Portal wars in a wireless world
By Peter Thal Larson
Published: June 20 2000 18:35GMT | Last Updated: June 20 2000 22:14GMT
Portal wars have returned but this time on a wireless battlefield.
Hardly a day goes by without a mobile operator or information provider launching a new portal to guide users of Wireless Application Protocol (WAP) telephones across Europe. Most of these portals provide news, sports and share price information presented simply enough to be read on a small screen.
This week, iTouch, the mobile information group that is part of Tony O'Reilly's Independent News & Media, launched such a portal. Vizzavi, the portal set up by Vodafone AirTouch, the world's largest mobile operator, and the French media group Vivendi will roll out its services in the next few weeks.
It feels like a throwback to the past. About five years ago companies were falling over themselves to launch portals for the fixed-line internet. They were convinced that most users would come to rely on a familiar service to guide them around the net.
For most of these companies, the bet has largely failed. A few dominant portals such as Yahoo!, America Online and Lycos have survived but many of the rest have been forced to reinvent themselves or have disappeared. But that has not dissuaded mobile operators from trying again.
They have learnt one lesson from the past. When the internet took off in the mid-1990s, fixed-line telecommunications groups were slow to realise its potential and allowed independent operators to control the market. Mobile operators are determined not to repeat that mistake.
The operators have limited time to establish a brand. It is still awkward for users of WAP phones to switch portals, which means many are likely to stick to the one pre-installed by the network operator. "More advanced mobile users will be able to reset the phone," says Karen Higgins, mobile analyst at Merrill Lynch. "But if the default portal is a good one, many customers may become used to it."
However, as the technology develops and third-generation phones capable of more sophisticated browsing emerge, it will become far easier to abandon an operator's portal. "The network operators can block access to some WAP sites," says Fabiola Arredondo, managing director of Yahoo! Europe. "But as we move into third-generation mobile phone technologies, they can't and they won't."
Mobile phone operators have other advantages. As network operators, they have far closer links with their customers than independent portals. Not only do they hold standard billing information but they also know where each of their customers is at any moment. This information is helpful in offering services based on location, such as guides to films showing locally.
This has not stopped established internet portals from trying to break into the new world. AOL has taken a stake in Mviva, a portal being set up by Carphone Warehouse, the British mobile phone retailer, while Yahoo! has signed agreements with mobile operators including Telecom Italia. Even manufacturers are starting to compete. Nokia, the Finnish mobile phone manufacturer, has set up a club for Nokia users.
Such moves do not please some mobile phone operators. Evan Newmark, chief executive of Vizzavi, says equipment manufacturers must think carefully about their tactics. "Nokia and Ericsson are selling equipment to operators. If Nokia wants to compete with some of its biggest customers that is a choice it is going to have to make," he says.
Most analysts expect phone operators to take an early lead. Merrill Lynch estimates that mobile operators' own portals will capture about half the market, with existing fixed-line portals and small start-ups carving up the rest. Even iTouch says it would be foolish to compete head-on with established operators. "They will take a mass-market approach while what we are looking to provide is niche content," says Hugh Griffiths, managing director.
Yet the phone operators will not have it all their own way. Independent portals can make it relatively simple for WAP phone users to switch portals. Iobox, an independent mobile portal, claims to have already signed up more than 1m users across Europe. When a user registers on its website using a fixed line, it sends a text message to the mobile phone that automatically switches the portal.
Network operators can go further, and program their phones to make it impossible for users to switch portals. But regulators are becoming alert to this.
British Telecommunications is under investigation by Oftel, the UK telecoms regulator, for preventing some of its users changing the home page on their WAP phones. Wappup, a French operator, recently won a similar case against France Telecom.
Furthermore, it will not be easy for phone operators to create powerful portals. They have little or no experience in supplying content and services to their customers. They will also need to spread their portals across other services, such as cable networks and interactive television, if they are to make the best of their investment. "The challenge for the incumbent operators is to create an organisation of people who can work across different platforms," Mr Newmark says.
As a result, existing portal operators are confident they will have a place. "In the US, every single one of the internet service providers has abandoned the idea of having its own portals [on the fixed-line internet]," says George Bell, chief executive of Excite@Home, the cable portal. "In six to 12 months' time, the European operators are going to realise that it is hard to do."
The economics of scale involved in setting up and maintaining portals with good content and services suggest consolidation is inevitable. Indeed, it is already happening among cable companies that have tried to establish similar portals. Excite@Home is discussing a merger of its international operations with Chello, the European broadband portal controlled by the cable operator United Pan-Europe Communications.
As mobile phones and television challenge the PC as the preferred way to access the internet, the opportunity for mobile portals is huge. But it seems likely that, as in the case of the fixed-line internet, there is only room for a few players. The battle has only just begun.
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