4/10/2001 Author: Sandip Mukerjee, Director of Mobile Internet, Lucent
Lucent is trying to light the path towards 3G profitability. Its director of the mobile Internet, Sandip Mukerjee, provides an insight on how vendors are pushing business advice to cash-strapped operators.
Technology is rapidly changing our lives. The Internet is changing the way we work, play and shop. People are getting hooked on it and beginning to take it for granted. Now they want to take it with them. And why not? Third-generation mobile Internet applications promise consumers that they will stay connected, keep informed, conduct business, be entertained and find their way - wherever they are.
For new and traditional mobile service providers, these high-speed data and transaction services everyone is talking about will be a means to attract and retain customers and generate revenues in a new market that analysts say will grow from $30 million today to $21 billion in 2004 in m-commerce alone. The clear winners in the competitive marketplace will be the first to implement and deliver a richer and broader range of mobile Internet services to consumers. However, as carriers invest billions to acquire their third-generation (3G) licenses and build next-generation networks, how do they get started? How do they recoup the tremendous cash outlay quickly?
As we at Lucent see it, the challenge is creating new revenue streams now so operators can make their third-generation business cases work well into the future.
That requires a partner who recognizes and understands the challenges mobile operators are facing and that can help drive revenue quickly. It also dictates a vendor partner who can deliver solutions that address the new 3G business model while protecting operators' financial investments.
The stakes are high and the 3G mobile Internet business model is fundamentally different than offering voice. For one thing, there is an increase in new players in what the industry calls the 3G value chain - service providers, portal suppliers, applications suppliers and wireless operators. These companies are literally coming between licensed network operators and mobile subscribers.
This will mean complex billing based on revenue sharing with all the key players in the value chain, rather than on simple minutes of usage. In this new business model, micro-billing and transaction settlement will be the cornerstones for collecting new revenue. The right partner will be ready to help operators recognize these shared revenues, collect them and deliver the customer care associated with them.
The revenue generating 3G services consumers want will focus on individualized, personalized content, in other words on "Me." They include transaction-based services for banking and individually tailored location-based services that provide information on travel, hotels and ATM machines, even video and Web-browsing - wherever and whenever users dictate. Until they are available, we see connectivity and transport services, such as e-mail messaging, as the table stakes for higher value services that will yield higher margins. Operators may have to use these services now as loss leaders to gain mind share for richer, more data-intensive services, such as video games, that will yield higher margins down the road.
Of course, operators will also be able to generate revenues collecting fees from merchants for access to information, entertainment, ordering/reservations and financial services, and by selling advertising space on the portals. All these services will bring network power to the mobile device.
Networks, by the way, talk. They reveal important information about end users, like what they want, when and where. And mobile operators are in a critical position to maintain customer loyalty because they are intimate with their customer through the power of their networks. Their networks hold dynamic customer information based on location and on presence that can be transferred onto a mobile device. Networks are, in essence, the crown jewels of 3G and we need to ensure solutions that are standards-based and compatible with each network element so operators can deliver these services whenever and wherever customers want them.
Timing, however, is everything and the industry needs to move forward fast to cooperatively design, develop, test and market applications and devices that are compatible with today's evolving wireless networks. This will enable us to offer mobile operators market-ready, flexible platforms that can carry innovative data and transaction services and generate revenue with current digital networks as well as with third generation networks.
Lucent's approach is to drive the industry to 3G mobile Internet services seamlessly and painlessly by creating an environment that promotes rapid creation and introduction of mobile Internet services that will run on a variety of platforms. The end result will be services that increase revenue, retain value and reduce subscriber churn. One way we're doing that is through the Lucent-sponsored Global Wireless Multimedia Forum. The conference is designed to create a dialogue exchange with content providers, service providers, wireless operators, application developers and handset/device manufacturers.
The intent is to spur innovative, real-time tangible applications that offer consumers innovative services that are ready now for current 2G platforms and will be markedly improved as they evolve to 3G platforms. Lucent is also collaborating with others through its Cooperative InnovationsSM Program and forging alliances that will enhance the competitive advantages of our customers, our partners and Lucent by providing superior infrastructure solutions and innovative data applications.
Lucent is also going beyond the wireless industry. This is, after all, about thinking out of the box. Our approach is to create brand new markets for Internet mobility by leveraging private equity through new ventures and financing. We're also working with universities to focus on the impact of mobility on the industrial landscape. For example, through our Mobility Research Initiative, we have committed some $10 million in grants to the Boston University School of Management, INSEAD in France and the London Business School, and we are working with them to research and identify business models that will be created by the mobile Internet. At the same time, we are developing local content in our technology centers in the United Kingdom, Canada, Japan and Italy.
Mobility has a broad economic reach with potential applications across many service sectors: health and medical services; insurance; banking and trading; education; food products; travel; transportation; energy and purchasing. And that's just the beginning. A year ago, using a mobile phone to find our way in a foreign city, check out restaurant menus and make purchases were only visions. Today, many of these services are already available with Internet-capable phones.
Repeated positive experience with such services and the devices that transport them will ultimately win mind share with consumers who consider the services useful and valuable enough to pay for them. We believe that mobile Internet services engaging communities of people, like fantasy football, video games and digitized music will drive usage. Bottom line, it will mean a shift in perceived value from the network to the device, which will grow muscle as distributed computing applications optimize the use of network resources.
The road to 3G sounds bumpy, but we've done this before when networks evolved from analog to digital. The migration was flawless and seamless to operators and users. Although more complex in the demands of common platforms and links, the transition from second-generation digital to third-generation Internet will be just as smooth. In our view, the major challenge this time around will be speed and the name of the game is collaboration.
