Research Notes

New report concludes

Bringing i-mode to Europe is like importing a Japanese car to a place with no roads.
A new report by Strand Consult concludes that DoCoMo’s i-mode is not the success many claim it to be, and rather than trying to adopt i-mode into Europe, European operators should instead concentrate on making it attractive to content providers to develop, and market quality content and services, because:

§There are as many users of mobile services in Europe as there are in Japan
§SMS-based services currently generate as much revenue as i-mode services do
§Because of the ‘Open-garden’ strategy, SMS- and WAP-based services are much better prepared for a mobile market with many operators, and offer much greater revenue potential to both operators and content providers

What European operators and content providers need are revenue models and strategic partnerships, not i-mode.

Back in the seventies, we learned it was possible to buy cars and motorcycles that broke down less and lasted longer. We learned about the Japanese understanding of quality. Ever since we have been quick to think that what the Japanese did, they did better than us. Kaizen, Quality Circles, Just-in-time. We quickly learned to translate Japanese concepts into best practices and benchmarks.

The latest example of this thinking is I-mode, the Japanese equivalent of WAP services. In keeping with tradition, we have been quick to dismiss its western equivalent, WAP as a failure and quick to send people east to learn the secrets of i-mode.

However, i-mode is a success for the same reason that WAP is not, and the sooner we understand that, the better. The sooner we will understand that the problem is not with the product, but rather with its implementation. There is no point in importing a Japanese car, if there are no roads on which to drive.

The European mobile market is lacking the network of roads and the road pricing system required to handle 3G mobile technologies and services. It lacks the kind of road system that can connect and integrate operators, content providers, media companies and users. This is a virtual road system, with virtual road pricing. The more you want to see and the faster you want to go, the more you will have to pay.

Bringing i-mode to Europe will not solve the problem with no roads and no road pricing. European mobile operators alone hold the key to solving this problem. Operators must lead the way in formulating and implementing business models and establishing partnerships based on revenue sharing. They must accept their role as the collective driving force in the market for 3G services.

While 2G mobile services are stand-alone products, many 2.5G and 3G services will combine elements from both operator and content provider. These services include those based on Customer Identification, Location, M-gaming, Community and other platforms. If operators and content providers are to mutually realise the potential of these kinds of services, they must agree on standards. If different operators chose to support different standards – both in term of platforms and billing systems, they will make it virtually impossible to create viable business models. Content providers and media companies will have to version their products to fit each of the different platforms and billing systems. This is likely to result in poorer quality services for user and reduced revenue for operators and content providers.

Mobile operators will have to actively pursue agreements on platform standards. It is these standards, which are the road and road pricing system needed to ensure the commercial success of 3G mobile services. The longer it takes to agree on standards, the more difficult it will be to ensure a return on the UMTS investment. European mobile operators will have to actively pursue a new working relationship – one based on both competition and co-operation.

In a new report, ‘Show me the money’ Strand Consult provides an overview of these issues and strategic challenges. The report maps and explores different business and revenue models in terms of their respective advantages and drawbacks. As such, the report is a strategic tool for both operators and content providers looking to prepare themselves for upcoming negotiations on partnership and revenue sharing

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