Figuring out where the European operators went wrong becomes even more important now that DoCoMo is transferring licences and technical know-how to its Dutch affiliate KPN Mobile. The move will enable KPN to launch a European version of the Japanese mobile Internet service in early 2002. Sure to heat up the market even more is the news that DoCoMo's CEO is on the lookout for additional outposts in Germany, France, Italy and Spain.
While proprietary technology and DoCoMo's tight control over development has helped ensure the success of i-mode, the ace in the carrier's hand has been its store of content - a model the carrier says has generated $500 million per month in revenues with over $60 million per month finding its way back into the pockets of content providers.
Content will probably become to the wireless industry what prime time shows are to TV broadcasters. No one would say CNN's chief asset is its satellite antennae - and so no operator should believe its most valuable asset is the network, observes Iain Gillott, founder and principal of iGillott Research in the US. "What's the value of an always-on network if there isn't anything on it?"Gillott asks. "Operators in Korea and Japan have shown that it's rich content that drives usage."
But negotiating partnerships with content partners to catch up with the likes of DoCoMo creates a slew of new problems: How can an operator manage relationships with tens, hundreds and even thousands of content providers and developers? What's more, what's the guarantee that content providers will accept the revenue split?
Strength in numbers
As it stands the mobile data business model requires content providers to negotiate with operators on a one-to-one basis. It's a pain for both parties involved.
"If we don't get a fair revenue flow going, then a lot of sites are going to die and a lot of providers are going to throw in the towel," says Soren Queitsch, the driving force behind FDIM, an association bringing together Denmark's top 50 content providers.
"No one (content provider) is going to put money into a system where there is no money coming out." In some cases, Queitsch says, a content provider comes away with "5 percent or less" of the revenues generated.
Correcting this imbalance is also the motivation behind the formation of the Mobile Content Providers Alliance, a global professional association scheduled to launch by the end of this month. "Although the operators are finally starting to become more open to revenue sharing and opening up their networks to content providers, industry development is still being dictated by the heavy weights - the operators and hardware vendors," complains Claire Macdonald, an industry veteran promoting the forum.
"The operators say, "we welcome content and applications players, but they must have a viable revenue stream and business model for us to consider them". This is all very well, but there's no overarching support network to help them do this."
While the alliance is primarily a vehicle for content providers to join together, it does support the clearinghouse model as a means to "get content seen and paid for," Macdonald says. "A clearinghouse will provide an additional revenue stream and, if the clearinghouse has enough operators as partners, it will enable network-independent content, which is crucial in creating the competition needed to maintain quality, valuable content. This will be key in driving the growth the industry needs."
The opportunity for intermediaries
Indeed, content providers are no longer buying the operators' argument that billing systems are to blame. Granted the myriad of systems and the lack of standards make it difficult to charge for mobile data, let alone divvy up the revenues, but there are ways around this.
Comparing the current confusion in the mobile data market to the chaos in the early days of airline reservation systems Bornstein stresses that it was the introduction of a centralized reservation system that boosted the industry and streamlined sales. "A clearinghouse (in the mobile data market) will allow the mobile industry to evolve from what it is now, a Wild, Wild West, to an organized market based on efficiency and business sense," says Garner Bornstein, CEO of Airborne Entertainment, a Canadian content aggregator delivering entertainment to mobile operators in the US and Canada.
For this reason Airborne is close to sealing a deal with Wmode, a US-based wireless infrastructure services provider that has created a wireless clearinghouse system for m-commerce uniting carriers, content providers and consumers.
Its solution, ClearMode, enables carriers, content providers and portals to charge users for wireless services and have those charges appear on the user's phone bill. "The market won't take off until money can start changing hands," notes Dennis Woronuk, president and CEO of Wmode.
M-payment in practice:
Another clearinghouse making gains is Dan Net A/S, a Danish company that has been providing data clearing, roaming and e-business solutions. Already serving one third of the world's GSM operators, Dan Net has turned its attention to the m-commerce arena.
"Our focus is solutions for on-site wireless services where the user needs coins in his daily life," notes Christina A. Sorensen, Dan Net Business Development Manager. "Consumers won't want to have e-wallets everywhere and they won't want to have to keep track of what they buy and what bills they'll get."
Dan Net is currently trialing m-commerce clearing services in its home market together with the Danish operators TFC Mobile and Sonofon. Its role is to manage the transfer of micro-payments information between the operators and the content providers.
EDS, which works together with over 100 carriers to clear voice services, is in the early stages of working on m-commerce transaction clearance systems, according to Patty Wilkey, an EDS vice president. "We're in the testing mode, but we're also looking beyond the clearinghouse model to removing the real m-commerce bottleneck: the end-consumer," she explains. "We've been watching the m-commerce market and it's not happening because the consumer take up isn't there."
In her opinion, facilitating the monetization of content is the easy job; it's developing a business model to lure in the customer where other clearinghouses come in short. "We're looking at couponing as a way to show the consumer that there is value add in m-commerce services," Wilkey says.
Too much of a good thing?
With content providers clamouring for an efficient system for generating and collecting revenue for wireless services, Gillott is convinced that "the first six months of 2002" will see the emergence of the clearinghouse model and the demise of the mindset that dictates it's the operator who owns the customer.
But no one company has a runaway lead in this new market. The list of clearinghouses is sure to include the giants such as Convergys, TSI and EDS - as well as companies such as Dan net and Wmode.
Lesser-known players including TeleCash Kommunikations- Service GmbH, a subsidiary of Deutsche Telekom and Comfone of Switzerland may also play a role. "The market can handle as many data clearinghouses as it could voice clearinghouses - so that means at least ten," Gillott observes.
While it's clear that clearinghouses are a necessary link in the value chain, some wonder if the model might collapse. After all, if content is king - and the chief differentiator playing in an operator's favor - then why would an operator want access to a stock of content that his rivals are also pushing to their customers? Sure, a clearinghouse will take the trouble out of managing the relationship with the content provider-but won't there also be a case for going it alone?
Gillott sees it this way: "There's an 80/20 rule that is going to hold true for this market. The 80 percent is going to be generic content that the operator is probably going to negotiate through a clearinghouse, while the remaining 20 percent will be carrier unique."
But maintaining this model won't be easy. At the same time that operators will want the good content and applications for themselves - the developers of these services will want to partner with as many operators as possible.
One could imagine that operators would love to have their 20 percent of unique content include the likes of Disney and CNN, but that probably won't happen since these providers are hardly willing to enter into exclusive contracts. That would cramp their style and limit their revenues.
While companies are trying to figure a way out of this dilemma, the place of the clearinghouse in this model is still secure no matter what. The clearinghouse will either liaison between many carriers and many content providers - or it will mediate between a lot of content providers on behalf of one mega-carrier such as Vodafone or Virgin.
Whatever the outcome, the model is here to stay.
Peggy Anne Salz monitors the global telecoms markets and contributes regularly to Communications Week International. Her articles have also appeared in a number of daily and weekly publications including TIME, Fortune, The Wall Street Journal Europe and The International Herald Tribune.