New Hope For Wireless Data
Andrew M. Seybold, Forbes/Andrew Seybold's Wireless Outlook, 11.15.02, 7:00 AM ET
forbes.com
NEW YORK - Is wireless data about to take off? I think so. Wireless network operators are finally getting around to correcting some early blunders. In their early attempts to interest customers in data, wireless operators made many mistakes. The worst, perhaps, was their assumption that consumers would want to access the Internet wirelessly using low-quality monochrome displays on standard wireless phones. It didn't work.
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The second error was that wireless operators failed to see that data would not catch on until every party to the transactions made money. This is something Japan's NTT DoCoMo (nyse: DCM - news - people ) recognized early on. It established a model that provides revenue for every player in the information chain. Result: DoCoMo has had resounding success offering wireless data applications. Each user of DoCoMo's i-mode service spends about $75 per month on data services and there are more than 30 million users. Although the revenue generated from data represents only about 20% of DoCoMo's total revenue, much of it falls directly to the bottom line.
At last, U.S wireless operators are learning from their mistakes. While they have yet to offer the kind of service DoCoMo offers, they have several fresh approaches.
So far, the earliest successes have been with very simple applications such as those that allow consumers to download ring tones, thereby personalizing their phones. Several wireless operators provide access to ring tones from third parties, bill the customer and then share the revenue (typical ring tones sell for $1 to several dollars each). Sprint PCS (nyse: PCS - news - people ) offers only its own ring tones over its network. In controlling where users go to obtain ring tones, Sprint PCS hopes to keep its customers from "wandering" onto other sites.
But ring-tone applications are just the beginning. Qualcomm (nasdaq: QCOM - news - people ), with its BREW operating environment, may be closest to finding a winning strategy. So far, BREW is used by Verizon Wireless and Alltel (nyse: AT - news - people ) in the U.S., Korea and Japan, but its model provides all of the elements for success. Qualcomm works with software developers who design and build applications and games, certifies these applications and hosts them on a server. Verizon connects to this server and makes the applications available to its customers on a pay-per-download basis or a usage license. The BREW back end "talks" to the Verizon billing system which bills customers for the applications and services on their regular monthly statements. The proceeds are divided using a formula that benefits all of the parties involved.
The competitor to BREW is Sun Microsystem's (nasdaq: SUNW - news - people ) Java. This platform is being used by Sprint PCS, Nextel (nasdaq: NXTL - news - people ), AT&T Wireless (nyse: AWE - news - people ) and others. It is similar in most respects to Qualcomm's offering except that billing is handled either by the network operator or a Java third party. I think Qualcomm's system is better. Sun didn't understand how important the end-to-end model would be and is working to fix its model.
Besides BREW and Java, a third approach to giving data a boost is to offer new color-capable browsers. Openwave Systems (nasdaq: OPWV - news - people ) is the leader here and more than 90% of data-enabled phones use Openwave's browser. Openwave provides users with browser-like access to information from a cell phone. Along the same lines, Microsoft's (nasdaq: MSFT - news - people ) .NET gives companies the ability to distribute their internal applications and services to Pocket PC wireless devices.
Andrew M. Seybold - Forbes/Seybold's Wireless Outlook
Wireless data will give the industry a boost and enhance the future of wireless. Capitalize on the trend by investing in the companies with the best prospects for success.
Of course, selling applications to the consumer will only be successful if the applications are compelling. Among the offerings are taking and transmitting photos, instant messaging and access to the Internet and other information sources. It is not clear which of these will catch on but all offer hope to an industry that urgently needs new sources of revenue.
Unlike in Asia and Europe, where teenagers grew up with wireless phones and quickly turned to data services, U.S. teenagers are just beginning to embrace wireless devices and services. The new products may persuade this huge market to spend more time on wireless networks.
However, in the U.S., business users, not the general population, traditionally become the first consumers. These users are either individuals who pay a premium for wireless services to gain an edge at work, or companies that realize that wireless could help them reduce their costs while improving productivity. To sell into this market, operators need to work directly with the corporate information technology and line-of-business managers. They must educate their retail sales staffs so that when business users walk into a wireless retail store, they will walk out with a data service that is easy to install.
Wireless operators have yet to find a way to cultivate business users. To target companies requires applications such as e-mail, calendar, address book, Sales Force Automation, Customer Resource Management and database access.
Companies such as Wireless Knowledge, GoAmerica (nasdaq: GOAM - news - people ), Aether ( nasdaq; AETH) , Hewlett-Packard (nyse: HPQ - news - people ) and IBM (nyse: IBM - news - people ) provide servers designed to be installed behind the corporate firewall, charging the company for the server and per seat or per user. The network operator charges the company for the amount of data sent and received over its network. Where there are agreements between back-end providers and wireless network operators (AT&T Wireless and HP, for example), the corporate customer might receive a single bill and the wireless operator and back-end provider divide the income.
Either way, Information Services will be critical if wireless operators are to avoid becoming "wireless pipes" while others make money from their customers. Now that their networks are in place and there are some really great handheld devices on the market (see next article), data service offerings will give the operators a chance to differentiate their services and thus increase their critical Average Revenue Per Use (ARPU).
As operators begin to offer Information Services, I will identify the networks I think best understand the information delivery models, and which will be successful. I will also be keeping you up to date on the Information Service companies that are working with the wireless operators. For now, put these on your radar: Openwave, InfoSpace, (nasdaq: INSP - news - people ) GoAmerica, Wireless Knowledge, CellMania.
Excerpted from the October issue of Forbes/Andrew M. Seybold's Wireless Outlook |
