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Cooking Up Content

By Tammy Parker

It's no secret that operators worldwide are studying the promise of Internet-based value added services, with certain brave pioneers-many with current or planned CDMA-based networks-offering early services in affiliation with pioneering content providers intent on expanding their services to the wireless world.

The increasing dominance of wireless communications is driving this convergence with Internet services. UK-based consultancy, the ARC Group has forecast that in late 2001 the number of data-capable handsets will surpass the number of Internet-connected personal computers. Further, the number of mobile data users worldwide will grow rapidly from 46.3 million in 1999 to more than 1 billion in 2005-70 percent of all mobile subscribers. In developed countries the percentage of mobile subscribers using some form of data services will approach 100 percent (98 percent in the USA, Western Europe and Japan). Mobile data use in this sense will include information retrieval using SMS, possibly via WAP, and other forms of straightforward messaging.

Many operators dip their toes into the content waters by offering rudimentary 'push' services like news, weather and sports, delivered at scheduled times. Yet while these may be the easiest services to offer, they are not necessarily the services that people want. Instead, subscribers want to control the information they can receive, and that information must be timely and personalized. Further, operators are trying to become involved in numerous links across the value chain, increasing the incremental revenue they can earn through each step of a user interaction. According to ARC Group: "By going beyond simply providing a communications pipeline and leveraging involvement in content, e-commerce, website hosting and wireless ISP services, operators will be able to bring in multiple revenue streams from a plethora of interrelated businesses. By integrating this new range of services, a wireless operator will transform itself into the network access point, ISP and information gateway that customers turn to."

End-to-end capability
With that in mind, companies such as InfoSpace.com have stepped forward to provide full end-to-end portal capability that operators can private-label as their own. The company's proprietary Web server dynamically manages content for different devices, constructing information at the time of a query for whatever device a user has, whether a WAP phone, PC, palmtop computer or whatever. Steve Shivers, general manager of the Wireless and Information Appliances Group at InfoSpace.com, claims that carriers should not be building their data infrastructure or using service providers that are limited to compatibility with a single device, such as a WAP phone, because numerous new devices and protocol solutions are hitting the market. InfoSpace.com provides portal services like calendaring, address books, email, instant messaging for wireless devices, e-wallets for mobile commerce, comparison shopping services, news, weather, sports, local movie schedules and more. However, operators and their subscribers retain access to commercially branded portals such as Yahoo and MSN as they wish.

InfoSpace.com has signed a major portal deal with U.S. cdmaOne operator Verizon Wireless, which combines the wireless properties of Bell Atlantic, Vodafone AirTouch, PrimeCo and eventually GTE. According to Verizon Wireless spokesman Howie Waterman, Info-Space.com will provide a common backbone infrastructure for all of Verizon Wireless' U.S. customers as well as Vodafone's portals in more than 20 countries. Verizon will "self-brand our portal," he says. "We want people to use us for multiple services, and we will form multiple relationships with multiple content providers," Waterman says, adding that Verizon is especially keen to enter deals that will garner it revenue from mobile commerce transactions.

However, not all operators are keen to create their own portals and have chosen instead to work with branded portals like those offered by Yahoo! or AOL. For instance, although cdmaOne operator Sprint PCS provides InfoSpace.com's directory service to wireless customers, the operator is opening its wireless data pipe to branded portals like Yahoo! and other third-party services without branding those services as its own. Shivers feels that is a dangerous approach. If Yahoo! makes a deal with another operator, and a wireless user has set up all of their personalized services with Yahoo!, rather than Sprint PCS, it would be relatively easy for that user to leave Sprint PCS and simply follow Yahoo! to the other carrier.

Shivers draws a comparison with the hot ISP business in the 1980s during which companies rushed to be pipe providers to the Internet. The ISP business has since become a commodity proposition with price-based competition ruling. The ISPs that thrived, such as AOL, opted to provide value-added services under their own brand, he says. Users can reach other portals via AOL but on the way they are bombarded with AOL services and promotions, "so AOL has a chance to monetize the relationship with their customers and provide services that differentiate AOL from the rest of the Internet". Providing more than the pipe, he claims, should also be the goal of wireless operators.

While that point continues to be debated, numerous small, independent and relatively unknown portals are springing up, hoping to attract wireless user loyalty. Shivers doesn't think the independents can have early success without carrier support. "We're just introducing these services to users for the first time, and it's really important for the carrier to be involved to present the product and make it easy for the consumer to begin to use," he says. "There will be very few consumers badgering us, begging carriers to go in and set up other bookmarks" for the independent portal services.

Some operators that have added wireless data services report higher average revenue per user among subscribers who adopt those services. One interesting side effect is that the use of simple SMS offerings often results in higher voice use due to follow-up action calls to the message senders and other parties. Directory services also increase use because subscribers can find the numbers they need more easily. Also, the addition of wireless data services might help reduce churn due to higher service utility and the fact that users want to avoid having to re-enter all of their personal information and content requests elsewhere. ARC Group sees five areas in which operators providing wireless data access can draw additional revenue, depending on how far into the value chain they venture. Those include:

  • Access Users pay for airtime, flat-fee subscriptions or a combination of both
  • Content Customers may pay a flat fee or per-use charge to access desired information. Revenue-sharing schemes can be arranged between content providers and network operators.
  • Advertising Businesses pay per impression or per order processed over the network. Payments can be made to an operator that directly sells the ads or to a third-party that operates a wireless advertising business. In the latter case, a revenue-sharing agreement may be prepared between the ad broker and the network operator.
  • M-commerce Customers pay the network operator for goods or services ordered via the network. The operator then processes revenue sharing with the providers.
  • Provider savings This includes cost savings afforded the operator through less operator interaction thanks to services being performed over the air. It also applies to cost savings for merchants doing business wirelessly, who may then subsidize subscribers' bills to encourage more usage.

Premium placement
For its part, InfoSpace.com is compensated by operators for the number of users supported on its platform and the services it provides to those users. The operators, in turn, bill their subscribers for their wireless Internet use. On the flipside, operator Sprint PCS is getting paid by some of its content providers. For instance, it has been reported that AOL, the United States' biggest ISP, paid Sprint PCS $50 million for premium placement on its subscribers' handset menus.

Content provider CNN Mobile, which has signed some 20 operators worldwide, is moving from simple licensing to a cable TV model of shared risk and growth for content distribution, says Locke Raper, business development director at CNN Interactive. Raper notes other economic models could be based on Pay-Per-View or TicketMaster models.

Many operators and content providers see transaction revenue as the real key to wireless Internet success. According to John Yuzdepski, vice president of product marketing and development at Sprint PCS: "Merchant services is the holy grail." He says that when users wirelessly order a book from Amazon.com, Sprint makes more in shared transaction revenue than it does in airtime. Yuzdepski further envisions the day when airtime is free and operators make their money primarily from transaction revenue commissions. "The key to success is making micro-margins on everything, rather than trying to make set margins on specific products," he adds.

"Merchants more and more will be willing to compensate the carrier for providing special offers to the carrier's customers," agrees InfoSpace.com's Shivers. "We already have set up relationships with merchants. So each time a transaction occurs, we get a commission on that, and we share that with the carrier. This is the way money will really be made."

Even directory assistance can play a role in m-commerce. Some analysts claim that 25 percent of wireless users' requests for business listings from directory assistance lead to a purchase from a 'bricks-and-mortar' retailer. Electronic couponing is also a possibility. For instance, location-based technology can be used to direct messages about store discounts to users entering a shopping mall.

Yet CNN's Raper warns that form factor limitations and airtime costs for downloaded ads are hurdles for wireless advertising. Advertisers are interested in wireless, but haven't figured out how to leverage it, Raper adds, explaining that widespread advertising won't happen till operators or content providers can accurately track usage. Ad tracking efforts are coalescing but are still in fairly early stages.

Mobile comparison shopping is another m-commerce service and is already hitting the airwaves. Verizon Wireless announced that its subscribers will be able to enter a product's bar code information on their phones, access BarPoint.com's product information service and get relevant pricing information, allowing users to decide whether to buy an item in a store or from a specified online retailer. In 2000's third quarter, Verizon Wireless customers also will be able to execute m-commerce purchases via the BarPoint.com site from their digital phones.

Some observe that m-commerce won't make much of a splash in mass consumer markets until voice navigation technologies are more widely available. Sprint PCS' Yuzdepski terms voice commands and spoken replies the 'killer application' for the wireless Internet.

Nonetheless, retailers worldwide are getting into the wireless transaction and advertising market. For instance, Amazon.com formed its Amazon.com Anywhere unit specifically for entry into non-PC-based media. Amazon.com Anywhere is a featured content provider for Sprint PCS. According to Chuck Napier, product manager for Amazon.com Anywhere: "We are selling products everyday via Sprint, and that runs across our product line: [from] books, music, videos and software to wide-screen TVs. We're seeing some customer success through Sprint. We're also conducting some technical market education through Sprint for their customers." He cited the need for customer newsletters with information telling Sprint users "that they can shop in real time and it's safe and secure." Napier compared these 'educational' campaigns to similar ones that were conducted in the Web's early days, when consumers had to be convinced of the efficacy of privacy protections.

Tailored service
Amazon.com provides many of the same services to wireless phones that it does to its Web site, including price information, product reviews, and comparisons and comments from other customers. In fact, Lil Mohan, general manager of Amazon.com Anywhere, notes that service to a mobile phone is sometimes faster than that to a PC because the service has been stripped down and tailored to the phone and wireless network.

"Amazon saw that there was an opportunity in the mobile space and nobody else had figured it out," says Mohan. "Others are providing news and information, but Amazon.com is enabling commerce." Among the company's other wireless-related partners are Motorola, Nokia, Canada's Bell Mobility, Oracle Mobile and Nextel.

By entering the m-commerce space early, Amazon.com hopes to learn what consumers want. "That's why we're jumping into the space now. So, when others come in later, we'll already be on our third or fourth revision," Napier says.

And that approach is an implicit acknowledgement that it will take a lot of variations and experimentation before content providers and operators learn to brew up a truly tasty wireless Internet concoction of services.

Tammy Parker was lead author of ARC Group's research report on "Content & Applications for the Wireless Internet: Worldwide Market Analysis & Strategic Outlook 2000-2005." More information is available at www.the-arc-group.com.

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The Japanese cdmaOne content experience

Japanese cdmaOne operators IDO and DDI have been among the early pioneers in wireless Internet services, in part because they needed an offering to compete with NTT DoCoMo's wildly popular, but proprietary, i-Mode data services.

IDO and DDI are expected to merge before the end of 2000, but they are already offering similar wireless Internet services. IDO's wireless Internet service is called Ezaccess while DDI's is branded Ezweb. According to John Martin, director of IDO Lab in Seattle, the Ezweb and Ezaccess services will eventually be consolidated under the service name of Ezweb. Martin says the majority of content on both services has been provided in HDML "because WML 1.1 was not available until very recently." He notes, however, that some Ezweb/Ezaccess content is now available in WML 1.1 format. "We recently upgraded our infrastructure to support WML 1.1, and will continue our migration to supporting both HDML and WML1.1," Martin adds.

"The most popular services are entertainment and "chat" services," Martin says, observing that such Japanese preferences more closely resemble the European than North American experience with wireless Internet. Push services like sports, weather and news are also quite popular, he says. A top offering is a virtual community called Super Dream Apple Town. Another favorite is Himachu, which translates to "I have nothing to do now." Himachu lets users on a buddy list let others know when they are available for email or chat sessions. Community bulletin boards also draw a lot of response, with users flocking to Iketel ("cool") I Net and Tomodachi Hiroba ("friends community"). The Mini Page site allows users to make their own home pages via Ezaccess and the Internet, using HDML and/or HTML formats.

NTT DoCoMo's i-Mode service has won great success with offerings of fun services like games and icons. IDO and DDI have responded with similar products. Martin explains that IDO's Ezget offering includes three popular services: @Chaku Kyarakurabu (@arrival character club) from Cybird, an image service that offers downloadable screen savers. Famous character images offered include the Shari Lewis hand puppet Lampchop, Casper the Friendly Ghost and others. Other services include EZ Melody downloadable ringtones from Kyocera Multimedia and MeloCha! downloadable ringtones from Yamaha

IDO and DDI have been rewarded for their innovative services with phenomenal subscriber growth rates. Nationwide subscribers for the two companies topped 5 million on April 15, 2000, and 400,000-500,000 new users are being added monthly. Total nationwide EZ subs were estimated to reach 1.75 million by May 1, 2000. Ezweb/EZaccess subscribers have accelerated since IDO and DDI launched IS-95B 64kbps "PacketOne" service on Jan. 7.

On implementing the high-speed infrastructure from Motorola, Satoshi Nakagawa, president of IDO, noted: "No other commercial cellular system in Japan can match these data rates, which rival ISDN for wireless users." He added: "The rapid growth of Internet and data services is now shifting to wireless, and we will continue to provide our customers with all the benefits from this trend."

Martin notes that IDO and DDI are investigating future offerings such as location-based services but have made no announcements in that area yet.