American Wireless Efforts Playing Catch Up

European and US companies looking to make a killing in the wireless commerce market are making a big mistake by not following the lead the Japanese have set, according to Jupiter Research.

Mobile commerce generates $400 million in revenues, and it will take the European and US markets two years to reach that point. And even then, it will be the companies that have upgraded their infrastructure and adopted businesses models similar to those used in Japan that will get their share of the expected $7.6 billion mobile commerce market in 2003.

Japan’s lead in the mobile market is aided by the sheer number of Internet-enabled handsets in the country. By the end of 2000, the number of Net-enabled handsets will reach 6 million in both the US and Europe, compared to 30 million in Japan. By 2003, the numbers will rise to 115 million in the US and 254 million in Europe. Mobile commerce revenues in 2003 will reach $600 million in the US, $1.7 billion in Europe, and $3.5 billion in Japan.

According to Jupiter, Japan’s success in mobile interactive services is largely due to effective carrier execution built around four key elements: an adequate supply of handsets; the implementation of a packet data network; equal opportunities for content providers; and a billing infrastructure upgraded to support charges for premium services.

Despite the expanding user base, wireless carriers in the US and Europe have struggled in their quest for profitability.

“The success of mobile commerce does not depend on higher-speed data services and will rely more on the effective implementation of WAP and the roll out of packet data services over GSM cellular networks,” said John Montelius, a European wireless analyst with Jupiter Research.

Mobile Commerce Revenues
(in $ billions)
Region 2000 2001 2002 2003 2004 2005
North America 0.0 0.1 0.2 0.7 1.8 3.5
Western Europe 0.0 0.1 0.5 1.7 4.6 7.8
Asia 0.4 1.3 2.6 5.0 7.4 9.4
Latin America 0.0 0.0 0.0 0.1 0.2 0.5
Other 0.0 0.0 0.1 0.2 0.4 1.0
Global 0.4 1.5 3.4 7.6 14.5 22.2
US 0.0 0.1 0.2 0.6 1.7 3.3
Japan 0.4 1.2 2.1 3.5 4.5 5.5
Source: Jupiter Research

Not all research firms share Jupiter’s enthusiasm for the mobile commerce market. In the report “Driving Retail With Devices,” Forrester Research projects that mobile phones will account for only 3 percent of total online retail sales in Europe by 2005, totaling 5.2 billion Euros. The real value in mobile devices will be in retail sales influenced, but not captured, by non-PC devices, Forrester found.

Cahners In-Stat Group predicts that the wireless data market will grow from about 170 million subscribers worldwide in 2000 to greater than 1.3 billion in 2004. As a result, more than 1.5 billion handsets, personal digital assistants, and Internet appliances are expected to be equipped with wireless capabilities by the end of 2004. But the killer app, at least early on, will once again be messaging.

“Messaging will be the primary driver of wireless data adoption over the next few years,” said Dave Jackson, Senior Analyst for In-Stat’s Wireless Data service. “We estimate that the number of wireless messages sent per month will balloon from 3 billion in December 1999 to 244 billion by December 2004. Other features such as mobile or m-commerce applications; entertainment; real-time financial information; travel; and location-based (L411) information services (getting directions to the closest restaurant or ATM, for instance) will also be popular but will take longer to reach the market.”

According to J.D. Power and Associates, 12 percent of all households with wireless communication devices have the ability to access the Internet through their wireless handsets. More than 55 percent use their Internet-enabled phone to read/check emails. Other activities cited include obtaining general information such as news, weather or sports (43 percent), sending emails (42 percent), Web browsing (25 percent) and purchasing products/services (11 percent).

Like Jupiter, however, In-Stat also believes that the success of wireless data will not be an absolute given. To ensure that wireless data catches on, carriers must deploy new infrastructure and install new equipment to enable location-based services, high-level security, micro-payment options and detailed billing.

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