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Making Money from the Mobile Revolution

A leap into the future

"The killer application for a mobile phone is the ability to make phone calls"

Mobile phones are the success story of the last five years. While budgets are cut across the IT industry and companies are increasingly looking to do more with what they've got, mobile technologies continue to buck the trend and investment in wireless infrastructure and devices increases year-on-year.

The mobile phone occupies a unique place in wireless. It replaces nothing but is genuinely a new device the likes of which have never been seen before. Today's cellular systems are only 20 years old, while the technology to create handsets as fashion accessories has only been realized in the last few years. The initial cost of handsets led network operators to heavily subsidize the cost, on the understanding that they would make the money back on calls. This was intended to be only a temporary measure, but lit's proving rather less temporary than envisioned! The first network to remove the subsidy will see its customers taking advantage of number portability real fast, while working together to all remove the subsidy at the same time would be anticompetitive.

The Killer Identified
Let's be clear on one thing: the killer application for a mobile phone is the ability to make phone calls. The reason someone walks into a shop to buy a phone is so they can make calls on it. Everything else might be nice, and might make them choose one brand over another, but the reason they buy is voice calls. While data services and messaging get all the attention, it's still voice services that make the deal. Even the most data-centric network operator will get at least 80% of their income from basic voice service.

Even better than basic voice, and providing a significant proportion of that 80% figure, is roaming. Walk outside the area your network covers and suddenly you understand how they can afford a $200 subsidy on your handset! Roaming charges are a rip-off, for what they offer, but are one of the avenues open to the networks to recoup that huge subsidy on the handsets.

Second to voice comes text services. Originally introduced to the GSM service as an afterthought for sending network information to subscribers, it took years to get both the penetration of devices and acceptance by a critical mass of customers - to get the explosion of usage seen worldwide. Both of these conditions have come to pass in the U.S. in the last year, and we can expect a similar exponential growth in text services here, along with the revenue opportunities that come with it.

Multimedia messages are a logical extension of text messaging, including the ability to send pictures, sounds, and video. It remains to be seen if multimedia messages will strike the same chord text did; while volumes have been significant, the penetration of multimedia-capable devices makes message-volume comparisons impossible.

While customers like texting each other, there is significant income from messaging when it's tied into premium services. The ability to use text services as a back-channel for TV, radio and printed media, not to mention as an Internet micro-payment system, relies on a reliable cross-network charging system of the type recently available in the U.S. TV shows like "American Idol" allow viewers to vote for their preferred act, generating significant income. It won't be long before it's possible to finance an entire TV show from the income from viewer voting, as we've already seen in Europe with "Big Brother." But it isn't just the networks that stand to gain from this ability to charge customers small amounts for messages: companies are springing up offering an unimaginable range of services, all paid for by text.

Aside from the obvious share-price systems, and adult services, there are many other ways to make money from text. It isn't just about the provision of information; many European Web sites are already using text messages as a micro-payment system to charge for their content. Visitors to such Web sites must send a premium-rate message, the response to which is a password that can then be used to log on to the site. In this way the mobile phone becomes much more than a communications device, fulfilling its role as a secure mobile wallet with nothing more complicated than an SMS message.

Calling the Enterprise
Business users, on the other hand, have very different requirements for a mobile telephone, and it's worth taking a moment to consider just what makes the enterprise so different before we start to look at how and where they are spending their money.

One of the biggest problems that enterprises will face in the next few years is just keeping up with the technology. A device like the Mda II, a PocketPC device being offered by T-Mobile, will have a life of only about 18 months. After that time it will be supplanted by the "next big thing," which is fine for consumers who will just upgrade to the next device when their contract allows, but enterprise customers are in real danger of just having approved a device for company-wide deployment only to find it's been withdrawn! As consumers demand faster refresh cycles for products, the enterprise needs some stability to allow time for procurement and deployment processes to be followed.

The products and services wanted by the enterprise customer also differ radically from the consumer. While consumers want simple billing concepts that take place right on the mobile phone screen: "Downloading this ringtone will cost you 1.50USD"; the enterprise user doesn't need to be constantly reminded how much everything costs, and will be much happier with a central billing system.

The most important difference between the enterprise user and the consumer, from a technical point of view, is that the enterprise user will have access to their own company servers and is most likely to see the advanced mobile terminal as a way of getting access to those servers. This is easily demonstrated by considering mobile e-mail, and more specifically, the RIM Blackberry product. This is a product that does nothing but allow enterprise customers to access just one of the servers in their office, and its success demonstrates the importance of contact with these servers.

The markets are awash with remote mail solutions at the moment, though none offer the simplicity and power of the Blackberry. As devices conforming to the Open Mobile Alliance E-Mail Notification Service standard start to appear we will see this kind of service becoming a standard feature on all handsets offered in the enterprise market.

Of course, e-mail isn't the only service enterprise customers are interested in. There's a great deal of information on corporate servers that is useful to the employee on the move. The availability of databases, synchronization techniques, and advanced development environments has led to numerous vertical applications addressing needs as diverse as car repossession and crop-yield monitoring. With this comes the development offourth-generation development environments such as Visual Basic and its derivatives.

The Future Of Mobility
Many companies are working on video services, both narrowcast over mobile networks and broadcast using other available frequencies. Early services have been hampered by lack of quality, making even trials of TV-on-a-phone difficult. Handsets with analog TV tuners built in are starting to provide feedback that users are interested in watching TV on their phones, although it remains to be seen if they are willing to pay for it.

Instant Messaging (IM) certainly has content, though the revenue model dips into negativity. Networks are enjoying income from text messaging and launching a service that provides a cheaper alternative would seem counterintuitive. But with their networks offering IP connectivity and their handsets featuring open programming environments like Java, if they don't offer IM software then someone else will. IM will become a must-have feature on handsets within the next 12 months, and the networks will just have to take the hit on their profits.

But with IM comes "presence", where the server can tell other people your current status. Anyone who's used an IM service knows that when you log on you're shown a list of people you know along with their current status. With the next generation of handsets you'll be able to glance at your address book to see not only what your colleague's number is, but also what they're doing! When you change the phone profile everyone who knows you see that you're unavailable.

Of course, for all this to work you'll need to be registered with your network, and they will maintain this presence information for you, but what happens when you want to change networks? You can take your phone number with you, that's mandated by the FCC, but you will also have an identity on the presence system, and the ability to take that with you is not yet guaranteed. You can be sure that if the networks see a way to make it harder to switch they will take advantage of it.

You Say You Want a Revolution?
Presence services will change the way people think about phone calls; making wireless communications much more like speaking face-to-face. Once presence is established new services, like video calling and VoIP, become possible

Yet again, the networks are being asked to take a short-term loss: introducing IM services in competition to their current text messaging, with the assurance of longer-term profits from enhanced services made possible through presence. With profits from other services to make up the difference, the networks should be willing to make a leap of faith and presence-enable our future.

More Stories By Bill Ray

Bill Ray, former editor-in-chief (and continuing distinguished contributor to) Wireless Business & Technology magazine, has been developing wireless applications for over 20 ears on just about every platform available. Heavily involved in Java since its release, he developed some of the first cryptography applications for Java and was a founder of JCP Computer Services, a company later sold to Sun Microsystems. At Swisscom he was responsible for the first Java-capable DTV set-top box, and currently holds the position of head of Enabling Software at 02, a UK network operator.

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