Mobile Services: Less Talk, More Profit

As many savvy communications service providers (CSPs) are discovering, m-commerce comprises a host of products and services they can offer customers. CSPs are expanding their definition of m-commerce to include a range of mobile data services, such as short message service (SMS), multimedia messaging service (MMS), applications developed using Sun Microsystems' J2ME platform technology, mobile video streaming, mobile games, and location-based service.

Mobile commerce encompasses more than just making a purchase using a portable device. As many savvy communications service providers (CSPs) are discovering, m-commerce comprises a host of products and services they can offer customers — and even resell to other carriers.

Take Philippines-based wireless carrier Smart Communications, for example. The company has developed a service called Smart Money Mobile Commerce Platform that links credit cards to account holders' mobile phones. Each time the card is used, a message is sent to the phone with the purchase details. Cardholders then confirm each transaction, helping their banks combat fraud more effectively. The first electronic credit card application of its kind, Smart Money runs on the Sun Solaris Operating System.

But linking credit card activity to mobile phones is just one innovative application for mobile devices. Increasingly, CSPs are expanding their definition of m-commerce to include a range of mobile data services, such as short message service (SMS), multimedia messaging service (MMS), applications developed using Sun Microsystems' Java 2 Platform, Micro Edition (J2ME platform) technology, mobile video streaming, mobile games, and location-based services.

Windows of Opportunity

For CSPs, mobile commerce offers two new levels of opportunity, says Steve Gaede, president of Lone Eagle Systems, a technology developer and consultancy in Boulder, Colorado. "First, mobile services enable telecom providers to generate new revenue streams for non-voice communications, which is increasingly important in the competitive telecom market. Second, it allows them to sell access to consumers' devices, enabling advertisers to market directly to them," he says.

CSPs will soon act as the "gatekeepers" between content providers and consumers, predicts Dr. Robert Davis, a senior lecturer at the University of Auckland Business School in New Zealand and visiting lecturer at Assumption University in Thailand (ABAC). Davis has done extensive mobile commerce research in conjunction with Siemens Mobile and ABAC.

"The real opportunity is for telecom providers to create and manage high-quality access, protect the user, and maintain high levels of consumer respect; provide funding through revenue sharing to content developers and creators; and focus on the value of the experience through marketing communication," Davis says.

And while the market is still emerging, the Yankee Group forecasts that in just three years 50 million wireless phone users in the United States will authorize payments for premium content and physical goods on their mobile devices. The Yankee Group also predicts that the size of the U.S. mobile commerce market will reach $15 billion by 2006--which implies that carriers can increase monthly revenue anywhere from 20 cents to $3 per customer, depending on their share of m-commerce revenue.

And the story is even more promising in other parts of the world, which are way ahead of the United States in terms of m-commerce adoption.

Acceptance of mobile commerce applications is intertwined closely with culture, says Gaede. "It differs widely from continent to continent. In Europe, for example, people are more mobile, and the region is more dense. For that reason, SMS is already wildly popular and accounts for 90 percent of all cell-phone data revenue. People appreciate that you can communicate with others while in meetings, on trains, in shops — and it's all very unobtrusive."

In the Asia-Pacific region, historical circumstances have shaped the market for mobile commerce, says Bill Cowper, Sun industry director for telecommunications in the Asia-Pacific region. "Seven years ago, Asia-Pacific nations had no infrastructure and a very low penetration of wired services. So today they're not going from wired to wireless services, they're going from nothing to wireless."

In 1998, for instance, there were about 9 million cell phones in China. Now, that number is 210 million. And in Thailand, mobile commerce is a burgeoning market, estimated to be worth anywhere from 300 million baht to 1.8 billion baht ($7.2 million to $43 million), according to a 2003 report by Dr. Davis.

Delivering the 'Killer App'

Still, if CSPs are going to take full advantage of the opportunities offered by mobile commerce--both in the United States and abroad--they must first deliver the "killer app," says Cowper.

"The killer app is always going to be personalization," he says. "Finding the application that a specific population is willing to buy will drive new revenue opportunities for telecom providers. And this will vary from continent to continent and region to region. Telecoms need to target the right content and services to the right customers."

For that reason, finding such an application for the U.S. market may take time, says Bruce Baikie, a telecommunications industry manager at Sun.

"Eventually, what'll make mobile commerce take off in the U.S. is the same thing that made cell phones take off: namely, knowing it'll work anytime, anywhere," Baikie says. "Over time, consumers will have that level of assurance. Once consumers are confident, mobile commerce will become a daily part of life. And that's when carriers will really start to make money."