Giga mobile d13

Business modelsfor next-generationwireless services

GigaMobile 2001 - Work package 1.3

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Colophon

Date : 7 November 2001

Version : 1.0

Project reference : GigaMobile/D1.3

Editor : P. Ballon

Company : TNO-STB

Author(s) : P. Ballon, S. Helmus, R. van de Pas

G I G A M O B I L E / D 1 . 3 V

Table of Contents

1 Introduction 7

2 Business models: a framework 8

2.1 Typology of business models 8

2.2 Construction of business models 9

3 Current and emerging wireless business models 12

3.1 The wireless value system 12

3.2 Wireless services in 2 and 2,5G 13

3.2.1 The wireless migration path 13

3.2.2 From e-business to m-business models 15

3.2.3 Service characteristics 16

3.3 Wireless value networks in the Netherlands 19

3.3.1 Actors and activities in the Dutch market 19

3.3.2 Interactions and hierarchies 22

3.4 Current and emerging wireless business models 23

4 Towards business models for UMTS services 28

4.1 UMTS characteristics 28

4.2 UMTS service scenarios 31

4.3 Conclusion 34

References 35

7

1 Introduction

Mobile Internet has been a buzzword for the last couple of years. However, due to the

problems facing telecom operators today, the uncertainty and anxiety about the advent and

success of mobile Internet have grown considerably. This paper argues that the main causes

for this are the uncertainties surrounding the business models for 2,5 and 3G mobile services.

In response to this, this paper presents the findings of research by TNO-STB on emerging

and future business models for mobile voice and data services1.

The paper starts with a concise discussion of recent theory about business models, showing

which approach to business models may be fruitful in order to respond to the uncertainties

mentioned above.

Next, it presents an analysis of current and emerging voice and data services and their

underlying business models. This analysis is based on the situation in the Dutch market. It

shows the most prominent business models for 2 and 2,5G services and outlines their main

characteristics.

Finally, the last part of this paper sketches a number of 3G service scenarios and assesses to

which extent 3G business models might differ from present and emerging models.

1 The authors acknowledge the input of Henk-Jan van de Meeberg, who, at the time of writing this paper, wasfinishing a traineeship at TNO-STB.

8 G I G A P O R T

2 Business models: a framework

In current literature and practice, there are various ways in which business models are

defined and used. Traditionally, a business model describes the external organisation of

commercial transactions between organisations. Transactions include the exchange of

information, goods, services, money, contracts, and knowledge. Such activities are described

in a business model.

In recent years, the concept of a business model has developed and has been used in a

wider sense to encompass all the mechanisms involved in the generation of revenues from

the sale of goods and services. The business model has become a means of structuring

various cost and revenue streams so that business becomes viable, usually, but not

necessarily, in the sense of being able to sustain itself on the basis of the income it generates

(Hawkins, 2001). So, business models are not only used to describe external transactions, but

also internal processes concerning the production of a good or service and the various

business roles the actors play in this process. In fact the whole value chain of a good or

service is described in a business model, combined with the revenue streams that make the

business viable.

In this paper, we will use the following definition of a business model: a description of how a

company or set of companies intend to create value in the marketplace. A business model

describes the architecture for a product or service and the related information flows, including

a description of the various business activities and roles. Besides this, a business model

defines the potential benefits for the various business actors and the sources of revenues

(Timmers, 1998).

2.1 Typology of business models

There are several types of business models, depending for instance on their focus or range,

their function or goal. First of all, a distinction can be made between business models that

describe the business activities of a firm or a group of firms, and business models that

concentrate on one specific product or service.

Secondly, a distinction can be made between business models describing the roles of various

actors involved in a business process, and on the other hand business models that focus on a

calculation of costs and revenues. The latter are usually referred to as revenue models. They

include assumptions about financial gains and expenditure and will often aim at establishing

the profitability and the break-even point of products or services.

Another distinction is the one between business models and business cases, where the

business case is the specific application of a business model for an individual company in a

specific situation.

9

Finally, a distinction can be made between strict business models and business scenarios. In

this view, business models provide a more or less static representation of a specific

configuration of a value network and the corresponding revenue streams. Business scenarios

are more dynamic and forward-looking, concerning themselves with the potential impact of

trends on different business models.

Business models can also be characterised by their function or goal. In economic literature

the following functions of business models are mentioned:

� To articulate the value proposition: the value created for users by the offering based on

the technology

� To identify the market segment: the users to whom the technology is useful and for what

purpose

� To define the structure of the value chain within the firm required to create and distribute

the offering

� To estimate the cost structure and profit potential of producing the offering

� To describe the position of the firm within the value network linking suppliers and

customers including identification of potential complementors and competitors

� To formulate the competitive strategy by which the innovating firm will gain and hold

advantage over rivals.

Currently, there is great uncertainty about the value proposition behind next-generation

mobile services, not only regarding user adoption or revenues for a specific service, but even

about which services to offer, which networks to form, and which activities and roles to

perform or to outsource. Therefore, a general approach, outlining potential business roles,

relationships and hierarchies in networks, is in order. Rather than on specific firms, the

business models presented here focus on general services. Rather than on quantitative

models, they aim at making structures apparent, and adopt a scenario approach. The next

paragraph looks at the components of such business models and presents a framework for

constructing and analysing them.

2.2 Construction of business models

A first step in constructing a framework for business models is to examine the creation and

exchange of value in more detail. Traditional economics considered tangible production

factors such as land, capital, and labour to be the main assets for value creation. However,

during the last decades, the importance attached to intangible assets such as knowledge,

trust relationships, intellectual property, and leadership has risen considerably. These

intangibles are more and more being incorporated into business models (Boulton, Libert &

Samek, 2000).

10 G I G A P O R T

Also, in the past, it was customary to think of the process of creating and exchanging value as

a linear process. This idea has largely been abandoned, resulting in a shift in terminology

from value chains to value networks. The traditional value chain is focused at the level of the

firm with the objective of linking business strategies to the characteristics of actual products. It

describes the activities connecting a company’s supply side (raw materials, inbound logistics,

and production process) with its demand side (outbound logistics, marketing and sales) in a

linear way (Timmers, 1998). With the growing use of ICT in production and business

processes, interdependence between firms has become an important factor, leading to the

rise of the so-called network economy. As a result, the value chain concept is focussing more

and more on the value-added relationship between the different participants involved in the

process of production and consumption.

Moreover, this relationship has in many ways become more dynamic and flexible. As the

Internet, along with other digital information and communication means, allows production and

business processes to become faster, more flexible and more transparent, this has rendered

possible a higher complexity and flexibility of linkages between firms. Also, virtual organisation

structures have appeared which are characterised by flatter hierarchies and a more flexible,

team-based work organisation in order to respond quickly to changes in the business

environment and customer demands. Finally, there has been a shift from supply-side thinking

to a more demand-side oriented approach all the more because of the interactive possibilities

of new ICT. For all these reasons, the value-chain concept has been gradually replaced by

the concept of value ‘networks’ or value ‘systems’ (Bovel & Martha, 2000).

Such a value network describes the creation and exchange of value through the interaction

between actors, characterised by different relationships and hierarchies, within a networked

environment. These elements provide the main components for the construction and analysis

of a business model as it is conceived in this paper:

� Actors in a value network can be suppliers, producers, intermediaries or users of a certain

good or service. They can be independent entities as well as business units within a firm.

� The interaction between the originator and the user (organisation or consumer) of specific

goods or services can be conceptualised as a direct or an indirect transaction (by means

of intermediation). The interaction can exist of the exchange of information or trust as well

as of economic transactions.

� If these interactions are repeated and become recurrent, relationships and linkages are

formed. These relationships allow the different actors to combine their productive and

innovative potential. They shape the value network and constitute the setting for the

business models that originate in these networks.

� The relationships between actors are not power-neutral. Assets are not evenly spread

over all players in a value network. This unbalance has even become more important than

before, as it potentially effects a much larger number of players. This means that the

analysis of hierarchies and power relationships remains vital in understanding the

11

business process. According to Håkansson & Johansson (1992), the elements defining

relationships and hierarchies between actors are functional dependencies, power

structures, knowledge structures, and time dependent structures.

These elements need to be considered when constructing a business model. Business

models are created by stepping back from the business activity itself to look at the underlying

structures that make the product or service commercially viable. They are important in

understanding the context and strategies of the different players in a market. A systematic

approach for identifying architectures for business models can be value chain (or network) de-

construction and re-construction (Timmers, 1998). In order to assess the viability of potential

business models for future 3G services, this is to be complemented with a scenario approach.

Not only a calculation of revenues and expenses is needed, but even more so an assessment

of present strategic, technological and consumer trends.

The approach of this paper is as follows:

� Value chain or value network deconstruction: identifying the different elements of the

value chain or network involved in the production and consumption of certain goods and

services.

� Identification of services and their characteristics.

� Identification of actors, interaction patterns, and hierarchies.

� Value chain or value network reconstruction: the integration of the different actors and

interaction patterns to form a commercially viable business model.

� Assessing the impact of future trends and developments on the business models.

12 G I G A P O R T

3 Current and emerging wireless business models

This chapter explores the current and emerging business models for wireless services in the

Netherlands. In the first paragraph, the wireless value network is deconstructed into its

different functional chains. The next two paragraphs examine the main influencing factors on

current business models. In the second paragraph, some characteristics of 2 and 2,5G

services are analysed. The third paragraph provides an overview of the relevant actors, their

interactions and relationships in the Dutch mobile market. Finally, the main business models

behind wireless services today are reconstructed.

3.1 The wireless value system

A report by the Yankee Group (2000) provides a basis for deconstructing the value network

for wireless services. This report describes a value network existing of five major value

chains. These refer to:

� Network Transport. Traditionally, network operators have integrated the whole network

operating value chain, consisting of spectrum brokerage, mobile network transport, and

mobile service provisioning. They are often labelled as gatekeepers, both in terms of

customer ownership and in terms of ownership of limited resources such as spectrum and

operating licenses.

� Applications Operation. The application environment includes application developers,

systems integrators, and applications operators. Companies that bundle these activities

are also labelled wireless application service providers (WASPs).

� Content Provisioning. This value chain consists of content providers, content aggregators

and portals. Portals also serve as wireless Internet service providers (WISPs), as they

become the gateway to Internet content.

� Payment Processing. Traditionally, network operators have had the only billing

relationship with the client.

� Providing Device Solutions. Handset vendors are a well established part of the mobile

value system. They provide hardware as well as software solutions.

In addition, there are two ‘enabling’ value chains involved:

� Network Equipment Provisioning. Companies providing network equipment are e.g.

Ericsson, Nokia, Motorola, Alcatel, Nortel. Traditionally, infrastructure vendors provide a

relatively standardised product.

� Middleware/Platform Provisioning. Examples are WAP gateways, SMS gateways, mobile

portal platforms, mobile commerce platforms, and other applications platforms.

13

The resulting value network is portrayed in figure 2-1.

Spectrum BrokerMobile Network

Transport Provider

Mobile Service

Provider

Potential

Integration

by

Customer /

Carrier -

Facing

OperatorMidd

leware

/

Platfo

rm Vendors

Network Equip-

ment Vendors

Content ProviderContent Aggregator Mobile Portal /WISP

Applica

tions

Develop

er

System

s Integr

atorApp

lication

Operato

r

Payment Processor

Device Solutions

Providers HW/SW

Consumer

/ End-user

Figure 3-1 Wireless Value System

Source: TNO-STB, based on The Yankee Group (2000)

This schematic representation will be used throughout this paper in order to describe the

different roles performed by the players active on the Dutch market, as well as the business

models they use. Companies determine their business model by bundling different elements

of these value chains and by (re)designing their interactions with other parties in the wireless

access value system, including the customers. Shaping these business models are the

characteristics of current and emerging wireless services, as well as the relevant actors, their

interactions and relationships. These are examined in the following paragraphs.

3.2 Wireless services in 2 and 2,5G

3.2.1 The wireless migration path

After the introduction of Global System for Mobile communications (GSM), a tremendous

growth in the area of wireless communication took place in Europe. During the second half of

the nineties, data services based on the Internet protocol have turned out to be another very

successful innovation in the field of communication and information. Increasingly, new mobile

data services are merging mobile telecommunications and data communications. However,

data services in cellular systems have traditionally been secondary services. As a result,

14 G I G A P O R T

existing GSM data services are piggy-backing on the existing circuit switched mobile network

with a maximum speed of 9.6 kbps.

The first major move towards “mobile Internet” is labelled General Packet Radio Service

(GPRS), introducing packet switching as an overlay to the circuit switched GSM networks by

introducing new elements in the GSM-infrastructure, as well as new software in some existing

elements. The packet switched nature of GPRS doesn’t only increase the capacity for data

transmissions but also makes possible an immediate and constant connectivity to external

networks such as Internet and Intranet, without repeatedly having to carry out a time

consuming setup procedure. Furthermore, the GPRS system incorporates new billing

concepts, such as paying for the volume of transmitted data, rather than for the time of the

data-connection. 2001 is the year of the introduction of GPRS services on the Dutch market.

Three out of the five mobile operators have announced concrete plans for this, i.e. Telfort

(O2), Libertel-Vodaphone, and KPN Mobile.

A second technology for upgrading GSM networks is EDGE (Enhanced Data rate for GSM

Evolution). Both GPRS and EDGE offer a more cost-effective approach to accessing data

networks, such as IP-based networks. A second advantage is that EDGE offers an IP platform

independent of communication standards.

Today’s second and the second and a half generation mobile network standards will be

gradually replaced by the third generation Universal Mobile Telecommunications System

(UMTS). The UMTS standard is intended to enable multimedia services, as well as to unify

the disparate standards of today’s wireless networks. However, due to amongst others the

blocked 3G spectrum in North America, it isn’t possible to upgrade to a uniform 3G-network

on a worldwide scale right now.

There is not one fixed standard of UMTS but there are several releases, each introducing an

improvement to its predecessor. For example, UMTS release 4 (99) offers an option to use

either IPv4 or IPv6 as transport protocol and specifies that either permanent or temporary

allocation may be used. In UMTS release 5 the most important change is that network

elements for the IP multimedia services are exclusively based on IPv6. The future use of IPv6

has some advantage like more addressing space and better equipped to handle mobile IP

multimedia services.

UMTS will offer high speed access rates, which depend on radio conditions as well as the

network environment (pico/ micro-cells), by using expanded bands of wireless spectrum at 2

GHz. This requires a new air interface meaning investments in completely new basestations,

which is a lot costlier than the upgrades to GPRS and EDGE.

The higher transmission rates of UMTS are meant to enable access to voice, graphic,

multimedia, and video-based information and communication services, regardless of the kind

of underlying network. It is also intended to enable customers to choose the desired quality of

services by offering differentiation in tariffs. UMTS will support the following bit rates: up to

144 kbps in macro-cellular environments (e.g. in moving vehicle or train), up to 384 kbps in

15

micor-cellular environments (e.g. walking pedestrian) and up to 2 Mbps in indoor/ pico-cellular

environments (e.g. in office buildings).

3.2.2 From e-business to m-business models

The migration towards increased bandwidth and reliance on internet protocols mean that

wireless internet is slowly becoming a reality. This could mean that internet business models,

or e-business models, become feasible in the wireless environment too. The main reason why

business models have become the object of wide interest is precisely because of a number of

highly visible companies which, over the past few years, have developed business over the

Internet. Holland a.o. (2001) provide the following examples of e-business models:

� Advertising model: in this case a website provides room for advertising messages in the

form of banner ads, pop-ups etc. Advertisers pay for exposure (‘eye-balls’). Portals are

the most important exponents of the advertising model.

� Brokerage model: brokers are ‘market-makers’. They offer a platform where supply and

demand can meet. This kind of transactions facilitation is relatively easy to do in an

electronic environment because of the low marginal costs involved.

� Infomediary model: in this case value is created by collecting, processing and exploiting

information about consumers and users. The activities of infomediaries are often related

to the idea of ‘mass customisation’.

� ASP model: application service providers host and provide access to applications over a

network. The ASP model is based on the (thin) client / server – model. Value is created by

giving users the possibility to outsource a number of activities and services.

� Subscription model: this model is based on charging subscription fees for access to

infrastructure, to services or to content.

� Floatmodel: this is based on exploiting the time gap between payment by the customers

and payment to the suppliers. This is basically a matter of logistics, facilitated by the use

of digital networks.

� ISP’s: internet service providers provide access to the Internet along with some

supporting services such as hosting.

� Licensing model: this is based on the patenting of new ideas or technologies. What’s new

to the electronic environment is the patenting of new ways of interacting with the customer

and of the resulting new business models.

� E-tail model: this model consists of wholesale and retail via the Internet, either by

‘completely’ virtual enterprises or by ‘brick-and-mortar’ companies expanding their outlets.

16 G I G A P O R T

� Utility models: this is based on a pay-per-use or a pay-per-view model. Customers are

charged per time unit or per bit used.

As Hawkins (2001) observes, most of such on-line business models emulate off-line models.

In these cases, the novelty of e-commerce or e-business is simply that commerce or business

is taking place in a new, electronic environment.

However, some qualitative changes caused by the advent of the Internet can be observed.

For instance, there is evidence that this environment favours more complex business models

and more freedom of choice from existing business models. If there are indeed entirely new

business models to be found on the internet, these usually refer to new forms of dis- and

reintermediation.

This already provides a clue as to which business models might be developed in a wireless

Internet environment. However, the mobile environment creates specific problems and

opportunities for creating value. The next paragraph explores some of the typical

characteristics of 2G and 2,5G services that are influencing mobile business models.

3.2.3 Service characteristics

So what are the characteristics of current and emerging services in the Dutch market? Most

observers will agree that the main 2G services are voice communications, short messaging

service (SMS), and WAP services. Among these, one-to-one communications (i.e. voice and

messaging) are by far the most popular. WAP information services attract far less users.

Reasons commonly cited for this are the long connection times, limitations imposed on

content and interactivity by screen size and data rates, a lack of attractive content, and a

failed management of expectations.

2,5G (GPRS) technology has brought the promise of new services to the Dutch market.

GPRS can be seen as a stepping stone in the wireless migration path towards more

bandwidth and more reliance on internet-based transport. Additional services which are

theoretically possible with GPRS, are a.o. mobile office services, mobile commerce services,

enhanced mobile information, communication and entertainment services. In 2001, three out

of the five Dutch mobile operators, i.e. Libertel-Vodaphone, Telfort/O2 and KPN Mobile,

completed the upgrading of their networks to 2,5G and began to develop GPRS services.

Currently, all three of these operators have started by offering one type of GPRS service:

mobile office services. The most important traits of these services are the fact that users are

constantly on-line, have access to the company intranet and other applications, and have

access to the Internet. Libertel-Vodaphone has introduced Libertel Corporate GPRS Access,

a business service allowing the customer to have mobile access to corporate networks and

systems on their mobile phone, laptop or PDA. Telfort/O2 has followed this with the

implementation of the same kind of service named Telfort Mobile Office, while KPN Mobile

also has a service called Mobile Office Online. The three operators all have their own third

parties with whom they co-operate and develop new applications and services.

17

The extent to which these services will be successful and to which other GPRS services will

be introduced to the market, will in the first place be determined by two basic characteristics:

transmission speed and transmission costs.

Speed

Theoretically, GPRS can deliver a maximum speed of 171,2 Kbit/sec. Transmission rates that

are mentioned in literature vary from 115 Kbit/sec to 170 Kbit/sec. However, in practice,

maximum data speeds are more likely to approach 56 Kbit/sec, because at this stage of

developments there are still a lot of unsolved problems in the network, the handsets and the

software, all of which cause restrictions to the transmission rate.

For instance, the GPRS phones launched by Nokia in March 2001 have a maximum

transmission rate of 40 Kbit/sec. According to Nokia, as GPRS networks are upgraded and

expanded, new handset models will be able to support around a transfer rate of around 60

Kbit/sec. Motorola, the world's number two mobile phone maker, offers 30 Kbit/sec rates for

data transmission at this moment, while Ericsson phones can manage 43 Kbit/sec (Reuters,

2001). These rates are effectively much slower than those promised by telecom operators.

The effective transmission rates will also be restricted because of the limited capacity, which

is measured in time slots, that is available. GPRS can use several timeslots to send packages

of data very quickly one behind the other. However, in practice, the operators have only

reserved one time slot for sending data. This means that as the number of users in one cell

grows, transmission rates will drop very fast.

Table 3-1 Transmission speeds

In theory (Kbit/s) In practice Top rate

(Kbit/s)

In practiceNormal

rate (Kbit/s)

GSM ? 14,4 9,6-10

GPRS 170 40-50 25-30

EDGE 384 ? Approx. 56

UMTS 2000 384 ?

As for the impact on services, this means that GPRS is not suited for multimedia services or

streaming services, but rather for asynchronous communication and data transmission. The

fact that only one out of eight time slots in a GPRS cell is reserved for data traffic, indicates

that voice is expected to remain the most important service.

Costs

18 G I G A P O R T

Another important issue is the cost of making use of GPRS. The expectation is that the Dutch

mobile operators will charge a subscription fee of around 30 € per month. In exchange, the

customer is getting an 'always-on' access to the GPRS network plus a ‘free’ amount of

transferable data.

What does this mean for the services people will use on their GPRS phones? As a reference,

a typical email without attachment is somewhere between 1-10 KB. This means that 1 MB of

data includes on the average about 200 emails without attachments. A WAP-page is between

0,5 and 1,5 KB. So 1 MB of data is good for 1000 WAP pages. An internet-page is on the

average about 80 KB, which means that for 1 MB one can only view 12 pages. The table

below provides an overview of tariffs as they are known at this point in time for Telfort/O2,

which has released the most comprehensive list of tariffs as yet.

Table 3-2 Costs of GPRS: Telfort/O2

Amount Price in euro Average

price per e-

mail

Average

price per

web page

Average

price per

WAP page

1 MB 30 € per month +

2,50 € per extra MB

0,15 € 2,5 € 0,03 €

20 MB 75 € + 2 € per extra

MB

0,02 € 0,31 € 0,004 €

40 MB 115 € + 1,50 per

extra MB

0,015 € 0,24 € 0,003 €

Sources: TNO-STB; Houtman (2001)

Telfort/O2 is planning to introduce three subscriptions: including 1 MB, 20 MB, and 40 MB.

This would mean that with a 1 MB subscription, the downloading of 1 MB of web pages will

cost 2,5 € per web page visited. The downloading of 2 MB of web pages results in a cost of

1,35 € per web page, and the downloading of 5 MB results in a cost of 0,66 € per page. So,

when using 5 MB of data per month, the costs per page are sharply reduced, but it still costs

about 1,5 Dutch guilders to view one web page. This also means that it will be very costly to

send movies and audio documents by mobile phone. With a 20 MB subscription, one web

page costs 0,31 € or less. With a 40 MB subscription, a web page costs 0,24 € or less.

All of this means that a monthly fee of at least 40-45 € is necessary to arrive at an acceptable

price for downloading a web page; while the use of e-mail or WAP pages for that price

becomes almost unlimited.

Telfort/O2 also plans to introduce the BlackBerry, a messaging and agenda device, to the

Dutch corporate market. Its server software costs at least 3000 €. The device will cost approx.

19

700 € a piece. Subscription costs will be 62,5 € a month including a 5 MB data limit. The main

feature is its permanently on-line status, keeping e-mail and agenda status constantly up-to-

date. For the consumer market, Telfort/O2 has more distant plans to launch the xda, a

combination of palmtop and mobile phone, which uses MS PocketPC 2002, Microsofts new

operating system for mobile devices.

Adding to this the limited availability and high cost of GPRS phones, which is somewhere

around 500 € at this moment, all of this points to corporate users as the initial target user

group. It is still an open question to operators whether private consumers will want to visit web

pages and send e-mail enough in order to justify getting a GPRS subscription.

So, while GPRS renders possible a whole range of rich voice and data services, and the

associated range of business models, today’s GPRS implementations mainly point towards

already existing communication services as the wireless services of the short term future,

complemented with some specific services targeted at the corporate world.

3.3 Wireless value networks in the Netherlands

The previous paragraph looked at some characteristics of GPRS services as an indication of

which m-business models may be expected in the short term future. This paragraph examines

the value networks formed by actors in the Dutch market in order to develop these wireless

services in the Netherlands.

In 2001, Libertel-Vodaphone, Telfort/O2 and KPN Mobile began to develop GPRS services for

the business market. Yet, by the end of the year, the operators are still running pilots in order

to test the GPRS network, the software and the currently available mobile phones. Although

problems in all of these fields still seem to be abundant, the main reason behind the delay

seems to be the lack of business models supporting GPRS services. Operators are starting to

admit that, in the race towards mobile data services, strategic and emotional considerations

have guided investments rather than business cases, which were (and are still) considered as

too uncertain (see e.g. Buitelaar, 2001).

Also, there is great uncertainty over which collaborative networks have to be formed in order

to put wireless services on the market. This is caused by the crisis facing network operators

as well as the failure of an array of on-line content models. The next paragraph takes a look at

which networks currently exist in the Netherlands, in connection with the introduction of new

(GPRS) services to the market.

3.3.1 Actors and activities in the Dutch market

Table 2.5 provides an overview of KPN Mobile’s main strategic partners for GPRS services in

the Dutch market. In 2000, KPN Mobile and NTT DoCoMo closed a strategic co-operation

agreement that was topped off by a 15% participation of NTT DoCoMo in KPN Mobile. KPN

Mobile and NTT DoCoMo have also announced plans to start up a new company aimed solely

at mobile data, in particular I-mode services, which were introduced successfully by NTT in

20 G I G A P O R T

Japan. KPN Mobile has vowed to invest 90 million € in the new company, and to incorporate

its mobile portals and platforms M-info and E-plus online in it. NTT DoCoMo will invest 50

million €, thereby taking a 25% stake, and will make its knowledge on mobile data available.

As the following overview shows, the main actors in KPN Mobile’s network are either linked to

its strategic partner NTT Docomo, or consist of wholly owned subsidiaries acting as service

providers to KPN Mobile. In addition, there are some links with equipment and handset

manufacturers, which are actively participating in content provision and piloting.

Table 3-3 Overview of Actors and Activities for KPN Mobile GPRS services (* Not specific for

GPRS)

Main actor Secondary actor Activities

KPN (85%) NTT DoCoMo (15%) KPN Mobile is developing new mobile services

for GPRS together with its Japanese partner,

who has made I-mode, a system including

several interactive mobile services, into a big

success in Japan.

KPN Mobile RAM Mobile Data 100% subsidiary of KPN Mobile. Exploits the

Mobitex datanetwork. Is now working together

with KPN Mobile to develop GPRS-services for

vertical markets. RAM is turning into a service

provider for hosting and WASP services.

KPN Mobile TIM Joint venture to develop an Internet portal

based on i-mode*

KPN Mobile Interpay, Nokia Pilot WAP payments*

KPN Mobile Toshiba Producer of the Snapcam which is further

developed by KPN Mobile and NTT DoCoMo*

KPN Mobile Ericsson, Nokia Suppliers of the GPRS network

KPN Mobile IBM, Interpolis Pilot clients/partners GPRS service Mobile

Office Online

KPN Mobile M-info, XS4All GPRS portals/ WISPs

21

As for Libertel-Vodaphone, based on the publicly accessible data shown in table 3-4, it can be

said that this company mainly has built relationships with a large array of pilot partners

including equipment manufacturers, applications developers, and the research and

consultancy world.

Table 3-4 Overview of actors and activities for the development of Libertel-Vodaphone GPRS

services (* Not specific for GPRS)


Libertel-Vodaphone Ericsson Supplier of the GPRS network. Ericsson also

supplies the Ericsson Virtual Office, a set of

applications in order to improve the speed,

security and accessibility of the Libertel

Corporate GPRS Access services.

Libertel-Vodaphone Cisco system Pilot client Libertel Corporate GPRS Access

Libertel-Vodaphone Ernst & Young Mobile workspace pilot development

Libertel-Vodaphone PinkRoccade Pilot client Libertel Corporate GPRS Access

Libertel-Vodaphone KPMG Pilot client Libertel Corporate GPRS Access

Libertel-Vodaphone GigaPort, TU/e,

Ericsson

Pilot GPRS user possibilities

Libertel-Vodaphone Libertel-Vodaphone,

Ericsson, Industriebank

LIOF

Joint venture Syntrack to develop a test

environment for new network technologies*

Telfort/O2 closely cooperates with its mother company British Telecom. BT Cellnet, its UK

counterpart, launched its first set of GPRS services in june 2000. By the end of 2001, Telfort

will undergo a name change to O2, as will all mobile daughters of BT Wireless.

Table 3-5 Overview of actors and activities for the development of Telfort/O2 GPRS services

(* Not specific for GPRS)


Telfort/O2 Ericsson Supplier of the GPRS network and pilot client

22 G I G A P O R T

Telfort/O2 Ernst & Young Interim

Management, Netlink

Framfab & Oracle

Implementation of Multi Access Portal. Ernst &

Young is pilot client and will market the system in

a later stage, Netlink Framfab is system integrator,

Oracle is the software supplier.

Telfort/O2 RIM Introduction BlackBerry (messaging hardware and

software) for GPRS network

Telfort/O2 Compaq, Microsoft Co-organisers of a forum for applications for

vertical markets, based on Windows CE *

Telfort/O2 Siemens Pilot client for Telfort/O2 Mobile Office

Judging from these data, Telfort/O2 has mainly established partnerships with applications

developers and equipment and handset developers.

3.3.2 Interactions and hierarchies

Regarding the interactions and relationships between the actors described in the paragraph

above, it has been stated that the network operators remain pivotal actors in the value

networks, although the linkages and interdependencies increase. All three operators have

sought to create partnerships with pilot partners, who often act both as launching customers

and co-developers. These pilot partners are usually systems solutions and applications

providers, participating in the setting up of GPRS service pilots. There are few initiatives in the

content provisioning sphere, and rather more in the applications, equipment and handset

providers, and business consultancy sphere. While Libertel-Vodaphone and Telfort/O2 may

rely on their international parent companies for working out a number of general solutions,

KPN Mobile has looked for a strategic partnership with NTT DoCoMo for this. Also, KPN

Mobile, in connection with its own subsidiaries, is developing a number of solutions itself.

Regarding hierarchies and power relationships, this means that:

Network operators such as KPN Mobile, Vodaphone or Telfort/O2 have traditionally integrated

the whole network operating value chain. They are still in a strong position because of their

access to the customer (in terms of billing relationships, but also in terms of trust). In general,

though, they are retreating to their core activities because of their huge investments in the

recent past and limited outlook on short or middle term profitability.

� Network equipment vendors traditionally provide a relatively standardised product.

However, this is changing as new applications and middleware are being developed by

these companies. As these vendors are now often the same companies as the ones

providing platforms and device solutions, their position in the value network has become

23

of much greater importance. This has also happened because of increasing financial

dependencies of operators on equipment vendors through all kinds of equipment

subsidies.

� Wireless application service providers (WASPs) may develop and host applications for

end-users, but they may also concentrate on providing solutions for mobile network

operators. This means that there are strong links with middleware/platform providers.

� Handset vendors are a well established part of the mobile value system. As they provide

hardware as well as software solutions, they not only have access to the user because of

the direct buying relationship, but they can also preset the operating and browser systems

running on the handsets to their own advantage.

� Payment processing is no longer the exclusive domain of operators. With the possible

advent of mobile commerce, requiring a number of mobile financial services, other

parties, such as banks, specialised billing companies, and mobile commerce platform

vendors, have opportunities to get involved in this activity.

� Middleware/Platform Provisioning is becoming an ever more important part of the wireless

value system. Examples are WAP gateways, SMS gateways, mobile portal platforms,

mobile commerce platforms, and other applications platforms.

The implications of these developments are reflected in the business models behind wireless

services, which are reconstructed in the next paragraph.

3.4 Current and emerging wireless business models

As was mentioned earlier, four main types of services with their accompanying business

models can be observed in the Dutch mobile market today. Among these are three existing

services: voice communication, messaging, and WAP services. However, the business

models behind these services are likely to change, taking into consideration the

characteristics of GPRS as outlined previously. The fourth type of services has been

introduced by the network operators that have implemented GPRS in their networks, i.e.

mobile office services.

Figure 3-2 reconstructs the typical business model behind voice services. This is a very

simple model, with the mobile operator as the central actor. However, with the subdivision of

telecom groups into fixed and wireless operators, and the advent of so-called mobile virtual

network operators (MVNOs), some fragmentation of this model can be expected. In the case

of MVNOs, these companies take over the billing relationship with the customer.

24 G I G A P O R T

o

Mobile Service

Provider

Mobile Network

Provider

Consumer

Market

Business

Market

Market

Mobile Operator Vendor

Middleware

platform

Infrastructure

equipment

MVNO

x + yp + v

w

z

p, x = subscription fee

v, y = conversation cost

o = cost of capacity

w = equipment cost

z = equipment subsidy

o

Figure 3-2 Voice service business model

Figure 3-3 represents a simplified model of (short) messaging services. Traditionally, these

are one-to-one services. However, the huge popularity of these services has lead to the

development of all kinds of content services delivered by SMS. In this figure, this is

represented by the SMS content provider. Apart from the mobile operators, it is the platform

providers, which are providing the SMS servers, that are the most important actors in this

business model. As mentioned before, these platform providers are often the same parties as

the equipment vendors.

25

o = interconnection tariff

(if applicable)

p = cost of infrastructure

w = cost of SMS-server

x = subscription fee

y = cost of SMS-message


Consumer

Market

Business

Market

Market

Network Service

Provider

x + y

w

z

p

Infrastructure

equipment vendor

Platformprovider

Mobile Service

Provider

Contentprovider

SMS-service

% of y

Mobile

Operator Xo

Figure 3-3 SMS service business model

Figure 3-4 reconstructs a WAP service business model. This is a more complex business

model, which is a.o. due to the many different forms of paying for content. There is no fixed

content model yet. The actual form and direction of the revenue streams for content

provisioning depend upon the premium value of the content and on the strength of the

gatekeeper’s role of the network provider vis-à-vis the role of the content aggregator. Also,

there are different forms of service provisioning. These affect the relationship between the

platform provider, the network operator, the mobile service provider, and the content

aggregator.

Alternatively to the model presented here, the mobile service provider may be, instead of

being integrated with the mobile network operator, bundled with the role of content

aggregator. In this case, an integrated WAP service provider exists, which serves both as

portal as well as wireless Internet service provider (WISPs).

In this model, the customer only has a billing relationship with the operator. Alternatively,

though far less common, the customer may also have a billing relationship with the content

provider or content aggregator.

Under GPRS, the cost of time on-line (factor y) will be replaced by the cost of data transport.

This is also true for the model represented in figure 3-5.

26 G I G A P O R T

Mobile Service

Provider

Mobile Network

Provider

Consumer

Market

Business

Market

Mobile

Operator

Contentaggregator

Market

Contentprovider

Contentprovider

Infrastructure

equipment vendor

Platformproviderw

z

p

x + y

h = hosting cost

k = cost of content

m = income generated

by traffic

n = % of income

o = cost of being

selected for portal

p = infrastructure cost

w = cost of WAP-

gateway


y = cost of time on-line


o n

Contentaggregator/

contentprovider

o Contentprovider

% of mk

% of m

Contentaggregator/

contentprovider k

h

Figure 3-4 WAP service business model with integrated mobile operator

Finally, figure 3-5 represents a simplified and still more or less hypothetical mobile office

business model. In this model, the customer not only pays the network operator, but he or she

also pays an independent platform provider for the use of the required applications and

gateway. This platform provider may serve as a WASP, either supporting the end-user, or

delivering to the network operator.

p = infrastructure cost

w = cost gateway and

applications


y = cost of time on-line


Mobile Service

Provider

Mobile Network

Provider

Business Market

Mobile Operator

Infrastructure equipment

vendor

Platformprovider

z

p

x + y

w

27

Figure 3-5 Mobile office service business model

From these wireless business models, which were derived from the situation in the Dutch

market today, it can be concluded that, in general,

� platform/middleware providers have gained a relatively strong position in the value

network, even more so as they are often linked with handset and network vendors. It can

be said that the ‘enablers’ are moving into the core of the wireless business model.

� the billing relationship with the customer, however, is still largely held by the mobile

operator, although it is no longer restricted to them.

� there is no definite content model yet.

28 G I G A P O R T

4 Towards business models for UMTS services

This chapter briefly introduces a number of characteristics of UMTS which might alter or

reinforce the present wireless business models. It looks at a set of scenarios and forecasts for

UMTS services and draws some conclusions about their implications for next-generation

business models.

4.1 UMTS characteristics

As was mentioned before, UMTS represents a next step in the wireless migration path. Table

4-1 provides an overview of the main differences between UMTS and GPRS. These can be

traced back to the service environment, the network design, and cost structure of UMTS.

The UMTS service environment can be characterised as an always-on data environment. This

means that data services and enhanced voice services become dominant. In this

environment, voice becomes an application. Mobility of services in this environment is

enhanced, for instance, by the different way of naming in UMTS. While GSM and GPRS

together have four different names (numeric strings), each assigned to a specific service,

UMTS users can use many Ids to access different services in different virtual environments.

Under the latest version of UMTS, the network migrates from a circuit switched network with

an additional packet core network to a multiservice IP-based network. This will be based on IP

version 6, allowing more security, increased mobility, a reduction in costs because of

increased efficiency, and different pricing options. By adopting Wideband-CDMA as its

operational mode, UMTS networks will offer more capacity and quality. Also, the cells in a

UMTS network are smaller than in a GPRS network, which means higher deployment costs

but also more possibilities for location based services.

Table 4-1 Characteristics UMTS versus GPRSGPRS UMTS Release 5 (December 2001)

Environment

Close to voice-centric environment Always-on data environment

Dominant services

Voice services Data services; rich voice services.Rich Voice is the enhancement of voice services toinclude advance voice capabilities such as Voiceover IP and multimedia elements.

Mobile network

29

Circuit switched network.GPRS will provide an additional packet corenetwork to the circuit switched phase 2 GSM.The function of GPRS is to provide IP accessvia pipes (tunnels) from the mobile terminal toan ISP or corporate network at the edge of themobile networks. The ISPs or corporatenetworks may be attached to either the visitedor home network. GPRS will use the existingradio interface structure so that mobileterminals with GPRS are compatible with GSM.Voice services are still circuit switched via theexisting GSM network.

Multiservice IP based network.UMTS (Release 99) will introduce the new UMTSradio interface known as UTRAN (UMTS TerrestrialRadio Access Network). The basic structure of thecore networks will not change much from that ofGSM with its overlay of GPRS. The core network willhave IP based transport for the IP part and circuitswitched transport for the circuit switched part.UMTS also provides a 64kbit/s circuit feature whichcan be used to carry IP traffic.UMTS Release 5 (formerly known as Release 2000 -All IP network) will migrate the core network to asingle IP network and add multimedia servicesbased on IP. Release 5 networks shall use thePacket Switched (PS) domain and the IP Multimedia(IM) domain to provide IP multimedia servicesupport, such as voice, video etc.

Consequences for services

Cost for the services can be divided betweennon voice (amount of data, flat rate) and voiceservices (time, location based).

Cost depends on the kind of IP service offered, e.g.real time or not.

Choice of IP version

IPv4 (32-bit address size). In the absence of any other reason to start earlier,UMTS operators will have to start to introduce IPv6(128-bit address size) in the IP Multimedia domainwhen they start to implement services based onRelease 5 of the UMTS.


Renumbering is a serious issue in IPv4 e.g. asite has to give back its address space to theISP when it changes to another ISP. This ishandled by Network Address Translators(NATs). One of the biggest problems is thatNATs affect the transparency of the end-to-endconnectivity, a fundamental assumption in theInternet design. Loss of transparency:

� Disables a whole set services like IPsecurity.

� Introduces a single point of failure, andmakes the network less robust because ina failure situation the state values stored inthe NAT will be lost making recovery inmost cases impossible.

Creates problems when two companies with“uncoordinated” private addresses merge.

Some of the advantages of IPv6 which are relevantto the mobile environment are:

� Ipv6 supports mobility much better than Ipv4

� Ipv6 reduces administrative and managementoverhead (and costs) by autoconfiguration(Plug&Play).

� Ipv6 will provide means for privacy and securityas an integral part of the standard rather than asa separate protocol.

� Ipv6 has an enlarged address space enabling allterminals to have a globally unique IP addressfor the duration that they are connected to thenetwork. This will enable services andapplications to be developed without having totake into consideration network issues like NAT(Network Address Translator) etc.

Naming

GSM users have three different E.164 names(numeric strings) for voice, fax, and dataservices on GSM. GPRS will add names of theform “user@domain”.

Names are related to services and each servicemust specify the form of name to be used. Thirdgeneration technology is designed to supportmultiple services and hence more than one type ofname.


Voice services are telephone-based using anumeric string. Other services can be accessedsimilar to WAP or Internet. The provision ofinformation can limit portability.

Voice service will be IP based so a numeric string isnot necessary or used. Users can use many Ids indifferent virtual environments accessing differentservices.

Support of mobility

Mobility is supported by providing a virtualconnection between the terminal and aGateway GPRS Support Node (GGSN) ineither the visited or home network. This virtualconnection is provided in two segments:

� Between the mobile and the visitedServing GPRS Support Node (SGSN) by

Mobility for IP multimedia may be different becauseit will be based on IPv6. There is a mobilityenhancement of IPv6 which can create anassociation of:

� A static IPv6 address for the mobile terminalassigned by the home network

� A dynamic “care of” IP address assigned by the

30 G I G A P O R T

the procedures used for the air interface

� Between the visited SGSN and the GGSNby the GPRS Tunnelling Protocol (GTP)

This virtual connection is maintained as long asthe mobile remains “on” and the mobile end ofthe GTP can be moved if the mobile movesfrom the coverage area of one SGSN toanother.Under GPRS and UMTS Releases 3 & 4, theuser may select an ISP or Intranet using theAccess Point Name. However, the mobile isassigned the IP address used for externalcommunications by the GGSN and not by theISP or Intranet.

foreign agent (visited SGSN)Both addresses are used in communications andthis association allows packets to be routed to andfrom the mobile without having to pass through thehome network, providing more efficient routing. Atthe same time the use of the static IPv6 addressenables the other features of IPv6 such as securityto be used, since they depend on the availability of astatic address.It is not yet clear to what extent this feature of MobileIpv6 will be used in Release 5.


The user has a choice of GGSN (expressedthrough the Access Point Name) and can eitherlog-on to the visited or home GGSN. Thischoice may be influenced by the roamingagreements between the operators concernedand the home operator can prevent the mobilefrom logging on to the GGSN of anothernetwork. This can limit the accessibility of someservices offered.

Although there are many uncertainties about Mobilityfor IP multimedia, it should make open access frommobile terminals to any ISP or Intranet possible.IPv6 provides enhanced mobility in which the mobileterminal can be assigned by the home network(static IPv6 address) and by the foreign agent(dynamic “care of” IP address). This makes it moreflexible for the use of services without having to passthrough the home network, providing more efficientrouting and services.

Location and cells

Number of cells 5,000 rising to 7,500 peroperator. Cell range (GSM 900 <300m-35 kmand GSM 1800 <100m – 15 km).

Number of cells 17,500 cells per operator. Becauseof the smaller cell sizes of the UMTS network (andintegration with GPS), more accurate locationdetermination is possible.


Relatively low installation costs. Limitednumber of location based services.

Higher installation costs and more hand-over whenmoving around. Location based services.

Satellite component

No Yes


No satellite services High capacity download possible in remote area’s.

Operational modes

Time Division Multiple Access (TDMA) is usedin the GSM standard. GPRS uses a maximumof eight time-slots for a single user. However,initial GPRS equipment will not support the useof that much time-slots, otherwise this woulddecrease speech capacity, as GSM and GPRSshare the same timeslots.

Two operational modes, Frequency Division Duplex(FDD) and Time Division Duplex (TDD), in parallelprovide the end-user with the benefits of both radioaccess principles in either overlapping or distinctenvironments. Both will use Wideband Code DivisionMultiple Access (W-CDMA). Some of theadvantages of using CDMA are that there is no needfor transmission synchronisation, or spreadspectrum transmission, which offers usefulprotection against interference, multiple paths, othersystems and enables satellite communication withmobiles.


In theory, GPRS will enable service like webWeb Browsing, Document Sharing/Collaborative Working, Audio, HomeAutomation, Remote LAN Access, ElectronicAgents, Dynamic Authoring, Job Dispatch, StillImages and Information Services- Qualitative.Multimedia IP services that are video based willnot be possible with GPRS because of itslimited bandwidth (amongst others caused bythe sharing of timeslots and less efficient use ofthe frequency band).

In theory, UMTS will enable video and audio, eitherreal-time, near real-time or download. Examples aretwo-way video conferencing with audio, videostreaming, hi-fi music streaming, Voice over IP(VoI,), Moving Images, File Transfer, DownloadingSoftware, Virtual Home Environment and InteractiveGames. The speed and quality of the service willenable new presentation formats, such as ultra highvoice clarity and mobile multimedia applications.

31

Sources: http://www.umts-forum.org/; Gudding, 1999 and 2000; K. Hoogervorst, 2001, EHPT,

2000, K. Jedeloo, 2001; Ponsioen & Van Staalduinen, 2001

As for the costs of UMTS services, these are still very unclear. It seems certain that

transmission will become less costly as efficiency increases. However, this doesn’t mean that,

for instance, streaming video will become feasible over UMTS. On the contrary, some

research indicates that the efficiency gains associated with UMTS might sooner be used to

diminish the costs of (voice) communications than to develop all sorts of new enriched

services. As GSM networks are becoming increasingly clogged up, the additional UMTS

spectrum may serve as a way out.

However, there is the question of how to raise enough average return per user (ARPU) to

justify the high cost for operators of deploying UMTS. According to recent calculations, even

with an ARPU of between 40 € and 55 € per month and with high penetration rates, it will still

take operators between 10 and 15 years to reach payoff time (Bohlin & Björkdahl, 2001).

Some researchers are speculating about flat fee or very low communication prices under

UMTS causing a quantum leap in (mainly voice) communications (Odlyzko, 2001). In any

case, this dilemma will require extensive experimentation with different pricing and business

models in order to be overcome.

4.2 UMTS service scenarios

What, finally, does UMTS mean for future services and their underlying business models? In

addition to the general observations made above, a number of scenarios is feasible (see also

Ballon a.o., 2000). This paragraph describes four different scenarios concerning future UMTS

services. They are differentiated by using the following uncertainties surrounding UMTS

services:

� What kind of Quality of Service (QoS) will be offered to end-users? Will QoS be best-effort

(the “internet model”) or managed (the “telecom model”)?

� Will there be any integration of functions into one handset? Will consumers use a single

handset (an “all singing and dancing machine”) or will they have a multitude of

interconnected devices (“pervasive connectivity”)?

On the basis of these uncertainties, four different user contexts, corresponding with four types

of services and business models, have been constructed. The four service scenarios are

depicted in figure 4-1.

32 G I G A P O R T

Internetmodel

Managed model

Single

terminal

Pervasive

connectivity

Mobile acces

device

Cellular

Wallet

Cellular

Webbrowser

Office on the

move

Figure 4-1. UMTS service scenarios

This paragraph describes these service scenarios and assesses their implications for next-

generation business models.

The Cellular Webbrowser

In this scenario, the mobile handset remains more or less the same as today, i.e. it doesn’t

communicate with other types of devices, but it is enhanced with some standard mobile

internet functionalities. It is used for personal communication and information searches on the

internet. There is a huge increase in the quantity of information (and transport), rather than in

quality. There is a big heterogeneity in handsets, which vary from very cheap internet enabled

terminals to integrated walkmans, cellular phones and gameboys. In general, the content and

the intelligence are located in the network with the providers and the network operator. The

main types of services are : voice communications, e-mail, WAP/internet browsing, directory

services, advertisements, personal instant messaging.

Impact on business models:

Mobile internet is a mass market. There are few added value services. The end user pays for

communication and/or access. Content provider generally don’t get paid to display their

content. There is hardly any direct m-commerce. Few paid added value services are

successful. There are some portals for directory-type services, mainly deriving revenues from

content providers. Operator revenues stem from voice and e-mail traffic and from flat rate

subscription fees. Mobile payment services do not develop, a.o. because of security hazards

and low accuracy of location determination.

The operator integrates the roles of service manager and transport provider. The first priority

for the operator is the fast roll out of a mobile broadband network, rather than the provision of

services. There are a lot of content providers and packagers, but only few of them make

money.

33

The Office on the Move

There are a lot of functionalities and intelligence integrated into one handset. The mobile

phone is a PDA, laptop and cellular phone all in one. A lot of data is stored in the handset

itself. The managed Quality of Service makes it possible to have services tailored to the

needs of specific (mainly business) users. There is room for personalised, added value

services such as unified messaging, productivity services and personalised services. The

main types of services are: especially business and productivity services, some local m-

commerce applications.


Vulnerability of data is an acute problem, for which specific security services are offered by

operators and/or service managers. The end user pays the operator and also pays a service

provider offering a service platform and a number of added value services. There are different

quality of service (and price) categories. There are good opportunities for rather closed and

managed platforms delivering specifically tailored services. These are offered by players

closely connected with the network operators. Maintenance and upgrading of the office-on-

the-move happens with software that is downloadable from the WASP or WISP that the user

(or his operator) has a contract with. There are good opportunities for WASPs or WISPs,

possibly delivering their services as a white brand to the operator.

The Mobile Access Device

The handset is primarily a tool for connecting to the internet. It sends the information it

receives to other terminals such as laptops, car computers and PDAs using Bluetooth. There

is little intelligence residing in the handset, which can be further miniaturised and integrated in

e.g. a wrist watch. Users have a large number of devices, each with very different product life

cycles and functionalities. Communication and connectivity services are most used. The

biggest problems lie in the field of interoperability. The handset is context aware rather than

personalised. The user can however indicate a number of preferences. There are few

location-based services. The main types of services are: communication services, alert

services, push services, downloading of applications and content.


The end user is paying the telecom operator for transport and access, and he is paying some

content providers on the net for a number of services. There are few players involved in the

packaging of content, which may be mainly distributed on a peer-to-peer basis. Handset

vendors and application developers have good opportunities.

The Cellular Wallet

The handset is the central hub in a standardised set of devices. There is a lot of intelligence

residing in the terminal, but it is not used to store a lot of information. This is an advantage for

34 G I G A P O R T

mobile payments and the storage of key personal data. The handset functions as an

electronic passport, a credit card and a purse. It communicates with other devices on the

basis of a general standard. The user is constantly on-line. In general, content is transferred

to other devices. Added value is a.o. to be found in the fields of security and payment.

Robustness and security are important issues. Personalisation is very high. Location-

dependence is quite big because of the payment and identification functions. The main types

of services are: m-commerce, identification and access services, travel services, connectivity.


The user pays a fixed subscription fee and, possibly, additional fees for services delivered to

him by the operator/service provider/bank of his choice. In this scenario, there are good

opportunities for application/service providers, that function as middlemen and are able to

send an integrated bill. They can enter into partnerships with specific operators or operate

independently over an open service platform.

4.3 Conclusion

This paper set out to find a useful approach to constructing a framework for the analysis of

business models, to provide an overview of present wireless business models, and to give

some indications of what next-generation mobile business models might look like.

In doing this, it stressed the continuity in value networks and business models from 2G over

2,5G into 3G, which is partly reflected by the ever prominent place of communication services.

However, a number of potentially far-reaching developments were signalled, such as the

increasingly strong role of application and platform providers in wireless value networks.

Also, the role of operators is undergoing change. If one thing at this point is clear, this is that

extensive experimentation with different business models for 3G services will be necessary

for these operators to survive.

35

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Documents

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