M-Commerce: An Operator's Manual

Mobile-telephone operators could compete on all levels of the mobile-commerce value chain--but they should think twice before they do. Upward of 300 million people--more than own PCs--across the world subscribe to mobile telephones. If, as forecast, this figure passes one billion by 2003, mobile telephones will be as common as television sets. Such a penetration rate--combined with technology that provides for the fast transfer of data on mobile networks, standard protocols that deliver Internet-like services on smaller screens, and the very personal nature of mobile telephones--will drive a mobile-commerce revolution (see sidebar, "M-commerce: The next big thing," on the next spread). Within three years, the annual value of goods and services transacted over mobile networks could reach $13 billion, or 7 percent of all e-commerce transactions. [1] Wireless operators are well placed to benefit from this growth because they alone own and operate the mobile networks that make in-commerce possible. But as available bandwidth proliferates and the coverage capabilities of networks converge, the basic business of transporting data will become more competitive, and profit margins will fall. Hence operators are keen to seek value-creating opportunities beyond the simple transport of data. In theory, mobile operators could compete at all levels of the m-commerce value chain, from the provision of basic technical services to the supply of lucrative, customer-facing content. The high stock market valuations of Internet-related companies, their powerful financial muscle, and the absence of strong competition at all levels in the new industry might even tempt them to try. The danger is that they will spread their skills and resources too thin. Moreover, given the first-mover advantages associated with much Internet-related business, such companies risk forfeiting long-term shareholder value unless they concentrate on areas in which they naturally hold a strong competitive advantage. [2] Operators thus need to make difficult decisions about which parts of the value chain to compete in--and how--and which parts to avoid. The m-commerce value chain There are seven links in the m-commerce value chain. At the bottom is transport: the maintenance and operation of the infrastructure [3] that provides for data communication between mobile users and application providers. The second link consists of basic enabling services, such as server hosting, data backup, and systems integration. Vendors wishing to target wireless customers need these services to make products available via mobile telephones. Transaction support is the third link of the value chain. Many wireless services will require some form of payment--usually from the user to the service provider to pay for, say, books or CDs--but possibly also in the other direction, for refunds or customer reward schemes. Transaction support provides the mechanisms for assisting those transactions, for security, and for billing users. The fourth link is presentation services. Providers convert the content of Internet-based applications, which are formatted in a standard known as HTML (HyperText Markup Language), into a standard such as WML (Wireless Markup Language), an HTML subset suitable for the small, low-resolution screens of wireless devices. Content that isn't already on the Internet can be formatted directly into a wireless standard. Personalization support is the fifth link of the chain. One of the main value propositions of in-commerce is its ability to personalize applications for individual users. Providers that wish to offer the best in-commerce services need information such as the user's name, address, location, and billing details (the number of a credit card or a bank account, for example) and even--because the size of the screen affects the kind of information that can be viewed--the type of device used to connect to the service. …