFTPOS 178 electronic arts 82 electronic cash 128 electronic key 170 electronic purse 124 EMC 35 EMEA 105 eMORI tracker service survey 222 Emperor Meiji 159 enhanced message services (EMS) 105, 207 Entel 271 enterprise application 252 Epinion 55 Equant 100 Ericsson 20, 39, 86, 148 ESPN 246 EuroMillions 226 EV-DO 180, 199, 203, 206 Evernet 47 Express Computer Weekly 148 EZ Wallet 167
F Fame Academy 223 Fastnet mobile 187
FC St. Pauli 264 FedEx 253 Fido 18 field service applications 253 FIFA World Cup 273 Fimm 206 find and seek 229 Finland 72 five tariff formula 107 fixed wireless (WLL) 136 fixed-line service providers (FSPs) 5 Flash-Lite 166 Flickr.com 80 FLY 57 Forrester 119 France 90 France Telecom 48, 93, 102, 272 Frances Cairncross 63 FreeMove 102 French Teletel 99 FSPs 5 Fujitsu 230
G Gallery 107 Game Boy 243 Garmin 11 GEO Corporation 170 geo-coded datasets 5 GeoSmart 186 Germany 112, 264 Glenayre 11 global cellular NetVillage 40 global positioning satellite (GPS) 5, 11, 25, 63, 80, 125, 209, 227 Google 245 GPRS 12, 47, 57, 91, 101, 123, 180, 188, 241 Grandeur XG 210 Groupe Bouygues 94 Grupo Endesa 271 Grupo Iusacell 272
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Index 303
GSM 3, 16, 31, 48, 74, 92, 125, 136, 144, 180 Guangzhou 37 GuideCell 203 GW 39
H Hamburg 264 handset subsidies 251 Handspring 11 Hayakawa Estate Inc. 170 Helsinki Televisio 84 Hertha BSC Amateure 264 homogenization 103 Hotmail 29, 246 hotspots 267, 272 HP 150 HSCSD 12 HTML 105 Hutch 144 Hutchison 49, 137, 270, 271, 274 Hydro Texaco 55 Hyundai Kia 210
I i-Mode 94, 126, 162, 168, 252 i-Tunes (Apple) 122 IC chip (integrated circuit) 167 ICI India 149 ICI Paints 149 ICONZ 179 ICT indicators 91 Idea - Chitchat 139 Idea - I-Card 139 Idea Cellular 137 iHUG 179 IMS 255 IMT-2000 36, 198, 211 independent expert group 222 India 133 Indiagames 147 industrial materials 152
INFO 99 Informa Telecoms 16 information on demand (IOD) 39 Infusion Tea Spa 241 innovation 75 Instant Talk 22 Intel 271 interactive 84 interactive voice response (IVR) 53 Interforum 235 International Telecommunications Union (ITU) 17, 36 internationalization layers 78 Internet 93, 162 Internet protocol (IP) 36, 274 Internet service provider (ISP) 5 iPod 134, 242 ISDN 92, 166 Italy 271 Itochu Corp. 168 iTunes 80, 148, 242 IVR-system 56
J JAMBA 121 Japan 157 Java 27, 145, 166 Java Games 145 Java-enabled 25, 40, 147 Jeil Advertising 207 Jet Airways 145 Johnston, Mike 232
K kaizen 171 karaoke 169 KDD (Kokusai Denshin Denwa) 160 KDDI 158 KDDI/au 166 Keitai 158 Kerala 135
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304 Index
killer application 92, 145, 207 Kiwibank 186 K’merce 203 KongZhong 261 Korea Information Security Agency 213 Korea Internet Information Center 211 Korea Securities Computer Co. 215 Korea Wireless Internet Standardization Forum 215 KPMG Consulting 106 KPMG India 148 KPN mobile 95 KTF 205 Kyocera 11, 185
L LBSs 31 LCD device 206 Lehman Brothers Inc. 36 LFS 12 LG 198 LG Telecom 205 limited mobility 136 Linux-technology-focused 85 Little Smart 35 location-based service (LBS) 28, 127, 210, 231 location pattern matching (LPM) 125 London Taxis 224 L’Oreal 206 Lotte 206 Lotto 226 Lotus Notes 100 Lowrance 11 Lucent Technologies 272
M m-advertising 205 m-banking 202 M-Com 188 m-commerce 109, 167
M-Gain 79 m-government 213 m-Mode 245 m-payment 40, 202 m-portal 6, 49, 57 M6 95 mAdnet 206 Magellan 11 Malaysia 274 Manabi 158 Manchester 226 Manga (cartoons) 163 Mangaratiba 271 Maori 192 MapMe™ 29 Marty’s Liquors 241 Matrix software 41, 264 mblog 100 McDonald’s 182, 185, 272 McText 184 media consumption-driven model 87 media group 16 MEdia Net 246 media publishing 78 Mediaset 84 membership card 169 meta-data 78 Metax 47 metro regions 138 MexE 12 Mexico 272 Mfreei 209 MIB City 100 Microcell 16, 21 Microsoft 11, 81, 105, 123, 230 middleware 104 Milligan, Ian 226 Million-2-1 226 Ministry of Communication 160 Ministry of Economic Development 191 Ministry of Industry 159
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Index 305
Ministry of Information and Communication 212 Ministry of Post and Telecommunications 212 Ministry of Trade and Industry 159 Minitel 99 Mint Inc. 22 MIS/Sales 149 Miss Universe 147 Mlogistics 227 mobile advertising 205 mobile banking 148 mobile blogging 97 mobile content 87 mobile data association 223 mobile e-mail 274 mobile ecosystem 2 Mobile GEO 170 mobile Internet service 200 mobile middleware 12 mobile public certification service 215 mobile spam 213 mobile termination rates 191 mobile ticketing applications 264 mobile virtual network operator (MVNO) 91 mobile wallet service 203 mobile Web browsing 274 MobileLime payment system 241 Mobilix 48 Mobitech 55 Mobitel 209 Modi Telstraand Usha Martin Telecom 137 MODS 98 Moneta 202 Moscow 273 Motorola 11, 148 Movial 85 MP3 224, 244 MPA 148 Mpower 148
MS-Mobile 249 MSN Hotmail 29, 246 mTicket 187 MTN South Africa 273 MTNL 136 MTNL Cellular Trump Power 139 MTNL Cellular-Trump Traveler 139 MTNL Cellular-Trump-Keep in touch 139 MTNL-Trump 139 MTNL-Trump Afford 139 Mtone Wireless Corp 40 mTopUp 187 MTS Mobility 16 MTV 98 MTV3 84 multi-point distribution systems 16 multimedia message services (MMS) 5, 49, 80, 105, 207, 227 multiplayer network games 25 Music Wizard 98 Musicload (T-Online) 123 Musitones 98 Musiwave 98 MVNOs 95
N n-Zone service 213 n.Top 203 NAFTA 105 Napster 148, 244 Nate 203, 280 national lottery 224 National Telecom Policy (NTP) 136 NEC (Nippon Electric Company) 159 Nelonen 84 Nemo (Network Memory) 202 NetEase 39 netset 39 Netsize 105 NetVillage 40 New Zealand 177, 184
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306 Index
New Zealand Dairy Foods 184 Newbury 220 Newton PDA 123 Nextel 241 NMT services 94 Nokia 11, 30, 73, 274 Nokia’s Youth Text 2004 30 Nordea 84 Nordic Mobile Telephone (NMT) 47 Nortel 271 NRJ 95 NTT (Nippon Telephone & Telegraph) 8, 92, 105, 158, 160, 171, 245, 252 NTT DoCoMo 8, 105, 158, 171, 252 NTT DoCoMo i-Mode 245
O O2 115, 227 O2 Ireland 98 OB beer 206 OECD 91, 191, 198 Ofcom 222 Omer Telecom 95 One2One 221 OOS thumbs 178 Opera 60 Oracle 105 Orange 48, 92, 97, 221, 272, 274 Orange France 93 Orange Intense 93 Orange MIB 100 Orange Moblogging 103 Orange plc 93 Orange SA 93 Orange World 100, 103 organizational boundaries 267 organizational culture 230 Origin 106 Outerrim 83 Outlook 61 overlapping wireless environment 267
Ovum 119, 208 oyayubi sedai (thumb tribe) 163
P P2P (person to person) 145 Palm 11 Paradox Studios 143 Paris Café 241 Pay for Play 163 Paybox 120, 128 Paymint 22 PDA 62, 103, 123, 143 permission 9, 191 permission-based marketing 213 permission-based mobile marketing 191, 228 personal communications service (PCS) 19 personal digital assistants (PDAs) 2 personalization 9 Philippines 274 Phoneytunes 147 PIA Corp. 169 PicTicket 264 PIM (Portail Intranet Mobile) 101 PIN 124, 148 pixilated mess 186 PKI 12 PlayFon 273 POD 227 Poland 272 Polkomtel 272 polyphonic ringtones 272 portals 104 Post No Bills 124 postpaid 138 prepaid 138, 167, 178, 188 Primo 184 privacy 128, 208, 267 Project Nomad 229 Psion 11 PSP 243
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Index 307
PTK Centertel 272 Pulso 270
Q Qualcomm 143
R R Connect 143 R World 143 Radio Communications Agency 222 RED-Play 185 Reeperbahn red light district 264 regulatory constraints 19 reliability 128 Reliance 136, 143, 146 Renault-Samsung 210 Research in Motion (RIM) 11, 21, 120 Resene Paints 184 revenue sharing model 251 RFID 3, 203 ringtones 121, 141, 166, 246, 275 Riot Entertainment 75 Rogers 16, 18, 21, 24, 28 RPG Cellular 137 Russia 273
S Samsung 11, 25, 198, 274 Santiago 271 Sanyo 8100 phone 25 SaskTel Mobility 16 SAT Tests 158 Satama 79, 84 satellite-aided 3 Scandinavian Airline 55 security 128 SEMA 106, 223 Seoul 206 Sequel Server 230 SFR 92, 100 Shanghai 37
Sharepoint 230 Shields, Alan 229 Siemens 272 SIM-card 49 simplicity 128 Sina 39 Singapore 274 single assessment process (SAP) 229 SKIPPI 122 SKT 202 Sky Cell Communications 137 Sky Digital 226 Sligos 106 Smartcom 271 SmartFIND 186 SmartTrust 270 SMS 5, 49 SMS+ 106 SNCF 99, 102 social learning 230 Sofia Digital 83 Sohu 39 SolidSoft 230 Sonofon 47, 50 Sony 11, 86, 167, 243 Sony-Ericsson 11, 86 South Africa 273 South Korea 197 spectrum availability 250 Sprint 241 Sprite Interactive 228 ST Microelectronics 84 St. Katharine’s Dock 220 St. Petersburg 273 Starbucks 182 static services 127 stovepipe solutions 253 Strand Consult 49 Strategis 234 Strictly Come Dancing 223 subscriber trunk dialing (STD) 140 Sulake 81
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308 Index
Sumea 82 Sumit Mobile Systems Ltd. 40 Sun Microsystems 84, 97 Super 88 241 superdistribution 98 Sure.com 209 Suunto 81 Sweden 273 Swedish-Finnish TeliaSonera 74 Swiftpass 264 Swordfish 21 Symbian 83, 249 Symbianphone.com 36 synchronization 12 Synergy International 188 systems integrator 104
T T-Mobile 77, 93, 98, 115, 241, 264 T@lecom 227 Tandy Radio Shack 11 Tata Teleservices Ltd. 139 TD-SCDMA 36 TDC 47, 50, 57, 272 TDMA 3 technological capability 75 TEKES 75 Telcel 272 Tele Mobil Denmark 54 Telecom Italia 93, 271 Telecom NZ 179 Telecom Regulatory Authority of India (TRAI) 136 Telecommunication Technology Association 215 Telecommunications Business Act 160 Telecommunications Carriers Forum 192 Telefonica 95 Telefonica Moviles 93, 271 telematic system 210 Telia 49, 54
TeliaSonera 274 Telmore 49 Telstra 270 Telstra Active 270 TelstraClear 178 Teltix 264 Telus 16, 21, 26 Tesco 224 Text.it 223 TGIF 206 Thailand 274 thumb talkers 209 thumb tribe (oyayubi sedai) 163 TIM 93 time difference of arrival 125 TOA 12 TOHO Corp. 169 Tokugawa 159 TOM Online 147, 261 Toronto Parking Authority (TPA) 22 Touchpoint 178 Transaltel 95 tsunami 88, 189 TXT-a-Park 187
U u-Korea 212 ubiquitous access 271 ubiquitous marketspaces 233 ubiquitous network 197 Ukraine 273 UMTS 92, 95, 118 United Kingdom 220 United States of America 240 UPS 253 USSD 12
V value added services 140, 166 VAT 226 Veikkaus 84 VeriSign 122
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Index 309
Verizon 241 VIAG 126 video calling 224 video diaries 270 video messaging 228 video streaming 224 videophony 103 Videotex 106 Vietnam 274 Vimplecom 273 Virgin Mobile 20 VisionWare 230 Vivendi Universal 94 Vodafone 77, 91, 100, 115, 178, 182, 188, 221, 272, 274 Vodafone HotLink™ 188 Vodafone Live! 94, 100, 182, 228 Vodafone mTicket 189 Vodafone Omnitel 271 VSNL 136 VXML 12
W Waikato Times 191 Walkman phone 134 walled garden 8, 57, 270 wallpaper 201 WapIt 75 WapMail 183 Warhol, Andy 80 Warsaw 272 Wave Internet 179 WCDMA 36 Weather Channel, The 246 Web clipping 12 Wellington Institute of Technology (WelTec) 187 WelTec 187 Western Electric 159 WIA 221 WiBro 199
Wikipedia.org 80 Wimax 93 win-win situation 168 Wind 95, 271 Windows CE 123 wireless application protocol (WAP) 5, 36, 47, 57, 96, 105, 119, 162, 178, 187 wireless delivered technologies 227 wireless fidelity (Wi-Fi) 3, 36, 93 wireless markup language (WML) 162 wireless service providers (WSPs) 5 Wisemax 41 WLAN 3, 126, 267 WordDial 184 World Cup 145, 273 World War 160 WSP 5, 30, 119
X XDA devices 227 XML 105, 255 Xpress 54 Xtra 183
Y Yahoo! 27, 104, 214, 246 Yankee Group 119 YLE 84
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