March 2003

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Advanced multimedia applications may not be a way of life for the mobile mass market quite yet, but they're catching on quickly worldwide. Attention-grabbing color images, favorite melodies and personalized content are at the center of operators' plans to provide richer experiences to their customers. As people increasingly use their mobile phones as "infotainment" devices to stay in touch with the world around them and to be entertained while on the go, a new breed of multimedia communications services are being introduced to the market.

One of the newest offerings is Multimedia Messaging Service (MMS), which is already emerging as a very popular application. MMS allows mobile phone subscribers to attach graphics, photos, audio or video to a text message. Users are usually first introduced to MMS through person-to-person applications such as photo and video messaging. Future MMS applications will include multi-player games that have a messaging component, interactive video-and-text advertisements, and much more.

Many experts in the wireless industry expect MMS to slowly overtake the very popular SMS (Short Message Service) in coming years. Consultancy Ovum has forecast that yearly service revenues from multimedia messaging services and their associated content will reach US$70 billion within four years. ARC Group analysts forecast that more than 20% of all mobile data subscribers will use MMS in 2007, and Strategy Analytics predicts that 147 million imaging-enabled mobile phones will be sold globally that same year (up from 16 million sold in 2002). Similarly, Shosteck Associates observes that Japanese and Korean operators are promoting camera phones to the exclusion of others and are doubling their data ARPU thanks to the use of mobile photo services and other MMS offerings.

CDMA operators are especially well positioned to ride the growing MMS wave as they leverage the advantages of their new high-speed CDMA2000 1X and 1xEV-DO networks and the availability of a growing range of imaging-capable handsets. MMS can be delivered over CDMA2000 1X at an average speed of 60-100 kbps with peak at 153 kbps, while 1xEV-DO data networks offer speeds of 480-1200 kbps with peak at 2.4 Mbps. There are more than 280 CDMA2000 devices in the global market, and those devices increasingly come standard with color displays and built-in cameras, perfectly suited for MMS.

CDMA operators have been quick to seize the revenue-generating opportunities inherent in MMS. They are also using MMS to differentiate themselves from competitors. KDDI of Japan, along with SK Telecom and KT Freetel of South Korea, were the first operators in the world to offer multimedia messaging. And, across the Pacific, Sprint has introduced innovative MMS services in the U.S. market.

KDDI enjoys early success

KDDI, the second largest wireless operator in Japan, has more than 13 million customers who benefit from the operator's long tradition of technological and service innovation. In July 1999, KDDI was the first operator to introduce high-speed packet data services based on cdmaOneTM IS-95B technology, and in April 2002 it launched CDMA2000 1X services with 153 kbps data capabilities.

KDDI's CDMA2000 service has been a phenomenal success, adding more than 500,000 subscribers per month to reach the 6 million mark in March 2003, after just eleven months of service. During this same period, rival NTT DoCoMo's highly publicized FOMA services attracted only 192,000 users. In the fall of this year, KDDI will launch a CDMA2000 1xEV-DO network capable of supporting broadband access at 2.4 Mbps.

KDDI has been offering data services since April 1999. Today, more than 10.5 million subscribers (77% of the total base) use its highly successful EZweb wireless Internet service. The services were expanded with the launch of KDDI's CDMA2000 1X network, and today the EZweb portfolio includes eznavigation (location-based services), ezmovie (video distribution), EZweb@email (multimedia messaging) and ezplus (JAVA application service) high-speed web access.

One of KDDI's most popular MMS offerings is Movie Keitai, which combines video clips and text messages. KDDI's Movie Keitai is integrated with ezmovie and uses industry standard protocols such as MPEG-4 for video coding and MP4 for video file format. The service initially enabled KDDI subscribers to download video clips onto their handsets. With the introduction of the Toshiba A5301T handset in October 2002, KDDI subscribers can send MPEG-4 video messages up to 15 seconds long. Subscribers can also choose font and background colors and add up to 80 characters of text to each video message. Movie Keitai was so successful that competitor NTT DoCoMo subsequently introduced the service for its FOMA platform.

Another MMS product, KDDI's popular GPS Keitai, continues to expand with new features. The service is integrated with the GPS-based eznavigation location service and is supported by numerous handsets, including models from Sanyo, Casio, Toshiba and Sony. In addition to standard tracking and navigation services, GPS Keitai can be used in combination with a camera phone to send text and images. A GPS-photo message might include a snapshot of a tourist site accompanied by specific location information or a photo of a restaurant along with driving directions. Since a URL of a map site can be inserted in the text part of the message, this combined information can also be received by any EZweb-enabled handset without a camera.

Hiroshi Sakai, KDDI senior general manager and deputy general manager of the Kanto Regional Office, believes the key factors for mass adoption of MMS and other advanced services are the availability of a wide range of phones, ubiquitous coverage and low service prices. Sakai attributes the relative success of KDDI's 3G au services vis-à-vis NTT DoCoMo's FOMA primarily to the technological advantages of CDMA2000 over WCDMA in meeting these requirements.

Today, KDDI sells 15 CDMA2000 handset models, including eight with built-in cameras and five that feature a camera that is compatible with highly accurate positioning information services based on GPS satellite signals. Nearly half of KDDI's CDMA2000 1X handset sales have been camera phones, with some 3.45 million of the subscribed devices at the end of February 2003. In addition, Sakai notes that the evolutionary aspect of CDMA2000 has enabled KDDI to deploy its network quickly and at relatively low cost, allowing the operator to provide service over a wide area (CDMA2000 covers 90% of Japan's population) and offer rich content at a low price.

SKT creates customer value

Jae Byun, vice president in charge of the Network Engineering Division at SK Telecom, agrees with Sakai, saying, "The crucial barriers to popular, widespread usage of wireless Internet are the price of service and the data speed." He notes that SKT has leveraged CDMA2000's evolutionary network upgrades to keep costs down in order to offer customers robust content and applications delivered at high speeds and attractive prices.

In the two years since launching CDMA2000 1X, SKT has added 10 million 3G customers (including 240,000 CDMA2000 1xEV-DO subscribers), accounting for more than 50% of the operator's total customer base. According to Byun, SKT expects many CDMA2000 1X customers will upgrade to CDMA2000 1xEV-DO in coming months. The company predicts it will have 3.5 million CDMA2000 1xEV-DO subscribers by year-end 2003, with 1.5 million of those customers carrying enhanced multimedia handsets.

With the launch of CDMA2000 1X in October 2000, SKT was able to offer a number of multimedia services, including MMS. Its most popular MMS offering is Movie Previews, similar in concept to KDDI's Movie Keitai. In one application, SKT subscribers can download a variety of movie trailers and forward them to their friends with a text attachment. Movie tickets can also be purchased over the mobile phone via an SKT order service.

SKT launched a Photo-Mail Service in September 2001 and in January 2002, the company launched the Nate portal with services which included NATE-Photo and NATE-Printing among others. NATE-Photo has seven categorized menus including digital image printing, a gallery, storage services, community service, and more.

Note: From Jan. 2002, the figures shown above represent the combined numbers of SKT and Shinsegi Telecom due to the merger between the two companies

Since September 2002, SKT has also offered Video-Mail, an MPEG-4 video-based MMS that supports downloads and streaming (Web-to-handset) multimedia services. SKT is upgrading Photo-Mail and Video-Mail using the new multimedia technology SMIL with video/audio/vector graphics. "New multimedia formats such as SMIL and Video (e.g., MPEG-4) will radically increase the transferable data size up to 80K ~ 200K bytes," according to Byun.

In late 2002, SK Telecom unveiled June, a premium multimedia service that leverages the high-speed broadband capabilities of CDMA2000 1xEV-DO. The June service goes beyond Nate to provide a cutting-edge collection of multimedia services designed to capture the user's imagination, such as music-on-demand, streaming video and video telephony. June offers seven major service channels and more than 5,000 content options.

More than 70% of data usage by SKT customers is for entertainment, so it's no surprise that sales of SKT's video handsets have skyrocketed to as many as 20,000 per day. Over 2 million video handsets have already been sold, and MMS-enabled handsets are carried by 11.1% of the total SKT subscriber base. Further, more than 90,000 Photo-Mail and Video-Mail messages are exchanged on a daily basis.

SKT has already seen positive economic results from its bold forays into MMS and other multimedia services. Data revenue increased 168% and its share of total revenue doubled to 8.4% in one year (August 2001 to July 2002).

KTF delivers magic

Korean operator KT Freetel has built on the success of its Magic package of multimedia applications by delivering pioneering MMS services over the 1xEV-DO network it unveiled in May 2002. The company's video-on-demand (VOD) download service can be integrated with its messaging service for delivery of entertainment and information.

In addition, KTF has had great success with its Photo Mail MMS application. Users can pass messages back and forth that have any combination of multimedia content, including a cartoon image, photo or video with text and music.

Advanced data services have contributed significantly to KTF's bottom line. In October 2002, the operator reported that data ARPU generated by its CDMA2000 1X subscribers increased 14 times while subscribers of CDMA2000 1xEV-DO services generated 50 times higher data revenue and more than 20% higher overall revenue than cdmaOne subscribers. By December 2002, KTF had more than 4.8 million CDMA2000 1X subscribers.

Sprint looks ahead

In the United States, the PCS Vision-branded CDMA2000 1X network launched by Sprint in August 2002 has tallied up some firsts. For instance, in October 2002 the operator set a mobile data pricing benchmark by offering an aggressive pricing plan under which customers can add unlimited PCS Vision data usage to any calling plan for an additional $10 per month.

In November, as part of the PCS Vision services, Sprint introduced the United States' first wireless phone with a built-in digital camera, the Sanyo SCP-5300. The phone plays an integral role in the operator's dedicated foray into picture messaging. In addition to the SCP-5300, Sprint also offers the Samsung A-500 and N-800 handsets, which have detachable cameras. Further, a handful of other phones from LG, Hitachi and Sanyo are capable of receiving and accessing URL links for viewing photos.

Sprint subscribers with camera phones can share their photos by sending an SMS to another PCS Vision subscriber or sending an email to any Internet email address. As part of the photo service, the Sprint Pictures Website, lets subscribers upload photos, and modify and manage them from their mobile phone or a computer. The users alsocan change colors in their photos, crop them and add text bubbles. In addition, every picture that is sent or shared is automatically uploaded so subscribers can build an album.

According to Jeff Hallock, senior director of consumer marketing for Sprint, the instant sharing of pictures is the most apparent, and probably will be the most popular application within MMS for the next year or two. He expects wireless photo messaging to catch on quickly, and says, "Reports show that the most popular attachment in a consumer email is a picture. Extending the ability to take digital photos and send them from a wireless device gives one the opportunity to capture images and share them with others instantly."

He also comments that, at this point, photo messaging is primarily a consumer offering, but it also has a host of vertical industry applications, such as realtors sending their clients photos of properties or construction personnel sending updates or spot-checks back to the office.

MMS and other innovative multimedia services have helped Sprint rapidly build its base of PCS Vision users. In December 2002, the operator had signed 633,000 PCS Vision subscribers after only four months of service.

Conclusion

The experiences of CDMA operators show that MMS has arrived in the wireless world. As it evolves from nascent photo and video messaging services, MMS will take on an increasingly pivotal role in bringing enhanced mobile data services to the masses. Ongoing technological developments, as well as marketing lessons learned from offering these early services, promise to yield a vibrant business and multiple revenue streams that CDMA operators will enjoy for years to come.