Nokia and DoCoMo Versus the Old Guard


Mike Hill, general manager of IBM's Global Communications business, described for us the changing climate in the wireless carrier space. "Voice revenues (as an application) are declining as far as the price point, but the volumes are going up. Cell companies have to continue to provide voice services, but the costs for providing them are increasing. How will they recover that revenue and grow? By offering new applications, most telcos are gearing themselves up for this new opportunity landscape." A market that has more than 170 million subscribers in the United States alonenearly every American adultis an attractive market opportunity for additional services.

But it's not so straightforward. First, there are two competing approaches. Some device manufacturers, such as Nokia, want to build more intelligent devices that run a number of applications locally (i.e., with much of the application processing done by the cellular device or PDA itself). The other camp favors a "thin-client" model with minimal processing at the consumer end of the connection and more processing at the service provider end, resulting in lighter-weight (and cheaper) handheld devices. "We've seen such pendulum swings many times in the regular computer industry. Typically, as speed and ubiquity of communication infrastructure increases, services migrate back to the center and allow for thinner clients. We're seeing wireless speeds and coverage soar, so we're likely heading for service provider services," extols Hill.

Electronic Jack Knives

Our cell phones are rapidly turning into "everything" devices. Candide Media Works (www.candidemedia.com) offers a service called Talking Street (www.talkingstreet.com). For a few dollars, Candide takes you on a pay-per-use walking tour of city sites that would be of interest to you as a tourist, hosted via your cell phone. Dial in to an interactive walking tour; then, as you roam around to various landmarks, pressing different keys activates recordings of scenic details and history. Listen to the tour at your own pace (asynchronously) over the course of a week if you want. Candide Media currently uses celebrities such as Sigourney Weaver or Steven Tyler as the narrators and is appearing in various cities around the United States (Boston, New York City, and Washington, D.C. so far, with more to come).

One could imagine that PDA-cellular devices could augment such a tour with pictures and short video clips. A GPS-enabled device could perhaps guide you along a path during the tour as well. Perhaps even an RFID reader in the phone could detect specific objects in the area and activate recordings for additional details.

Cell phones can also be used as a payment device for services and products; NTT's DoCoMo phones can now be used for retail purchases simply by waving the phone at the checkout in some locations. Such a phone can also be used as a "wireless key" to allow entry into your house or office or admission to a movie. Going forward, it appears that our cell phones (or PDAs) will become our electronic jack knives.


Hill goes on to explain that the adoption rate of any new cellular service is highly dependent on availability of a wide range of extremely easy-to-use applications available for it. We saw that the success of the PC in the 1980s was driven largely by the broad availability of applications made possible by Microsoft's development model, which encouraged a multitude of small software companies to write application software specifically for MS-DOS first and Windows later on (far unlike Microsoft's rivals of the period). However, playing out a similar scenario would be more problematic for the U.S. cell industry. As Hill puts it, "The only model our telcos know is a world where they own everything." In contrast, DoCoMo in Japan is fabulously successful because it has recruited 80,000 software vendors (ISVs) to write applications for its infrastructure. "The DoCoMo model succeeds in Japan partly because they have crafted a win-win model between themselves and the application and content providers, which allows many firms to develop services on a profitable basis. That is a lesson that all service providers should learn from," continues Hill.

Why is this interesting to us as hunters of Inescapable Data incarnations? The apparent rigidity of old-line telcos is currently a barrier to a wider adoption and wider penetration of wireless data connectivity for those interested in crossing the connectivity divide. In the interim, the only people crossing the divide are those who are sufficiently attracted by the limited number of applications available. Thus, the "have nots" presently outnumber the "haves." In time, the logjam of have nots will loosen and break free as more compelling applications bring ubiquitous wireless communication services to all who will embrace them.

Cell Phones That Rock

The music-download industry has been growing rapidly as evidenced by the phenomenal success of Apple's iPod and download services offered by a growing list of e-tailers and retailers (Apple, Microsoft, Sony, and even Wal-Mart and eBay). Apple sells nearly a million iPod-type devices per quarter, resulting in yearly revenue of $320 million.[1]

Think of it, though. For the connected cognoscenti, carrying both an iPod (or other portable MP3 player) and a cell phone is cumbersome and unnecessary (and maybe not even cool anymore). Enter mobile phones that can also store and play music. Additionally, some forward-looking wireless carriers offer both music-download and streaming services. (Remember, it is all about the application.) Strategic Analytics expects that 54 percent of cell phones by 2009 will be capable of storing and playing digital music.[2]

Chaoticom Inc, a start-up based in Andover, Massachusetts, makes software that allows carriers to offer music-download services for properly equipped phones. Europe appears to be ahead of the United States in this new trend, with more than 20 million subscribers signed on through Telenor (a Norwegian carrier).[3] Some analysts predict that within a few years, as much as 20 percent of all music downloads will be to cell phones. The lure for wireless companies is (what else?) increased revenue. In Europe, cell bills are 14 percent higher on average for those with the music-download service versus those without, and in a marketplace characterized by keen price competition, music could be an attractive way to add a higher-margin, value-add service to a base service offering.

It is unclear, however, whether the current approach that puts cell carriers in the position of being download "gatekeepers" will have staying power. As hybrid PDAs start adding in MP3 capabilities in addition to wireless Internet access (and thus access to the traditional Internet-based pay-per-download sites), will there be any need for special software and services from the wireless companies? Currently, the wireless data speeds are still relatively slow and the extra compression afforded by specialty software is needed, but 3G services will soon start to roll out higher-speed wireless data communications. In any case, there is a huge demand for digital music provided by electronic distribution avenues, and the invisible cell network is not only an additional pathway but one that drives more convergence of devices such as PDAs, cell phones, and laptops.


[1] http://www.macworld.com/news/2004/07/14/numbers/.

[2] http://www.strategyanalytics.com/press/pr00134.htm.

[3] http://boston.bizjounrnals.com/boston/stories/2004/08/16/story8html.



    Inescapable Data. Harnessing the Power of Convergence
    Inescapable Data: Harnessing the Power of Convergence (paperback)
    ISBN: 0137026730
    EAN: 2147483647
    Year: 2005
    Pages: 159

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