Strategies for the U.S. Mobile Internet Market
Strategies for the U.S. Mobile Internet Market
By: Junichi Threat
Jan. 1, 2000 12:00 AM
Plotting sound strategies to navigate the rough waters of today's mobile market means charting the hazards along with the opportunities. What will it take to keep your business plan for 2003 from ending up on the rocks? Here are some helpful tips for staying on course.
In January 2002, in a Wireless Business & Technology article, entitled, "Wireless Internet...The Next Generation?" (Vol. 2, issue 1), I outlined how the wireless Internet has become a way of life for Japanese consumers and what I thought it would take to create a similar experience for North American mobile users. I also discussed the challenges of the U.S. market and a new technology that promised to provide a long-term fix to the limitations imposed by the then-current mobile technology and business models.
Many of the market and technology trends noted in that article, such as the increasing popularity and availability of Java-enabled mobile phones, are still ongoing and are having a noticeable effect on both sides of the cash register. Wireless solution providers, including carriers, handset makers, and enterprises, are continuing to move away from the older and slower browser-based WAP technology to a more robust Java-based or J2ME technology. All of this supports Gartner Group's forecast in March 2002 that predicted 1 billion Internet-connected mobile devices within the next five years, and 80% of them running Java.
This article deals with the U.S. market for wireless Internet products and services, starting with a market overview. The overview looks at how the U.S. market compares with Asia and Europe, and examines the major inhibitors in the consumer and enterprise markets. The concluding section looks at what key executives in major wireless technology firms are doing to overcome the greatest perceived challenges to market growth in order to move forward.
Today more enterprise-level executives are choosing wireless as part of a planned approach to stay competitive by boosting productivity and cutting costs. Consumers are looking for innovative services that are both fun and practical. Each market has its own hurdles, opportunities, and mindsets. Some products and services designed for one market find immediate application in the other and some don't. Conditions that inhibit one market may or may not inhibit the other. Some wireless executives operating in this jungle are focused on building global markets while others inch forward cautiously with an eye on survival.
The U.S. Mobile Internet Market Today
1. American consumers who are demanding secure and reliable wireless services that are as well matched to their culture and lifestyle as those designed for Asian and European consumers
2. Economic recession and incompatible, competing engineering standards that cause delays in introducing innovative new mobile services that are secure and reliable.
Compared to Asia and Europe, the U.S. mobile market is 1-2 years behind in the rate of wireless Internet use and adoption and is likely to remain that way for a while. This is due to a general lack of demand among users of mobile phones for wireless Internet services. Others cite the expense and complexity of using a mobile phone to access and browse the Net. Add to that the American consumer's current lack of interest in sending text messages using a keypad designed to transmit numbers and not letters.
Other more systemic factors are perpetuating the market gap:
The U.S. Mobile Market Compared to Asian and European Markets
Other reasons for the disparity include:
The faster adoption of the newer wireless services in Asia and Europe is caused by cultural as well as business factors. For example:
Overseas markets tend to be consumer-driven. Consumer applications that prove popular in the consumer market work their way into the enterprise market packaged for business use. The U.S. market is enterprise-driven with applications designed for enterprise use such as e-mail and scheduling eventually finding their way to the consumer side.
U.S. Mobile Market Trends
The Enterprise Market
Growth Inhibitors in the Enterprise Market
The Consumer Market
Growth Inhibitors in the Consumer Market
For both consumer and enterprise sectors, many of the challenges in the U.S. mobile market will be resolved in the coming years with the consolidation of U.S. carriers and the arrival of a flat rate plan for wireless data and voice. AT&T Wireless's "mLife" and Sprint's "PCS Vision" are already moving in that direction. The strength of the major world wireless markets will continue to fuel development in peripheral areas not yet fully equipped with a robust wireless network.
The right technology exists to provide a long-term fix to the limitations imposed by current mobile systems and business models. At the same time, large-scale efforts to experiment, innovate, and convert to new systems are on hold until evidence accumulates that next-generation technology will actually produce new revenue streams and increase profitability.
Perspectives for Moving Forward
NTT DoCoMo's Perspective
Dr. Nakamura views the challenges in the wireless industry on two levels. "For the short term," he says, "the biggest challenge I see for wireless companies is to focus on the customer. U.S. companies still describe their wireless services in technical terms. Customers do not buy the technology; they buy the service itself. So the challenge is to focus more on the customer and on how the technology will make a busy lifestyle easier to manage.
"The biggest challenge in the long term is the trend of globalization," he continues. "This is very difficult for one company to manage alone, so this means a trend toward partnerships or, in other words, alliances beyond domestic borders. I see at most two or three large groups or alliances of companies surviving this trend. Globalization means intense competition in the marketplace for mobile services. The key here is finding the right partnerships with companies that already operate in the major world markets. The big providers of wireless services already have partnerships with companies in foreign markets. This is true of Japan, Europe, and the Americas.
"So, for the short term," he says, "companies must focus more on the customers and how to customize technology to them. For the long term, globalization and alliances will shape strategies for survival."
And what of the strategies themselves? Dr. Nakamura's perspective calls for viewing the challenges on two levels. Successful strategies are based on the same split-level perspective.
"Strategies are simple once the challenge is known," he says. "Many companies have strategies to study customer requirements. The challenge is to find solutions that the customer will value enough to buy. We know that customers value mobile phones because sales go up every year. Not all customers value the wireless Internet enough to use it or even care about it. So we look for a killer app to convince the customer to value the wireless Internet and use it often.
"So the solution is to know what the customer wants and design services that the customer is excited enough to buy and use," Dr. Nakumura says. "SMS is popular in Europe but not in the U.S. Japan has the i-mode service. But right now we don't know what American customers really want to buy beyond mobile voice service.
"History indicates that many technology booms are youth driven," he points out. "This was true of the Walkman. So, I think the killer application for the wireless Internet in the U.S. may well be a product designed for the youth market. In this sense, I think games combined with music and colorful graphic displays are very attractive options for the U.S. wireless market.
"One overwhelming phenomenon which has happened over the past year-and-a-half in Asia," he says,"is the digital camera built into a mobile phone. DoCoMo sold 2 million camera-embedded mobile phones in a two-month period this past summer. It is cool for teenagers to send e-mails with photos - on the spot - at a party, a sporting event, or a music concert using their mobile phones. Sharp Electronics just started to sell 3D image phones in November of 2002.
"Regarding globalization, my advice," he says "is to work hard to make good strong long-term partnerships that give equal benefits to all partners. Each partner must contribute a needed service or technology, or a large number of customers. Because we are talking about survival, choosing the right partners is a very important business strategy. I am very optimistic about the future of the wireless industry, so I think it is worth the hard work of finding partners that will ensure long-term stability and survival."
NEC America's Perspective
Mr. Spreen is NEC America's delegate to a global team that includes representatives from NEC Japan and Europe. This group is directly responsible for defining global road maps and common platforms for NEC worldwide. They focus on the growth of GPRS and W-CDMA technology standardization, content, and tariff issues associated with Java, Synch ML, downloadable applications, and browsers.
Mr. Spreen's involvement in major world markets has given him an inside channel to business development and manufacturing processes in Asian countries. Prior to joining NEC, Mr. Spreen was the senior product manager at Siemens Wireless Terminals and held management positions at AT&T and Ericsson.
Mr. Spreen's view of the wireless industry is generally optimistic. He has a firm belief that the wireless industry will surpass market expectations and overcome the traditional obstacles that impede delivery of innovative wireless systems to mainstream markets. With developments toward next-generation and 3G wireless environments already underway, NEC America has taken a tactical and logical approach to overcoming current challenges and developing a road map for moving ahead.
Mr. Spreen believes that the key to acceptance of advanced wireless systems in the consumer and enterprise markets lies in education. He says, "To best triumph over this challenge, the wireless industry must work together to provide a clear understanding of the benefits and advantages of enriched mobile products.
"For example," he says, "the consumer market must understand how next-generation telephony will not only enhance daily life, but how it will better serve their basic need for mobile communication. Although consumers will be interested in options like an attractive color display and customizable features (downloading ringtones, wallpapers, and Java applications), they do not want to understand the specific back-end technologies. Only by focusing on the benefits that a mobile phone can provide in the form of real-world examples can wireless executives capture consumer interest and stimulate demand.
"This is also true in the enterprise arena," he says. "By focusing on how wireless technology can fulfill the business needs of the enterprise, the value should be self-evident. Wireless offers mobile access to vital enterprise data. Success in the enterprise market will be realized only by the formation of strategic alliances within the value chain of companies that solve the real-life issues of secure remote business accessibility. The enterprise will undoubtedly be more interested in Java-based applications as a means of remotely accessing critical business information and network-based documents. By putting the power of enterprise applications on a consumer handset, the enterprise user will gain a profitable, competitive edge.
"In the consumer arena," Mr. Spreen says, "NEC America is providing Tier 1 and Tier 2 developer support to spur application development. This, coupled with the launch of our consumer-focused portal, will allow consumers to have the ability to customize and download the latest content and applications to their NEC wireless handsets, making the phone as feature-rich as possible. On the enterprise side, NEC has taken all of the benefits and customization strategies that we have targeted for the consumer, and built strategic partnerships with providers of advanced wireless technology like Vuico to deliver those same benefits to enterprise users."
Looking ahead, Mr. Spreen envisions the next hurdle in marketing wireless services to American consumers: "Many predicted in the mid-1980s that cellphone usage in the U.S. would be very low due to the high availability of home, office, and public pay phones. However, the American public proved everyone wrong, and penetration rates soared in the 1990s due to the convenience and the ability to create a personalized mobile experience. Now the same thing needs to happen in wireless data, and NEC is looking forward to being a major driver of this next-generation movement."
Given the current market, there's one more rule of thumb you should keep in mind when putting together business plans.
After you implement your overall wireless business strategy, closely monitor it to ensure that it is not only fulfilling your objectives, but that you are getting the predicted benefit from your investment. If you are not, you need to re-examine your initial requirements and consider available options to the current system.
It's easy to forget that wireless solutions are simply a vehicle for getting from Point A to Point B. Unless you can describe Point B well in advance of choosing a wireless system, you'll be the one who gets taken for a ride.
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