New report concludes: Most European mobile operators are acting as if the typewriter was back in fashion
|Can you imagine IBM going back to producing typewriters and DOS based software? Can you imagine a technology company ignoring the technological development? Difficult, is it not?|
However, this is exactly how many European mobile operators are behaving in relations to the development of 2.5G and 3G mobile services:
They are focusing on 2G mobile services like SMS, even though their investor relations departments will tell you that their future revenue will come from 2.5G mobile services.
They are not developing revenue sharing models to accommodate content providers and media companies looking to develop and market 2.5G mobile services.
They continue to push 2G terminals and as such continue to delay the learning process necessary for ensuring user-readiness for 2.5G and 3G mobile services.
European mobile operators have invested enormous amounts of money in buying UMTS licenses, and they will have to invest even larger amounts in the building of 3G networks. Voice based services cannot be expected to generate sufficient revenue to cover these costs. Therefore, non-voice mobile services are the only way of financing the massive UMTS investments.
The first generation of such non-voice services are Premium SMS and Premium WAP services, and these are what mobile operators are focusing on. However, these 2G mobile services do not have the revenue potential necessary for financing the debts incurred from buying UMTS licences.
Mobile operators urgently need to begin offering 2.5G mobile services like WAP-via-GPRS to their customers. However, before being able to offer these services, they must first create the incentive for external content and services providers to develop and market high-quality 2.5G mobile services. They will need to design and implement revenue sharing models and roaming agreements for WAP-via-GPRS.
Mobile operators need to realise that they, not the terminals, are the drivers of the market for 2.5G and 3G mobile services. 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. This is the important lesson from the South Korean market.
By offering revenue sharing on 2.5G mobile services, South Korean mobile operators have made it very attractive to content and service providers to develop and market quality services. This, in turn, has made it attractive to users to subscribe to these services and provided the incentive to upgrade their terminals from 2G to 2.5/3G. This virtuous circle has again meant a considerable increase in the number of content and service providers.
Strand Consults’ new report ‘Show Me the Money’ is about revenue models and revenue sharing on both SMS, WAP/GPRS and 3G/UMTS based mobile services. In the report, we critically evaluate 28 mobile operators worldwide – including three South Korean operators – 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.
|More information on the report|