M-Commerce The Next Big Thing

M-Commerce The Next Big Thing

Four main forces underpin the mobile-commerce revolution third-generation technologies, the Wireless Application Protocol (WAP) and iMode platforms, handset penetration, and personalized services.

Third-Generation (3G) Technologies

Unfortunately, the current (second) generation of wireless networks and handsets supports data rates of only 9.6 kilobits per second, far below the 64- kilobit-per-second capacities of landline copper wires.

That situation will improve this year, however, as GSM (Global System for Mobile Communication), the most common cellular standard, is extended by the General Packet Radio System.

GPRS can support data rates of 112 kilobits per second, almost twice the rate of a standard computer modem and enough to support high-quality streamed audio. True third-generation networks, based on the UMTS (Universal Mobile Telephone System) standard, will raise the rate to 2 megabits per second —one-fifth of the bandwidth available on the standard

Ethernet in Today’s Offices

The high speed at which Internet data can be downloaded is only one important characteristic of the new networks. In current wireless networks, most data communication, apart from the limited Short Message Service (SMS), requires a circuit-switched connection a user must connect to a server to check e-mail, for example.

This limitation has two drawbacks. First, users find themselves on-line even when they are not sending data (while reading or composing e-mail, for example), so they pay higher costs and network capacity is wasted. In addition, since the connection can be initiated only from the mobile handset, asynchronous services, such as automatic forwarding of e-mail, are not possible.

Like the wired Internet, GPRS networks use a connectionless (packet-switched) communications mechanism. Data are split into chunks called packets, to which an address uniquely identifying the destination is appended. This means that although a GPRS handset is, in effect, permanently connected to the network, it uses network capacity only when packets are actually being sent.

The WAP and iMode

Two of the leading platforms for delivering Internet content to mobile telephones and other wireless devices—the Wireless Application Protocol and iMode—were designed to take into account the constraints of wireless communications limited bandwidth and end-system processing as well as a constrained user interface.

Each platform defines a standard markup language that permits an application’s user interface to be specified independently of the end device. The delivery of these services is independent of the underlying networking technology, so applications can be used on different networks, just as Internet applications can.

Handset Penetration

The uptake of mobile telephones has been nothing short of phenomenal, and the trend is expected to continue (Exhibit B). Nokia predicts that within three years people will use mobile telephones to access the Internet more often than they use personal computers.

Personalization

The wireless Internet has three main features that permit mobile interactive services to be more personalized than traditional Internet applications are.

First, mobile telephones are carried by their owners almost everywhere and kept switched on most of the time (especially in Europe, where mobile users aren’t charged for incoming calls). Consumers can thus not only gain access to wireless services wherever there is a network presence but also keep tabs on time-critical information, such as stock market reports or urgent messages.

Second, wireless-network operators—at least those using the GSM standard— are uniquely able to determine the identity of a user. Since mobile telephones are not usually shared, and a personal-identification number often protects them, the telephone itself can be used as a means of identification. Finally, operators can detect a user’s exact location, enabling a whole range of new applications.

In theory, mobile operators could compete at all levels of the m-commerce value chain, from the provision of basic technical services to the supply of lucrative, customer-facing content. The high stock market valuations of Internet-related companies, their powerful financial muscle, and the absence of strong competition at all levels in the new industry might even tempt them to try.

The danger is that they will spread their skills and resources too thin. Moreover, given the first-mover advantages associated with much Internet-related business, such companies risk forfeiting long-term shareholder value unless they concentrate on areas in which they naturally hold a strong competitive advantage.

Operators thus need to make difficult decisions about which parts of the value chain to compete in—and how—and which parts to avoid.