Research Notes

European mobile operators are not ready for GPRS

Making a mistake and learning from it, is a sign of intelligence. Making the same mistake twice is a sure sign of incompetence.
Many expect WAP-via-GPRS to save the mobile Internet from the damage done by the failed introduction of WAP-via-GSM. However, European operators are proving themselves not ready for GPRS. In fact, they are making the same mistakes as they did with WAP-via-GSM.

Many mobile operators have already implemented the General Packet Radio Service (GPRS) technology for the delivery of WAP-based services. The benefits to users of this 2.5G upgrade of the GSM technology are twofold:

§It offers a four- to fivefold increase in transmission speed from WAP-via-GSM mobile services
§It offers much faster dial-up similar to the difference between analogue and ISDN modems.

To mobile operators, terminal producers and content providers GPRS offers an opportunity to use existing GSM technologies to educate and prepare user for 3G/UMTS based services. To mobile operators especially GPRS is a strategic and cost-effective first step towards ensuring a return on the huge UMTS investments.

Despite these benefits and opportunities, GPRS has not meant an increase in customers’ use of mobile services. Operators have upgraded their GSM networks to GPRS, and the level of use has remained the same. When asked to explain why, operators have argued that as long as Nokia did not offer a GPRS phone, this would obstruct the development of the mobile Internet.

Now even Nokia is offering a GPRS phone, but the level of use of the mobile Internet remains the same. In other words: WAP-via-GPRS is in danger of becoming a commercial flop in the same way WAP-via-GSM was it when first launched. The reason is that mobile operators are making exactly the same mistake with WAP-via-GPRS as they did with WAP-via-GSM.

Just like with WAP-via-GSM, the driving force behind WAP-via-GPRS is not the terminal. Yes, GPRS require new terminals, but they are merely a prerequisite. What drives the market for mobile services is content – quality content that makes users want to pay for the services and thus for new terminals.

Just like with WAP-via-GSM, not enough quality content is available and that, not the missing Nokia terminals, is the real reason why we are not seeing an increase in the use of mobile services. Most operators have not implemented revenue sharing models for WAP-via-GPRS and roaming agreements, which makes it attractive for content providers to develop and market high-quality services. These models and agreements are the real key to making GPRS a commercial success.

What operators are instead focusing on is Premium SMS. They have realised its revenue potential, but this focus is three years too late in relations to 3G/UMTS. The revenue potential of Premium SMS is nothing compared to that of GPRS, and nothing compared with the revenue needed to pay for the investments required by 3G/UMTS.

Mobile operators urgently need to create parallel revenue streams. They urgently need to also design and implement revenue sharing models and roaming agreements for WAP-via-GPRS. Models and agreements, which can help them realise the revenue potential of this market, and help them educate their customers in use of future 3G/UMTS services. Operators who fail to do this will simply not be able to survive long enough to experience the market for 3G/UMTS mobile services.

Our new report ‘Show me the money’ is about revenue models and revenue sharing for SMS, WAP/GPRS and 3G/UMTS based mobile services. In the report, we critically evaluate 28 mobile operators worldwide and their different choice of revenue sharing models. We describe each model and evaluate them from the point of view of both the operators themselves and content providers. We describe how operators share revenue and look at the contractual costs incurred by content providers. We look at the consequences of these contractual costs on the supply of services.

The report concludes that only the Norwegian operators have succeeded in translating their experiences and successes with SMS based services into equally successful WAP-via-GPRS strategies. Consequently, Norway is one of the very few markets where it is commercially viable for content providers to develop and market mobile services.

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