Mobile multimedia - static reception?

June/July 2002

With mobile telephones penetration rates reaching saturation point across much of Europe, operators are desperate to find new ways of generating additional revenues. One way they hope to achieve this is by the provision of mobile multimedia services. However, it will be anything but an easy sell

Ask a mobile phone owner if they are excited about GPRS and 3G and you are likely to get a blank stare. Although mobiles have been the big consumer technology success of the past decade in Europe, the introduction of fast GPRS networks and handsets with the promise of more interesting and colourful applications has largely passed consumers by.

This is unsurprising if you check where mobile revenues are coming from. According to Analysys Research, Western European operators will get 86.2 per cent of their revenue from voice in 2002, with only 8.2 percent coming from short messaging service (SMS) and a small fraction from services like utilising the WAP protocol. Although Western Europe will have approximately 289 million mobile users by the end of the year according to Analysys, the majority will still regard their mobile terminal as a telephone rather than as a multi-media messaging centre.

But operators are still spending vast amounts on money on high-speed networks. Reasonably, the question is ‘why’? Perhaps the reason may be to do with the near saturation point Europe has reached with mobiles. Nearly everyone who wants one has one. The only way of generating different revenues is to squeeze more cash from existing subscribers.

‘Operators are under pressure and their margins are narrowing,’ says Miles Powell, business development director of Aspective, a business mobile services provider. ‘They’re looking to data to increase average revenue per user (ARPU). Networks are short of money because of the cost of 3G licences.’

Although many network operators in Europe have either rolled out GPRS or plan to, neither GPRS nor 3G is being featured prominently in advertising campaigns. That is because there is no one service or application exciting enough for buyers to hook on to; plus the fact that 3G, which will finally allow applications like streaming video and music downloads, is many years away.

‘The message we’ve been giving to operators, to vendors and to enterprises is to focus on now; because even when 3G is rolled out it’s going to be hot spot coverage for some time,’ says Delia Macmillan, principal wireless analyst at Gartner.

Business users

But there is one group of users for whom the so-called interim measure of GPRS is - if not exciting - definitely useful: businesses who want to connect wirelessly to notebooks or send email and other data to handsets. ‘GPRS is a seismic change for large companies for two reasons,’ says Powell of Aspective.

‘Firstly, it’s an always-on packet-switched network, which means firms only pay for the data they use rather than the time they are connected. We approach IT managers and you can see their eyes light up when they realise the cost implications. We emphasise predictable monthly costs. Secondly, there’s the speed. GPRS runs at about 54Kbps which makes data services much more feasible,’ he says.

These kinds of services are not restricted to the high-powered, technology-savvy corporates. ‘We have been following the launch on the O2 network of the Blackberry (PDA-style) device in the UK and Europe. I think it even surprised O2 that some of the uptake of that device wasn’t necessarily the white-collar worker but the construction foreman on site who needs to keep in contact with his email while he is wandering around,’ says Delia Macmillan, principal wireless analyst at Gartner.

Applications for consumers are not as established. For the average mobile customer, the immediate benefit of getting GPRS is the ability to speed up WAP data services. WAP has been less than a stunning success for the mobile operators on GSM. Only 0.4 per cent of revenues came from WAP in Europe in 2001, according to Analysys.
Users have complained that WAP is too slow, too awkward, too limited and too expensive. GPRS should ease at least two of those problems: it will speed up the service and - by charging by byte rather than minutes spent online - make it cheaper.

MMS

But WAP will soon have a rival. Operators and content providers are hoping ‘Multimedia Messaging Service’ (MMS) will follow SMS as the next big mobile craze. MMS is as different from SMS as the old text-only browsers are from the modern visuals of the Web. Developers are working on a huge variety of messaging services, including the exchange of photos and images, sound clips, email and eventually messaging protocols that allow shopping.

Operators are keen to get MMS rolled out as quickly as possible. In Germany, T-Mobile has already launched a free trial MMS service on the Ericsson T68i handset. The trial is useful to T-Mobile and Ericsson because it highlights not only the potential of MMS but also the desirability of the T68i with CommuniCam. Vodafone has also recently announced a technology partnership with Ericsson to provide MMS, and has promised to launch services in a number of European countries from the middle of this year.

But just because SMS was a success it does not follow that MMS will be. The tastes of mobile users have been very tricky to predict. SMS was launched in the early nineties but has only become a phenomenon in the past three years, with the advent of network interoperability and cheap handsets.

Just as ring tones were an unexpected money-spinner, MMS may be driven by something that seems quite trivial. ‘If Monsters Inc came out in six months’ time you would have a little furry animal pushed to your phone with maybe a little music in the background,’ says Macmillan of Gartner. ‘Or wallpaper, or little images that dance across the screen. That is what is going to drive traffic from the consumer side.’

Essential?

Some companies see the wait for GPRS and 3G as a red herring. Mobile games developer In-Fusio offers Gameboy-style games for download over GSM networks. It has a gaming engine embedded in several handsets and a variety of billing models, including charging for extras such as new levels.

Although the firm has plans for GPRS and 3G, it thinks speed can be over-emphasised. ‘GPRS is not going to make much of a difference. We set ourselves three conditions: our services have to work on today’s handsets with today’s billing systems and with today’s data rates,’ says Giles Corbett, managing director of In-Fusio. ‘With GPRS the hope is that the networks will allow multi-player gaming. Then we’ll see a real change in the nature of games,’ says Corbett.

Music service provider Shazam has not waited either. The firm offers a music recognition service, whereby users can find out the identity of a song they are listening to in a bar or on the radio and then send it to a friend. Shazam can see potential in GPRS and 3G but does not see it as essential.

‘We could send a visual, such as an album cover and list of songs. We wouldn’t go into streaming music or downloads. We might do something like pass on a request to buy a song to someone like Sony. We’re more interested in the revenues to be made from person-to-person interaction than m-commerce,’ says Chris Barton, CEO of Shazam.
Early-mover content providers such as these, and others who may not be on board yet, will be important if operators are going to make the most from next generation networks.

‘Operators and their partners are capable of doing amazing things over the next year or two,’ says Paul Clarke, head of e-services for Gap Gemini, Ernst and Young. ‘It depends on how they lead customers through these propositions and educate partners within the value chain. If you ask someone if they want 3G you won’t get a sensible answer. If you ask someone if they want to get home quicker tonight, the answer is yes. If the operators form the partnership with Traffic Master they can make that proposition.’

Hurdles

Unfortunately, there are technology barriers other than the high-speed networks themselves. MMS is hampered by the fact that Multimedia Messaging Centres (MMSCs) are far from in place. ‘The terminals for MMS have to be there before it can launch but the price of terminals won’t come down until subscriber numbers go up. The prices may well fall if Asian companies compete in Europe,’ says Mark Tubinis, chief technical officer of infrastructure company Watercove. ‘But MMS needs to be offered to all kinds of subscribers – both pre and post-paid – and it needs to be able to travel across all networks.’

Billing systems are another technology barrier. At the moment GPRS is charged per byte of data downloaded, which does not mean much to consumers. ‘Everybody has talked about charging by data volume and this is ridiculous, the operators have it horribly wrong’, says Macmillan of Gartner. ‘The prepay market is incredibly competitive. You have to be able to serve that market effectively for these revenues to take off.’
Macmillan thinks there may be method behind the madness. ‘There is a slight move to discourage uptake in the early days by making GPRS not as attractive as it could be until operators get their network sorted out and fine tuned.’

Both business customers and consumers are more likely to respond to new services if they are billed for individual services or transactions rather than general phone use, thinks Tubinis of Watercove. ‘One of the great benefits of GPRS is that the session can be maintained, just like DSL. But operators need to offer content over the same pre-paid account the user has for voice. Our infrastructure allows operators to charge by time or volume or, in the case of MMS, picture by picture. We can have these services over one infrastructure and stop the operators seeing each others’ accounts.’

Being able to separate the billing could lead to some interesting opportunities, thinks Macmillan. ‘Perhaps if I went to access Citibank on my mobile, that sort of access over WAP may be sponsored by Citibank; so Citibank says ‘yes, this is our customer, this is charged to us.’ Whereas if I go online to purchase cinema tickets I’m paying for that and perhaps the ticket can be added to the bill. There are all sorts of different models that can become interesting if you can differentiate content.’

A full range of applications may be some months off and their success uncertain, but the technology and potential market is there. Now it is simply up to the operators and content providers to find the right applications to keep mobile users logged on for longer. As long as the applications are simple and bills easy to understand, it should be easy. Over-engineering, however, will strangle the market and operator revenues and ensure that mobile multimedia remains a niche product.