Time to Face the Facts
By David Cotriss, Wed Aug 22 00:00:00 GMT 2001

Coming to grips with reality isn't always easy.

I hate to say it, but many aspects of the wireless industry are just boring. I can look at the dozens of "cool" new handsets available to me and they all start to look the same. Of course, what's exciting to one person may not be to another. The trick is to keep it interesting (and useful) to the critical mass - if any sort of successful business is to come of it. Which raises the questions: What will be needed to keep the industry appealing and make for viable business models?

In general, new industries appear to generate the most excitement. This includes the early days of TV, radio, and the Internet, for instance. I can remember when cell phones first emerged and how exciting they seemed. "I recall when the ultimate wireless penetration was 12 percent," says iGillott Research principle Iain Gillott. "Now it has reached 70 percent, and it will reach 80 to 85 percent." Having neared saturation, I have to wonder if the most exciting days of wireless are behind us.

Are you an investor or a consumer?

Clearly these two groups have different outlooks on the industry. "If you're in investment banking or backing spectrum bids, it's not boring," says Gartner analyst Mike McGuire. Mark Riseley, analyst with GartnerG2, says operators need to sell investors over the long term to pay for 3G debt. And this can be accomplished by setting realistic expectations of what makes money. He believes the payments market will be key to 3G - which is a long-term view - but better service will be required to get there, which should be focused on now.

Being on the consumer side, I can see the challenges involved in capturing user interest. But without that, the wireless industry won't last very long. Voice is essentially a commodity today, with more coverage and minutes available for less money - essentially taken for granted. In the United States, where desktop Internet access is ubiquitous, voice is still the king. Wireless services in Japan and Europe are more exciting in general - color screens, cool animation, ring tones, and the like.

As Jupiter Media Metrix analyst Seamus McAteer points out, much of this is cultural - such as the amount of time spent on the subway or access to desktop computers. One has to question whether those users will also become bored with those services. "Users in other countries don't tend to take SMS and other services for granted. They value them, and there are always new developments like MMS that will peak interest," explains Cahners wireless analyst Dom Longueuil.

"Mobile operators have failed to recognize the phone as a service in the past," states Riseley. "They have a short-term revenue-centric vision. They need the help of other service companies to get a piece of the $300 million annual credit card transaction revenue, for instance. They haven't seen the light." He adds that the lack of standards in the United States has only hampered development; hence excitement, and that service will need to be seamless as in Europe for the industry to truly evolve.

Forrester analyst Carsten Schmidt also notes that more phones like those used in Japan extended to other parts of the world would help build interest and excitement. This is similar to the computer industry and the recently introduced iMac compact computer, which aimed to bring freshness to an otherwise stale industry.

Schmidt points to how Microsoft, for example, has great difficulty making things seem exciting, especially since consumers don't expect excitement from them - they expect reliability. However, Microsoft and others would do well to bring some fun back to wireless, which could do far more than cashing in on people's desire to have the "latest and greatest" models and upgrades, a tradition carried over from the software industry.

Inside the hype machine - and beyond

Part of what I think causes the wireless industry to look boring is the constant hype by carriers that fails to deliver. By hyping services beyond what they can deliver, the industry is essentially shooting itself in the foot. I certainly recall this happening with the World Wide Web.

"For the next few years, the biggest problem is managing expectations," states McGuire. "Carriers won't always find a magic feature set. They will have to segment offerings more." A good example is games, which may seem exciting to many but definitely aren't exciting to all.

"There's lots of awareness of extra services, but people don't really want to use them. Surveys repeatedly show that people want to do what makes sense via mobile, like using maps and email alerts," McGuire explains. He says consumers must be educated on why they should use services beyond voice, especially in the United States.

I can certainly attest to that, since I often find myself wondering why I would use wireless video, for instance. Much of the hype, says McAteer, is for the huge immediate upside from potential customers and investors. "Greed wants to believe the claims," McAteer states. "Expectations must be managed or interest falls." He notes that many elements of the process are beyond the carriers' control, including hardware, infrastructure, development environments, and business models - all of which must come together to form a viable service.

Schmidt finds the wireless Internet to be similar to the desktop in Europe, for instance, comes from many former fixed operator professionals trying to market wireless the same way, which is impractical. Longueuil cites the recent 3G trial failure in Japan, noting that tests were conducted in perfect environments that didn't mimic the real world - the tests the hype was based on.

"There is a gradual evolution and improvement in technology," says McAteer. "We'll get to a platform in the next five years that can support many of the claims. Most outlandish predictions will occur in the long run, but the marketing machine must be slowed."

It appears likely that the phone will evolve into a "lifestyle management" device, keeping track of payments, schedules, and the like. While this view may be overhyped now, it seems that consumer behavior will eventually evolve along with technology to meet at some future date that remains to be determined.

A new (and better) way to market wireless

Clearly, the wireless carriers have much work to do to educate the public. "There will have to be public service announcements regarding secure payment methods, location-based services, and such. It would help to start educational announcements now," states McGuire, adding that these will eventually target consumers but will be aimed at the industry in the short run with help from the Cellular Telecommunications Industry Association (CTIA) and Wireless Advertising Association (WAA).

If people can get used to applications beyond voice, the industry will seem more interesting. Riseley points out the need to focus on helping people solve daily problems and make better decisions can lead to usage of other services.

"We'll see more consumer goods companies, airlines, and such market wireless services to their customers as an added value to them, which will introduce the wireless Internet to more people and boost usage and interest," explains Schmidt.

Gillott adds, "We'll see differentiation through deals with Coke, McDonald's, celebrities, and the like. There may be combined packages of digital cameras with phones also."

"The wireless industry is still exciting," Longueuil says. "There are new developments in software and technology, and start-ups with fascinating new business models and offerings - even under the current economic climate. There's lots of hype but it's still an exciting, vibrant industry." Perhaps that's what keeps me interested in it - being on the cutting edge. There just needs to be some education on why consumers should be, too.

David Cotriss has published over 100 articles, mostly on wireless and new media topics. He has an advertising background and is originally from San Jose, CA. He now resides in sunny Los Angeles, CA.