Although competing technologies such as Bluetooth and 802.11x wireless local area networks also carry mobile data traffic, the cellular phone system ‚ today's most comprehensive mobile data network in every community ‚ is the focus of this chapter. In all current digital mobile phone systems, voice is carried over switched circuits as a digital signal. GSM networks use a relatively slow signaling channel to carry short message service (SMS) traffic and other data applications. With general packet radio service (GPRS) or enhanced data GSM environment (EDGE) upgrades to GSM, data flows over the more efficient packet-switched protocol. In the emerging third-generation (3G) networks, fax and data traffic will flow at far higher rates (Held, 2001).

Industry analyst (2003) believe SMS will peak in 2004 and be eclipsed by newer data and messaging services running in 3G environments. SMS is a store-and-forward messaging utility with delivery confirmation. Although the original message limit was 160 characters , concatenation and data compression techniques enable delivery of longer messages. Interconnection among SMS servers and other facilities such as e-mail and the Internet allows interoperability between mobile terminals and a wide range of digital services (Held, 2001, p. 100). SMS functionality is evolving, with new capabilities such as interactivity and personalization. Enhanced messaging service (EMS) and multimedia messaging service (MMS) are newer standards enabling the transmission of richer messages combining text, images, and sounds on GSM networks. They are compatible with existing signaling channels but require new network software and upgraded handsets. As a GSM network knows the identity and approximate location of subscribers, an MDS application can now fix the location of a messaging subscriber, check its databases, and retrieve and forward useror location-relevant data (Longueuil, 2003). Such services generate the value of "immediacy" and network effects with very different economic characteristics to a voice connection (Bergeron, 2001).

A competing wireless data standard, the wireless applications protocol (WAP), adapts layered Internet architecture to the constraints of current mobile networks and cell phone designs from many vendors . However, poor performance accompanied the premature introduction of WAP over circuit-switched GSM data channels. Combined with a lack of compelling content, this deterred adoption. In contrast, NTT DoCoMo's popular i-Mode service uses a proprietary standard ‚ a stripped-down and always-on version of Web technology ‚ adapted for specially designed mobile phones (Matsunaga, 2001). Yet regardless of enabling technology, the marketing challenge is to match service content to needs over time.

The telecommunications industry, caught between the forces of globalization, radical changes in core technology, and overcapacity, is experiencing a long cycle of crisis (Scott, 2001). While some see MDS as a potential savior, the average revenue per user (ARPU) for data (still mainly SMS-driven) services is still less than 10% of total revenue in the lead European market. Under pressure from high 3G license bidding, mobile operators are struggling to fund UMTS network deployment. Not all will find the necessary resources: in the ashes of the NASDAQ meltdown, capital is scarce . The Quam consortium in Germany took the bitter pill of writing off an $8 billion 3G license and exited the market (Blau, 2002).

Despite these problems, many consulting firms that serve the industry are bullish on MDS, with Ovum Consulting Group (2002) predicting that by 2005 the majority of 3G subscribers will be in the Asia-Pacific and in North America, where the Yankee Group (2002) reports that more than 800,000 Americans now use wireless devices to access financial information, although only half have actually completed mobile transactions. Triangle Consulting (2002) sees increases from 8 to 32 MDS services per week per subscriber by 2007. And the nonprofit UMTS Forum (2002) ‚ which backs the UMTS (universal mobile telecommunications system) 3G standard ‚ projects that 3G services will reap cumulative revenues of US$1 trillion worldwide by 2010, with growth opportunities in the Asia-Pacific and data services generating more revenue than voice. While these optimistic scenarios assume the enabling infrastructure, applications, and data are in place, sufficient revenue simply will not appear unless large numbers of subscribers adopt MDS.

The current cellular network and the billing systems that support its revenue model were designed for voice, not for data. Web surfing and other value-added MDS applications run faster and more smoothly on networks designed for data traffic. A useful interim solution, the GPRS upgrade to GSM provides a higher bandwidth, always-on packet-switched data path . EDGE technology offers even better performance, while full UMTS (3G) is in the trial stage in several Asian cities. However, the runaway successes of SMS and i-Mode point to human behavior as the key barrier to MDS adoption rather than technology. Given the investments in facilities required to deploy MDS infrastructure, applications, and data, operators will need to understand what value propositions specific subscribers will expect and be willing to pay for over time.