Towards the Next Wave of Mobile Communication

Transcription

Helsinki University of Technology Publications in Telecommunications Software and Multimedia
Teknillisen korkeakoulun tietoliikenneohjelmistojen ja multimedian julkaisuja
Espoo 2005
TML-C19
Towards the Next Wave of Mobile Communication
Proceedings of the Research Seminar on Telecommunications Business
Editor Sakari Luukkainen
ISBN 951-22-6622-9
ISSN 1455-9749
Helsinki University of Technology
Telecommunications Software and Multimedia Laboratory
P.O. Box 5400
FIN-02015 HUT
Tel. +358-9-451 2870
Fax. +358-9-451 5253
Publications in Telecommunications Software and Multimedia
Teknillisen korkeakoulun tietoliikenneohjelmistojen ja multimedian julkaisuja
TML-C19
Espoo, 2005
Towards the Next Wave of
Mobile Communication
Proceedings of the Research Seminar on Telecommunications Business II, spring 2005
Editor: Sakari Luukkainen (Lic.Tech.)
Keywords:
Mobile, UMTS, Business Process, Broadcasting, RFID, M2M, Push-to-talk, PoC,
Payments, Terminal OS, VoIP, DVB-H, Games, Music, P2P, Operator Strategy.
The articles have been written by the students of the course T-109.551 Research Seminar on
Telecommunications Business II in the spring 2005. The authors have full copyright to their articles.
Layout and technical editing by Eino Kivisaari.
http://www.tml.hut.fi/Studies/T-109.551/2005/Proceedings.pdf
ISBN: 951-22-7794-8
ISSN: 1455-9749
3
3
Preface
This publication is a collection of research reports written during
the course Research Seminar on Telecommunications Business II
(spring 2005) at Helsinki University of Technology. The course is
especially designed for students taking Telecommunications
Management for their major but is as well suitable for all students
that like to develop their techno-economic analysing skills in the
telecommunications area. The aim of the Telecommunications
Management major is to help the students to understand the
structure and dynamics of economic life and industry with a
special focus on the telecommunications by combining business
and technology studies.
The course provides an opportunity to rehearse scientific writing
and presentation skills. The goal of the spring 2005 seminar was to
investigate the challenges service providers face when updating
their network infrastructure to offer emerging mobile and wireless
data services taking into consideration both business and fast
developing technology requirements and possibilities.
As a result of hard work we have now a collection of interesting
papers of several possible technological scenarios in mobile and
wireless data networks. I want to thank all the contributors for their
excellent papers as well as for the lively discussions during the
seminar sessions.
Sakari Luukkainen
April 23th 2005
Espoo, Finland
4
Contents
Sauli Kamppari ................Mobile Market in Finland .......................................................................................6
Petri Noponen ..................WLAN, WIMAX and CDMA 450 - UTMS’s Replacement or Complement ..... 16
Maikku Sarvas ..................Mobile Solutions in Business Processes ................................................................. 22
Toni Paila .........................Mobile Broadcast Radio Technologies:
Factors Affecting the Emergence of Dominant Design ........................................ 28
Mikko Jalasto ...................Mobile Phone Applications for Radio Frequency Identification Systems.......... 33
Renjish Kaleelazhicathu....Machine-to-Machine Applications over Mobile Networks .................................. 40
Raili Koivisto ...................Push-to-Talk over Cellular: Still Searching the Flow of Success ........................ 45
Markus Kalliola ...............Mobile Payments ..................................................................................................... 51
Tommy Back ....................Mobile Terminal OS Competition ......................................................................... 56
Elina Vartiainen ................Mobile Music ........................................................................................................... 62
Alexei Semenov ................Mobile Games .......................................................................................................... 68
Marcin Matuszewski ........Business Study of Mobile Peer-to-Peer Content Distribution ............................. 73
Eino Kivisaari ...................Mobile Broadcast Business in Finland .................................................................. 83
Anders Rotkirch ...............Internet Telephony Going Mobile.......................................................................... 87
Kimmo Palletvuori and
Sakari Luukkainen ............Incumbent Operator Strategies ............................................................................ 92
5
MOBILE INDUSTRY SUCCESS FACTORS IN FINLAND
Research Seminar on Telecommunications Business II, T-109.551, 22 March 2005
Update 20 April 2005
Sauli Kamppari, M.Sc.
P.O. Box 3000, FIN-02015 HUT, FINLAND
Position
Penetration
Abstract
Country
The success of the Finnish mobile industry has been
explained referring to various theories and factors. Due
to rapid development of the markets and the mobile
industry the factors that have been considered important
in the past are not necessarily important for the future
success. Especially the role of national factors seems to
have changed. E.g. the leading home markets for the
mobile services used to be a key success factor for the
Finnish mobile cluster but during recent years the
leading market position has been lost. This paper
presents the Finnish mobile industry success factors and
their evolution.
Taiwan
Mobile industry, success factors, markets, Finland,
Nokia
Finland has lost the leading position in mobile
subscription penetration and the role as a pioneer in
service development.
Finland had a clear lead in the subscription
penetration at the end of 1990s but the situation has
changed during the last years. Table 1 shows the
development of subscription penetration in leading
mobile service countries and in some interesting
reference countries.
2003
Finland
1
11
55%
90%
Sweden
4
12
39%
89%
Japan
7
32
37%
68%
South Korea
10
29
30%
69%
United States
14
42
25%
54%
111%
In this paper the national success factors refers to the
distinctive factors in Finland that have greatly
contributed the mobile industry competitiveness.
Considering the Finland’s mobile industry success
and the big national economic impacts it is natural that
the phenomena and the success factors have been studied
a lot and various explanations for the success have been
given. Mäenpää and Luukkainen (1994) conducted an
early research on the Finnish telecommunications cluster
competitiveness factors. They emphasized the role of
competence and identified there several supporting
factors like the high standard of education, rivalry in the
telecommunications service provision and the early
Penetration
1999
22%
1.3 Researching national success factors
Table 1. Mobile subscription penetrations (ITU 2004) 1
2003
1
2003
Finland’s mobile industry has been very successful
internationally and it plays a big economic role
nationally in Finland. The international success is lead
by the mobile device market leader Nokia with an
estimated markets share of 31% of the sold mobile
device units in 2004 (Gartner Dataquest 2005). The
important national economic role of the mobile industry
is prominent in the foreign trade exports where in 2004
16.2% (Finnish customs 2005) came from the
‘Manufacture of radio television and communication
equipment and apparatus’ category which is dominated
by the mobile industry products.
1.1 Leading mobile service markets
1999
1999
1.2 Successful mobile industry
1. Introduction
Country
17
2003
Finland also used to be a pioneer in experimenting
uses of mobile phones (The Economist 1999). Examples
range from the soft drink vending machine application
that generated a lot of publicity but little revenue, to the
ringtones downloading that has grown to a multi billion
business 2. Today countries like South Korea are getting
a lot of publicity on various mobile multi-access,
Internet, fast multimedia and financial services in their
markets (SK Telecom 2005). Even Finnish Prime
Minister Vanhanen (Nikulainen 2005) has raised a
concern on the current modest level of innovations in
Finnish operator service development.
Keywords
Position
1999
2Ringtone business took off rapidly after 1997 when
Nokia introduced Smart Messaging technology and a
Finnish programmer Vesa-Matti Paananen from
Yomi Group developed the world’s first commercial
ring tone composer and downloader (Frere-Jones
2005).
11999 penetrations calculated based on the GAGR
figures in ITU (2004) and population growths in
OECD (2004) and CIA (2004).
6
NMT experience. Several other important success factor
researchers and studies are referred in chapter 2.
In different phases different circumstances in the
Finnish environment have been conducive to the success.
An interesting research question is how the national
success factors for the Finnish mobile industry have
evolved. Related questions have been researched before
but with a different focus. E.g. Paija (2001) has
described the ICT cluster dynamics and Steinbock (2001,
2004) has researched the competitive stages of Finnish
telecommunications from a wide perspective ranging
from geo-politics to Nokia internal processes.
In order to improve the understanding of the issue
and to prepare a concise answer to the question, a critical
evaluation of the prior research and consideration of the
evolved competitive environment is required. Some
items may require also further research. The objective of
this paper is to introduce the topic with some key aspects
and serve as a reference for discussions and further
research. The following chapters introduce the identified
success factors from the past, a framework to discuss
them, the economic competitiveness of Finland in
general, the present Finnish mobile service markets
characteristics as a home market for the mobile industry,
and finally the present mobile industry challenges and
opportunities.
telecommunications development capability was based
on experience with the NMT predecessor ARP3
technology which was a national network specified by
PTT. Later the powerful PTT participated in the creation
of the early markets for the NMT mobile industry in the
2) specification of the NMT standard, 3) allocating the
radio frequencies for the mobile phone service, 4)
collaborating in various scientific and engineering
communities, and 5) placing early orders decreasing the
uncertainty and financial risks.
Also 6) government support in the form of bigger
R&D budgets for PTT, efficient organisations of
resources in various forms of the 7) joint ventures4,
collaborations, networks of subcontractors5 and 8)
Nokia reorganisations6, and 9) good technology choices
especially in digital switching systems have been
emphasized. Edquist (2003, pp 21-32) complements the
list of success factors by pointing out that the rapid
market growth, thanks to 10) high quality services and
low tariffs, created equipment manufacturers early
benefits from economies of scale.
Also two important demand-side factors can be
identified for the NMT success. First, 11) PTT and the
ARP users were familiar with the mobile phone concept
which made the NMT adoption easy. Second, NMT
provided a telephone service opportunity to the 12) big
number of summer cottages which didn’t have fixed
telephone lines.
It can be debated and should be researched further
whether these factors include all of the important factors
and how to evaluate the relative importance.
2. Finnish mobile industry success
2.1 NMT and the growing mass markets
Before the NMT era the public mobile service and
the mobile industry markets were relatively small
everywhere. The service and mobile devices were
expensive, the coverage was bad, and the usage was
limited in vehicles.
For the Finnish mobile industry the major
opportunity was to enter the growing mobile voice
business in advanced markets.
2.2 GSM and the globalisation of the
business
The emergence of GSM coincided with that of new
players and major role changes. In many nations the
regulatory function was separated from the mobile
service and the mobile service was opened for
competition.
For the Finnish mobile industry the major
opportunity was to become a big player in the emerging
global mobile infrastructure and mobile device mass
markets.
Most of the Finnish mobile industry history literature
is Nokia focused. Nokia has played a key role in the
development of the whole mobile industry in Finland
since the early days of NMT and it still does as will be
shown in chapter 5. Nokia NMT success has been
described by Palmberg (2003, pp. 167-189) who has
emphasized the role of Finnish PTT as a competent
customer for Nokia. Koivusalo (1995) has provided a
factual account of the major events in the Finnish mobile
phone history and explained the success by the actions of
the authorities and most of all by various strategic
business organization, product development and
marketing decisions, and good company management.
The following is based mainly on works of Palmberg
and Koivusalo.
The competent and demanding customers,
the
national PTT and the local fixed telephone operators,
supported the national telecommunications industry first
in the national success with fixed networks and later in
the international success with mobile networks and
devices. First the decentralized and competing fixed
network operators contributed to the 1) capability buildup of telecommunications network element development
by demanding advanced network features and flexibility
for the different technical specifications. The mobile
The national factors at the creation of the GSM
specifications played a less significant role in GSM than
in NMT due to various reasons. First, GSM as a
European initiative instead of a Nordic initiative
involved many new countries each with their own
interests. Second, the new role of the former state owned
PTT monopolies did not any more have the role of
supporting the local equipment manufacturers. Third, the
specification work included new groups like the new
private network operators and the international
equipment manufacturers.
Like before for NMT also for GSM several of the
national success factors were technology and market
3Auto Radio Puhelin (ARP) translated in english car
radio phone.
4Especially the joint ventures Telefenno with state
owned Televa, and Mobira with Salora.
5E.g. with companies like LK-Products.
6Merging the Telefenno and Mobira to Nokia.
7
path dependent. Many of them originated from NMT.
Nokia had 1) exceptionally good competencies in the
new technological areas (Palmberg & Martikainen
2005). Also 2) PTT’s existing mobile subscribers and
base station sites made the deployment of the GSM
service relatively easy in the home markets.
Two 3) coalitions where Nokia and PTT were
members also contributed to the success. First, the
Nordic alliance7 won the CEPT’s initial technology
competition which helped the alliance achieve an early
technological lead position (Hommen and Manninen, p.
92). Second, while Motorola initially held more than half
of the essential GSM patents the MoU and ETSI drove
IPR policies towards the principle of non-exclusive
licensing for members (Hommen and Manninen, pp. 96100). The final bilateral cross-licensing policy of IPRs
turned out to be favourable to Nordic manufacturers not
only by removing a potential business obstacle but also
by being a barrier to completely new entrants with empty
patent portfolios.
The national success was also based on 4) good
Nokia vision, strategy and execution. While Nokia has
been claimed (Palmberg 2003, p. 181) to have lacked the
vision for NMT, for GSM it had an early and clear vision
of the mobile voice potential and focus to exploit the
opportunity (Palmberg & Martikainen 2005). The weight
of Nokia vision, strategy and execution among other
success factors seems strong considering the market
share and profitability development during the 1990s.
Nokia company culture or ‘Nokia way’ has been
influential here (Steinbock 2001, p. 295) and it has
strong national roots.
Study
WEF, Global Competitiveness Report 20042005 ranking (WEF 2004)
1
WEF, Global Information Technology
Report 2004-2005 (WEF 2005)
3
3.2 Criteria
According to the Enterprise Policy Scoreboard
Finland doesn’t have any special weakness areas and the
strength areas are Human Resources, Innovation, and
ICT. The business environment is monitored in nine
areas:
• Access to finance
• Regulatory and administrative environment
• Taxation
• Open and well-functioning markets
• Entrepreneurship
• Human resources
• Innovation and knowledge diffusion
• ICT
• Sustainable development
The Innovation Scoreboard combines 20 different
indicators in a summary innovation index and it has also
examined the innovation differences between industry
sectors. The indicators are grouped under areas of
• Human resources
• Knowledge creation
• Transmission
and
applicability
of
knowledge
• Innovation finance, output and markets
In the innovation performance per sector Finland
leads in the Electrical and Optical Equipment sector
which includes also the mobile industry products.
3. Finland’s competitiveness
Finland’s economic competitiveness has been
evaluated in many international studies. How well do
those studies reveal the mobile industry success factor
areas?
Below is a summary of results and ranking criteria in
some recent international studies of national
competitiveness.
In the IMD’s World Competitiveness Yearbook
(IMD 2005) the ranking criteria is grouped into four
competitiveness areas
• Economic performance
• Government efficiency
• Business efficiency
• Infrastructure
3.1 Rankings
National competitiveness is measured regularly by
European Union, IMD and World Economic Forum
(WEF). Finland has ranked well as shown in table 2.
In the WEF Global Competitiveness Report the
ranking is composed of indexes in the areas of
• Technology
• Public institutions index
• Macroeconomic environment
Table 2. Finland’s competitiveness
Study
Ranking
Ranking
European Union, Enterprise Policy
Scoreboard (EU Commission 2004a)
2
European Union, Innovation Scoreboard
(EU Commission 2004b)
2
IMD’s World Competitiveness Yearbook
(IMD 2005)
8
The WEF Global Information Technology Report
ranking is based on ICT related areas of
• Market, political and regulatory, and
infrastructure environments
• Individual, business, and government
readiness
• Individual, business, and government usage
3.3 Evaluation of the international studies
7Sweden’s Televerket, Finnish, Danish and Norwegian
PTTs, Ericsson, Nokia and Elab.
A big number of criteria have been used in different
8
studies. The purpose of the studies are slightly different
but the evaluation criteria are partly overlapping.
Couple of things shall be noted when evaluating the
relevance of criteria in the studies to the mobile industry
national success factors. First a general note that
favourable conditions do not automatically generate
success. How well the conditions are exploited depends
on the industry and may vary between countries.
Second, the criteria are very general and as such can not
identify the mobile industry specific success factors. The
criteria may though serve the purpose of identifying
potential problem areas that may be common to many
industries. As the good rankings show no serious
problem areas have been identified in Finland.
markets can have a major impact on
competitiveness. Chance may be relevant in
explaining the past but fickle in planning the
future.
6. Government. The government may play as a
catalyst or inhibitor by influencing the four
factors, either positively or negatively.
Finally all the factors combine into a dynamic system
Chance
Firm strategy,
structure and
rivalry
Factor
conditions
4. Success factor frameworks
Several different theories and frameworks have been
referred to in explaining the national competitiveness in
general and the Finnish mobile industry success in
particular. How well do those frameworks reveal mobile
industry success factor areas?
The following short descriptions introduce the most
often referred frameworks8 .
After descriptions a new synthesized framework for
the Finnish mobile industry national success factors is
presented.
Demand
conditions
Related and
supporting
industries
Government
that reinforce each other (see Figure 1).
Figure 1. Porter’s diamond
4.2 Market dynamics framework
Palmberg’s (2003, pp. 167-189) theoretical
framework is innovation focused and based strongly on
Dahmén 1989 (cited in Palmberg 2003, p. 168) tradition
and Carlsson and Eliasson (2001) concepts of coupling
of the supply of innovations and their selection and
diffusion in the market. Also Edquist’s (2003, 21-32)
approach is innovation focused and rather similar to
Palmberg’s approach. In the Sectoral Systems of
Innovation framework the main elements are
organisations and institutions, the relationships between
them and the functions they are involved in. Also the
concepts
of
creative
destruction,
innovative
entrepreneur,
evolutionary
approach,
non-linear
development are distinctive for this loose discipline.
The national innovation success factors can be
categorized (Carlsson and Eliasson 2001) as follows.
1. Cognitive dimension. The technical capabilities
set the boundaries for possible innovations. The
boundaries can be expanded by adding new
capabilities, by co-evolution of various elements
or by understanding the needs better.
2. Organisational and institutional dimension. This
defines the problem-solving network of actors in
the scientific and engineering communities.
3. Economic dimension. Early selection and
diffusion of innovations depends on the
capabilities of the economic dimension. Market
competence is based on learning and is path
dependent.
4.1 Porter’s diamond
Probably the most often referred framework for
explaining the national competitiveness is the Porter’s
diamond model (Porter 1990). In order to understand
why firms based in particular nations achieve
international success in distinct industries Porter divided
the factors in four categories.
1. Factor9 conditions. The advanced and specialized
factors of production like skilled labour, capital
markets, and good infrastructure provide the
industry with high value adding resources.
2. Demand conditions. Demanding home markets
enable the industry to better understand the needs
and desires of the customers.
3. Related and supporting industries. Locating close
to related and supporting industries improve the
economic efficiency in transactions and in
resource pooling. It also supports innovations by
rich knowledge sharing.
4. Firm strategy, structure, and rivalry. National
preferences in capital markets, career choices,
management style and competition suit certain
industries well.
Two additional factor categories Chance and
Government can alter conditions in the ‘diamond’ in
different ways in different nations.
5. Chance. Chance events in innovations,
technological discontinuities, and shifts in
The framework is outlined in Figure 2.
8Because a more thorough description is beyond the
scope of this paper the reader who is unfamiliar with
the concepts is recommended to read the referrred
documents or some of the many summaries that are
easy to find from the Internet.
9The word factor in Porter’s book refers to inputs used
for production and is different to the meaning used in
this paper.
9
Technological system
Ideas
Idea generation
•
GSM 1) exceptionally good competencies in
the new technological areas
2. Demand. The definition of this criteria builds on
the Porter’s Demand conditions category. The
uncertainty will grow in many ways in the future (see
chapter 5) and it can be reasoned that the evolutionary
approach with venturing and diffusion capability of the
markets can contribute in the early success of
innovations. So, as a new viewpoint in the category the
Economic dimension from the Market Dynamics
Framework is added. The following factors from chapter
2 belong to this category:
• NMT 5) placing early orders
• NMT 10) high quality service and low tariffs
• NMT 11) PTT and ARP users were familiar
with the mobile phone concept
• NMT 12) big number of summer cottages
which didn’t have fixed telephone lines
• GSM 2) PTT’s existing mobile subscribers
and base station sites
3. Clusters. The definition of this criteria builds on
the Porter’s Related and supporting industries category.
Collaboration and coalitions that drive the interests of
the national players have also been important and so the
Organisational and institutional dimension from the
Market Dynamics Framework is added. The following
factors from chapter 2 belong to this category:
• NMT 4) collaborating in various scientific and
engineering communities
• NMT 7) joint ventures, collaborations,
networks of subcontractors
• GSM 3) coalitions where Nokia and PTT were
members
4. Firm strategy and culture. The definition of this
criteria builds on the Porter’s Firm strategy, structure
and rivalry category. In case of an industry where one
single firm dominates it is natural to focus more on the
national factors influencing firm vision, strategies and
execution than on the firm rivalry within the nation.
Following factors from chapter 2 belongs to this
category:
• NMT 8) Nokia reorganisations
• NMT 9) good technology choices especially
in digital switching systems
• GSM 4) good Nokia vision, strategy and
execution
5. Institutions. The definition of this criteria builds on
the Porter’s Government category. A special emphasis of
this category is on the fact that certain actions can be
fundamental to the creation of new business
opportunities.
The actions are performed in the
Organizational and institutional dimension in the Market
Dynamics Framework. Following factors from chapter 2
belongs to this category:
• NMT 2) specification of the NMT standard
• NMT 3) allocating the radio frequencies
• NMT 6) government support in the form of
bigger R&D budgets
The Chance category from the Porter’s framework
has not been taken into account here because it was not
needed for explaining the past national success factors
and the need for it as a separate category for future
planning is problematic.
The synthesized framework is depicted in figure 3
and the impacts of the strenghts of uccess factors are
Competence bloc
Release of
resources
Selection of winners
Innovations
Rejection of losers
Cognitive dimension
Organizational and
institutional dimension
Economic dimension
Figure 2. Industry innovation dynamics
4.3 Resource-based view frameworks
The resource-based view of the firm sustained
competitiveness is described e.g. by Barney (1991).
Salmi et al (2001) suggest that the resource-based view
applies for the competitiveness of regions as well. In this
view resources are the source of sustainable
competitiveness. They form a success factor category if
the resources are
• Valuable,
• Rare,
• Inimitable and
• Non-substitutable
The resource-based view is strongly related to path
dependency of
technology
competencies
and
capabilities.
4.4 Synthesized framework
From the introduced existing theoretical frameworks
none is tailored for the mobile industry environment.
The Porter’s diamond framework seems to offer a good
foundation for a tailored framework but it lacks
emphasis on areas that would help understanding the
Finnish mobile industry success factors in chapter 2. A
target for a framework is to have a set of categories
which are collectively exhaustive and mutually exclusive
(Carlile and Christensen, 2004) and help to identify the
key items. With this target in mind a new framework
was created. The categories of the new framework have
been renamed from the Porter’s framework in order to
emphasize the mobile industry items and to clarify the
differences between the frameworks.
1. Resources. The definition of this criteria builds on
the Porter’s Factor conditions category. In order to
complement the category with technology path
dependent success factors that were identified as
important in chapter 2 also Resource-based view
framework success factor category criteria is added10.
This is a big modification to the original Porter’s model
where the category was focused on external inputs. The
following factors from chapter 2 belong to this category:
• NMT 1) capability build-up of
telecommunications network element
development
10In principle, the Related and supporting industries
category in the Porter’s diamond framework could be
an other category for the resource-based view items
but in NMT and GSM phases the existing capabilities
and competencies were Nokia's own.
10
revenues.
Figure 4. Value network of the Finnish mobile cluster13
(Leppävuori 2002)
Figure 4 does not show the supporting industries nor
the linkages that are important from the success factors
point of view. A proper figure for that purpose is for
further study. Anyway it is obvious that changes have
taken place also in the supporting industry side. More
and more of the subsystems as well as research and
development comes from other countries (Torikka
2005). Many Finnish suppliers have also moved their
activities behind Nokia closer to the end markets.
Firm strategy
and culture
Resources
Demand
Institutions
Clusters
summarized in Table 3.
5.2 Finnish service operator market
characteristics
Figure 3. Mobile industry national success factor
framework
The total amount of subscribers at the end of 2004
was circa 4 980 00014 representing a 95% penetration.
Figure 5 depicts the amount of subscribers of the biggest
service operators. TeliaSonera Finland and Elisa have
their own networks, DNA Finland belongs to the Finnet
group and provides the service in Finnet Verkot network,
Saunalahti
uses TeliaSonera’s and Radiolinja’s
networks and ACN Communications Finland used
TeliaSonera’s network but in early 2005 the ACN
subscribers were agreed to be migrated to TeliaSonera
Table 3. Mobile industry national success factors for the
NMT and GSM phases in Finland
Category
NMT
GSM
Resources
Strong
Strong
Demand
Strong
11
Clusters
Strong
Strong
Firm strategy and
culture
12
Institutions
Strong
ACN 200000
Saunalahti 419350
Strong
DNA 683000
TeliaSonera 2297000
5. Markets characteristics
Elisa 1383500
5.1 The Finnish value network
The Finnish value network actors and the relative
sizes of their revenues have been depicted in Figure 3
(Leppävuori 2002). The circle sizes represent the
revenues in 2001 level. The purpose of Figure 4 here is
to introduce the actors and justify the focus on Nokia in
this paper. Nokia represents a major share of the big
Terminal manufacturers and Network manufacturers
(TeliaSonera 2005a).
Figure 5. Service operator subscribers, December 2004
Portability of mobile phone subscriber numbers
became possible in July 2003 (Suomen Numerot
Numpac Oy 2005). Porting has been active and the
amount of numbers ported in 2004 represents 24% of the
total amount of mobile subscribers. In 2004 one service
operator, Saunalahti, gaining almost 280 000 (Saunalahti
2005) subscribers while another one, DNA Finland,
losing 80 000 subscribers (Finnet 2004 and 2005).
Terminal
retailers
Export
Terminal
manufacturers
estic
11Even though GSM 2) PTT’s existing Dom
mobil
en
d userse
Service
subscribers and base stationOperators
sites are mentioned in
this category, the impact was not as significant for
Network
the GSM success as
what the NMT success factors
operators
were Ne
for
the NMT success.
twork
nufacturers
12Even ma
though
NMT 8) Nokia reorganisations, and
Portals in
NMT 9) good technological choices are mentioned
this Maj
category,
the linkage
strategy was not as focused as later
or value adding
pplication
withMinGSM
technological chAdeoices
were to a
or valueand
addingthe
linkage
velopers
Pls.
atform
certain
extend serendipitou
Organisational
linkage
developers
13The term cluster here does not refer to the Cluster as it
is defined in the synthesized framework.
14Based on biggest service operator subscriber estimates
(Alkio 2005) and preliminary figures from the
company year end reports (TeliaSonera 2005a),(Elisa
2005a), (Finnet 2005) and (Saunalahti 2005a).
11
Millions
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
03 03 03 03 03 04 04 04 04 04 04
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
5.3 Mobile industry opportunities and
challenges ahead
For the equipment manufacturers the NMT
opportunity was fundamental in nature, i.e. to enter the
growing mobile voice business in advanced markets. At
the same time it was rather simple. The markets of the
equipment and subscriber services were well defined,
and the business interfaces were clear with vertical
industry structures. The GSM opportunity was also
fundamental in nature, to become a big player in the
emerging global mobile infrastructure and mobile device
mass markets. However, the market definition was
already more extensive with new network and mobile
device functionalities and services. Complexity was
added also by the added subsystem layers in the industry
structure.
In the future various mobile industry opportunities
and challenges exist in the areas of markets, technologies
and industry structures.
The traditional rapid market growth by subscriber
numbers can not continue for a very long time and the
growth must be found from replacing the equipment and
extending to new not well identified areas without just a
single prominent market opportunity. In the access side
it may be in 3G, new local area radio technologies, new
wide area radio technologies, unlicensed spectrum radio
technologies or in the intelligent management of several
of these. In the services side the market opportunities
may be in VoIP, music, TV, telematics, just to mention
some. In the mobile devices side it may be in new
experiences or applications facilitated by integrating
new functions and features. To make the picture even
more fragmented, the opportunities will vary among the
geographical markets. Due to big number of alternatives
and high uncertainty, the mobile industry will most
probably see many market flops. The sooner the bad
candidates can be rejected the better.
The mobile industry structure may change due to
new horizontal layering of the technology, and at the
same by new vertical structures by the service providers
capturing new control of the mobile device markets.
New technology layer manufacturers may capture high
value adding links in the value system. New vertical
functions in turn may give the operators new power and
let them capture the brand, increase the mobiles device
customer purchase power, and drive the mobile device
development. On the other hand also
bypassing
traditional operators in large scale may pose new
challenges if it leads to a change in the dominant
infrastructure architecture which may be advantageous
for the traditional IT players.
04 04 04 04 04 04
Jul Aug Sep Oct Nov Dec
August 2003 - December 2004
Figure 6. Finland mobile subscribers14,15 and ported
numbers (Suomen Numerot Numpac Oy 2005b)
In a European comparison (Nupponen 2004) of
mobile call tariffs in March 2004 Finland was ranked
third cheapest with the minute charges from 0.15€ to
0.16€. Since that time the tariffs have dropped
significantly. Mobile service operators DNA (2005),
Elisa (2005b), TeliaSonera (2005b) and Saunalahti
(2005b) were all offering subscriptions at 0.069€/min in
March 2005.
The rivalry seems to be strong which according to the
Porter’s framework (1990) leads to demanding
conditions that are often good for the national
competitiveness. However, it has been claimed16 that the
operators concentrate on low tariff levels instead of
developing new services, which is not good from the
Demand category point of view. The claims are in line
with the TeliaSonera announcement that in Finland
measures will be taken to reduce development costs
(TeliaSonera 2005a). On the other hand new innovative
service pilots like Finnish Mobile TV (2005) and Visual
Radio (Nokia 2005) have recently been launched in
Finland so it seems as if the activity in the service
development has decreased even it has not been fully
neglected.
In Finland TeliaSonera and Elisa have opened 3G
networks. A third 3G service provider is Saunalahti
which offers 3G services in TeliaSonera’s network. Also
Tele2 has a licence but the required 3G network
investments in Finland look unlikely (Cellular-news
2005, cited Dow Jones). In fact the Finnish 3G
coverage is very limited (TeliaSonera ?2005, Elisa
?2005).
Finnish mobile service markets have certain
distinctive features that may have an impact on the
mobile industry competitiveness and should be studied
further but they are beyond the scope of this paper.
Those features are e.g. the forbidding of the handset and
subscription sales bundling, Nokia handset high market
share, and the very low prepaid subscription penetration.
Table 4. Evolution of the business opportunity
15the mobile subscriber numbers from August 2003 to
November 2003 have been extrapolated.
16E.g. by the Finnish Prime Minister Vanhanen
(Nikulainen 2005). The reason for the concentration
on tariffs has been debated (Poropudas 2005) by the
operators and regulatory authorities without an
obvious plan for remedy.
12
NMT
GSM
Future
Business
Opportunity
Business
entry
Growth
Replacement
and extension
Market
definition
Fixed
scope
Growing
scope
Open scopes
Industry
structure
Vertical
Table 5. Success factor evolution
Vertical
Horizontal and
subsystem vertical
s
Framework
category
NMT
GSM
The evolution of the business opportunity is
Resources
Strong
Strong
6. Conclusions
Demand
Strong
Clusters
Strong
6.1 General
Firm strategy
and culture
1. National competitiveness reports measure areas
that have not been very important for the mobile
industry specific competitiveness.
2. Porter’s
diamond
model
for
national
competitiveness is a good starting point for the
national success factor framework for mobile
industry sector. Adding certain emphasis areas
improves the explanatory power of the
framework.
3. An evolution can be identified in the Finnish
mobile industry success factors. The framework
categories most crucial for the success has
changed and will probably continue changing.
4. The national role for the mobile industry success
is diminishing.
Institutions
Future
Strong
Strong
Strong
Strong
6.3 Evaluation of the results
As the objective of this paper is to introduce some of
the key aspects and serve as a reference for discussions
and further research, the conclusions are tentative.
Several of the further research items have been
mentioned in the text. Also following things shall be
considered in further research.
1. Mobile
industry.
The
mobile
industry
characteristics vary a lot for the networks and for
the mobile devices. Also the success factors may
vary.
2. Evolution phases. The selected phases of NMT
and GSM in this paper extend over so long
periods that the opportunities and challenges as
well as the success factors may evolve within the
phases17. In assessing the strenghts of current
success factors the alternative future opportunities
may deserve separate assessments.
3. National success factor concept and impact. The
concept and impact of national success factors are
not always clear due to number of open questions.
How to research national vs. regional vs. multinational clusters? How distinctively national is a
particular success factor? What factors are the
national success factors based on? What is the
relationship between favourable national success
factors
and
microeconomic
industry
attractiveness?
6.2 National success factors in the future
Referring to the synthesized framework following
more detailed assessments about the future sources of
national success factors can be made.
1. Resources. The added complexity of the business
opportunity, difficulties in defining the target
market boundaries and the changes in the
industry structure create discontinuities that risk
undermining the value of old technical
competences and the Resources category success
factors.
2. Demand. Considering the decreased activity in
service development, slow 3G network build up
and the overall diminishing Finland markets share
of the global markets the Demand category
success factors seem to be endangered.
3. Clusters. The role of the Cluster category as a
source of success factors may be decreased not
only by new non-Finnish suppliers but also by
Finnish suppliers that have moved their activities
with Nokia closer to the end markets.
References
Alkio, J 2005, ‘DNA ja Saunalahti voittajia loppuvuoden
liittymäkisassa’, Helsingin Sanomat, 19 February, p. B3.
4. Firm strategy and culture. No obvious major
changes in this area have been identified. The
growing complexity of the business environment
suggests that the Firm strategy and culture will
continue to be a key potential category for
success.
Barney, J 1991, ‘Firm resources and sustained
competitive advantage’, Journal of Management, Vol.
17, No. 1, pp. 99-120.
Carlile, PR & Christensen, CM 2004, ‘The Cycles of
Theory Building in Management Research’, Version 5.0,
viewed 20 March 2005,
http://www.innosight.com/documents/Theory%20Buildi
5. Institutions. The national means to impact on
creating new business opportunities will be
smaller than before.
A summary of the mobile industry success factor
strength evolution is summarized in Table 5 using the
synthesized framework.
17E.g. Think about the period from the NMT
specification kick off meeting in 1969 to peak
volume deliveries in the early 1990s
13
ng.pdf.
newswire, viewed 20 March 2005,
http://www.pressi.com/fi/julkaisu/94848.html.
Carlsson, B & Eliasson, G 2001, ‘Industrial dynamics
and endogenous growth’. DRUID Nelson&Winter 2001
Conference 12-15 June, Aalborg, Denmark.
Finnish customs 2005, Foreign trade 2004:12 monthly
survey, Tullihallitus, 3 March,
http://www.tulli.fi/fi/05_Ulkomaankauppatilastot/01_Til
astokatsaukset/pdf/2005/2004_K12.pdf.
Cellular-news 2005, ‘Tele2 Sees Subscriber-Base
Growth Slowing In 2005’, based on Dow Jones
information, viewed 20 March 2005,
http://www.cellularnews.com/search/index.php?term=finland.
Finnsih Mobile TV 2005, ‘Finnish Mobile TV’, Press
Release 8 March 2005, viewed 20 March 2005,
http://www.finnishmobiletv.com/default.aspx?f=25&d=3
8.
CIA 2004, World Factbook, Central Intelligence
Agency, U.S., viewed 20 March 2005,
http://www.odci.gov/cia/publications/factbook/index.ht
m.l
Frere-Jones, S 2005, ‘Ring my bell, the expensive
pleasures of the ringtone’, The New Yorker, 7 March
2005, viewed 20 March 2005,
http://www.newyorker.com/critics/music/index.ssf?0503
07crmu_music.
DNA 2005, ‘Hinnat – DNA Onni -liittymä’, DNA
Finland Oy price lists, viewed 20 March 2005,
http://www.dnafinland.fi/yksityisille/liittymat_ja_palvelu
t/gsm/hinnat_dna_onni.shtml.
Gartner Dataquest 2005, ‘Gartner Says Strong Fourth
Quarter Sales Led Worldwide Mobile Phone Sales to 30
Percent Growth in 2004’, Gartner Inc, Press release
March, viewed 20 March 2005,
http://www3.gartner.com/press_releases/asset_121402_1
1.html.
Edquist, C 2003, ‘The fixed Internet and mobile
telecommunications sectoral system of innovation,
equipment access and content’, in The Internet and
mobile telecommunications system of innovation, ed. C
Edquist, Edward Elgar Publishing Limited. UK.
Hommen, L & Manninen, E 2003, ‘The global system
for mobile telecommunications (GSM): second
generation’, in The Internet and mobile
telecommunications system of innovation, ed. C Edquist,
Edward Elgar Publishing Limited. UK.
Elisa 2005a, ‘Hinnoittelumalli Kolumbus K1’, Elisa Oyj
price lists, viewed 20 March 2005,
http://www.kolumbus.com/ominaisuudet_hinnat_k1.htm
l.
IMD 2005, ‘The world competitiveness scorecard’, IMD
world competitiveness yearbook 2004, International
Institute for Management Development, viewed 20
March 2005,
http://www.imd.ch/documents/wcc/content/ranking.pdf.
Elisa 2005b, ‘Tilinpäätöstiedote 1.1.- 31.12.2004’, Elisa
Oyj annual report press release February 10 2005,
http://www.elisa.fi/ir/docimages/attachment/konserni/05
0307Elisa%20vuosikertomus%202004,%20suomi,%20k
orjattu.pdf.
ITU 2004, ‘Cellular subscribers’, International
Telecommunication Union, 10 May,
http://www.itu.int/ITUD/ict/statistics/at_glance/cellular03.pdf.
Elisa ?2005, ‘3G Kuuluvuuskartta’, Elisa, viewed 20
March 2005,
'https://www.radiolinja.fi/img/fi/vip_sivusto/nmd_kuulu
vuus.html'.
Koivusalo, M 1995, Kipinästä tuli syttyy, Gummerus
kirjapaino, Jyväskylä, ISBN 951-97358-0-1.
European Parliament 2000, Lisbon European Council
23-24.03.2000: conclusions of the presidency, viewed 20
March 2005,
http://www.europarl.eu.int/summits/lis1_en.htm.
Leppävuori, I 2002, Analysis of the Finnish mobile
cluster - any potential in mobile services, Publications of
the Ministry of Transport and Communications 28/2002,
ISBN 951-723-791-X, viewed 20 March 2005,
http://www.mintc.fi/www/sivut/dokumentit/julkaisu/julk
aisusarja/2002/a282002.pdf.
EU Commission 2004a, Benchmarking enterprise
policy: results from the 2004 scoreboard, Commission
staff working document, Commission of the European
Communities, Brussels, 10 November, SEC(2004)1427,
http://europa.eu.int/comm/enterprise/enterprise_policy/c
ompetitiveness/doc/scoreboard_2004_en.pdf.
Mäenpää, K & Luukkainen, S 1994, From
telecommunications technology to multimedia – the
competitiveness of the telecommunications cluster,
Helsinki, ETLA, ISBN 951-628-184-2.
EU Commission 2004b, European Innovation
Scoreboard 2004, Commission staff working paper,
Commission of the European Communities, Brussels, 19
November, SEC(2004) 1475, viewed 20 March 2005,
ftp://ftp.cordis.lu/pub/cordis/docs/eis_2004_main_doc.p
df.
Nikulainen, K 2005, ‘Vanhanen arvostelee voimakkaasti
operaattoreita’, ITViikko, 3 February 2005, viewed 20
March 2005,
http://www.itviikko.fi/uutiset/uutinen.asp?UutisID=6588
9.
Nokia 2005, ‘Visual Radio :: Redefining the radio
experience’, Nokia Oyj, viewed 20 March 2005,
http://www.visualradio.com/index.html.
Finnet 2004, Finnet Oy Vuosikertomus 2003, Annual
report, Finnet Oy, viewed 20 March 2005,
http://www.finnet.fi/siirtokuvat/uutiset/finnet_vsk_2003.
pdf.
Nupponen, J 2004, Prices of Mobile Calls in 2004.
International Comparison, Publications of the Ministry
of Transport and Communications 41/2004, ISBN 951723-727-8, viewed 20 March 2005,
Finnet 2005, ‘Finnet-ryhmän tulostiedote vuodelta
2004’, Press release February 17 2005, Pressi.com
14
http://www.mintc.fi/scripts/cgiip.exe/WService%253Dlv
m/cm/pub/showdoc.p?docid=1971&menuid=97&channe
litemid=8548.
http://www.numpac.fi/tiedostot/Portings_in_2004.xls.
TeliaSonera 2005a, ‘TeliaSonera January-December
2004’, TeliaSonera Ab, Stocholm, Year-end report 11
February 2005, viewed 20 March 2005,
http://www.teliasonera.fi/Koncernwebb/Attachment/200
50211/TeliaSoneraEng.pdf.
OECD 2004, ‘Total population of OECD countries’,
Labour Force Statistics 1983-2003, OECD 2004 Edition,
http://www.oecd.org/dataoecd/62/38/2698549.pdf.
TeliaSonera 2005b, ‘TeleFinland Pulina’, Tele Finland
Oy, viewed 20 March 2005,
http://www.telefinland.fi/tietoaliittymasta_hinnat.php.
Paija, L 2001, ‘The ICT cluster in Finland – Can we
explain it?’, in Finnish ICT cluster in the digital
economy, ed. L Paija, Yliopistopaino, Helsinki, ISBN
951-628-340-3.
TeliaSonera ?2005, ‘Matkapuhelinverkon peittoalueet’,
Sonera, viewed 20 March 2005,
http://mobileplaza.sonera.fi/matkapuhelin/kuuluvuus_kot
imaassa.html.
Palmberg, C 2003, ‘Turning opportunities into
innovations’, PhD Thesis, Royal Institute of Technology,
Stockholm 2003, ISBN 91-7283-515-X.
The Economist 1999, ‘To the Finland base station’, The
Economist, 7 October 2005, viewed 20 March 2005,
http://www.economist.com/surveys/displayStory.cfm?St
ory_id=246267.
Palmberg, C & Martikainen, O 2005, ‘The GSM
standard and Nokia as an incubating entrant’,
Innovation: Management, Policy & Practice, vol 7/1
January.
Tilastokeskus 2004, ‘Väkiluku vuodenvaihteessa 5 236
100’, Statistics Finland press release 29 December 2004,
http://www.stat.fi/til/vamuu/2004/vamuu_2004_200412-29_tie_001.html.
Porter, M 1990, The competitive cdvantage of nations,
The Free Press, New York.
Saunalahti 2005a, ‘Tilinpäätös 2004’, Saunalahti Group
Oyj financial statements 7 February, viewed 20 March
2005,
http://www.saunalahtigroup.fi/Saunalahti_Group_tppresentaatio_7.2.2005.pdf.
Torikka, M 2005, ‘Kännykällä ei ole kotimaata’ in
English ‘No home country for mobile phone’,
Tekniikka&Talous 10 March 2005, viewed 20 March
2005, http://www.tekniikkatalous.fi/doc.ot?f_id=694966.
Saunalahti 2005b, ‘Ykkönen’, Saunalahti Group Oyj
price list, viewed 20 March 2005,
http://saunalahti.fi/gsm/gsmykkonen.php.
WEF 2004, Global Competitiveness Report 2004-2005,
World Economic Forum, 13 October 2004, viewed 20
March 2005,
http://www.weforum.org/site/homepublic.nsf/Content/Gl
obal+Competitiveness+Programme%5CGlobal+Competi
tiveness+Report.
Salmi, P, Blomqvist, K, Ahola, J & Kyläheiko, K 2001,
Industrial districts and regional development: Towards a
knowledge-based view, Telecom Business Research
Center Lappeenranta, Finland, ISBN 951-764-548-1,
http://www.tbrc.fi/ePub_Logger.php?PUBID=47.
WEF 2005, ‘The Networked Readiness Index Rankings
2004’, Global Information Technology Report 20042005, World Economic Forum, 9 March 2005, viewed
20 March 2005,
http://www.weforum.org/pdf/Global_Competitiveness_R
eports/Reports/GITR_2004_2005/Networked_Readiness
_Index_Rankings.pdf.
Poropudas, T 2005, ‘Viestintävirasto ei ota vastuuta
kuluttajahinnoista’, Digitoday, 3 February 2005, viewed
20 March 2005,
http://www.digitoday.fi/showPage.php?page_id=12&ne
ws_id=40312.
SK Telecom, 2005, ‘About SK Telecom>Business
Area’, SK Telecom, South Korea, viewed 20 March
2005,
http://www.sktelecom.com/eng/about_skt/business_area/
index.html.
Steinbock, D 2001, The Nokia Revolution, Amer
Management Assn, ISBN: 081440636X
Steinbock, D 2004, What next? - Finnish ICT cluster and
globalization, Department for Development of Regions
and Public Administration, publication 38/2004,
Helsinki, ISBN 951-734-747-2, viewed 20 March 2005,
http://www.intermin.fi/intermin/biblio.nsf/461584FDBB
699A17C2256F24004D60EE/$file/382004.pdf.
Suomen Numerot Numpac n.d., ‘A general description
of the management of number portability in Finland’,
Suomen Numerot Numpac Oy, viewed 20 March 2005,
http://www.numpac.fi/index.php?site=127.
Suomen Numerot Numpac ?2005, ‘Statistics in English’,
Suomen Numerot Numpac Oy,
15
WLAN, WIMAX AND CDMA 450 UTMS’S REPLACEMENT OR COMPLEMENT
Petri Noponen
Telecom and Multimedia Laboratory
HUT, Espoo, Finland
[email protected]
Other interesting question would be, whether these new
technologies are providing new competing services to
customers compared to the UMTS.
Abstract
This paper presents the mobile broadband technologies,
which might compete or complement the UMTS
technology in Finland. The technical characteristics and
services of the candidates are presented. The candidate
technologies are analyzed towards the UMTS. The
analysis is done using the Porter’s 5 forces model
adapted for the competing technologies and. In the
conclusion is presented the findings and possible future
role for each technology based on the analysis.
Key Words
In this paper is studied the relation of WLAN, WiMAX
and CDMA 450 towards UMTS in the point of whether
these new technologies are the replacement or
complementary to the UMTS. The rest of the paper is
organized as follows. In section 2, UMTS is introduced.
In section 3, WLAN is introduced. In section 4,
WiMAX is introduced. In section 5, CDMA 450 is
introduced. In the section 6, is done the analysis.
Finally, section 7 concludes the findings of the paper.
UMTS, WLAN, IEEE 802.11, WiMAX, IEEE 802.16,
CDMA 450
2. UMTS
UMTS is defined as a part of IMT-2000 standard by
ITU [ITU, 2005]. The standardization development of
UMTS is done in the 3GPP forum [3GPP, 2005]. In
Finland for UMTS have been reserved bandwidths in
frequencies 1900 -1980 MHz, 2010-2025 MHz and
2110-2170 MHz. Each operator have been reserved a
pared 15 MHz bandwidth both down and uplink. This
provides 3 channels with 5 MHz spacing for the UMTS
operator. [FICORA, 1998 a]
1. Introduction
Wireless communication is changing rapidly. The era of
circuit switched telecommunication evolves towards the
packet switching era. The success of GSM has created
a large cellular market worldwide. The need for the
GSM’s evolution to provide more bandwidth supported
the development of a W-CDMA technology. The
overheated economic climate at the end of 1990’s
attracted the telecom operators to invest heavily to the
UMTS licenses. The change in the economic climate
caused the financial difficulties for the telecom
operators and delayed the launches of the commercial
UMTS networks.
UMTS supports maximum 1920 kbps transmission rate,
later used 2Mbps. [Walke, 2003]
The FICORA recommended in 1998, that in first phase
during 2002 the UMTS should provide minimum 2
Mbps inside offices and outside offices with short range
applications (hotspot), the 384 kbps in urban and
suburban areas and the 144 kbps in rural area.
[ FICORA, 1998 a]
The commercial UMTS networks have finally been
opened during last few years and also competing
technologies have appeared. New radio frequencies
have been dedicated to new technologies like WLAN
and WiMAX. The NMT 900 and NMT 450 cellular
networks are end of their lifecycle in Europe. NMT 900
frequencies were taken into GSM usage and NMT 450
frequencies will be dedicated to the digital cellular
networks, like a CDMA 450.
Similar transmission rates have been recommended as
maximum values, because of the expected speed of
movement of the mobile user in different environments.
[Walke, 2003]
HSDPA (High Speed Data Packet Access) is expected
to provide 8-10 Mbps data rate from a W-CDMA base
station to terminal in future. [UMTSworld, 2005 a]
However, the technology development together with
new services and the telecom deregulation have opened
opportunities for the new rivaling technologies. The
interesting new comers, like WLAN, WiMAX and
CDMA450 might challenge the UMTS in the
developing market.
.
UMTS Services
UMTS provides services like full mobility, international
roaming, voice and video calls, mobile data connection,
16
multimedia messages, email, web browsing and
traditional telecom services [ UMTS-Forum, 2005]
Table 2: WLAN Data rates
Mode
802.11b
Forward
link
11 Mbps
Reverse
link
11 Mbps
802.11a
54 Mbps
54 Mbps
Table 1: UMTS Data rates
Mode
WCDMA
Forward
link
2 Mbps
Reverse
link
2 Mbps
HSDPA
8-10 Mbps
2 Mbps
4. WIMAX
WiMAX, the Worldwide interoperability for
Microvawe Access, has become synonym for the radio
interface of the MAN, the Metropolitan Area Network.
WiMAX is based on the IEEE 802.16 standard and
operates at the bandwidths between 10 to 66 GHz. The
NLOS (non-line-of-sight) connections supporting
WiMAX operates in sub 11GHz bandwidth. [WIMAX
Forum, 2005 b]
3. WLAN
WLAN is based on the IEEE 802.11 standards family.
IEEE 802.11b provides maximum 11 Mbps bandwidth
and IEEE 802.11a maximum 54 Mbps bandwidth.
WLAN operates in the 2.4 GHz and 5 GHz frequency
bands. These bands are unlicensed. [HUT, 2004]
The 802.11b channels 1 to 13 with 5 MHz spacing are
used in Europe. Each channel provides 1, 2, 5.5 or 11
Mbps. Automatic fall-back lowers bit-rate if channel
quality decreases. However using more than 3 channels
same time in the same area causes severe spectral
overlapping. In 3 channels case have to be chosen every
fifth channels (25 MHz spacing) to minimize
interference. The capacity of the hotpots could in theory
reach 33 Mbps. The physical layer implementation of
802.11b is based on DSSS (Direct Sequence Spread
Spectrum). [HUT, 2004]
WiMAX provides fixed wireless cable replacement
technology for the “last-mile”, but the further
standardization is aiming to add mobility allowing
portable WIMAX-enabled devices. [WIMAX Forum,
2005 b]
WiMAX provides stationary wireless connections,
where the transmission rate is depending on the
frequency band used and available channels. The first
example was the 28 MHz spectrum (2 x 14 MHz up and
downlink) divided to 3.5 MHz sub channels (FDD) in
the licensed 3.5GHz band. The second example was the
60 MHz spectrum divided to 10 MHz sub channels
(TDD) in the unlicensed 5.8 GHz band. The point of
service using 5.8 GHz could cover 16 square km in
example. [WIMAX Forum, 2005 b]
The 802.11a bandwidth structure provides 52 sub
carriers, where 48 sub carriers could be used for traffic.
Each sub carrier provides 6, 9, 12, 18, 24, 36, 48 or 54
Mbps. The size of the cell will be smaller than 802.11b.
The physical layer implementation of the 802.11a (and
also 802.11g) is based to OFDM (Orthogonal
Frequency Division Multiplexing).
[HUT, 2004]
The EIRP restrictions in certain countries would limit
the cell’s radius to 5 km with 5.8 GHz band. In the band
3.4 -3.6 GHz is used 3.5 MHz channels. In the band
5.725 – 5.850 GHz is used 10 MHz channels. The
possible rededicated in near future the band 2.5 – 2.69
GHz would be used 5 MHz or 5.5 MHz channels.
[WIMAX Forum, 2005 c]
The maximum radius of cell using the IEEE 802.11b
technology is restricted to 100-150 meters and using the
802.11a technology to 100 meters. The signal weakens
towards the edge of cell decreasing the transmission
capacity. The capacity will be at the edge of cell 1 Mbps
in case of the IEEE 802.11b and 6 Mbps in case of
IEEE 802.11a. The 11 Mbps is expected to be available
by the cell’s radius of the 30 meters in case of IEEE
802.11b. The IEEE 802.11a technology is expected to
provide 36Mbps by the cell’s radius of the 23 meters.
[Trapeze networks, 2005]
The physical implementation of WIMAX is based on
OFDM (Orthogonal Frequency Division Multiplexing)
and sub channels [WIMAX Forum, 2005 a]. In Finland
has FICORA dedicated the frequency bands 3,4103,590 GHz, around 10 GHz and 24-26 GHz to preWiMAX solutions, like WFA, the Wireless Fixed
Access solution [FICORA, 2005 b].
Services of WLAN
Services of WiMAX
WLAN provides services like an intranet or internet
connection, a limited mobility under a hotspot, e-mail,
web browsing [Nokia, 2005]. The seamless data call
between WLAN and the third generation’s CDMA2000
network has been demonstrated [Lucent, 2002]. The
concept of the coupling would allow the interworking
between WLAN and UMTS with the packet data
services [Dixit, 2004]. The solutions to couple the
WLAN and UMTS are available [Ericsson, 2003].
WiMAX provides services like a limited mobility in the
form of nomadic service, a point-to-point connection
using dedicated bandwidth for each user, point-tomultipoint connections using shared bandwidth for
multiple users and an internet connection [WiMAX
forum, 2005 b]. Services like the VOIP-call, call
waiting, voice mail, call forwarding has been provided
in a commercial trial [NextWeb, 2005].
17
40-70 kbps data rate in reverser link [Xilinx, 2005]. The
CDMA 2000 1xEV provides 153.6 kbds data rate in
reverse link [Qualcomm, 2003 a]. The CDMA 2000
1xEV-DO uses 154 kbps data rate in reverse link.
[Xilinx, 2005]
Table 3: WiMAX Data rates
Mode
2.5 GHz band
Forward
link
5/5.5 Mbps
Reverse
link
5/5.5 Mbps
3.5 GHz band
3.5 Mbps
3.5 Mbps
5.8 GHz band
10 Mbps
10 Mbps
Table 4: CDMA 2000 Data rates
Mode
5. CDMA 450
The CDMA 450 might be one which will occupy the
available frequency band of the NMT 450 in Finland.
The Nordisk Mobiltelefon has licence for CDMA 450
network in Norway and has applied licensies for
Finland and Sweden. The Nordisk Mobiltelefon is
aiming to become a fast mobile data provider in low
density population areas. [Nortel Networks, 2005 a]
1xRTT
Forward
link
1.03 Mbps
Reverse
link
40-70 kbps
1xEV-DO
2.4 Mbps
153.6 kbps
6. Analysis
Porter’s model of competitive analysis identifies five
forces as five main titles. Each main title covers points,
which could be analyzed deeper to create a broader and
more sophisticated view of the competitive position.
The Porter’s model analysis the competitive position of
the business or organization in its industry environment.
[Kotler, 2003]
In the trial test the CDMA 450 provided maximum 2.4
Mbps transmission rate. The CDMA 450 solution is
based on 3G CDMA2000 1X and 1xEV-DO wireless
technologies deployed in the 450 MHz spectrum.
The five forces presented in the figure 1, are the
Bargaining power of suppliers, the Bargaining power of
customers, the Threat of new entrants, the Threat of
new substitute products and the Intensity of rivalry.
[Kotler, 2003]
Nortel’s CDMA 450/800/1900 BTS base station
supports CDMA 2000 1X and 1X EV-DO
simultaneously across multiple frequencies. [Nortel
Networks, 2005 a]
Threat of
New Entrants
CDMA2000 1xRTT, 1xEV and 1xEV-DO provide the
maximum data rate in forward link from base station to
terminal. The data rate in reverse link from terminal to
base station will be lower. The CDMA2000 1xRTT the
phase one, uses 1.25 MHz bandwidth. The peak data
rate is 1.03 Mbps. The 1xEV-DO (1x Evolution for
Data Only) suppose to support higher data
rates.[Patil,2003]
POTENTIAL
ENTRANTS
Bargaining Power
of Suppliers
SUPPLIER
Bargaining Power
of Buyers
TECHNOLOGY
COMPETITORS
BUYER
Intensity of Rivalry
The CDMA2000 1xEV-DO transmission capacity is
described in IS-856 TIA/EIA standard family. A peak
data rate is 2.4 Mbps and an average data rate 1.5 Mbps
over the 1.23 MHz bandwidth. These data rates are
supported with ITU-pedestrian–A model with a slow
fading. [Qualcomm, 2003 a ]
SUBSTITUTE
Threat of
Substitutes
Figure 1: Porter’s model of Competitive analysis
Portel’s model adaptation in practice
The CDMA 450 provides larger cell size than UMTS,
which decreases the costs of the coverage because need
of fewer base stations [Nortel Networks, 2005 a]. The
cover the whole Finland by the CDMA 450 is estimated
to require total 350 base stations [Tietokonelehti, 2005].
Porter’s Five Forces model is meant to analyze the
relations between the competitors within the industry.
Instead of competing firms the analysis is done for the
competing technologies [Kotler, 2003]. The Porter
model analysis is adapted to the case of the technology
executing a two-dimensional analysis. The vertical
dimension of the analysis is done among the rivaling
technologies. The horizontal dimension of the analysis
is done assuming the technology vendors as suppliers
and the technology operators as buyers.
Services of CDMA 450
CDMA 450 networks provides services like mobility,
voice call, data call, packet data using PDSN platform
for internet connectivity, web browsing, personalized
messaging and email. [Nortel Networks, 2002 c]
The 3G technologies, like UMTS, have been
standardized by the major telecom vendors, operators
and legal bodies to cover all the 3G technologies by the
framework of the IMT2000 standards [ITU, 2005].
UMTS standardization continues on the 3GPP forum to
The CDMA2000 1xRTT mode provides voice and
medium data speed. The 1xEV mode provides high
speed/high capacity data and Internet access
[Qualcomm, 2001 a]. CDMA 2000 1xRTT provides
18
involve all the interest parties [3GPP, 2005]. UMTS
technology was designed to co-work with the 2G core
network technology to protect the earlier investments of
the 2G operators [UMTSWorld, 2005 b].
compete with the existing ones with new kind of
services or geographical areas.
Bargaining power of Suppliers
Price versus total purchases does not only effect to the
purchase decision. The operator’s willingness to trial
new technology and need of capacity in hotspots do
effect the decision to purchase. The technology
differences based to maintainability and extensibility do
have significant effect. The costly, difficult and feature
poor technology to update, extend and operate will not
attract the operator. The Brand identity is the basis to
create credibility and attract the operator. The less
known brand has to accept lower profit to create the
business relation with the operator. The Impact on
quality and performance will interest the operator,
which business is based to the trustful well performing
technology and infrastructure. The operator’s profit
could be measured monitoring the return of investment
and revenue generated of the technology overall.
However all profit could not be easily measured, like
the positive support to other business of the operator.
The decision maker’s incentives are based to business
opportunities, easing bottlenecks and seeking future
development.
Determinants of Buyer power -Price sensitivity
The Differentiation of inputs depends on how much the
vendor can differentiate itself from other vendor in
degree of integration, support, turn-key project, training,
financing, services development and other technology
related activities supporting the operator’s launch of the
UMTS technology. Switching costs of vendor are
growing towards the size of lost revenue by the old
operator, the possible lost credibility and reputation, the
creating relations to the new operators and the growing
degree of integration needed towards the multiple
vendors used by the operator. The Presence of substitute
inputs forces the vendors to use more effort to integrate
new technologies, establish strategic alliances, purchase
promising new inputs, research and develop
continuously. The Supplier concentration is necessary
for the collaborating with the standardization, patents
sharing and providing interoperability between the
different technologies and vendors. The importance of
volume to the vendor is meaningful while covering the
research and development costs of technology. The
Costs relative to total purchases are significant during
the research and development of the technology. The
vendors bargaining power is reduced by the large
purchase of the operator. The Impact of inputs on cost
and differentiation has the biggest effect with more
uncertain and unknown technology. The research and
development personnel create the main part of the input
costs of the technology. The vendor could increase its
bargaining power by gaining control over
standardization and intellectual properties of the
technology. The threat of forward integration relative to
threat of backward integration. The vendors trying to
gain access to the end-users of the operators’ services
by multiple different technology offerings would gain
their bargaining power by forward integration.
Threat of new entrants – entry barriers
The economics of scale is significant entry barrier for
the technology, which development costs are high. The
CDMA 450 is a variant of the CDMA2000 technology,
which gives advantage dividing the development costs
between the multiple CDMA2000 variants. The CDMA
450 is competing for the rededicated frequencies of the
removed NMT450 in many countries, which will
increase the probability of the economics of scale. The
WLAN and WiMAX are based to widely used IEEE
802.11 and 802.16 standards, which both are developed
constantly. The both technologies will gain advantage
from the economics of scale, because they are also used
as the cable replacement technologies with the wireless
internet. Proprietary differences are not significant. The
CDMA450, WLAN and WiMAX are all based to
general standards provided by many vendors.
Brand identity of the all new entrants is quite a
unknown. Switching costs between different CDMA450
providers might be significant, because there are few
possible vendors available and only Nortel actually
providing the working technology solution at the
moment. The WLAN and WiMAX have multiple
vendors and the switching between different vendors
should cause remarkable switching costs.
Bargaining power of Buyers-Bargaining leverage
The operator concentration versus vendor concentration
and operator volume. The operator gains power by the
bigger long term purchases and using more than one
vendor. Operator’s switching cost relative to vendors
switching costs are decreasing the operator’s power,
because the remarkable investment to the technology
infrastructure. The infrastructure investments require a
decade or more pay off period. Operator information
has effect to the technological choices and investment
decision. The low awareness of the technology and its
possibilities decreases the operator‘s bargaining power.
Backward integration would provide the end-users
choice to use less-operator dependent technologies, like
VOIP-calls over WLAN or WiMAX reducing the
bargaining power of the operator. Substitute
technologies do not threat the mainstream UMTS
technology, but might produce new operators to
The capital requirements of the CDMA450 based
solutions are caused by the need to implement
significant part of infrastructure to satisfy the
requirement of the license and to provide the necessary
services. The CDMA450 could cover larger area with
the fewer base stations than UMTS. The capital
requirements of the CDMA450 are less than the UMTS
because the coverage. The capital requirements of the
WLAN and WiMAX are less demanding than
19
CDMA450. The WLAN and WiMAX could be
launched with light size without difficulties. The Access
to the distribution requires establishing relationship
with the possible operators or vendors. The Absolute
cost advantage could be based to more efficient
coverage by the bigger cell sizes of CDMA450 or the
more bandwidth provided to limited area, like WLAN
and WiMAX. The Government policy does not prohibit
usage of any technology. The frequency and operators’
licenses allow a solution based to each technology to be
used. The WLAN does not need licenses. The expected
retaliation of the new technology is not possible for few
years, because the WLAN and WiMAX are the latest
edge of technologies.
development costs, while same time investing to the
further development. This would increase the rivalry.
The high switching costs between UMTS and
CDMA2000 decreases rivalry. The lack of competition
between UMTS and other 3G technologies decrease the
rivalry. The features of the UMTS technology are
incremented by releases requiring a careful planning
and designing the implementation. The diverse 3G
competitors under IMT2000 framework like UMTS and
CDMA2000 technologies would increase the rivalry.
The high exit barriers to invest to the 3G development
reduce the new UMTS as well CDMA2000
competitors.
Threat of new entrants
Threat of substitute.
The CDMA 450 technology challenges the UMTS in
suburban and rural areas, where UTMS infrastructure
will be expensive to deploy.
The
potential
substitutes
performing
similar
functionalities and providing the same services than
UMTS is CDMA450. The CDMA450 provides the half
of the bandwidth, but a wider cellular coverage than
UMTS. The CDMA450 provides similar basic services
than UMTS. The CDMA450 could be real substitute for
the UMTS, especially in the suburban and rural areas.
The CDMA450 has also shared core network with
CDMA800 and CDMA 1900 technologies. The
CDMA450 technology added with the 800 MHz or
1900
MHz
technology
would
create
the
CDMA450/800/1900 technology to potential substitute
for the UMTS technology. The WLAN could not
substitute the UMTS, because the small cell size. The
WiMAX could provide same coverage and more
bandwidth than UMTS. WiMAX can not substitute
UMTS, because of the limited services and lack of
mobility. Relative price performance of substitute
would be based the wider coverage with CDMA450.
The WiMAX would compete by the wide broadband
wireless internet connection with the fixed connections
and the UMTS with in stationary environment. The
WiMAX could not challenge the UMTS without the
proper mobility, which is expected to become in future
to the standards of the WiMAX. The switching costs
between CDMA450 and UMTS are significant
restricting the change from substitute to UMTS or vice
versa. The WLAN and UMTS are not real substitutes.
The WLAN could be coupled to UMTS. The WLAN
could also be used coupled to CDMA2000 based
technology, like to the CDMA450. The WiMAX is not
an option for switching from UMTS as far as it does not
provide mobility.
Threat of substitutes
UMTS and CDMA2000 are real 3G technology
competitors. They have similar network infrastructure,
services and enough bandwidth to provide broadband
connectivity. The CDMA2000 could substitute UMTS.
Bargaining power of operators
The operators could increase the bargaining power by
increasing the awareness of the technology and its
possibilities. The monitoring of the quality and
performance of the technology increases the operator
bargaining power.
Bargaining power of vendors
The vendors can increase the bargaining power by
providing services related to launch the UMTS
technology, gaining control over the standardization and
the intellectual property rights.
7. Conclusion
CDMA450 will absolutely challenge the UMTS in the
rural and suburban areas. CDMA2000 technology
together the CDMA450 technology would be a real
threat to the UMTS. WLAN with a limited coverage
complements the UMTS as well CDMA2000. WiMAX
is not replacement or complement at the moment.
WiMAX is a wireless cable replacement technology,
which competes with wired technologies.
Technology competitors - Intensity of rivalry
Numerous or equally balanced competitors could come
from the IMT2000 framework. The 3G’s UMTS
technology vendors have collaboration as well
competition between each others. The CDMA2000
based other 3G’s technology of the IMT2000
framework might to achieve the market position
indirectly via the CDMA450 technology. The 3G
market is shaping itself. The development of the UMTS
technology has been invested for many years. The
UMTS vendors are trying to cover the earlier
References
3GPP, 2005. 3rd Generation Partnership Project
(3GPP). Available at: http://www.3gpp.org/
(Referenced 30.04.2005)
Analysys, 2000. Equipment sharing in a UMTS roll-out.
http://www.analysys.com/default_acl.asp?Mode=article
&iLeftArticle=960&m=&n= (Referenced 30.04.2005)
20
Qualcomm, 2003 (a). Forward link coding and
modulation for CDMA2000 1XEV-DO (IS-856).
www.qualcomm.com/technology/1xevdo/publishedpapers/FwdLinkCoding_1xEV-DO.pdf
Batil, B. [et al.] 2003. IP in Wireless Networks. Prentice
Hall, p 216.
Dixit Sudhir, Tao Wu. 2004. Content networking in the
mobile internet. Wiley, pp 319-321.
Qualcomm, 2001 (b). 1xev: 1x Evolution IS-856
TIA/EIA Standard. Available at:
http://www.cdg.org/technology/3g/resource/1xEV_Airli
nkOverview_110701.pdf
Ericsson, 2003. Mobile Operator WLAN (MO-WLAN).
Available at:
http://www.ericsson.com/products/product_selector/M
O_WLAN_Product_hpprod.shtml (Ref. 30.04.2005)
FICORA, 1998 (a). UMTS – Taajuudet ja toimiluvat
Suomessa. www.ficora.fi/suomi/document/fina
lumts.pdf. (Referenced 20.03.2005)
Trapeze networks, 2005. Designing Enterprise Wireless
LANs for Capacity vs. Coverage. Available at:
http://www.trapezenetworks.com/technology/whitepape
rs/designingWLANs/designingWLANs.asp
FICORA, 2005 (b). Kiinteiden liityntäverkkojen
radiojärjestelmät (FWA). www.ficora.fi/suomi/radi
o/Aliite2.htm. (Ref. 20.03.2005)
Tietokonelehti, 05/2005 .Tiettömän taipaleen
laajakaista. SanomaMagazines, pp 62-64.
HUT, 2004 (a). Course S-72.250 WLAN applications
course 23.-24.9.2004 at Dipoli. www.dipoli.hut.fi/sahk
otekniikka/wlan/_Kuvaus/_kuvaus.html (Ref. 30.4.05)
UMTS-forum, 2005. What is UMTS ?. Available at:
http://www.umtsforum.org/servlet/dycon/ztumts/umts/L
ive/en/umts/What+is+UMTS_index
(Referenced
30.04.2005)
ITU, 2005. International Telecommunications Union.
Available at:http://www.itu.int (Referenced 30.04.2005)
UMTSworld, 2005 a.HSDPA in W-CDMA. Available
at: http://www.umtsworld.com/technology/hsdpa.htm
Kotler, P. 2003. Marketing management, 11th edition.
Prentice Hall, pp 242-254.
Lucent, 2002. Lucent Technologies successfully
demonstrates seamless roaming between WiFi and 3G
UMTS wireless networks. www.lucent.com/press/0
902/020918.nsb.html (Ref. 30.04.2005)
UMTSworld, 2005 b.HSDPA in W-CDMA. Available
at:http://www.umtsworld.com/technology/overview.htm
#a3 (Referenced 30.04.2005)
Walke, B. 2000. Mobile radio networks. Wiley, pp 327339.
NextWeb, 2005 . Pressrelease: NextWeb and
CommPartners Launch Largest Deployment of VoIP
over Wireless Services. Available at:
http://www.commpartners.us/corp/news041905.php?PH
PSESSID=655974f4f35010b2eb06609ee17f1e2f
WiMAX Forum, 2005 (a). WiMAX’s technology for
LOS and NLOS environments. Available at:
http://www.wimaxforum.org/news/downloads/WiMAX
NLOSgeneral-versionaug04.pdf.
Nokia, 2005. WLAN (Wi-FI). Available at:
http://www.nokia.com/nokia/0,,62531,00.html
WiMAX Forum, 2004 (b). Business Case Models for
Fixed Broadband Wireless Access based on WiMAX
Technology and the 802.16 Standard. Available at:
http://www.wimaxforum.org/news/downloads/WiMAX
-The_Business_Case-Rev3.pdf
. (Referenced 20.03.2005)
WiMAX Forum, 2004 (c). Initial Certification Profiles
and the European regulatory framework. Available at:
http://www.wimaxforum.org/news/downloads/Initial_pr
ofiles_final.pdf. (Referenced 20.03.2005)
Nortel networks, 2005 (a). Lehdistötiedote.Available at:
http://www.nortelnetworks.com/corporate/global/emea/f
inland/press/fi20041019-1.html (Referenced 20.03.05)
Nortel networks, 2005 (b). CDMA Base Station (BTS)
for CDMA 450. Available at:
http://products.nortel.com/go/product_content.jsp?segId
=0&parId=0&prod_id=51840&locale=en-US
Xilinx, 2005. CDMA 2000. http://www.xilinx.com/es
p/wireless/cellular_networks/cdma2000.htm (20/03/05)
Nortel networks, 2002 (C). Bell mobility launches
Canada’s first CDMA2000 1x next-generation wireless
network. Available at:
http://www.nortelnetworks.com/solutions/wireless/colla
teral/nn_102580.11-07-02.pdf
21
MOBILE SOLUTIONS IN BUSINESS PROCESSES
Maija-Kerttu Sarvas
Telecommunications Software
and Multimedia Laboratory
P.O. Box 5400, FIN-02015 HUT
FINLAND
do it they need to collaborate with leading technology
and system integration companies (Nokia , 2004) .
Abstract
Enterprise themselves are starting to see the
opportunities in mobile solution for business processes.
Wireless business solutions can be seen as a way to
eliminate the limits of time and space and that way make
business processes more efficient.
A CIO (Free Newsletter published by CXO Media Inc)
research showed that 52% of CIOs (Chief Information
Officers) surveyed thought wireless technologies
important to their companies business goals. The key
drivers to wireless were better productivity, streaming
processes and improving user satisfaction.
In the same research respondents expect the number of
wireless user to more than double in the organization in
the next 12 months (CIO Research, 2001) .
The aim of this paper is to describe what new
applications mobile access to corporate information
systems enables and to evaluate business benefits of
such services for the end user organizations.
First we take a brief look about the evolving enterprise
mobile business. Then discussion about the benefits a
mobile solution can bring to a company, followed with a
closer look of the business value involved.
Secondly, there is an introduction of application needs
of a mobile business solution. In the end we take a brief
look at what is available today having Nokia’s
enterprise solution as an example case.
Keywords
Business process is a collection of related activites that
produce from re-defined inputs specific outputs which
create business value to a corporation.
Mobile solutions, Mobile strategy, Business processes,
Business value, Enterprise market,
Mobile solution implements a process or part of it with
mobile devices, wireless access and mobility.
1. Introduction
Having and using a mobile device is a part of almost
everyone’s everyday life in countries with high mobile
penetration like Finland. The growth in the business is
not any more very prominent without something new to
offer. It is quite understandable that the companies in
the mobile business broaden their focus and look for
new opportunities.
2. Mobile Strategy
Companies need to develop a mobile strategy to
understand what is the best strategy for them to get best
advantage of the mobile business processes and how
will they get there
To get companies do this they need to be woke-up and
get to realize the value of mobility. This can be done by
educating stakeholders, securing the environment and
deploying the technology (Intel , 2002) .
Enterprise business is a very attracrive market, not least
because it involves big money. Some figures from the
enterprise IT market support this declaration. The
average enterprise spends about .4 % of its gross
revenue on IT, which is about .500 EUR month per
employee, of which about .60 EUR for mobile services.
Highest spending per employee is on IT, telecom and
financial sectors. The global enterprise IT market spent
about 1000 BEUR in 2003, the largest part of which is
in the system integration and outsourcing services
(Hammäinen, 2005) .
2.1 Investing in Mobile Solutions
In a research by CIO company CIO’s were asked about
the ROI (Return of Invest) of their wireless solution.
Forty percent replied that they have or will achieve full
return within 12 months and other 42% within 24
months. (CIO Research, 2001) .
A logical next step in the mobile business is aiming
closer at enterprises than before and offering mobile
solution designed for them. This can be seen for
example in Nokia reporting: one of its goals is to extend
mobility to enterprises. Nokia intends to capitalize on
the companies’ needs for mobile and seamless
connectivity. They aim to do it by offering products and
services for companies and business people. To be able
A mobile workforce can bring new level of productivity
and financial success to a company. Enabling mobile
processes is an important way IT can bring business
value to a company (Intel , 2002) .
For example a Intel case study showed that one extra
hour of productive work a week justified the additional
cost of a notebook PC, bringing the TCO (Total Cost of
22
Ownership) to the same level as with desktops. The
same study showed that mobile workers are even more
productive with productivity improvements of three to
eight hours a week. Did the employees not only work
more out of the office the also performed new tasks
(Intel , 2002) .
authorized agent to take action and contribute to
coordination of intermittent business solutions. (Burris,
2003).
An authorized agents are here seen as the people whom
the execution authorization is given. Usually in a fast
and complex business environment they need to confirm
and check the right actions to take. They need to know
what commitments they can and should take. These
actions create latency in the process, which gives an
opportunity for competition to attack. Execution speed
is the coordination problem here. Mobile solutions give
distributed resources way to act faster while still
remaining under control. Mobile solutions do not just
automate business process they change them (Burris,
2003).
A mobile solution to business gives higher Total
Benefits of Ownership (TBO). Benefits can be seen in
following areas (Intel , 2002) :
·
·
·
·
·
Faster decision-making. With instant, alwayson access to data faster business decision can
be made. It can bring competitive advantage to
the company.
Sales-force efficiency. Information can be
accessed anywhere and sales can faster add
value to the customer.
Better accuracy. Managers being able to
communicate whenever and where ever can
prevent or at least minimize mistakes.
Higher employee satisfaction. Tools to work
productively anytime and anywhere rises
satisfaction. This will lower employee turnover
and become that way a competitive advantage.
Increased productivity. Being mobile and
connected can increase employees efficiency of
time.
People are the most valuable and least reliable
components of the business process. A process that
does not misuses peoples time and reduces the need for
human touch point creates business value.
The right mobile solutions can drive effectiveness in
the following areas -user efficiency, network efficiency
and enterprise efficiency. Better user efficiency can be
achieved through offline functionality, application
choices and integration of solutions. Network efficiency
can be proved by reducing network’s impact on
applications, protect users against network inefficiencies
and optimizing information flow. This can be done with
optimized bandwidth and latency and seamless
connectivity. Enterprise efficiency can be proved by
enabling offline user applications and eliminating
needless human labor associated with many applications
(Burris, 2003).
The mobility work style can give a dramatic
improvement in productivity for business and business
users. A Gartner report (2001) showed a 41 percent
higher productivity among employees using wireless
LAN and notebooks (Burris, 2003).
.
The view that smartphones and more advanced mobile
devices are only for manager level employees is
becoming old fashion. The whole workforce might need
to be mobile. Equipping warehouse and factory
employees with mobile devices can help eliminate
mistakes and lower contamination and also increases
ROI and productivity (Intel , 2002) .
Re-defining business process is a good point also to
think of mobilizing the process. It is also good to keep
in mind that just adding mobility to a process does not
make it self-evidently better.
Changes in business value are almost associated with
people. Technology deserves little credit for creating
value, and also for destroying it. (Burris, 2003).
2.3 Concerns of the companies
2.2 Business Value
Even the benefits of mobile solutions can be seen and
notices by many companies, there still are some
concerns moving into them.
Technology must convert into business value not the
other way around. The objective should be where and
when business can be executed better, without getting
users confused with how (Burris, 2003).
Two CIO researches should that security, integration
with existing infrastructure, management and user
support are seen as biggest challenges in moving to
mobile solutions.
One research among 250 IT executives showed the
greatest concerns about implementing wireless were
security (66%), user support (37%), privacy (32%) and
cost restrictions (29%). (CIO Research, 2001)
Another research among CIOs asked to list the 3 top
challenges in supporting and managing wireless
technologies. They were integration with current
infrastructure (43%), security (38%) and real time
technical support (35%). (CIO Research, 2004) .
A good way to create mobile business processes is to
extend existing business logic with common standards
to mobile devices. This way existing skills and tools can
be used and less training and learning is needed.
All businesses need information for coordinating their
resources. Coordinating is the most general use of
information in business. It is also the most difficult and
most expensive asset (Burris, 2003).
Mobile solutions generate big coordination capacity.
They can revoke physical barriers to business
coordination.
The two most important ways for
mobilization to add business value are the ability of an
23
Later in this paper I’ll go through what mobile solutions
that now available. The issue about security is
understood and variety of solutions is available.
Technical support for the middleware is on place, but
the support of the end-user is not clear. Also the
concerns about integration with current systems are in
understandable. There is no one answer or solution that
works for all to it.
If the mobile solution depends only on the existence of
files, all the mobile application needs to do is to read
and write files. The files are then forwarded to the
companies network, where a server executes them
(Burris, 2003).
Intel has found that three application architecture
patterns represent 80% of all mobile business solution
needs and opportunities (Burris, 2003):
3. The Applications Needs of Mobile
Solution
·
In a research CIOs were asked about wireless
applications already in use. They answered that most
used were email (86%), access to company data (80%),
scheduling information (75%), company intranet (58%)
and Internet (57.5%). The research also asked what will
be supported in future a growing number will support
email, calendar/scheduling, personal productivity and
transaction-based applications (CIO Research, 2004) .
I would like to point out that this research does not
really point out what applications are used (except
email), it shows in what type of processes and areas the
applications are most used on or will be used on.
·
·
Offline database synchronization for Customer
Relationship Management (CRM), Human
Resources (HR), Software Configuration
Management (SCM) and Enterprise Resource
Planning (ERP) systems.
Offline document/forms synchronization for
supporting collaboration between employees.
Offline portals for access to content catalogs.
Intel also identified four critical capabilities for any
mobile solution. These are offline data management,
seamless connectivity, multiple platform support and
power and performance optimization.
Offline data management in needed to enable the same
user experience regardless of the connection status. This
calls for the mobile solution to asynchronously store and
manage data from the client to server. Seamless
connectivity requires the application capability adapt to
the networks state changes and behave appropriately.
Multiple platform support asks for the applications to be
written using open specifications and standards. Power
and performance optimization requires mobile
applications to deliver fast computational and I/O
performance to save battery life (Burris, 2003).
E-mail is the most common and best supported
application on mobile devices. Is it more a personal
messaging tool or part of business application is a good
question. Coordinating information flow through email
can be seen as part of a business process.
The use of other more obvious business processes
through wireless applications inventory management
and sales automation is growing (CIO Research, 2001) .
3.1 Security
Some general guidelines of what a mobile business
application is and what criteria should it meet is
discussed in the following.
Security being one of the issues that worries companies
in mobile solution an application needs to safe to use
from this aspect also.
For the application to be usable, taken into use and
effective it should resemble the applications already in
use in the company. Connection-oriented application
and ones demanding a lot of interactivity from the user
are most challenging to integrate into the mobile
solutions. A new architecture is needed to meet the
requirements (Burris, 2003).
In wireless solution middleware plays a critical role. It
sits between the public network and the private
corporate network. It needs to fulfill the security
demands. More transparent it is, easier it is to
maintenance.
The security solution can be a Virtual Private Network
(VPN) client that is optimized for wireless networks and
provides cryptography, a VPN gateway for tunnels to
serve wireless clients and authentication services.
A mobilized computing architecture is based on clientside applications that continue working whether or not a
connection is available (Burris, 2003).
Applications for content management are easier to use
and more efficient when the power of the local devices
is used rather than depending on a network connection
(Burris, 2003).
The applications should take most advantage of the
benefits of each mobile device. That way the users get
the most out of their devices. This to be possible a
mobile solution should put minimum requirements on
the device, maximize openness and be based on
standards (Burris, 2003).
3.2 Usability
Mobile devices are smaller with smaller screen display
and limited or different keyboard than computers.
Applications built for computers might not be that
usable on a mobile device.
To get people to use an application it needs to give a
least acceptable user experience. Applications user logic
and UI may need modification to fit the needs of the
user and limitations of the mobile devices.
24
Nokia Wireless Accelerator can be used on client-server
and server-only mode. The server- only access does not
require any installation in the client. It allows access
with any device with a web-browser having Nokia
Wireless Accelerator set as a proxy. In the client-server
mode a client is installed on the mobile device or laptop
(Nokia Wireless Accelerator , 2005) .
4. Mobile Business Solutions Today
To give a view where the industry is today and what is
available a mobile solution from Nokia is described here
in more detail.
Sony-Ericsson is in the market with similar products and
solutions. Both companies work with IBM to offer and
develop business applications to their mobile devices.
Also other similar alliances around the business can be
found for example Plam i705 providing Sibels Sales
force automation software integrated
Nokia phones support open standards and protocols.
They are based on the Symbian operating system. This
allows and makes easier the developing of services and
applications (Nokia datasheet , 2004) .
Apart from this Nokia has co-operation with different
software vendors to provide software business
applications.
For example a push email based on open standards
(Push-IMAP and SyncML) was developed with Oracle
Consilient Software (Nokia Press Release , 2004) .
Nokia works with Computer Associates International to
provide e-management applications to its mobile
devices. CA’s Unicenter provides solutions for
inventory management, software distribution and data
protection. (Nokia white paper , 2004) .
With IBM Nokia plans to integrate functionality of IBM
WebSphare product family to provide end-to-end
mobile solutions (Nokia datasheet , 2004) .
4.1 Nokia’s Mobile Solution for Enterprises
Nokia paints out a user scenario where with mobile
solutions people are able to make full use of idle
moments in everyday life. There are two ways to doing
it. First one is to support services needed by mobile
professionals with applications like email, calendar and
the Internet. The other one is to implement company
specific applications to support working. For example
sales and filed force automation applications.
Nokia provides mobile devices for individual business
users and a middleware solution for enterprise to enable
mobile process. They also develop applications to
connect the individual users into the business process.
Nokia also has The Nokia Channel Accreditation
Program to educate partners to sell Nokia mobile
solution for enterprises. (Nokia Channel Program ,
2005)
Nokia divides business user to different profiles
according on three key features. What is the sufficient
size of the screen for the user, need for input
mechanisms and need to have compatibility with office
applications. Direct Messaging devices (Nokia 6820i) ,
meant for person-to-person messaging
and
Communicators (Nokia 9500), for access to back-office
applications, to knowledge workers and Smartphones
(Nokia 6600) for skilled and professional workers.
(Nokia white paper , 2004) .
Nokia provides assistants for it customers Nokia
Support Web for its resellers and network software
users. The help for end-users, the ones using the mobile
device, is more open question. It can be available from
the carrier, from the application provider or the
company provides it to its own employee.
4.2 Business Model
On the private mobile phones market and voice services
the players are the mobile device provider, the network
operator to provide the connectivity and services and the
subscriber. Service operator can have a role, but it is
still unclear.
They all offer personal information management with
calendar and contacts database, email access, back-up,
synchronization, connectivity to IT infrastructure,
device security and development tools (Nokia white
paper , 2004) .
The enterprise market brings more players involved.
The application provider is also involved. Here the
need for a service provider is more obvious. Apart from
the applications enterprises need support, training and
maintenance services for there mobile solution.
Nokia’s middleware solution is Secure Mobile
Connectivity Solution. It works transparently and does
not require any changes to existing content or
applications. It includes the following components.
Nokia One Business Server a solution for mobile email.
It leaves the company freedom to use select and
integrate any email environment to the mobile device. It
reforms the content within the corporate network to fit
on small screen. There is no need to change existing
applications. (Nokia One Buisness Solution, 2005)
Nokia Secure Access system SSL-based VPN solution
which enables secure access to corporate email,
applications and resources for mobile employees and
partners. browser based remote access solution. (Nokia
SSL VPN , 2005)
To get a full mobile solution to business process today
enterprises can contact a service provider like
TietoEntator and Accentur. Applications can be
integrated and modified from exciting office solutions.
New ones can be applied from the variety of mobile
applications available, though there is not available a
mobile solutions for all needs and all mobile devices.
The service providers do provide the support needed.
Also network operators like TeliaSonera and Elisa offer
services for enterprises.
25
Network operator needs to be involved in a way or other
to provide the mobile network.
The way the value of mobility and the growth of
employee efficiency is presented to companies raises the
question what is our work style in the future? One can
work anytime, anywhere or is one demanded to work
anytime, anywhere? The boarder between work and
leisure has been narrowing. Will the availability of an
employee anytime anywhere make it vanish?
Idle time needs to be made productive. Or that is at least
what we are told as marketing message from the vendors
of this business.
Markets today are complex and move fast the role on
innovation in business is getting more important. To be
innovative and creative idle time and a level of freedom
is needed.
An enterprise can also choose to build their mobile
solution in house from the components available at the
market.
Who is involved and what are the roles and the earning
logic in the enterprise mobile market is still evolving.
Many players see the lure possibilities of the
marketplace.
5. Conclusion
The value of the mobile enterprise business is easy to
see. The benefits and improvements mobility brings to
business processes are easy show. TCO and ROI figures
look promising.
The business model and earning logic of the enterprise
mobile business is still evolving. The role of the service
provider is more critical than in the individual mobile
market. The division between network operator and
services provider can be seen more clearly.
The market is still in it early stages. What are the
solutions needed and how they should be implemented?
This paper discussed some of the features that can be
critical for mobile applications. The solutions now
available, like the one from Nokia, do not seem to fulfill
the criteria. They are connection-oriented, based on
same logic than used for computer based applications
and dependent of the network connection.
There are alliances working towards the markets.
Relationships come more important, sharing and
combining the knowledge of this marketplace. New
solution alliances and channel programs will evolve. A
packaging of total solution is not in place. Questions
like end-user support and billing need answers and
solutions.
References
Network connection and network usage bring the value
and money to network operators. In there view the best
applications would use the network as much as possible.
Their interest might be very different from the
application users point. A connection-oriented
application is good business for the network operator.
P.Burris, P.. 2003. The Business Value
Roadmap to Mobilized Software Solutions.
freeMarketpress.
CIO Research Reports. W ireless Intentions.
http://www2.cio.com/research/surveyreport.cf
m?id=15
One could argue that in future when 3G networks are
available and quality of services is better the connection
is no more an issue. Probably in the future also the
network roaming increases. Not only between different
mobile networks, but also switching from mobile
network, to LAN or company network on the move.
This all should be as transparent as possible to the user.
An application that is not dependent on the connection
supports this view better.
CIO Research Reports. The payoff of
Wireless IT Investments.
http://www2.cio.com/research/surveyreport.cf
m?id=68
Hämmäinen, H. Slides from course
Networking Business (S-38.041)
http://netlab.hut.fi/opetus/s38041/k05/index.sh
tml
Will the role of software developers increase, with more
applications coming available on mobile devices? The
variety of available mobile devices is large today,
leading operation systems in them being Symbian, Palm
OS and Windows Mobile. Usage of platform
independent development tools like Java, might be an
answer to some of the problems.
Or will companies buy services from service providers
that will build the solutions by integrating exciting
application to the mobile devices.
Small and medium size business may not have the
money invest in an integration project. Services
providers can build and host mobile solutions, renting
the service to S&M business.
Intel Information Technology Withe Paper:
Building the Foundation for Anytime,
Anywhere Computing – How the strategic
coupling of notebook computers and wireless
networks makes a business more successful.
http://www.dell.com/downloads/global/shared/
intel_whitepaper.pdf
Nokia Channel Program.
http://www.nokia.com/nokia/0,8764,60205,00
.html
Nokia Datasheet – Integrated IT for mobile
management.
26
http://www.nokia.no/campaign/nfb/pdf/benefit
sRefCases/CA_final.pdf
Nokia Form 20-F 2004.
http://www.nokia.com/BaseProject/Sites/NOK
IA_MAIN_18022/CDA/Categories/AboutNok
ia/Financials/_Content/_Static_Files/nokia_for
m_20f.pdf
Nokia One Business Solution
http://www.nokia.com/nokia/0,1522,,00.html?
orig=/nokiaone/
Nokia Press Release: Push e-mail for Oracle
Collaboration Suite to be offered on Nokia
9500 Communicator and Nokia 9300
enterprise smartphone with Consilient
Software. November 2004.
http://www.nokia.com/aboutnokia/press/nmc2
004/pressreleases/ES_Push%
20email_Oracle.pdf
Nokia SSL VPN
http://www.nokia.com/nokia/0,8764,60205,00
.html
Nokia White paper – Small Change, Big
Impact
http://wp.bitpipe.com/resource/Americas_Whi
tepaper_v3_1509041_bitpipe.pdf
Nokia Wireless Accelerator
27
MOBILE BROADCAST RADIO TECHNOLOGIES:
FACTORS AFFECTING THE EMERGENCE OF DOMINANT DESIGN
Toni Paila
[email protected]
layers are a necessary and often essential parts of the
overall broadcast technology solutions we will consider
these layers only in the light of radio technology.
The mobile broadcast – as we define it – has only
recently emerged and become a topic of many
discussions. From a technical point of view, the area of
mobile broadcast radio technologies has become very
diverse, manifested through the emergence of many
international standardization activities along with
regional and proprietary solutions. An example of
international standardization that has already been
completed is Digital Video Broadcast for Handheld
(DVB-H), which adds power-saving and error resilience
features to the terrestrial digital TV transmission
standard (DVB-T) making it suitable for reception.
Other examples of international standardization
activities are 3GPP Multimedia Broadcast/Multicast
Service (MBMS) and 3GPP2 Broadcast Multicast
Service (BCMCS). The former specifies mobile
broadcast support for the 3rd generation WCDMA
cellular systems while the latter specifies the similar
support for the 3rd generation CDMA2000 cellular
systems. Examples of regional solutions are the
Japanese Integrated Services Digital Broadcast
Terrestrial (ISDB-T) and the South-Korean Terrestrial
and Satellite Digital Multimedia Broadcast (T-DMB
and S-DMB). An example of proprietary mobile
broadcast solution currently being developed is the
Forward Link Only (FLO) by Qualcomm. From a
business system point of view the current situation is
equally mixed. Two main branches of value chains
exist: the one build around the cellular mobile operator
and the other built around the broadcast network
operator (Paila, 2004). At the moment many different
solutions are currently being introduced and developed
for markets that are developing, too. Therefore no
technical solution for mobile broadcast radio can be
regarded to be a dominant solution globally.
Abstract
Broadcast paradigm, the simultaneous delivery of
multimedia content and associated services to masses of
consumers has recently emerged also in the context of
mobile handheld terminals, such as mobile phones.
Consequently, the broadcast radio technologies have
started to find their way into mobile devices. While
currently there are a number of technologies being
developed, piloted and deployed, none of them can be
clearly considered a dominant design. In this paper we
propose a set of five factors that we consider to affect
which mobile broadcast transmission technology will
become a dominant design. In the light of the factors we
also discuss whether a dominant design would appear
on the global or regional level. As a background we use
the theory of dominant design and the cyclical model of
technological changes.
Key Words
Mobile, Broadcast, Radio, Dominant, Design, Factor
1. Introduction
Broadcast transmission, delivering same information
simultaneously to unlimited number of recipients within
a geographical coverage area, is an interesting concept
when applied to mobile receivers. The broadcast
delivery not only enables cost-efficient transport of
content but also a variety of new mobile applications
building on broadcast programming paradigm (Berg
2003, Sonera 2003, Open Mobile Alliance 2004).
In this paper we restrict the scope of our discussion on
mobile broadcast as follows. Firstly, we consider only
handheld terminals that can receive the mobile
broadcast in similar conditions that we are used to use
mobile telephony – both indoor and outdoor, and both
stationary and in motion. Consequently, the terminal
may be a cellular phone equipped with broadcast
capability, a hybrid phone device combining mobile
phone and another radio technology, or, a receive-only
device such as a personal digital assistant (PDA) with
broadcast receiver but no cellular connectivity.
Secondly, we focus on technologies that enable TV-type
of experience. That is, the audio-visual programming
that the end-user consumes using the above-mentioned
receiver must be provided live and resemble the
experience the end-user would get using the normal TV
(although the video frame rate and image resolution
may be significantly lower). Thirdly, we discuss radio
technologies only. Although the application and service
The purpose of this paper is to propose a set of factors
that either facilitate or inhibit the emergence of a global
dominant design for mobile broadcast radio. We start by
briefly revising the theory of dominant design and the
cyclical model of technological changes, and
positioning the current state of mobile broadcast radio
technology within the model. Consequently we describe
a set of factors, a combination of which we believe a
particular radio technology need to successfully address
in order to become a dominant design: Availability of
spectrum and regulation; Existing investment and reuse;
Availability of hardware components; Availability of
terminal solutions; and; Availability of official standard.
In the light of the proposed factors we end this paper
28
design may be replaced by another design and the cycle
may turn back to the era or fermentation.
with a discussion on whether or not there will be a
dominant design for a broadcast radio technology on
global level, or will the dominant design emerge on
regional level.
Applying this cyclical model of technological changes
to the mobile broadcast radio technologies we make the
following observations. Firstly, we consider the mobile
broadcast – reception of multimedia broadcast by small
handheld devices – a technical discontinuity that has
been enabled by two main developments. On one hand
the increasing processing power, enhanced display
technology and battery life of handheld devices have
enabled it. On the other hand, the innovations in radio
and link technologies and especially the receiver side
implementation (smaller antennas with better gain,
decreasing size and power consumption of hardware)
have enabled it. Secondly, we observe that the technical
area of mobile broadcast radios is currently in the
technical fermentation phase, as no dominant design
exists yet. Instead, several competing technologies are
being developed and introduced to the developing
markets.
2. Theory of Dominant Design and the
Cyclical Model of Technological Changes
Our main goal in this paper is to identify the success
factors that make a specific mobile broadcast radio
technology a dominant design among the others.
Therefore it warrants a brief introduction to the theory
of dominant design and the cyclical model of
technological changes (Anderson and Tushman, 1990).
The cyclical model is initiated by a breakthrough
innovation that causes technical discontinuity. Such
innovations “command a decisive cost or quality
advantage and that strike not at the margins of the
profits and the outputs of the existing firms, but at their
foundations and their very lives” (Schumpeter, 1942
p.84). In other words, the technological innovation
introduces in some respect a significantly different and
more efficient way of providing the end product,
service, or conducting business.
3. Factors Facilitating Or Inhibiting
Emergence of a Dominant Design
3.1 Availability of spectrum and regulation
The discontinuity is followed by an era of technological
fermentation: “A revolutionary innovation is crude and
experimental when introduced, but it ushers in an era of
experimentation as organizations struggle to absorb (or
destroy) the innovative technology. This era of ferment
is characterized by two distinct selection processes,
competition between technical regimes and competition
within the new technical regime.” (Anderson and
Tushman, 1990).
To be able to provide mobile broadcast service in the
first place, one needs to have an access to a band of
suitable radio spectrum. Governments regulate the
assignment of terrestrial radio spectrum on geographical
basis. Once a part of spectrum is allocated (or licensed)
for a certain purpose in a certain area, it is exclusively
reserved for that use and can only be used by the owner
(or licensee) of the allocation.
According to Anderson and Tushman, the era of
fermentation ends when a dominant design emerges.
We also stick to the strictest definition they give for a
dominant design – it is a design or technical solution
that accounts over 50 percent of new implementations
of breakthrough innovation. To their definition we add
the aspect that the dominant design may emerge locally
(within a nation or a group of countries) or globally.
The emergence of dominant design is followed by a
period of incremental evolution. During that period the
technical competition has either ended or significantly
faded, and the focus of industry wide activities is to
enhance the dominant design.
Different regulation usually applies to different bands of
spectrum. In many countries terrestrial television
spectrum is reserved for television broadcasting. One
particular characteristic of terrestrial broadcast
regulation is that it is highly regional. In television
broadcasting the government regulation often mandates
which solution or standard shall be deployed nationwide (Pelkmans and Beuter, 1987). However, there are
cases such as Germany, where each federal state sets
and enforces its own broadcast regulation. All in all,
when the television broadcast frequencies are used to
provide the mobile broadcast services, it is not known
whether the same regulation applies those as would
apply to television broadcasting.
It is worthwhile to note that emergence of a dominant
design may take several years if not decades, and that a
dominant design may never emerge. In the latter case
several competing technologies become established and
continue to co-exists and be gradually enhanced within
their individual evolution paths. It is also worthwhile to
acknowledge that in the fast-changing area of mobile
communications technology the competition is fierce
and only few technical solutions have become
dominant. Last, we point out that the era of incremental
change – following the emergence of dominant design –
does not mean era of stability. Indeed, the dominant
Currently, the terrestrial mobile communications
spectrum is regulated in a different way than the
broadcast TV spectrum. These bands are licensed for
providing 2nd and 3rd generation mobile services.
Whether mobile broadcast can be regarded a mobile
service, for which these bands are targeted, is not
known yet. However, regarding mobile broadcast, only
3rd generation systems are of our interest since the 2nd
generation systems do not have capability to support
broadcast paradigm. Also with mobile communications
spectrum the government has a central role as the
licensor of frequency bands.
29
In addition to the basic types of frequencies for
broadcast and mobile communications, there are a
number of other types of bands available – and under
government regulation – that may be used to provide
mobile broadcast. One example is so called “L-band”;
in Germany the L-band has been allocated for digital
radio. Another example is satellite. As we mentioned in
the beginning, one of the radio systems under analysis
is based on satellite transmission. The regulation of
satellite frequencies differs from the regulation of
terrestrial frequencies. The reason is that the coverage
area of a given satellite signal usually transcends the
boundaries of many countries. For that reason the
regulation of satellite frequencies takes place on global
level.
driving business. In this context, we can identify two
alternative main drivers. The first is broadcast network
operator, which already has a traditional broadcast
network. In this case there may be an opportunity to
reuse the existing broadcast investment. The second is
the cellular operator, which already has a cellular
network without broadcast capability. Also in this case
there may be an opportunity to reuse the existing
network investment. In both of these cases the type of
existing system will determine whether it can be reused
at all, and how big an additional investment would be
required to enhance the system to provide mobile
broadcast coverage.
Consider that one has made an investment in a network
system and now has an opportunity to either directly
reuse or upgrade it with a marginal cost to provide a
new service (mobile broadcast) and consequently to
enter new market. In such a case we believe that the one
having this kind of existing investment and facing such
an opportunity will take the opportunity. Hence, we
consider that the level of existing investment and the
possibility of reuse are factors that will, at their part,
affect which technology becomes a dominant design.
There is more in spectrum regulation than just
technology selection. The local regulation often
associates a set of rules to an allocated band. These
rules may require the operators to acquire operation
licenses or program licenses, to follow various content
considerations, or even impose a quota for the amount
of data transmitted (relative to TV-programming). We
regard this element an important factor as the contentlevel regulation directly affects what kind of mobile
broadcast services can to be provided.
3.3 Availability of hardware components
Since the government regulation enforces the
technologies to be used for given bands, we consider the
regulation to be an important factor affecting which
radio technology becomes the dominant design on a
national level. However, as the scope of regulation is
limited to the regions under government control, the
local regulation has weaker impact on the global level
selection of dominant design.
Technologies exist as specifications or even as
standards. However, considering the actual deployment
of a particular technology, what matters is the
availability of actual hardware components for
products. That is, in order to produce actual working
equipment utilizing the technology there needs to be
supply of components. In the mobile broadcast radio
these components mean both the components for
transmission side (transmitter, modulator, baseband
processing) as well as the components for the reception
side (receiver front-ends, chipsets, decoders). The
mobile broadcast terminal is handheld, which means
that the receiver side components have an extra
constraint regarding the small form factor and limited
power consumption, as they are to be integrated into the
terminal.
3.2 Existing investment and reuse
Let us first define the terms of existing investment and
reuse in the context of this paper. Firstly, by existing
investment we mean that a stakeholder in mobile
broadcast value chain has already invested building up
radio coverage using a certain technology. The existing
investment may or may not be directly usable for
providing mobile broadcast service. Secondly, by reuse
we mean a situation in which providing mobile
broadcast coverage would mean an incremental upgrade
cost building on and/or extending the existing
investment.
Another important aspect related to the availability of
hardware components is the number of vendors that
provide the technology: the greater the number of
component providers the greater competition among the
vendors. It is a widely accepted economical fact that
greater competition under unbiased circumstances
usually leads to lower prices with same quality or better
quality with same price. To allow unbiased and healthy
competition the intellectual property for the technology
must be available for reasonable and non-discriminatory
terms. That is, no single company should have a
dominant ownership of the intellectual property, or the
company having the dominant ownership of intellectual
property should not be in the business of providing
implementations or components of the technology.
In the light of these definitions, the crucial question
becomes: What does building of mobile broadcast
coverage mean when the one willing to provide mobile
coverage already has existing investment? Does it allow
leveraging the investment and extending it further? Or
alternatively: Does it mean discarding the existing
investment and making a new investment from scratch?
This problem setting is strongly related to who is the
driver – i.e. which business is driving the first
deployments of mobile broadcast. We envision that the
value chain of mobile broadcast will, at least in the
beginning, be built around the business model of the
The aspect of timing may be crucial and is to be
considered in the context of availability of the hardware
components. Imagine that there is a high market
30
demand for mobile broadcast services. From the system
and terminal providers’ point of view this demand
translates consequently to the need of providing the
mobile broadcast radio feature in the systems and in the
terminals, respectively. If hardware components for a
particular technology (and not for any others) are
available to answer the demand, we consider it likely
that the terminal and system vendors will select those.
This will enforce the chances of that particular
technology becoming a dominant design. On the other
hand, if components for several competing technologies
are available at the time the market demand for
technical solution emerges we consider that the timing
will have significantly less impact on which technology
will become dominant.
technology the higher probability the technology has to
become a dominant design.
3.4 Availability of terminal solutions
We would like to point that the official standard is not
the only way to get a particular broadcast radio solution
on air. Namely, there are some few cases, such as U.S.
FCC auctions where bands of spectrum have been
auctioned without any requirement or binding to any
particular technology.
3.5 Availability of official standard
By availability of official standard we mean that a
particular mobile broadcast radio technology
specification has been published as a standard by some
recognized standardization organization. There are
different levels of global standardization organizations
as well as regional standards bodies. Generally
speaking, as we noted in our discussion on regulation,
governments tend to allocate frequencies to be use by
established standards. For these purposes, the broadcast
radio technology must be standardized.
As mentioned in the introduction: terminal may be a
cellular phone equipped with broadcast capability, a
hybrid phone device combining mobile phone and
another radio technology, or, a receive-only device such
as a personal digital assistant (PDA) with broadcast
receiver but no cellular connectivity. In any case, there
will be terminal vendors of different kinds who provide
these terminals. Consequently, their technology
selections will be an important factor in determining the
dominant design for mobile broadcast radio. Indeed, we
envision that the technology the majority of vendors
will endorse will become the dominant design.
All in all, in most of the cases the standardization and
getting the official standard status for a specification
seems to be a mandatory milestone for a technical
solution if it is to satisfy the basic regulator
requirement. In the market areas where the local
regulation allows several alternative and parallel
solutions, such as China and USA, the availability of
official standard is significantly a weaker factor
determining the dominant design.
We base our reasoning as follows. The greater the
availability of particular technological solution is (i.e.
the more end devices implementing a given mobile
broadcast radio) on the market, the more interesting it
becomes to provide the service based on the given
technology. Then again, the more end user services
exist and are developed based on the given technology,
the more demand the technology receives from the
market. And the more end user demand there is, the
more terminal solutions are needed and besides the
existing vendors on the market, new ones are drawn in.
This is a good example on the network effects and on
the positive feedback that is characteristic to technical
innovation (Arthur 1996).
4. Conclusion
In this paper we have described a set of factors, which
we believe a particular radio technology need to
successfully address in order to become a dominant
design: Availability of spectrum and regulation;
Existing investment and reuse; Availability of hardware
components; Availability of terminal solutions; and;
Availability of official standard. While we consider
each of the factors important on their own right, we still
emphasize that it will be a right combination of the
factors that will have the crucial role. Indeed, we
believe that a design – the mobile radio broadcast radio
technology – that succeeds addressing the right
combination of factors sufficiently will have the
greatest probability becoming a dominant design.
Further, it is not yet known whether all the factors will
have an equal weight or whether a success in one factor
can substitute a failure in another.
If a particular technological solution for mobile
broadcast radio becomes widely available through
support by several terminal vendors, we envision that
such a situation will affect other factors, as well. Firstly,
a growing base of terminals deploying the solution
creates an increasing demand for technology
components, and consequently new component
providers. Secondly, this factor (availability of
terminals) has an important impact in countries where
the regulation enables many options and the technical
selection is market driven, for example in China and
USA.
Considering purely the factors we have introduced, we
can identify at least one strong trend that we envision
likely to happen. Due to strong role of regulation the
mobile broadcast radio layer is likely to remain
geographically fragmented. I.e. the dominant design
will emerge country by country and the main
determinant will be the local regulation. Actually, in
many cases it may be unclear whether there will be a
dominant design on local level. This is because within a
single country several mobile broadcast radio
Due to the aspects mentioned in this section we
consider that greater the availability of terminal
solutions implementing a particular mobile broadcast
31
technologies may co-exist on different bands. However,
regional fragmentation not necessarily prevents the
emergence of global dominant design. Namely, if a
particular radio becomes widely adopted in many
European countries, in USA, and in China one could
call it dominant (the strict rule being that globally 50%
of all implementations of mobile broadcast radio would
be based on the dominant solution).
Technology. Research Seminar for Telecommunications
Business. Spring 2004.
We acknowledge the following shortcomings
concerning our paper. Firstly, the list of proposed
factors may not be exhaustive. In addition, the validity
of the presented factors would need to be validated with
empirical cases. For those purposes we encourage
further research. Secondly, for the sake of simplicity we
have limited our discussion to the level of radio bearer.
In practice there will be an application layer that
supports the services provided on the mobile broadcast
radio. The role of the application layer and its effect on
the emergence of dominant design for mobile broadcast
radio would warrant additional research. In that context
the interesting questions are whether the success of
service layer will be bound to the success of radio layer,
whether within the service layer a dominant design will
appear, and, which role global service layer
harmonization for mobile broadcast services – for
example through the Open Mobile Alliance – will have.
Schumpeter, J. 1942. Capitalism, Socialism, and
Democracy. New York. Harper & Brothers.
Pelkmans, J. and Beuter, R. 1987. Standardization and
Competitiveness, Private and Public Strategies in the
E.C. Color TV Industry. In H.L. Gabel (ed.), Product
Standardization and Competitive Strategy 29-46.
Amsterdam. North-Holland.
Sonera Medialab. 2003. IP Datacasting Content
Services. White Paper.
Finally we propose two further research topics building
on our paper. As we noted in the introduction, several
mobile broadcast radio technologies already exist or are
currently under development. Thus, we encourage an
evaluation of the known radio technologies in the light
of the presented factors. Another topic that would
warrant a closer research is the relation between
regional technology selections and their aggregate effect
on a particular mobile broadcast radio becoming the
globally dominant design.
References
Anderson, P. and Tushman, M. 1990. Technological
Discontinuities and Dominant Designs: A Cyclical
Model of Technological Change. Administrative
Science Quarterly, 35 (1990). Pp. 604-633.
Arthur, B. W. 1996. Increasing Returns and the New
World of Business. Harvard Business Review. JulyAugust 1996.
Berg, M. et al. 2003. CISMUNDUS: Convergence of
Digital Broadcast and Mobile Telecommunications.
Proceedings of IBC 2003, September 2003, Amsterdam.
Open Mobile Alliance. 2004. White Paper from the
Broadcast Services BOF. March 30, 2004.
http://member.openmobilealliance.org/ftp/Public_docu
ments/TP/Broadcast_Bof/Permanent_Documents/OMA
-WP-BcastSvcsBOF-20040330-A.zip
Paila, T. 2004. Model For Mobile Broadcast Business
System. Research report. Helsinki University of
32
MOBILE PHONE APPLICATIONS FOR RADIO FREQUENCY
IDENTIFICATION SYSTEMS
Research Seminar on Telecommunications Business II, April 2005
Mikko Jalasto
Espoo, Finland
[email protected]
along time. For example during some processes the
object can get more information attached to it and it can
be then followed better. RFID also tolerates dirt and
moisture better, so it is more reliable.
Abstract
The boom of RFID usage -especially in logistics- has
taken down the prices of RFID components and
therefore opened possibilities for other business fields
to benefit from the advantages of RFID. RFID
applications in the mobile phone business have been
deployed only in small scale, but the discussion around
this topic has been started. The RFID may enable new
things within mobile phone business and therefore
many parties in this multi billion-dollar business are
looking at this direction.
RFID is only a general term for technologies that can
identify object using radio waves and unfortunately
there are quite many different technologies and
standards used now days. The work for getting one
standard is ongoing, but at the moment the technologies
are divided. Choosing of right technology might be
sometimes difficult and requires specialists that know
also the area where the application would be used.
Key Words
2.1 RFID Components
RFID, Mobile application, Business application
Normally the RFID system contains three main
components: RFID tags, RFID reader and middle ware
system using the RFID data. The basic idea of RFID is
quite simple: You attach a RFID tag to the object and
you identify the object later with RFID reader. The
RFID reader is transferring the data to the middle ware
system that can use the data for its own purposes.
1. Introduction
The objective of this paper is to study the potential
usage of RFID in mobile phones. The paper will study
the technology behind the RFID and the applications
that are deployed or discussed currently in the RFID
area. The paper will combine the technological
limitations and advantages and combine those with the
business prospects. The nature of this paper is not to
provide a full understanding of RFID technology but
rather to introduce the topic to the reader and analyze
the relatively new area of mobile phone industry.
The tag contains an integrated circuit and an antenna.
These small units can be attached to thin plastic or
metallic sticker or integrated to e.g. wrist straps or smart
cards. In the simplest case the tag can be used only
once and it does not contain a power source. These kind
of passive tags are relatively cheap and are commonly
used e.g. in the grocery industry (Wall Mart, 2004). The
information written to the tag might be anything, but
many times the tags contain information concerning the
product or asset to which the tag is attached. As an
example a tag attached to apple juice bottle might
contain the basic product information such as: validity,
ingredients, manufacturer, importer etc. The tag might
also contain the link to the producer home page or the
date when the bottle was put to the self of the shop.
2. RFID Technology
RFID is a technology that enables contactless
identification of objects (RFID = Radio Frequency
Identification). RFID can be compared to the commonly
used barcode that has significant role in identification of
objects in business and in our daily lives. The difference
between RFID and barcode is that with barcodes you
have to have visual contact to the object. The high
frequency RFID technologies offer transmission ranges
up to more than 30 meters, although wavelengths in the
gigahertz range are absorbed by water (the human body)
and therefore there are limitations. The low-end
frequency RFID does not enable such long ranges, but
those can be read even trough packages, which gives
big benefits in some cases.
Following pictures illustrate the size and layout of basic
passive tags (Computerworld, 2004)
Another significant difference compared to barcodes is
that information contained in RFID can be changed
33
are attached with simple RFID tag and the antennas
around the park can collect the children’s location from
longer distance. (Texas Instruments)
There are also tags that can be rewritten and are
containing internal power source that enables longer
operating range and longer lifetime. These tags are
called active tags and they might have huge power
supply units and weather and shockproof covers build
around them. These kinds sophisticated and bigger tags
can be attached to e.g. container that can be than
followed in the harbor or inside the ship1. The different
tags also contain different amount of information-,
which has also impact to the price of the tag. The
following table shows the approximate prices of
different RFID tags (Socket Communications,
Crossbow, Forrester, 2005):
Tag type
Extra elements
Price
Basic passive
tag
Basic integrated
circuit and antenna
0,15-0,7 €
Rewritable
passive tag with
more capacity
Basic active tag
Rewritable larger
capacity circuit
0,5-5€
Basic elements and
external power
supply
Containing stronger
power supply and
better tolerance to
external effects
5€-50€
Advanced active
tag
2.2 Used Frequencies
The RFID is always using radio waves to communicate
between tag and reader. How ever the communication is
not always done on the same frequency. The RFID
systems are currently using four different frequency
zones. These frequencies are varying between few
kilohertz and several megahertz and the different
frequencies are used in different applications. The
following table will specify the different frequency
zones and define where those are commonly used.
10€- 300€
Operating
frequency
Advantages
Limitations
Applications
LowFrequency
125kHz134kHz
-Widely
deployed
-Metal
interferes
minimal
-Read range
less than 1,5 m
HighFrequency
13.56 MHz
-Widely
deployed
-Minimally
affected by
moisture
Widely
deployed
-Read range
significantly
longer than
LF and HF
Read range
greater than
all other
standards
-Read range
less than 1,5 m
-Metal causes
serious
interference
- Heavily
affected by
moisture
-Tags close to
each other
cause errors
-Not widely
used
-Complex
implementatio
n
-Antitheft and
immobilizer
systems
-Animal and
container
tracking
Retail product
and asset
tracking
- Access
control
-Pallet,
container and
vehicle
tracking
Ultra-High
Frequency
868MHz928MHz
The RFID readers have also huge spectrum of different
options. The size and functionality is greatly depending
on the field of application. The reader can be meant
only for reading similar tags from fixed distance or it
must manage simultaneously many different tags at
different ranges. The following pictures demonstrate
different
RFID
readers
(Crossbow,
Socket
Communications). The first reader is used with PC and
the second can be integrated e.g. to mobile phone.
Microwave
2.45 GHz
Vehicle
access control
2.3 Gaps and Problems with RFID
The different standards and frequencies that are applied
in RFID technology are slowing down the wider
spreading of RFID applications. The systems operating
in different frequencies cannot work together and this
can be frustrating for the companies working with RFID
and as well for the real end users. Some frequencies –
especially with UHF- are especially difficult due to the
reason that in some counties parts of these frequencies
are already reserved to the mobile phones. There are
also differences between countries in what is the used
power in RFID. In Europe the readers can operate with
0, 5 watts and in US the power in many times higher.
However the standardization is constantly ongoing and
improvements are hopefully on the way. (RintaRunsala, 2004)
On top of tags and readers the RFID solution might
contain separate external antennas that multiply the tag
signals. With this solution you can build local networks
that can deliver e.g. the location information with great
accuracy. Good examples of these kinds of local RFID
networks are Singapore harbor and Lego land
amusement park. In Singapore there are implemented
three-dimensional RFID networks that can pin point any
container in real time with close to 100% accuracy. In
Lego land there is build RFID network that follows the
children can locate them if they get lost. The children
Some materials cause disturbance for RFID readability.
Especially metal and liquids are causing problems in
RFID applications. This area is under heavy study and
many parties are developing RFID standards tolerate
better these materials.
34
example of this is the Lego Land system, where lost
children can be tracked down immediately. The children
are carrying basic RFID tag that can be located from the
park, using the network of readers and antennas that has
been placed around the park. The human follow-up
systems enable one very important benefit for
companies working in customer interface. The behavior
and preferences of customers can be recorded with huge
accuracy when using RFID tracking and feedback
systems. Fun parks, skiing centers or conference
organizers can collect real time and accurate
information about the customers by following the
actions of them in their premises. E.g. skiing center can
follow which elevators are most popular or which is the
average age of people is in certain track. (Rinta-Runsala
and Tallgren)
In cases when there are several RFID that has to be read
at the same time there is possibility for effect called “tag
collision”. Tag collision can be managed somehow with
software applications that enable of reading 20 to 1000
tags in second. This is however not enough in many
environments that require faster and more reliable
methods.
3. RFID Applications
3.1 Widely Spread Applications
RFID solutions are probably most common and well
known in different asset and material tracking
applications. RFID is widely used in supply chain
processes where huge number of packages and pallets
are moving trough warehouses, factories, harbors and
shops. The RFID enables fast and relatively reliable
identification of materials and this is big advantage in
industries where material is moving in constant flow
and the number of individual daily material transactions
is counted in tens of thousands. Biggest boost in grocery
industry was originated by Wall Mart, which announced
that by year 2007 it main suppliers has to attach RFID
tag to every product that they deliver to Wall Mart
shops. (Wall mart) It is quite likely that RFID will be
replacing the barcodes in future supply chains.
Especially the grocery business is potential leader in
taking the item identification to next century. The only
true question is the price of RFID tags. If the tag price
cannot be taken enough down –under 0.05€- we may
not see the real brake trough of RFID. (Shepard ,2004)
Lately also many companies have moved to used
electronic tickets that use RFID technologies. Examples
of this in Finland can be found quite many. Finnair has
been testing automatic check-in system that is based on
RFID technology and the public transportation around
Helsinki can be paid with RFID card. (YTV)
3.2 Mobile Phone Applications
RFID technology is not yet really deployed in mobile
phone industry. There are few examples of RFID
technology adaptation in mobile phones. Nokia has
produced first mobile phone that has RFID reader build
in the phone. Nokia 5140 phone has RFID reader
possibility trough removable RFID covers. Nokia has
also published RFID kit that enable user to design
simple applications for RFID usage. RFID has many
potential applications that could be integrated to the
mobile phones. The applications may sound good, but
before those will be used commonly there will be a long
journey. (Nokia, 2005)
The following list presents the
Top five fastest growing RFID application segments.
(Krebs and Liard, 2003)
No. 1 Point of Sale
No. 2 Rental Item Tracking
No. 3 Baggage Handling
No. 4 Real-Time Location Systems
No. 5 Supply Chain Management
Also important field of application of RFID is the
access control and security applications. In most of the
public and private companies the premises are equipped
with access control systems that track the movements of
personnel and allow the access to only allowed areas.
Car manufactures have long used RFID technologies in
immobilizer solutions that enable the vehicle to be
started only with right key. The key is containing RFID
tag that triggers the vehicle immobilizer off, when
needed.
Figure 1 Nokia 5140 with RFID covers (Nokia 2004)
Maybe most promising RFID application area in mobile
phones is related product identification and linking
mobile services to these specified products. The
customer could example use his or her mobile phone –
equipped with RFID reader- to read the information on
Newer application of RFID is the location systems
where the target of location is human. These human
tracking systems are used in some prisons, fun parks
and lately even in schools. (Shepard, 2005) Good
35
DVD movie. After this the mobile would connect to the
Internet and fetch related material concerning the
movie. The customer would possible want to see the
trailer of the movie or view the rankings given by other
customers.
These is promising area of RFID
application, but before it can be reality two things are
needed. First of all the relatively big amount of mobile
phones has to be equipped with RFID readers and
secondly the big amount of products would need to
attached with right kind of RFID tags. Without these
two things are there is no possibility to reach the critical
mass and with out the critical mass there are no major
business opportunities. More about these possible
limitations is chapter 4.
The access control could be also partly integrated to
mobile phone. People would not need to carry different
kind of keys with them if the RFID tags would be
integrated to their mobile phones. This would benefit
specially persons who are moving in many different
premises, e.g. security guards and maintenance
personnel.
4. RFID Potential in Mobile Phone Business
It is clear that RFID has many potential applications
that could be integrated to the mobile phones. The
applications may sound good, but those need more
analyses before you can see the risks and real potential
of the RFID applications in mobile phones.
Mobile phone – equipped with RFID reader or tag – can
be also used for device for paying goods or services.
Customer could pay his travel trip, food or product with
simply reading the RFID tag and getting confirmation
of purchase trough e.g. SMS. Japanese operator
DoCoMo has launched Mobile RFID payment
application in Japan. User can use his or her mobile
phone as electronic wallet and pay his or her products
and services with it. There are 39 companies -including
McDonalds and Japan railroads- offering their products
or services trough this application. (Telecom Asia)
4.1 Tools for Analyses
The potential of the different mobile phone applications
will be analyzed using SWOT analyses and Ansoff
model. The SWOT and Ansoff model should together
bring out the most potential opportunities and most of
all the risks that may many times be hidden to the
potential new businesses that rely heavily on new
technologies or business prospects that are not proven in
reality.
RFID payment and product identification may be the
most promising areas of RFID applications in personal
mobile phones, but for business usage there do exist
already beneficial RFID solutions. In all businesses
where the personnel of a company have to travel around
the field, trough beforehand known points, it is possible
to use the RFID technology as method for reporting and
operating tool. All service personnel could use their
own mobile phones to report their service time and
other data directly to the servers by just simply reading
RFID tag from the repaired item. E.g. elevator, base
station or coffee machine service personnel would have
direct reporting tool integrated to their mobile phones.
Think about the situation where coffee automata service
person receives a service request with SMS to his or her
personal mobile phone. After fulfilling the task he or
she would just read the RFID tag – containing
information what has been done and when- from the
coffee machine and the data would be transferred
directly e.g. to the invoicing data bases.
The SWOT analysis is simple tool to help matching the
capabilities and potential of prospect business to the
competitive environment that it would operate.
Normally SWOT is used in evaluating existing
companies strategic positioning, but is can be used
productively to also map the potential business or new
technology.
Ansoff model is developed to help companies or
potential companies to define the growth strategy. The
model contains four different growth strategy options
that may be chosen based on the product of company
characteristics.
Nokia presents some use cases in their web pages,
which has been developed around RFID. These
applications are based on the idea that user touches the
RFID tag with mobile phone, containing RFID reader,
and the phone will connect to needed place to execute
needed operation. Nokia promotes these applications as
“Touch and Browse”, “Touch and Record” and “Touch
and Call”. These applications do many things from
browsing the Internet to connecting to closest
restaurant, but there is one common thing in them.
These applications all use some other service to deliver
value to the customer. The applications use e.g. GSM,
MMS or Internet browsing services. (Nokia)
Figure 2 The Ansoff model
36
existing businesses is
development strategy.
I have used the Ansoff model to define the different
fields of RFID applications and strategies that these
fields would be most likely following.
more
related
to
market
These two different business field are analyzed together
in the SWOT analyses, but then discussed separately in
the conclusions.
4.2 Results of Analyses
In the following SWOT tables can be found most
important issues concerning both, technological and
business aspects of RFID usage in mobile phones.
These aspects are based on the issues in earlier chapters
and authors own judgments. As mentioned both
different business areas are analyzed here together.
I have taken the following approach in analyzing the
RFID mobile phone applications. First I have defined
the strategic growth area of RFID mobile phone
applications, using the Ansoff model. After this I have
conducted SWOT analysis for the RFID applications in
chosen growth strategy path. By combining these two
approaches it is possible to limit the analyses to slightly
more concrete level and concentrate only the most
relevant and important SWOT aspects.
STRENGTHS
Existing technology
Relatively cheap to modify and develop applications
Used widely in other business areas
Enables user friendly interface to launce mobile services
We can see from the Ansoff model that RFID mobile
phone applications belong to some somewhere between
the “Market development or extension” and
“Diversification”. The markets are clearly new, but the
product is some where between new and old. My
justification for this conclusion is the fact that RFID in
mobile phones is new product, but the final deliverable
in these applications is usually a service that has been
on the markets already for some time. With these
services I point to e.g. browsing and mobile
advertisement.
WEAKNESSES
Separated standardization of technology
Too expensive components (specially readers)
More RFID phones and services needed in order to reach
critical mass (now only on trial level)
RFID only enabler, not real new value element for mobile
phones?
RFID security still partly unreliable
Still some challenges with basic issues (interference of
material, collision etc.)
Due to the reason that these issues are totally separate
business prospects, I have here divided the business
area to two different fields:
1. RFID as new business area. (E.g. developing
RFID systems and middle ware fro mobile
phone usage)
2. RFID as enabler for growth of existing service
business (e.g. more web browsing and mobile
purchases)
The following picture shows how these fields are
located to the Ansoff model:
OPPORTUNITIES
Could open huge extra business for service providers
RFID has the basic elements to be successful also in
mobile phone industry
Some big players are showing the direction (Nokia,
DoCoMo, etc.)
Some good existing applications for companies may boost
up the coming of RFID
Open standard that can be used to develop new services
(easy access to markets)
THEREATS
What is the earnings principle (is it only business for
operators?)
Standardization can not be done on global level
Technology will not be enough reliable after all (still huge
efforts to improve reliability)
Other technologies may replace RFID in some potential
applications. (Barcode, OCR, WLAN, UWB….)
If the component prices cannot be reduced are end users
willing to pay extra for RFID readers.
Markets impregnated by technological innovations?
Figure 3 Different business areas in Ansoff model
RFID as new business area is more turning to the
“diversification” direction and the RFID as enabler of
3. Conclusion
37
Does RFID have true potential of being successful
technology to be adapted to mobile phones? The time
will show but currently it has still some technical
challenges that have to be solved. In mobile phone
applications I consider that the inadequate
standardization is the most important aspect from
technology point of view. The other technical
limitations are not as important as in supply chain
applications.
Despite of some applications that can be said that are
pure RFID products –like positioning systems – it
seems that RFID has very limited amount of mobile
phone applications that would create true business case.
These applications would require environment where
RFID reader/tag equipped mobile phones would be in
the majority of total amount of mobile phones. This
seems unlikely in near future.
The conclusion of this research paper is that RFID has
huge potential in enabling growth of mobile services,
but other real killer applications we have to wait for
longer time. The break trough of RFID enabled mobile
services will require vide co-operation from mobile
phone manufacturers, operators and mobile service
provides. It is unlikely that mobile phone users are
willing to pay extra for RFID readers in their mobile
phones, before there are real cases where they can us it.
This means that manufacturers, operators and service
providers have to finance this break trough. I consider
this to be the biggest obstacle between mobile RFID
success and failure.
RFID is totally open and relatively simple technology
that will not provide any competitive advantage as pure
technology. Any new RFID invention or RFID mobile
applications are currently – and seems that also in
future- too easily and rapidly copied by competitors.
There is no competition currently related to RFID
mobile phone business, this is due to the reason that it is
very much immature area where the current applications
are only on test level. The only players on the field are
huge telecommunication companies whose ultimate
target is not to sell physical RFID products, but to boost
the markets of mobile services.
As stated, RFID has still clearly its technical limitations
and the number of mobile phones and applications using
RFID is much too low for gaining the critical mass.
However if we estimate that these challenges will be
solved we might see even some killer applications
enabled at least partly by RFID
.
The biggest potential business area comes from the
possibility that RFID would bring the boost to the usage
of mobile services. In this aspect RFID cannot be seen
as new business idea, but rather like one enabler of
mobile service business. In this aspect RFID can deliver
truly user-friendly interface that can be used for
activating huge variety of different mobile services.
RFID could even bring at the same time ideas for
developing new kind of services, but still it would not
provide anything else than complementary technology
to link the user to these services.
References
Ailisto Heikki, Korhonen Ilkka, Plomp Johan,
Pohjanheimo lauri and Strömmer Esko. Realising
Physical Selection for Mobile Devices.
Aus RFID, Industry applications, 2005
http://www.ausrfid.com/industry.php
Computer world home page
Http://www.computerworld.com
Crossbow technology
http://www.xbow.com/
Holms Charles. 2004. Forrester research paper:
Exposing The Myth Of The 5-Cent RFID Tag, 2004
Socket communications Inc.
http.//www.socketcom.com
The substitute technologies in RFID enabled mobile
services are still question mark. The visual code
technologies could also enable the connectivity to
mobile services and e.g. the Optical Character
Recognition (OCR) could easily do the same job as
RFID in this case. The question is only that does it
count that RFID does not need any visual contact. The
usability of OCR in this matter should be studied
further. (Ailisto et al.)
Krebs D, Liard M, Global Markets and applications for
radio frequency identification. Venture Development
Corporation. 2001
Networking Center: Payments via mobile phones to
grow rapidly this year. 2005.
http://www.itnews.com.au/newsstory.aspx?CIaNID=17
939
After RFID has spread more widely, there is potential
also for business related to RFID technology. There is
naturally need for better and more reliable RFID
components and systems, as well as middle ware
applications, but this is related to business areas where
huge volumes and efficient production processes are the
core competence. This results to the fact that business
related to RFID hard and middle ware will be
dominated by huge global companies, rather than small
or start-up entrepreneurs.
Nokia, Use cases for RFID. Nokia external material
Nokia, 5140 RFID phone. Nokia external material
RFID usage in Japan. 2005.
http://Ubiks.net/
38
Rinta-Runsala E, Tallgren M, RFID-tekniikan
hyödyntäminen asiakkuden hallinnassa. VTT 2004
Savcor One, Container location system
http://www.savcor.com/one/cps_main.php
Shepard Steven, RFID Radio Frequency Identification.
McGraw-Hill. 2005.
Telecom Asia
www.telecomasia.net/telecomasia
Texas Instruments: RFID cases
http://www.ti.com/tiris/default.htm?DCMP=TIHomeTr
acking&HQS=Other+OT+home_tirfid
The Inquirer.2005. Mobile phones turned into
point'n'buy devices.
http://www.theinquirer.net/?article=20827
Tutorial overview of inductively coupled RFID
Systems. UPM Rafsec 2002-2004
Wal mart homepage
http://www.walmartstores.com/wmstore/wmstores/Hom
ePage.jsp
YTV information concerning the RFID travel card
www.ytv.fi/matkakortti/yleista.html
39
Machine-to-Machine Applications over Mobile Networks
Renjish Kaleelazhicathu
Networking Lab, Helsinki University of Technology
Espoo, Finland
machines expected in the future (Figure 1) (Forrester
2001).
Abstract
M2M applications have been in existence for many
years. However, its provisioning using mobile
technologies is a recent and emerging phenomenon. In
this paper, we discuss the concept of M2M in brief, the
services and technologies involved, identify the key
players required to provide these services and example
tariff models. Recently, regulatory requirements have
acted as drivers for the adoption of M2M solutions.
Vattenfall, the Swedish utility provider’s installation of
automatic meter reading (AMR) systems at the
consumer site is one such example. We discuss this case
in the paper and provide some analysis on the present
and future prospects for M2M solutions. The paper
mainly considers M2M provisioning using mobile
communications technology and hence an operator’s
point of view is emphasized.
Other factors responsible for the emergence of M2M are
regulatory requirements in markets such as electricity,
pharmaceuticals etc, and a need for operational costefficiency.
Internet
computers
93 million
Internet
users
Automobiles
Telephones
Electronic devices
Key Words
Today’s
Internet
407 million
663 million
The X
Internet
1.5 billion
30 billion
M2M, AMR, mobile operator, value network
Figure 1 Networking people vs. machines
comparison
1. Introduction
The organization of this paper is as follows. Section 2
describes the technology blocks involved in an M2M
communication solution. Section 3 lists some of the
M2M application categories in practice today and their
respective market segments. Section 4 gives an
overview of an M2M application’s value network.
Section 5 provides some example tariff models. The
paper discusses the Vattenfall-TeliaSonera case for
AMR in section 6 followed by conclusions in section 7.
Today, mobile operators in developed markets are
actively seeking new avenues for revenue generation
since the traditional sources such as voice are getting
saturated. M2M communication is considered as one
such opportunity. M2M is defined differently in
different literatures and contexts. A broader definition
of M2M communication includes the remote control of
machines (telematics) and monitoring/collecting data
from machines (telemetry). Recently, from a mobile
perspective, M2M is defined as communication
between a machine and a mobile terminal (machine-tomobile and mobile-to-machine) or between a machine
and a back-end information system (machine-tomachine) (Nokia 2004).
2. Technology
As mentioned before, M2M communications has been
in existence for many years. The three technological
building blocks necessary for the implementation of an
end-to-end M2M solution such as an automatic reading
meter (AMR) are as follows:
M2M communication isn’t a new phenomenon per se.
For instance, in the United States, AT&T proposed an
automatic meter reading (AMR) system in 1962 for
utilities which didn’t materialize due to economic
reasons (Tamarkin 1992). In 1980s, many utilities in the
US introduced such systems due to the availability of
cost-effective solutions. However, it is only recently
that M2M solutions have emerged as a significant
revenue opportunity for mobile operators. The existence
of increasing number of network-enabled devices is a
major driver for this development. According to Frost&
Sullivan, Europe has around 13 billion devices that can
be M2M-enabled (Levi 2005). Forrester provides a
comparison of the number of networking people vs.
40
•
Meter interface module: This module acts as an
interface between the communications system and
the meter unit (such as electric, gas or water). The
interface is bi-directional, thus enabling the
transmission and reception of data from the meter
to the back-end information system and vice versa.
•
Communications system: The system acts as a
transport medium for the transmission of control
and information data between the meter unit and
the back-end information system. Fixed-line,
Often, the amount of data traffic generated by M2M
communication is limited and not frequent. Considering
the number of units to be deployed, especially in cases
where the deployment is for millions of customers, the
revenue generated for a mobile operator from the traffic
may only be a small fraction. Hence, an operator needs
to provide value-added services in addition to the basic
data transmission to enhance the revenue prospects.
mobile, powerline carrier (PLC), and cable are
some examples of communication systems.
Unlicensed spectrum-based radio technologies can
also play a major role in enabling communication.
•
Back-end information system: This can either be a
server that collects data for further processing and
analysis or a handheld terminal.
3. Services and market segments
While the earlier M2M systems have used fixed-line
telephony as the communication system, the current
trend shows a growing acceptance of GSM-based
mobile technology. GSM-based systems with its
availability in more than 200 countries and properties
such as greater security, mobility and higher bandwidth
in recent years have become a natural choice for many
M2M applications. For instance, many Nordic utility
providers such as Denmark’s NESA and Sweden’s
Vattenfall have chosen mobile communication systems
for their mass installation of AMR systems.
M2M applications are of different types, suitable for
different market segments. The market segments are
classified as business and consumer. Some of the recent
implementations of M2M using mobile communications
has been for the AMR system. An AMR system enables
the remote collection and monitoring of end-user’s
consumption of utilities such as electricity, gas or water
supply. Some of the other possible services are
illustrated in Table 1 (Nokia 2004, Kviselius 2002).
Table 1 M2M services and market segments
Machines
Service
Market segment
Utility meter
Monitoring, maintenance, home and
building automation
Business &
Consumer
Household
appliances
Vending
machines
Monitoring, maintenance, home
automation, infotainment
Monitoring, maintenance,
infotainment
Consumer
Security systems
building automation, transportation
and logistics
Business &
Consumer
Monitoring, maintenance, building
automation
Business
building automation
Business &
Consumer
Billboards
Maintenance, infotainment
Business
Amusement
machines
Maintenance, infotainment
Business
Industrial
machines
Photocopiers
transportation and logistics
Monitpring,maintenance
Business
Business
Traffic signs
Monitoring, infotainment,
Business
Monitoring, maintenance
Business
Business
Monitoring, maintenance
Business
Elevators
Heating,
ventilation and
air conditioning
Trucks and other
vehicles
Speed cameras
Medical
equipment
41
Consumer
4. M2M value network
Business
•
Consumer
A player can assume one or more of these roles
according to the business model. Assuming more than
one role could provide additional power in the value
network. For instance, a network operator can act as a
service operator and systems integrator in order to get
greater control over the value network.
Service operator
System
integrator
Network
operator
GSM-based
modules
for
M2M
communications. A player having this role
works in cooperation with the network
operator.
System integrator plays a major role in providing
an end-to-end M2M solution. A player with this
role would work together with the network
operator, end-user and equipment vendors.
Application
provider
5. Tariff models
End -user equipment
vendor
Monthly fee
Basic
M2M
34,00
HRK
Optimum
M2M
45,00
HRK
Expert
M2M
56,00
HRK
Inclusive
bytes
0 MB
5 MB
15 MB
Not
included in
fee for 100
KB
1,34
HRK
1,34
HRK
1,34
HRK
0,30
HRK
0,30
HRK
0,30
HRK
0,98
HRK
0,98
HRK
0,98
HRK
1,46
HRK
1,46
HRK
1,46
HRK
Mobile equipment
vendor
Figure 2 M2M value network
Based on Table 1, it is evident that value generation for
an M2M solution is only possible with the confluence
of multiple industries and their respective players.
Hence, a value network approach would enable us to
capture the reality in an M2M business. Figure 2
provides an overview of all the roles involved in an
M2M business.
SMS
message
CSD/Fax in
T-mobile
HR network
CSD/Fax
towards
other
network
The roles are described as follows:
•
•
•
•
•
The end-user for the M2M application can be either
a business firm or a consumer. These roles don’t
have a major influence on the value network as
they are mainly involved in the consumption of the
service. However, one possible way of their
influencing the net is in terms of the demand.
Changes in demand would lead to different
configurations among other players in the network,
in order to generate economically viable business
models.
Service operator provides the basic M2M service to
the end-user. The service operator works in tandem
with the network operator to provide M2M
services. The service operator has a direct
relationship with the end-user
Network
operator
provides
the
basic
communications transport network service to the
service operator.
Application provider develops M2M value-added
services for a service operator to be consumed by
the end-user.
Equipment vendor:
o End-user equipment vendor provides
M2M-enabled equipments. A player
having this role would typically work with
the systems integrator.
o Mobile equipment vendor provides the
necessary mobile infrastructure such as
CSD/Fax
international
Voice calls
Data
roaming
(SMS,
GPRS,
CSD, Fax)
According to standard price list
No
No
No
According to standard price list
Table 2 Example tariff model for data M2M service
([5])
Applying appropriate tariff models is very important for
encouraging usage and penetration of any service. M2M
is no exception. M2M services typically generate
constant-bit rate (CBR) traffic. In many cases, the
transmission time can be set to suit the mobile operator.
For instance, an application that requires monitoring
once a day could be operated to generate traffic at night
or off-peak hours, enabling an operator to increase the
efficiency and usage of the network as well generate
greater revenue. The tariff models applicable in such
42
cases are in line with other data service provided today
over mobile networks. An example of data M2M tariff
offered by T-mobile for business users in Croatia is
shown in Table 2 (T-mobile 2005). This tariff model is
similar to the current data access tariffs provided by
many service operators. Considering the volume of such
M2M data to be lesser than the traffic generated by
regular data traffic, operators may have to provide
value-added services over their M2M system. We will
discuss more on the tariff models in the next section.
•
Control Plus: This subscription offers a low
volume-based data charge for higher data volumes
of M2M services that generate continuous traffic
such as credit card scanners.
•
Data subscription: This subscription is suitable for
M2M services which require high speed data
transmission. Voice service is not included in this
model.
6. Vattenfall case
So, based on the arrangements by TeliSonera, the valuenetwork seems to be controlled by it since it assumes
the role of network and service operator as well as
systems integrator (refer Figure 2). ELTEL Network
acts as the end-user equipment vendor in this case.
In this section, we discuss the case of Vattenfall, one of
the three major Swedish multinational energy group,
which has recently installed the AMR system for its
consumers in Sweden and Finland. We look at
Vattenfall’s implementation plans in Finland. In
Finland, Vattenfall has 360,000 customers and a market
share of approximately 12%. It had EUR 375 million in
net sales in 2003 and had 550 employees. Vattenfall’s
core business includes production, sales and distribution
of energy to about 6 million customers in Europe.
The AMR system is expected to provide accurate
invoicing, even on a per-hour basis, and enable
monitoring of power failures and state of the electricity
network which would help to improve customer service
and fault management. It would also reduce Vattenfall’s
operations cost. From a regulatory point of view,
Vattenfall will be better prepared to face any such
requirements for AMR by Finnish regulators in the
future. From an organizational point of view, this is step
towards greater synchronization of processes among
Vattenfall’s European sub-groups.
All the 25 European electricity markets are expected to
complete the liberalization process by 2007. The
deregulation of the electricity market in Sweden
witnessed price rise, consolidation and confusion
among the end-users in terms of the billing. This led the
Swedish Energy Authority (STEM) in May 2002 to
propose monthly electricity meter readings in order to
enable economic benefits for the consumers and
providers as well as reduced power consumption.
7. Conclusions
Maturity in voice revenues and advancement in the
mobile technologies have motivated operators to look at
possibilities of providing value-added data services. In
this regard, M2M services have attracted much attention
recently from the mobile operators. The current
implementations are concentrated towards business
users. However, considering the number of networkenabled appliances in the future, operators will
inevitably start providing services for the consumers as
well. We identified such services in this paper. Key
players were identified and example tariff models were
mentioned. The Vattenfall case was discussed.
Vattenfall’s decision to introduce M2M AMR systems
in Finland seems to be the result of its requirement to
install such systems in Sweden. Vattenfall had
concluded an agreement with TeliaSonera to provide an
end-to-end M2M solution for automatic metering of
electricity consumption by Vattenfall’s consumers. The
total agreement is valued at EUR 100 million. The
service offered by TeliaSonera includes delivery,
installation and maintenance of the AMR which is a
GSM-modem based solution. It also provides
application services, secure connections and mobile/IP
gateway services as part of its M2M solution.
Based on the discussions thus far, we conclude this
paper by indentifying some of key drivers for the
success of M2M services from a mobile operator’s
perspective. They are as follows:
TeliaSonera has teamed up with ELTEL Networks in
order to install M2M-enabled meters at Vattenfall’s
360,000 customer sites. The project is expected to start
in spring 2005 and is expected to last for 2 years.
ELTEL will take care of the management and
installation work in cooperation with TeliaSonera. The
new meters are expected to be installed at the rate of
5000-25000 households per month.
•
•
TeliaSonera has segmented its M2M tariff models into
three as follows:
•
•
Control: This subscription offers a low monthly
charge and is suitable for low data traffic or nonfrequent M2M services such as anti-theft alarm.
43
Considering the data generated from M2M services
to be lower in volume, operators should provide
value-added services in order to boost the revenue
prospects.
Regulation in other sectors/industries can be a
driving force to generate business in M2M as is
evident in the case of Vattenfall and the European
electricity market in general.
Mobile operators need to interact and cooperate
with industry players outside the mobile realm in
order to provide innovative, cost-efficient and
revenue generating M2M solutions. This would
mean new relationships in the value network which
•
is no longer same as visible in the mainstream
mobile market.
Major operators can gain greater control of the
value network due to their financial power.
However, smaller operators can also play a major
role as service operators.
There are numerous forecasts predicting an enormous
increase in the number of M2M-enabled devices and an
increase in the M2M-related revenue generation.
However, these reports must be considered with
cautious optimism, as not all the M2M-enabled devices
would automatically translate to business opportunities.
Different players in the value network require greater
cooperation among each other in order to maximize the
benefits from M2M service market in the future.
References
Forrester 2001,
http://www.gii.co.jp/press/epr15863_en.shtml
Kviselius N.Z, 2002, ”Swedish M2M Industry Case
Study”, Tokyo roundtable on seamless mobility,
Akasaka, Tokyo,
http://web.hhs.se/cic/emarkets/whoputthedoginthedogh
ouse/m2m_abstract.html
Levi N., 2005, “The rise of the machines”,
Telecommagazine, Feb 2005,
http://www.telecommagazine.com/default.asp?journalid
=2&func=articles&page=0502i13&year=2005&month=
2
Nokia 2004, White paper, “Machine-to-Machine: Let
your machines talk.”.
http://www.nokia.com/BaseProject/Sites/NOKIA_MAI
N_18022/CDA/Categories/Business/Machine-toMachine/WhatisM2M/_Content/_Static_Files/m2mwp_may04-final.pdf
Tamarkin T.D., 1992, “Automatic Meter Reading”,
Public Power magazine, Vol. 50, No. 5, Sept-Oct 1992,
http://www.energycite.com/amr.htm
T-mobile 2005, T-mobile Croatia’s data M2M tariff
model,
http://www.t-mobile.hr/english/50/50-10-10-35-00.asp
44
PUSH-TO-TALK OVER CELLULAR: STILL SEARCHING THE FLOW OF
SUCCESS
Raili Koivisto
E-mail: [email protected]
for that domain also when the cost of data transfer has
decreased to reasonable level along with GPRS. So in
near future the key technology and business selections
has to be made in order to get on right track. Current
cellular packet switched networks are still narrow band
ones, so the latencies and error rates are too high for
full-duplex IP telephony but enough for the half-duplex
push-to-talk service.
Abstract
Push-To-Talk over Cellular is a VoIP solution which
continuously is under standardization, market research
and operator business development. In the best case it
will provide a future-proof solution to make the IP
based Multimedia services to interwork globally over
different air interface standards. There are several key
technologies still competing of the industry leader
position. The proprietary solutions already taken into
production may slow down the interoperability
diffusion and ruin the weak customer interest and
service image. The operators have challenges to
package the PoC product in a profitable way and create
especially in Europe a new kind of user behaviour in
order to increase their average revenue per user
(ARPU). The report gathers and describes the main
challenges related to technology, vendor and operator
strategies concerning PoC take-up.
For operators Push-To-Talk over Cellular is typically
the first IP-based voice service i.e. their first step
towards all-IP architecture. While waiting for proper
standards, the mobile phone and network manufacturers
have launched pre-standard based solutions and
encouraged the operators with the American success
story of Nextel.
Push-To-Talk, PTT, PoC, GSM/GPRS, IMS, OMA
Depending on who you ask, the revenues are expected
to grow fast or slowly like with WAP and MMS
(Turner 2005). In any case, the vendors, operators and
service providers have a tough challenge to select their
strategies.
1. Introduction
3. Technology Preview
Push-to-talk (PTT) feature is a half-duplex voice
service, basically instant messaging with speech instead
of text. In cellular networks PTT is a wireless VoIP
service called Push-To-Talk over Cellular (PoC).
Implementing it into cellular networks is still one of the
most interesting topics in the business. The operators
and vendors are fighting for positions in the business
while the standardization is still under finalizing.
The core network consists of PoC Call Processor and
PoC Register network elements which are connected to
GPRS or EDGE network.
Key Words
The phone needs to include a PoC client and user
interface (embedded or loaded), it also has to support
SIP porotocol and VoIP features. The phone sends the
data packets to a PoC server which manifolds them for
each receiver if it is a group call.
The purpose of this document is to illuminate the status
of Push To Talk over Cellular service related business.
The main objective is to analyze strategic actions
related to standardization, vendor product strategy,
substitutes, regulation and service provision in order to
achieve successful service diffusion for PoC.
Session Initiation (SIP) protocol is an application layer
protocol for creating, modifying and terminating
sessions with one or more participants. It also enables a
terminal to register its currrent address to a proxy so
that other users are able to reach it with a textual
address; it includes also authentication and
authorization. (RFC3261 2004)
2. Background
Current SIP-based PoC terminals for GPRS networks
use Adaptive-MultiRate (AMR) audio coding schema,
which are designed to tolerate transmission errors and
packet losses. In GSM networks AMR is not yet
commonly used.
PTT has been used decades in walkie-talkie terminals
over different radio bands by for example military,
truck drivers, event organizers and hunters. Push-to-talk
has been widely used in USA and Great Britain in
circuit-switched networks. Today, when cellular
networks are transitioning to packet-switched
technology, there is a clear need to launch new services
45
The voice packets are transported with Real-time
transport Protocol (RTP). Floor control is needed for
preventing users to speak at the same time.
PoC enables the cellular operators to compete with
existing Push-To-Talk services on their own
competence area by providing enhanced voice services
and thus increasing the number of subscribers and
Average Revenue per User (ARPU) (Nokia 2005).
Internet Protocol Multimedia Subsystem (IMS) is a
platform that may be used by operators to quickly
develop and deploy multimedia services for 2.5G and
3G mobile networks. This platform contains a SIP
application server on which mobile data services like
PoC and telephone conferencing are based on in the
future. The servers handle session and group control,
VoIP streaming, stream control, provisioning and
management of users and groups (Nokia FAQ 2005).
PoC might create new usage models in developed
markets which brings more usage to the networks which
increases ARPU. In developing countries it might bring
totally new customers if the price is set cheaper than for
normal voice service.
PoC also provides for the future a platform for direct
voice communication services using IP Multimedia
applications (Nokia 2005).
Access to IMS requires IP connectivity from terminals,
using IPv6 and expects underlying end-to-end quality of
service for the traffic.
Albeit the connection is always on, PoC is an efficient
way of using the network resources by reserving them
only for the duration of talk spurts. (Nokia 2005).
The key benefit of IMS is that it enables the users to
access to the same services regardless of the terminal
type. It also enables to transmit voice and data over the
air simultaneously and in any combination. E.g.
presence and messaging (immediate, session-based and
deferred) services will be offered over IMS platform.
PoC is the first commercial application based on IMS
which obviously makes large infrastucture vendors very
interested in driving PTT into use (Northstream 2004).
5. Technology Competitors
Trunked radio systems (analog and digital) which allow
automatic sharing of multiple radio channels, have
replaced land mobile radios in professional use. They
include Terrestrial Trunked Radio (TETRA) and
Integrated Digital Enhanced Network (iDEN) which
have became the basis for proprietary technology
camps. The most successful PoC operator Nextel uses
iDEN but the future of this technology seems to be
problematic. (Rehbehn 2004)
4. Benefits
4.1 Benefits for end-users
The primary benefit for the user is the possibility to
immediately contact a pre-defined person or a group
without searching numbers or channels and separately
making connections through answering because there is
an always-on connection between group members. PoC
supports also text chat between active group members
In the future combination with other applications like
presence, picture sharing and video clips will make it
still more attractive to consumers. (Nokia 2005)
Due to Nextel´s high ARPU, about 23% higher than
national average and the need for new services, also
other cellular operators and vendors woke up to find out
ways to implement PTT. (Northstream 2005)
Open Mobile Alliance (OMA) has been working since
2003 in order to agree a standard based on proposal
made by Ericsson, Motorola, Nokia and Siemens. The
pre-standard version describes how PTT can be
implemented by using HTTP, SIP, RTP/RTCP and
XML.
PoC enables calls over nationwide networks and across
regional borders as provided by GSM/GPRS networks
which gives a remarkable advantage as compared with
traditional two-way radio systems like Land Mobile
radio or Professional Mobile Radio.
The current proprietary solutions are shown in Figure 1
(Rehbehn 2004). In addition to the figure there is also a
software based solution from Fastmobile called
Fastchat. Kodiak Networks integrates packet-based
presence function with circuit-switched voice
transmission, so after setting up the call, the delays are
like in normal call. Nextel is developing QChat
compatible with iDEN for its CDMA networks.
These benefits are valuable for various kinds of
businesses and leisure groups where it is essential to
shortly communicate within a dedicated, geographically
dispersed group of people to give guidance, orders or
feeling of security (Nokia 2005).
However, for the time being the performance of PoC
from user view cannot be guaranteed in current cellular
networks due to long cell-reselection times and possible
network congestion; GPRS was not originally designed
for real-time traffic. (Karvonen 2005)
Kodiak has won some operator deals because its client
is loadable to smartphones but it seems to stay
temporary because circuit-switched PoC can be over six
times more expensive than PoC over GPRS
(Northstream 2004). Circuit-switched PoC uses SMS
for signalling, the cost of this should be compared to the
price of sending SMS messages to the end-user in
4.2 Benefits for operators
46
usage behaviour decreases the attractiveness of many
substitutes.
addition to its pure performance as a bearer for
application protocols.
From radio resource usage point of view, PoC over
GPRS is five times more efficient and over EGPRS
over 14 times more efficient than PoC over circuitswitched GSM. From core network view it is hard to
say which one has favourable resource, scalability and
cost figures. (Northstream 2004).
7. Standardization
One of the most critical success factors especially in
consumer area is interoperability between different
vendors, devices and operators and that is what Open
Mobile Alliance (OMA) is working on. The lack of
interoperability was one of the reasons provoking bad
feelings of MMS. (Wieland 2005)
The dedicated standards are needed for defining how to
reserve talk items in real time and how to optimize
streaming for half duplex voice over GPRS.
OMA PoC builds on 3GPP IMS but with some
concessions because IPv6 is not yet widely used and
IMS has not yet passed trial phase even in existing 3G
networks. The PoC standard is still under finalising and
to be launched early this year according to OMA.
(Wieland 2005)
You might ask if slow and delayed standardization is
due to difficult technological decisions or business
political aspects.
8. PoC Performance
6. Substitutes
Latencies are remarkable here because the distance
between terminals may be thousands of kilometers.
OMA uses the Quality of Experience to describe user
perceived quality of service but it is hard to find any
independent studies on acceptable level ot it. The
business users may find the delays more inconvinient
than consumers. So there is a doubt that OMA has
selected quite high delay values only because GPRS
network has not capacity for better (Karvonen 2005).
Depending on the strongest driving factor (from
customer view), we can find some relevant substitutes
for this functionality.
If the driver is talking to a group by phone, one could
use conference call which does not limit the phone type
selection. If talking free of charge is the thing, one
could take SKYPE with PDA and WLAN access to
Internet or Push-To-Talk over Bluetooth (PoB).
The voice quality requirement is on GSM level but bit
error rate quite high. In practice the required
performance of PoC cannot be guaranteed in all
situations in GPRS but the true real-time services have
to wait for EGPRS or UMTS. (Karvonen 2005)
SKYPE is a peer-to-peer solution available free of
charge through Internet between registered users. Calls
to or from operator networks is chargeable. SKYPE
calls uses typically 3 to 16 kB bandwidth depending on
the connection quality.
The business users may find the delays more
inconvinient than consumers. Finally one must
remember that the performance of packet based solution
highly depends on how well the whole service delivery
chain is tuned. (Northstream 2004)
PoB is competitive on short range (100 meters with
class 1) and even further if multihop communication is
used. The main advantage from user´s view is that it is
free of charge which probably would encourage its
usage for gaming, folder sharing in addition to
communication. It is also possible to create a hybrid
service using PoB for reaching local members and PoC
for reaching distant members. (Rönnholm 2005)
9. Vendor strategies
Global technology vendors are divided into two camps:
iDEN by Motorola, Siemens, SonyEricsson and
TETRA by Nokia and Samsung. In China Huawei and
ZTE have their own camps (China Economic Net
2005). Kodiak is in team with Lucent Technologies for
CDMA networks. (Northstream 2004)
Microsoft is adding PTT feature to its Messenger
application used in computers.
The users tend to optimize the number of terminals
buyed and used, so the limited terminal selection and
47
avoid being locked
(Northstream 2004)
Although the biggest mobile phone vendors are working
in OMA, they have also formed other groups beside.
E.g. in the beginning of 2004 Siemens AG, Motorola
Inc. ja Sony Ericsson Mobile Communications Ltd
formed one group, Nokia and Samsung another. Then
Nokia answered by announcing that it will use the
prestandard immediately and promised to a offer a
development route to the coming OMA standard.
According to Nokia its products fully support both preOMA standard phones and the protocol preceding the
optional standard by Ericsson, Motorola and Siemens.
Reciprocally they expect the others to support Nokia
phones already in the early phase. (Viitasaari 2004)
to
one
or
few
suppliers.
In Europe the operators also face the challenge of
lacking walkie-talkie culture, in US people are used to
‘asynchronous’ types of communication like walkietalkies and pagers. (Wieland 2005)
The operators have several alternatives to select how
they package this product, e.g. a cheap alternative to
telephony, a voice complement to Instant Messaging, a
voice messaging service or a standalone walkie-talkie.
(Northstream 2004)
IMS core network would solve the quality problems
beside its other benefits but investing into it requires
significant CAPEX, so there are no operators in Europe
rolling out IMS now. (Wieland 2005)
Most of the vendors have started trials with operators in
order to test and push their own solutions. On the other
hand, many operators have trials with several vendors to
see the whole picture.
11. Phone provision
To enable diffusion of the service Nokia includes the
feature into the most new phone models to be launched
in 2005. Nokia has already launched new features to
allow users to initiate group calls to temporary groups,
as well as allowing them to use their normal mobile
numbers for push to talk. (Nokia Press)
In phones PoC service demands for integrated handsfree functionality, PoC software and user interface
(Nokia Q&A).
Including the PoC client also to the cheapest phone
models is crucial if the the product is aimed to emerging
markets (where the biggest growth will be in the next
couple of years) as a cheaper alternative to voice call.
Push-to-Talk feature is already available in many new
mobile phones. It also possible to load it into many
modern phone models free of charge but embedding it
directly is seen as a prerequisite for wider service
diffusion. (Northstream 2004)
10. Operator Strategies
12. Pricing
From operator´s point of view the main issues are how
to use the network on the most efficient way and how
to set prices high enough not to cannibalize existing
business but low enough to increase network usage and
to attract new customers.
Although the call is data in IP network, it is meant to be
charged as traditional voice calls by duration, not bit
load. The OMA architecture supports both subscriber
based and traffic based charging and each operator will
be able to charge contracted online and offline
participants independently. It is also possible to charge
based on fixed monthly fee, active group membership
(i.e. listened minutes), group creation or group
attachment, session type, number of sent/received talk
bursts. (OMA 2005)
Worldwide over 35 operators are deploying prestandard solutions until March 2005 but 14 of them are
using Kodiak´s technology for 2G circuit-switched
network and so threatening to cripple the whole market
according to critics (Tanner 2005). In Europe
commercial PTT launches can be counted on one hand.
The strategies are usually not published but some of
them have stated to target the business customers first
believing that PTT will be a better value proposition for
closed user groups than for consumers. (Wieland 2005)
In US PTT is a subscription service with certain number
of minutes included (Northstream 2004). In Australia
the operator charges a double price compared to a
normal call independent of the group size (Ouluexpo
2004).
Using simple pricing model so that the costs are
predictable is attractive from users view. Free local
communication (PoB) may act as a driver for
chargeable PoC or vice versa (Rönnholm 2005).
Proprietary PTT solutions may slow down the
interoperability diffusion. Charging may require
interconnection agreement between operators. These are
necessary requirements in order to benefit from positive
network effect on consumer market. According to
Motorola the operators need time to optimize their
networks, target the right customers, work out tariffs
and use vendors committed to interoperability (Wieland
2005). By using standardized solution the operators
The latencies in GPRS network would justify expecting
lower price than for full-duplex. The circuit-switched
solutions could be charged with premium already. But
fragmentation of pricing policies due to different
latencies in different networks may cause fragmentation
48
of how the customers understand the service and then
the pricing will be really difficult (Wieland 2005).
streaming etc. services when deciding about resources
used for marketing and investments.
13. Regulation
References
VoIP technology does not fit easily into the old
regulation definitions. In general the regulators seem to
be quite late reacting to the change in transport media.
The regulatory framework in Europe is better suited to
deal with Internet-based services than in US. Regulation
scope of VoIP services is under discussion on both
continents. (Juniper 2004)
China Economic Net 2005. PoC phone service slow to
take off, p. 2. Retrieved 10.3. 2005.
http://en.ce.cn/Industries/Telecoms/200501/21/t200501
21_2915711.shtml
EU 2005. EU addresses VoIP Penetration in Europe.
VoIP Newsletter. Mercator Capital, Reston. Retrieved
10.3. 2005.
http://www.mercatorbroadband.com/newsletters/March
2005newsletter.pdf
In Europe European Regulators Group (ERG) is not
willing to strongly regulate VoIP but to promote its
penetration due to its lower infrastructure deployment
cost and more efficient network utilization, i.e. benefits
for social welfare. “The approach focuses on the
regulatory principles of objectivity, technological
neutrality, transparency, non-discrimination and
proportionality that would help
consumers and service providers to make informed
choices”. (EU 2005)
Juniper 2004. Emerging Trends: Interview with J. Scott
Marcus of FCC. Retrieved 8.4. 2005.
http://www.juniper.net/company/newsletter/feature_arti
cle_041101.html
Karvonen, Tuukka. 2005. Design of Push To Talk
Client for Performance Measurements. Master´s Thesis,
TKK, Espoo.
Nokia 2005. Push To Talk over Cellular – Real-time
always-on voice service. White paper. Nokia
Corporation, Espoo. Retrieved 4.3. 2005.
14. Conclusion
There seems to be a strong technology push to provide
new services to mobile customers in order to replace the
revenues disappearing due to the tough competition
between mobile operators.
Nokia Press 2005. Nokia launches products for service
convergence and network evolution. Nokia Corporation,
Espoo. Retrieved 10.3. 2005.
http://press.nokia.com/PR/200502/980032_5.html
For some customer groups PoC clearly brings an
opportunity to reduce their terminal count to one but the
amount of those may be too small. Indeterminate groups
like truck or taxi drivers on a certain area are now using
open calls which is not possible with this service.
Families and groups of friends may take this service if
the pricing model is reasonable. However, they may
find it difficult to get used to the half-duplex feature.
Nokia Q&A. PoC – Questions & Answers. Nokia
Corporation, Espoo. Retrieved 4.3. 2005.
http://www.nokia.com/nokia/0,8764,46750,00.html
Northstream 2004. Overview and comparison of Pushto-Talk solutions. Pp 1-34.
http://www.northstream.se/page/custom/northnews/get_
news_file.asp?id=8
On the other hand, the PoC service differs so little from
the normal voice service that the customers may find it
useless to familiarize themselves with, at least before
the enhanced functionalities (e.g. shared video) are
available.
Northstream 2005. VoIP – A threat and an opportunity
fo mobile operators. Northstream AB, Stockholm, p. 2.
http://www.northstream.se/page/custom/northnews/get_
news_file.asp?id=83
For some vendors there is a risk to be locked out if the
OMA standard is still delayed or it is not followed by
those vendors having a significant market share before
the launch. It seems not to be clear yet that OMA PoC
will win.
OMA 2005. Push to talk over Cellular (PoC) –
Architecture. Candidate Version 1.0. Open Mobile
Alliance. Retrieved 30.3. 2005.
http://www.openmobilealliance.org/release_program/do
cs/poc/v1_0-20050317-c/oma-ad-poc-v1_0-20050317c.pdf
The operators are presumably waiting for proper
standards both for PoC and IMS. Widescale deployment
of IMS presumably takes still years. Before that the
operators cautiously protect their existing business
models and formulate strategies used in case the
competitors put the big belt on. In Europe and Asia the
expected revenue may be too small compared with the
cost of creating the market. The operators also have to
prioritize between PoC, MMS, games, video telephony,
Ouluexpo 24.11. 2004. Interview of Marko Saarinen,
Nokia, p. 1-3. Retrieved 9.3. 2005
http://www.ouluexpo.fi/kohdeT_haastattelu.html
Rehbehn Ken. 2004. Push to Talk. Telecommunications
Americas. Vol. 38, Iss. 3, pp. 22-23.
49
http://proquest.umi.com/pqdlink?index=10&did=58160
0901&SrchMode=3&sid=1&Fmt=4&VInst=PROD&V
Type=PQD&RQT=309&VName=PQD&TS=11146875
20&clientId=23406&aid=5
RFC3261 2002. IETF.
http://www.ietf.org/rfc/rfc3261.txt?number=3261
Rönnholm, Valter. 2005. Push-To-Talk over Bluetooth.
Master´s Thesis, TKK Espoo, pp. 80-92.
SKYPE 2005. SkypeTechnical FAQ 12.4. 2005
http://www.skype.com/help/faq/technical.html
Tanner, John C. 2005. Push to Talk struggles with
standards. America´s Network, Duluth. Vol. 109, Iss 3,
pp. 30-34.
http://proquest.umi.com/pqdlink?index=7&did=807551
411&SrchMode=3&sid=2&Fmt=4&VInst=PROD&VT
ype=PQD&RQT=309&VName=PQD&TS=111468838
9&clientId=23406&aid=10
Viitasaari, J. 2004. Siemens, Motorola ja Sony Ericsson
push-to-talk –liittoon. Digitoday Finland. Retrieved
10.3. 2005.
ws_id=29244
Viitasaari, J. 2004. Nokia ja kilpailijat taistossa push-totalk –standardista. Digitoday Finland. Retrieved 10.3.
2005.
ws_id=29246
Wieland, Ken 2005. A soft push on PTT.
Telecommunications International. Norwood. Vol. 39,
Iss. 2, pp. 20-22.
http://www.telecommagazine.com/default.asp?journalid
=2&func=articles&page=0502i07&year=2005&month=
2&srchexpr=PTT#hls1
50
MOBILE PAYMENTS
Markus Kalliola
[email protected]
2.1 Phone call
Abstract
Phone calls are traditionally charged by the amount of
pulses user consumes in a certain time period. Pulses
are some time interval and the operator keeps track of
them. After the invoice period a bill is sent to the
customer. The system is simple and works well. As the
networks developed service numbers were added to the
system. It meant that when calling to some number the
time interval between pulses was shorter or there was an
initial fee for calling to these numbers.
Mobile payments have been implemented with a
number of ways using different technical and business
models. Most of the solutions operate with mobile
phones using GSM or some other existing
communication channel. Technical aspects of the most
interesting solutions are covered and analyzed the focus
being on their suitability for mobile payments. Finally,
the conclusions chapter analyzes what can be learned
from the history of creating a mobile payment system
and what are the requirements of a successful design.
A new era for mobile phone payments was started in
2
1997 when the Finnish phone operator Sonera created
service for buying a soda from vending machine using a
GSM
phone
(Ministry
of
Transport
and
Communications Finland, 2003). After that many kinds
of payment solutions have been implemented with a
phone call. A very interesting one is the Pay Box
solution. When user finds an interesting product from
the Internet, he selects Pay Box as the payment method
and then fills in his mobile phone. Soon the operator
calls an automatic confirmation call and user verifies
identity with PIN code. The transaction is direct debit.
The weak spot in this service is that users and
merchants have to be registered to the service (
Paybox.net AG. 2005).
Key Words
Mobile payment, payment methods, mobile wallet,
WAP, RFID, EMV
1. Introduction
Mobile networks have been common in everyday living
for the past decade. Gaining a huge success as a primary
communication channel between people, it offers
greater potential than just talking and sending messages.
To take advantage of these possibilities network
manufacturers, operators and third parties have
developed a large number of applications. In most of the
cases these solutions work but many times applications
end up being only nice pilot projects.
Paying with a phone call is simple. Users already know
how to use a phone, so the interface is familiar. Other
advantages include that people trust the communication
channel and it is proven to be liable. There are also
strong disadvantages. In the Sonera example every
vending machine has to have its own number to call.
Making a general payment system using that kind of
payment method is impossible. Users should remember
an enormous amount of numbers to cope with different
services. Pay Box solution is quite elegant but it needs
both the merchant and the customer to register to the
service.
One application that has been among the most
promising ones is mobile payments. There have been
numerous attempts to create a money transaction system
using existing communication network and mobile
phones but final breakthrough has not been reached.
The outcome of the amount of effort put to development
of mobile payments is that there are plenty of
technologies in a mature age at the moment, early
problems have been solved. Most of them are presented
in this document.
2.2 SMS3
2. Technologies
SMS is the most used supplementary service in mobile
phones. Only Americans are still holding on to their
pagers to send text messages (The Economist, 2004).
SMS messages have some instruction sets in the
beginning and then a custom message body, usually 160
characters in length. SMS is routed through a local base
In this chapter most of the interesting technologies
considering mobile payments are introduced. The focus
is mainly on mobile phone technologies, PDA1
payments systems are not covered. The motivation for
introducing more mobile phone technologies is that they
are more developed and PDAs still today are quite rare
among people.
2
1
Personal Digital Assistant
3
51
Merged with Swedish operator Telia and is now called
TeliaSonera
Short Message Service
station and from MSC4 to SMSC5, which then contacts
the receiver’s HLR through the GMSC. If the HLR
responds to the query, an SMS will be sent to the
receiver, otherwise SMSC will keep the SMS for a
certain amount of time (Kantola, 2005).
Internet and other network capabilities and to fit the
content into low bandwidth network. WAP enabled
phone connects to a WAP gateway, which then interacts
with Internet servers or other services using more
powerful protocols. One of the very clever inventions in
WAP is the optimized protocol stack. The text headers
are translated into binary form to reduce the amount of
data. Session can be suspended and reestablished
without a new initialization. Some information in HTTP
headers like packet order is dropt out. An example
calculation made by WAPForum points out that WAP
uses less than half of the number of packets to deliver
the same content compared to HTTP/ICP/IP8 (Wireless
Internet Today, 2000).
SMS is a really good tool for many services like
notification or alert service. It has also been used for
payments and it works well for special purposes. For
example, the Helsinki City Transport offers tickets
using SMS (Helsinki City Transport, 2002). A user
sends an SMS before entering the train, bus or tram and
gets a message with a specific code as the receipt. The
ticket is valid for an hour. The service is charged on the
phone bill and needs no registration from the user.
All kind of services has been implemented using WAP.
There are a lot of information services realized like
news, weather forecasts, stock quotas, but also more
complex subjects such as games or mobile payments.
The usual model to create mobile payment is to put up a
WAP gateway and connect it to Internet server using
HTTP. The server has users’ virtual accounts and does
the communication with the bank. This scenario
requires a third party to host the server and make the
contract with bank about the costs and the quality of
service.
SMS is a nice tool for such micro payments but there is
a strong doubt that it will become popular in bigger
payments or time critical services. There are plenty of
reasons for that. Firstly SMS is not secure enough. If
somebody has access to ones mobile phone, it is
possible for him to read all the messages and then
obtain sensitive information. Secondly the delay might
cause problems. It is easy to imagine a situation where
user wants to pay in grocery store, but because of busy
network SMS is not delivered instantly and user has to
wait until receipt arrives. Third problem is the
legislation. Some countries have strengthened laws for
what the operator can charge in their bills (Ministry of
Transport and Communications Finland, 2003). The
operators should only charge for phone calls and related
services like buying a ring tone, otherwise they should
apply for a license for the other business. Related
problem is when service user is using a company
telephone, which is considered a part of the salary. If
user buys other services than operator related, it may
violate the work agreement he has made with the
employer.
WAP payment systems work very well, but there are
some significant problems. People just are not familiar
to use the user interfaces that WAP offers. WML9,
which is the language for showing the content in WAP
enabled devices, is not designed for user-friendly
interfaces. Actually it is almost impossible to create
such a language because the number of different WAP
phones and screen sizes. Beside that using WAP is quite
expensive, at least when using GSM, because
connection has to be open all the time. With GPRS it a
bit cheaper, because connection can be suspended and
charging is based on the amount of transferred data.
Since its simplicity and cheapness there is belief that
SMS will be used in some services that are not time
critical or too big in scale of money.
There is still light at the end of the tunnel for WAP. It is
called WAP 2.0 a next generation protocol that uses
XHTML (WAP Forum, 2002). It has remarkable
enhancements to WAP 1.0 like colors and better picture
formats. It also has style sheets for making better user
interfaces, but the main enhancement is that WAP
gateway is no more needed. WAP 2.0 came into the
markets January 2002 and with faster communication
channels like UMTS, up to 2Mbps, WAP systems might
offer good payment solution one day.
2.3 Browsing technologies
Browsing technologies are considered to be solutions,
in which user interacts with the payment service online.
The definition is imprecise, but means that user does
not have all the knowledge needed to make the payment
before he starts the payment process. WAP6 and Java™
MIDP7 are examples examined.
2.3.2 Java™ MIDP10
2.3.1 WAP
Java™ MIDP is a result of 50 companies’ Java
community process. MIDP is a Java based profile,
WAP is a simplified version of HTTP optimized for
wireless environment. The idea is to use existing
8
A stock quote query made to with both protocols. WAP used 7
packets and HTTP 17.
Wireless Application Protocol
9
Wireless Markup language
Mobile Information Device Profile
10
4
Mobile Switching Center
5
Short Message Service Center
6
7
52
Mobile Information Device Profile
which offers a good end-to-end security with such
standards as HTTPS, SSL and WTLS11. It is installed to
nearly all phones that support Java applications. The
first version was released on September 15 2000 and
enhanced version on November 15 2002. MIDP offers
some good qualities compared to for example WAP.
One of these is portability. With MIDP programmer
does not need to think about different size of screens or
amount of buttons. He only uses MIDP profile, and the
preinstalled MIDP profile in handheld decides what the
user interface will look like. Beside good interfaces
Java
architecture
also
makes
guaranteed
interoperability. MIDP applets, called MIDlets, run on
Java virtual machine so hardware compatibility is not a
problem. The low usage of network and server load is
claimed, because MIDlets can operate without
connection. They only need network to transfer data.
For example WAP or custom built browsers cannot do
that. Finally MIDP also offers persistent secure database
for user information. Handheld can be switched off or
lost connection to the server and still the data remains,
database is also independent of SIM cards (Sun
Microsystems, 2000).
than 20 seconds. For non-time-critical solutions it is
acceptable, but as a general payment method it is not.
The Bluetooth chip is also more expensive than its
alternatives, costing average 5$. It’s highly probable
that Bluetooth will not be largely used as a connection
tool for mobile payments.
2.5 IrDA14
IrDA technology is a connection technology that uses
infrared light to transfer data. The IrDA specification
consists of two parts: hardware and software. Hardware
handles transceiver, encoding and decoding, serializing
and desterilizing and managing frames for data.
Transceiver converts electronic signals into IR signals.
Serializer and deserializer convert bytes into serial bits
and vise versa. Framer manages the frames for sending
and makes received signals into machine-readable
frames. The transfer speed varies depending on
transceiver from 116kbits to 16Mbits per second.
Software part handles error recovery and interrupts and
communication with other hardware and software. IrDA
has a range about one meter and connection establishing
takes 1s (IrDA org, 2001).
Is this technology valid for mobile payments? For its
technical aspects it should be. There are some
implementations for MIDP, like the payment system
from Finnish company Valimo (Valimo, 2002), but
mainly the same issues preventing WAP payment
systems to succeed relate to MIDP as well.
IrDA has advantages over many technologies because it
is the smallest, cheapest, fastest and most power
efficient technology for short distance communication.
It has also lower security risk because of short range
and low possibility of eavesdropping. But it suffers
from a basic fact that it is difficult to use. It requires
line-of-sight and with a range of one meter and
maximum angle of 20 degrees, it means the whole
duration of transfer both equipments need to be still.
2.4 Bluetooth12
Bluetooth is a local over the air connection technology
for mobile devices developed by a coalition of
telecommunication companies13. Bluetooth is usually a
chip consisting of two parts: baseband chip and a radio
chip. The radio chip handles the connection to the outer
world and baseband interacts with the device where
Bluetooth chip resides. It uses 2.4 – 2.48 GHz ISM
band and reaches 723.2 kb/s asymmetric or 433.9 kb/s
symmetric transfer rate. Asymmetric transfer is used for
data and symmetric for voice. The range is about 10 m
and because of its radio form, it does not need visual
contact and different Bluetooth devices can locate in
different rooms or behind obstacles (Bluetooth SIG,
2003).
For mobile payment transfers there is an additional
standard developed. It is called IrFM15. It has had a
couple of pilot projects in Japan and Korea (IrDA org,
2002), but because its usability it is not likely to have
much success against rival technologies.
2.6 RFID16
RFID is a technology developed during the 80’s for
non-contact reading. RFID chip consists of three
components an antenna, a transceiver and a transponder.
The antenna emits signals to make different operations
on tag like read and write. Antennas can be located for
example in a warehouse to keep track on stocks coming
and going. If antenna and transceiver are integrated
together it becomes a reader, which can both transmit
and receive data with tag. Active tags have internal
battery and data stored to them can be modified.
Maximum memory capacity is around 1 MB and range
varies from 1m to about 30 meters active tags having
longer ranges. RFID systems work with different radio
frequencies. Low frequency ones use 30 KHz to 500
Bluetooth has some established and widely used
applications like headsets that are connected to mobile
phone via Bluetooth. Bluetooth could also serve as
connection tool for mobile payment service, but there is
not much encouraging examples about it. The drawback
for it to succeed is long connection set-up-time. It varies
depending on the quality of connection. In test cases the
connection delay can vary from almost instant to more
11 Wireless Transport Layer Security
12
13
Bluetooth comes from Harold Bluetooth who was a Viking and
a king of Denmark and Norway 940-981
Initial members were Ericsson, IBM, Intel, Nokia, Toshiba
53
14
Infrared Data Association
15
Infrared Financial Messaging
16
Radio Frequency Identification
KHz and has low range. High frequency systems use
850 MHz to 950 MHz and 2.4 GHz to 2.5 GHz bands
and offer longer ranges and higher reading speed (AIM,
Inc. 1999).
user operator free, but has some significant drawbacks.
First, bank has to give out two bank or credit cards, one
normal size card and another WIM size card. The
second thing is even worse; there are no dual chip
phones on the markets (Setec Oy. 2000).
RFID chips have many suitable features for mobile
payment. The most attractive is the fast set up time.
Connection can be made almost instantly. Another one
is that it is non-line-of-sight technology, which make it
user friendly. Compared to other locale connection
technologies like Bluetooth or IrDA, RFID is
considered better. It has the good qualities of both
technologies, but lacks the drawbacks.
The third alternative is dual slot phone. It means that
phones have two types of card slots; one for small SIM
cards and another for traditional size cards. Then banks
could only offer one card for a user and when paying
the user could put the card into reader and pay with the
phone. This is a weird solution, which is not likely to
have any consumer implementations, but it might come
popular in business to consumer world. For example
pizza delivery boy has a dual slot phone and customer
uses this phone to use his/her debit card to pay.
2.7 Mobile wallets
Mobile wallet is a tool in mobile phone to save sensible
information like credit card numbers and passwords.
Without a safe storage Bluetooth or IrDA could not
realize a mobile payment. Unlike remote method like
WAP, SMS or Java MIDP, all the local payments
method use either wallet technology or secure SIM
cards to store data.
3. Payment methods
With all the connection technologies available there are
the same alternatives to choose for how to make the
payment. They are prepaid, phone bill, debit account or
credit account. This chapter discusses how they are
suitable for mobile payments.
Beside mobile wallets make secure buying possible; it
also makes it easier and faster. They can be
programmed to fill forms automatically or include links
to bank services with passwords, so users do not have to
remember them when shopping. Wallets are protected
with passwords like PIN code, but PIN passwords are
different from wallet password. So it is not a problem if
mobile phone is stolen or lost when usable. Most of the
recent phones have wallet preinstalled. If mobile
payments become popular, it is prone that wallet
technology is among the key technologies.
The normal way to use prepaid is to store money into
SIM card. The other one is so called virtual bank
account, which can be used remotely with for example
SMS. Prepaid’s main advantage is that there is no
possibility for any party to lose their money. There is no
credit risk. But there are also drawbacks. One that is not
usually mentioned is the lost interest for users. Having
money in bank account is an investment, which
increases the amount of money due interest rate. With
prepaid, the operator or third party is the one getting the
interest. The fact that prepaid actually adds one step to
user in a buying process is another drawback. However,
prepaid has been a profitable product for operators. So
there will probably be new solutions for mobile
payments using prepaid SIM card.
2.8 SIM related technologies
SIM cards can be equipped with secure technology to
make it possible to store secure data in them. With
secure SIM cards it is possible to for example store
EMV17 information in a SIM card and then let mobile
applications to read from it.
Debit payment is widely used payment method in
Europe in traditional retail business. However paper
checks make up over 70% of transactions at the Point of
Sale in USA (IrDA org, 2002). It is not possible that the
same practice continues with mobile payment system.
Checks are expensive to handle and with new payment
architecture they are expected to lose their position as a
payment method. Debit method has some clear
advantages having no credit risk and ready clearing
infrastructure. It is also convenient for user, because it
has one step less for the user in buying process than in
prepaid or credit card payment and it is likely to be the
most used payment method in the future. Debit
payment’s drawback is the fact that it is trickiest to
implement.
There are three kind of solutions suggested to use SIM
card as a part of mobile payments. First one is that SIM
card is equipped with the bank’s debit or credit card
application. This is fairly elegant solution, but requires
cooperation between the operator and the bank. It also
make users dependent on operator, so switching is not
possible without having a new agreement with a bank
also.
The other solution is a dual chip technology. Operator
has its own SIM and bank delivers its WIM18 card to
make able to buy with phone. WIM cards use PKI19
technology and so they are secure. This solution makes
17
Credit accounts are easy to implement because they are
not time critical. The details of payments made daytime
can be delivered to the credit company as a batch job
during the night or according to the agreement between
the merchant and the credit company. Credit method for
paying is also well known to work almost anywhere and
Europay MasterCard Visa
18 Wireless Identity Module
19 Public Key Infrastructure
54
Point and Pay Profile. Available: http://www.irda.org/
people trust to their trade labels like Visa or
MasterCard. Visa has been very active on mobile
payment developing community creating a method
called Verified by Visa, which makes online shopping
more secure (Visa). There is strong belief that the
people, who use credit cards today, will also use them
as a payment method with mobile phones.
Ministry of Transport and Communications Finland.
2003. Mobiili lähimaksaminen – nykykäyttö ja
tulevaisuus. Liikenne ja viestintäministeriöin julkaisuja
22/2003.
Paybox.net AG. 2005. mPayment for Mobile Shopping
and
Content
Billing.
Available:
http://www.payboxsolutions.com/m_payment.htm.
3. Conclusion
There are different interest groups developing mobile
payment
systems;
operators,
mobile
phone
manufacturers, banks and third parties. After a lot of
effort from third party companies and operators, banks
and phone manufacturers are starting to take over the
development process. Solutions like embedding EMV
into the mobile phone are very far from the solutions
that operators and third parties came up with. The future
of mobile payments may well be in the hands of
organizations like Mobey Forum, MeT and OMA,
which seek a common understanding for mobile
payment solution among all the stakeholders.
Raimo Kantola. 2005. TCAP, MAP. Available:
http://www.netlab.hut.fi/opetus/s38115/2005/lectures/M
AP.pdf
Setec Oy. 2000. Setec annual report 2000. Available:
http://www.setec.fi/uploads/media/
Sun Microsystems. 2000. Mobile Information Device
Profile, JCP Specification. Available:
http://jcp.org/aboutJava/communityprocess/final/jsr037/
index.html
The Economist. 2004. Text-messaging in France. Jul
8th 2004 Printed edition, page 65.
The European Union commission believes in their
action plan that mobile payments actually have the
potential to become an important segment of the retail
payment market, but there is a difficulty for a new
initiative to reach critical mass and it leads to
fragmentation and delay in the emergence of mcommerce applications (Commission of the European
Communities). As many technologies as were presented
in this document, it seem to be more important to get
stakeholders to work together for creating a mobile
payment system than finding the most suitable
technology that would implement it. This leads to
interesting future research questions whether it is
possible to create a standardization of mobile payment
architecture, which could gather the critical mass and
prevail.
Valimo. 2002. SUN Microsystems and Valimo Wireless
Developed Secure Mobile Payments. Available:
http://www.valimo.com/cgibin/en/content.php?Level1=press&Level2=news&Level
3=valimo_sun
Visa 2005. Verified By Visa. Available:
https://usa.visa.com/personal/security/vbv/
WAP Forum. 2002. Wireless Application Protocol
WAP 2.0 Technical White Paper. Available:
http://www.wapforum.org/what/WAPWhite_Paper1.pdf
Wireless Internet Today. 2000. Wireless Application
Protocoll white paper. Available:
http://www.wapforum.org/what/WAP_white_pages.pdf
References
AIM, Inc. 1999. Radio Frequency Identification – RFID
A
basic
primer,
White
paper.
Available:
http://www.aimglobal.org/technologies/rfid/resources/p
apers/rfid_basics_primer.asp
Bluetooth SIG. 2003. Specification of the Bluetooth
system. Available: https://www.bluetooth.org/spec/
Commission of the European Communities. 2004.
eEurope 2005 Action Plan: An Update.
Helsinki City Transport. 2002.
http://www.hel.fi/HKL/english/06_passguide/Guide200
2.pdf
IrDA org. 2001. Infrared Data Association
Serial Infrared
Physical Layer Specification. Available:
http://www.irda.org/
IrDA org. 2002. Infrared Financial Messaging
55
MOBILE TERMINAL OS COMPETITION
Research Seminar in Telecommunications Business II, spring 2005
Tommy Back
Espoo, Finland
[email protected]
mobile phones constantly are coming closer to the
Internet and what it has to offer. Moreover, to provide
the compatibility between mobile phones from different
manufacturers it was crucial to have a common
operating system. So what would this operating system
be?
Abstract
In the last couple of years we have seen an increased
growth in the smart phone marketplace. Manufacturers
are selling more and more high-end devices and the
prospects are that the percentage these devices have of
the whole handset market will increase over the coming
years. Smart phones enable a possibility for enhanced
services and applications due to the more powerful
operating system they use. Thus, the operating system is
one of the most strategic parts in this context and it is
important for the operators to identify the possibilities it
enables. Today, we have competing operating systems,
which all try to become the de facto standard. We will
also take a look at the pros and cons of the different
systems and how will these affect the operators’
businesses.
Big players in the mobile phones industry decided to
make their own system to be used as the platform for
high-end smart phones. One major reason for this was
to hinder Microsoft from taking over the market with a
mobile phone version of Windows, but also to be able
to control the development of the platform and maintain
its suitability for mobile phones. This resulted in an
alliance named Symbian.
Other players, in fields close to the mobile phone
industry, are manufacturers making other handheld
devices like Personal Digital Assistants (PDAs), and
also operating systems for other types of devices.
Adding these to the equation we will get the main
players, which are the targets for analysis in this paper:
Symbian, Palm, Microsoft and Linux.
Keywords
Symbian, Windows Mobile, Palm OS, Linux, Terminal
OS, operating system, smart phone
1. Introduction
In this paper, we will present the current main players
competing in the domain of operating system for mobile
devices, and, analyze the systems they offer from a
technical and a business perspective. The main focus
will be on mobile phones marketplace; however, it is
important to take into account the adjacent markets of
similar devices like PDAs and PCs. New services
enabled by the smart phones are presented in order to
see the possibilities available and how these will drive
the operators’ business opportunities. In addition, some
ideas, which vendor will win the battle of mobile
operating system, are discussed, and, finally
conclusions are drawn.
In the pre-GSM1 era of mobile phones there were
several mobile telephony systems in the world: Nordic
Mobile Telephony (NMT), Advanced Mobile Phone
Service (AMPS), Total Access Communications
System (TACS), to mention a few of the most important
ones. This was the first generation, or the analog era, of
mobile phones. These were all incompatible systems,
and basically all countries used their own system.
Consequently, when the work with the second
generation system (2G) was started, in the beginning of
the 1980’s, one of the main goals was to unite all
European countries under the new digital telephony
system (GSM). Later, GSM became the global standard
for mobile telecommunications. These mobile systems
did not include as many demanding features as the
enhanced second generation (2.5G) and now third
generation (3G) of mobile phones do, so all
manufacturers used their own software platforms in
their phones.
2. Competing Mobile Operating Systems
In the following sections we will present the main
rivaling operating systems used in mobile devices:
Symbian, Palm OS, Windows Mobile and Linux. Each
system has a different history and primary target market
segment, but now as devices are more similar and the
marketplaces start to intersect we get a new mixture of
players and interests. In order to better understand the
advantages and drawbacks each system offers, we need
to compare them, both from a technical and a business
viewpoint.
As the industry developed even more sophisticated
mobile devices there was a need to have a real operating
system, which could offer a better platform for adding
new features and complexity. Another aspect is that
1
Groupe Spéciale Mobile, which later was changed to
Global System for Mobile Communications.
2.1 Symbian
56
Mobile 2005). The target segment for this OS is all
kinds of mobile devices, like PDAs and mobile phones.
Symbian was established as an independent company
by Nokia, Ericsson, Motorola and Psion in 1998. It is
designed for the specific requirements of open, dataenabled 2G, 2.5G and 3G mobile phones. The main
characteristics are:

It all started in the beginning of the 1990’s with
Windows CE, which was aimed at handheld PCs. This
product line has later been adapted for smart phones and
other mobile devices. In order for Microsoft to be able
to penetrate the mobile phone market contracts with
several mobile device manufacturers were signed. For
example, Motorola and Samsung are also making
mobile phones based on Windows Mobile. In addition
to these, there are numerous smaller smart phone
manufacturers, which only use Windows Mobile as the
operating system.
integrated multimode mobile telephony,
open application environment,
open standards and interoperability,
multi-tasking,
fully object-oriented and component based,
flexible user interface design,
robustness. (Symbian, 2005a)
Nokia is the biggest owner in Symbian and has taken
the role as the real forerunner of this technology. Table
1 shows the current shareholders in the company:
Windows Mobile is a scaled down version designed for
smaller devices with less resources than normal PCs.
However, it is built based on Windows CE kernel, so
the main key features come from compatibility with
other Windows systems. It is 32 bit and includes the
following key features:
Table 1: Symbian ownership (Symbian 2005b)
Company
Shares (%)
Nokia
Ericsson
Sony Ericsson
Panasonic
Siemens
Samsung
47.9
15.6
13.1
10.5
8.4
4.5

multi-threaded,
rich and powerful applications,
well-known and easy-to-use user interface,
compatibility with other Windows’s,
robustness.
The real power of Windows Mobile is the compatibility
with other Windows’s, which means developers can
easily port applications to this new scaled-down
version, and, users are familiar with the interface and
how to use the applications. Windows Mobile includes
several of the key Microsoft applications like Outlook,
Internet Explorer, Media Player, Word and Excel. These
are of course also scaled down in order to work in
devices with fewer resources. Another very important
issue is the huge community of developers developing
in the Windows environment. These are the real valueadders, which boost the sales of new Windows
operating systems.
Since Symbian is the main operating system for smart
phones and also has all giants in the industry backing it
up, it is targeted to fully support these devices. The
operating system is 32 bit and it provides all current
technologies in mobile phones such as GSM, GPRS,
WAP, SMS, MMS, E-mail, Bluetooth et cetera. In the
newest versions the focus has been on security,
graphics, real time applications, and device
management for the operators. Because Symbian
develops alongside the mobile phone industry, features
are added to support new innovations and technologies,
and this is very important when considering the
competitiveness of the operating system.
Windows Mobile is maybe not focusing on
telecommunication-specific technologies that much,
even if it supports the main technologies like GSM,
CDMA, SMS, MMS, et cetera. It focuses on trying to
integrate mobile phones with the mother operating
system: Windows.
Currently, there are 14 mobile phone manufacturers
licensing Symbian: Arima, BenQ, Fujitsu, Panasonic,
Levono, LG Electronics, Motorola, Nokia, Samsung,
Sanyo, Sendo, Sharp, Siemens, and Sony Ericsson. In
addition, Mitsubishi is negotiating for a license. These
include all the big players in the mobile phone industry,
so the support for this platform is enormous.
2.3 Palm OS
PalmSource is the maker of Palm OS, which is designed
and developed for mobile devices, especially PDAs.
The operating system was originally developed for a
PDA manufactured by US Robotics, but later it changed
its name from Pilot to Palm OS.
Symbian is closely related with the C++ programming
language, so potential developers are many. The
community supporting it is also well developed and
numerous companies are supplying solutions for
Symbian.
Palm OS is a 32 bit operating system with the following
key features:
2.2 Windows Mobile

The biggest player in operating systems, Microsoft, has
also entered the smart phone operating system’s market
with its Windows Mobile operating system (Windows
57
scalable,
modular,
based on standards,

multi-threaded,
extensible multimedia framework,
wide application range.
The Open Source movement is really something
important today, and the community supporting it and
Linux is large and widely spread. This adds value to
using Linux as the platform on mobile devices.
In January 2005 PalmSource acquired China
MobileSoft (PalmSource 2005a) in order to target the
low-end voice-oriented mobile phone segment. China
MobileSoft has its own Linux-based mobile platform,
mfone, which will be used as the baseline for this new
platform. The look and feel will be kept the same as
Palm OS and data compatibility will be reached over
time as the new system develops.
2.5 Other Players
Smaller upcoming operating systems trying to challenge
the current market leaders are for example SavaJe
(SaveJe 2005) and Radixs MXI (Radixs 2005).
SavaJe is an operating system based on Java, which has
some interesting features like based on open standards,
highly customizable and full Java Second Edition
(J2SE) API compatible. SavaJe was founded in 1999 by
members from the Lucent Technologies Inferno
operating system team.
The mfone operating system adds the following key
features:

stable,
effective,
optimized graphical interface,
a rich set of networking protocols.
Radixs was also founded in 1999 in Singapore. After
several years of research it finally launched its operating
system Motion eXperience Interface in September
2003. The idea behind the operating system is to be able
to run any application, Windows, Linux, or Palm OS on
the system.
An important driver for Palm OS is the huge
community and the large applications offerings: more
than 400,000 developers and 20,000 (PalmSource
2005b).
In addition to these, there are some other smaller and
also legacy operating systems. We will not address
either of these in this paper.
2.4 MontaVista Linux
Apart from the commercial operating systems for smart
phones there are Open Source alternatives based on
Linux. MontaVista Software Inc. offers a modified
version of Linux, MontaVista Linux, made specifically
for embedded devices. Mobile phones are just one part
of the segment. The company was founded in 1999 and
it is located in Silicon Valley in California, USA. It is
privately held company funded by investors like Alloy
Ventures, IBM, NTT DoCoMo among others
(MontaVista 2005).
2.6 Comparison
The size of the mobile phone marketplace and the
potential of the smart phone marketplace are too big for
any major operating system developer to ignore, and
this is the reason for such diverse companies competing
in it. Windows and Linux both come from the PC
world, while Palm OS has been the main player in the
PDA operating system marketplace. Symbian, on the
other hand, being an alliance between the major cellular
phone manufacturers has a great advantage due to this.
Currently, the market shares in the mobile device
marketplace are dominated by Symbian, Windows
Mobile and Palm OS; this can be seen in figure 1
below. Linux has a couple of percent out of the 13
percent other operating systems share.
There are several important key features, which make
Linux an interesting choice when looking for an
operating system:

open-source,
flexibility and choice,
scalable,
performance,
robust,
multi-threaded,
memory protection,
portable.
According to the report by Catalys (Catalys: Global
smart phone shipments treble in 2003) Symbian is the
leader in voice-centric devices, while Microsoft has the
lead in data-centric devices. This reflects the strategies
the vendors have: Symbian, which comes from the
telecommunication industry, is focusing mostly on
technologies enabled by the networks. It tries to become
the standard operating system for these devices.
Microsoft on the other hand is everywhere trying to
make their other software solutions work in any
environment to get synergies between all its solutions.
To Linux’ strategy we can directly add openness and a
support for a wide range of devices, from
supercomputers to small embedded systems.
The most valuable property is open-source, which
means that it can be modified freely and customized for
a specific manufacturer’s products.
Currently, there are not so many mobile phone
manufacturers using Linux in their products, but it is
prospected (LinuxDevices Feb. 23, 2005) to change in
the coming years. Nevertheless, Motorola, NEC,
Panasonic and Samsung are big mobile phone
manufacturers offering phones running on Linux.
58
an operator sets. Palm OS is a turn-key solution, which
feels a little bit too inflexible and the market shares are
also going down, taken by Microsoft (Catalys: Global
smart phone shipments treble in 2003). Windows
Mobile is quite heavy and is not optimized for devices
with few resources and the development platform is also
maybe a little bit too unfocused on the smaller devices.
Figure 1: Market shares 2004 (Catalys 2003).
Market shares 2004
Others
13 %
3. New Services Enabled by Smart Phones
Palm OS
17 %
When mobile phones were focusing on voice-only the
link between Internet and mobile phones was quite
distant. Today, we have a totally different scenario. The
wired Internet and the wireless world are being brought
closer to each other. Through analyzing what has
happened and is happening in the wired Internet you
can somewhat see how the wireless world is going to be
affected – at least what could be demanded by the endusers. This evolution has given life to devices like the
smart phones, which have capabilities similar to the
devices found in wired networks.
Symbian
50 %
Microsoft
20 %
When only focusing on the technical aspects of the
different systems, it is quite evident that all the vendors
offer more or less the same basic functionalities. In
addition to this, we can identify some issues where they
differ. For example, Symbian is made by mobile phone
manufacturers to be used in mobile phones, so their
focus lies on supporting the mobile phone technologies
and to work well in these devices. This makes its
market segment narrower than the other competitors’.
Palm OS has also been focusing on a specific segment,
the PDAs, but in recent years they have found out that
they need to enter the mobile phone marketplace as
well. This has been done by extending the own system
to work in these devices, and also through the
acquisition of China MobileSoft (PalmSource 2005).
Smart phones and 3G networks enable new types of
possibilities for the operators to provide new and
innovative services to their customers. This part of the
value chain is really what drives the whole industry
forwards. Two very important new issues are the
possibility to simultaneously do several things, which
has been enabled by introducing multi-tasking into the
kernel of the operating system, and the 3G network’s
introduction of channels. There are a lot of technologies
and great innovations available, but the use cases are
still on a very basic level. For example, location based
services are just in their infancy compared to the
possibilities. Other important services and features
enabled by smart phones are:
Microsoft on the other hand has a huge selection of
operating systems to be used on almost any architecture
– this is both good and bad. The advantages come from
know-how in the field, and huge resources to be
allocated for developing an operating system. The other
side of the coin adds complexity to the operating system
due to integration with the other Windows’s, and also
the fact that Windows is not specifically tailored for the
needs found in small, handheld mobile devices. Then
we have the underdog Linux, which is fighting on all
levels in the operating systems marketplace. It has very
good key features, but the lack of control might hinder
it from getting real big market shares. However, there
are a lot of people, who believe in Linux and some even
think it will be the future market leader (The Standard:
Interview with PalmSource CEO David Nagel).
Another very important issue, for many countries and
organizations, is that Linux is open-source, which
means you are not using something you cannot analyze
and see what it actually does.

Internet browsing,
rich audio (VoIP etc.),
imaging,
banking services,
search services,
information sharing (peer-to-peer),
streaming services (radio, TV),
video conferencing,
et cetera.
Some of the above services and features have been
available in pre-smart phones as well, however, the
level of quality and usefulness have not been too poor.
In many areas we are still in the fermentation phase
with rivaling technologies trying to become the
dominant design. A good example of this is streaming.
As stated in the beginning, the operating system is a
crucial part when considering what kind of applications
and services are possible to create in the mobile devices.
Also nowadays when operators are starting to demand
customized graphical user interfaces and services it is
highly important that the operating system can deliver
these functionalities. Windows Mobile is not very
flexible considering the graphical user interface, but
both Symbian and Linux can be modified to look just
Concentrating only on smart phones, Symbian is very
interesting, because of the fact that it addresses the most
important issues found in these devices. The resources
and low, but still there is a great need to enable the very
latest technology to be used by application developers.
Linux key aspect is the high level of customization,
which might be required in order to fulfill all the needs
59
like the operators want it to look. Mobile phone
manufacturers like Motorola and just recently Nokia too
have started to provide major operators with customized
mobile phones. This way, the operators try to
differentiate and bring their services closer to the users.
The mobile phone business is constantly emerging
markets dominated by other devices, and this result in a
lot of really big players to count on. In order to
determine a clear winner we need a revolution or a
really superior design, and this can not be seen right
now. Therefore, we will most probably still have
different systems and several players competing for the
ultimate victory. The compatibility between the devices
could be reached by licensing technology and
communicating
using
common
protocols.
Geographically, we will see the same tendency as we
see today: the major players’ home markets will be
dominated by their design and offerings.
Today, we are still in trying to innovate and find
services for several great technologies in order to get
the demand from the users. The competing operating
systems are quite similar, so the major issue will be the
applications and services developed for them. Will the
services be developed as web applications or as
applications for the phones? This question is very
critical and might determine which operating system
takes home the role as winner. The tendency is that
most services will be web-based, so this puts even less
constraints on the operating system itself – assuming
that all operating systems have the same basic
functionalities and features. Microsoft and Palm on the
other hand has a huge application selection, but these
are not services as such. There are of course a certain
amount of these like games, e-mail clients, scheduling
applications and so on, which are important. Here
Microsoft has the advantage due to compatibility
between other Windows’s.
5. Conclusion
It is a bit early to draw any definite conclusions
regarding a dominant design for an operating system for
mobile devices. The reason is that we have so many
giants supporting different systems, and that the
technology found in all systems has not been fully
utilized by services and application developers.
However, from an operator’s point of view, we can
conclude that it is evident to identify the segment they
are providing services for and this way know how to
choose the right platform or platforms. Many have
tackled this by providing multiple platforms, but for
different segments, for example voice-centric users and
data-centric business users.
4. Which Operating System Wins?
Currently, Symbian is the clear leader, but Microsoft is
taking market shares every year, mostly from Palm. In
addition, Microsoft’s large capital resources can also
promote and boost the sales of its software. This is a
great resource, which no other player currently
possesses.
Advantages found at the moment are foremost the huge
support Symbian has from the major mobile phone
manufacturers, Microsoft’s software compatibility
between different Windows’s and huge resources,
Palm’s wide selection of applications and strong
position in the PDA business, and, Linux being opensource and good performance. The brands are also very
important. Here Microsoft has a clear advantage and the
Symbian brand is not that big, but Nokia’s is.
While there is no dominant design, manufacturers offer
several different systems throughout their product line.
Nokia is, however, only focusing on Symbian-based
phones, which can be motivated by being the biggest
owner in Symbian. Is this a good thing? Retailers and
operators on the other hand want to differentiate and
offer several different platforms. Is this only due to no
clear winner or because customers need different
platforms?
Symbian will most likely still be the big name in the
near future, if not only Nokia is supporting it. The
evolution and development of Linux, both for
embedded systems and PCs, will be interesting to
follow in the years to come. Palm could have a difficult
future ahead as Microsoft is pushing into its core market
segment.
The outcome of this battle depends a lot on the mobile
phone manufacturers: Nokia and Sony Ericsson are
pushing Symbian, new manufacturers in Asia are using
Linux and also Windows Mobile to some extent, and
we have Palm in the PDA business in the US.
Microsoft’s important role in the overall software
business can also be seen when Nokia (Nokia: Press
release 2005) licensed the Microsoft Exchange Server
ActiveSync protocol to be used in mobile devices. This
shows how important compatibility with Microsoft
software is. But, the question is if this will determine a
winner?
References
Symbian OS Version 9.1 functional description.
Revision 1.1. February 2005a.
http://www.symbian.com/technology/symbos-v91det.html.
Symbian website. 2005b.
http://www.symbian.com/about/ownership.html.
One thing, which has not been addressed in this paper,
is security. It will be even more important as we get
devices online and later all-IP networks. Symbian and
Linux are both focusing very much on this issue, and
Microsoft’s reputation is not the best in this area.
Microsoft. Windows Mobile-based Smartphone home
page. 2005.
http://www.microsoft.com/windowsmobile/smartphone/
default.mspx.
60
PalmSource. PalmSource Completes Acquisition of
China MobileSoft. February 2005a.
http://www.palmsource.com/press/2005/020305_cms.ht
ml.
PalmSource. About Us. 2005b.
http://www.palmsource.com/about/.
MontaVista Software Inc. About MontaVista Software.
2005. http://www.mvista.com/company/.
LinuxDevices. 2005. Linux on a roll in mobile phones.
http://www.linuxdevices.com/articles/AT3908389811.h
tml.
Radixs. Radixs home page. 2005.
http://www.radixs.com.
SavaJe. SavaJe home page. 2005.
http://www.savaje.com.
PDAStreet. Overview: Symbian and smart phone
market. June 3, 2004.
http://www.pdastreet.com/articles/2004/6/2004-6-3Overview-Symbian-Smartphone.html.
Catalys. October 27, 2004. Global smart phone
shipments treble in 2003.
http://www.canalys.com/pr/2004/r2004102.htm.
The Standard. February 14, 2005. Interview with
PalmSource CEO David Nagel: Linux is the future.
http://www.thestandard.com/internetnews/000966.php.
Nokia. February 14, 2005. Press release.
http://press.nokia.com/PR/200502/980375_5.html.
61
MOBILE MUSIC
Elina Vartiainen, 49617K
Research Seminar on Telecommunications Business II
T-109.551, Spring 2005
[email protected]
Abstract
2.1 Audio Formats for Mobile Music
Mobile music markets are developing into big
businesses in different corners of the world. Wide range
of services and products are already available for
mobile music consumers. Networks are speeding up to
enable the downloading of a full track in short time.
There are many participants involved in the market, and
a few possible business scenarios exist that have being
adopted and are possibly being applied in the future.
This paper summarizes the technical background of
mobile music and also defines potential business
models for existing and future markets.
There exist two audio format concepts, namely, natural
and synthetic audio (Seppänen 2004). Table 1
introduces main differences between them, and the
following sections explain the format concepts on a
more detailed level.
Table 1 Comparison between natural and synthetic
audio formats
Natural
audio
Key Words
Mobile music, business model, DRM.
Synthetic
audio
1. Introduction
The mobile music market is already big business in
Asia, particularly in Japan and South Korea, where the
3G network is advanced and handset penetration is high
(IFPI 2005), in addition to a wide range of products and
services available in those markets. In the US, the
mobile music market is in its infancy, but growing
rapidly. In Europe, 2004 was a breakthrough year with a
number of key service launches and the rollout of 3G
networks. Vodafone launched a 3G-music download
service in November 2004 under its “Vodafone live!”
brand in 13 markets.
Bandwidth
CPU/
Memory
Play
control
Source
material
20200
kbps
1-10
kbps
Medium
Limited
(play/
stop)
Advanced
Acoustic
recordings
Musical
performance
Medium
2.1.1 Natural Audio Formats
Formats for natural mobile audio are presented in Table
2 with their descriptions and file extension. AMR-WB+,
MPEG-2 AAC, MPEG-4 AAC, EAAC+, MP3,
RealAudio, and Windows Media audio are applicable
for mobile music.
Different natural audio formats can be used for different
services as shown in Figure 1, which also explains the
differences between bit rates between the formats.
This paper studies mobile music in its entirety. First as a
technical background, the audio formats of mobile
music are explained, in addition to the capabilities of
different networks to support mobile music markets.
After that, business models for mobile music are
defined. This is done by setting the pre-conditions for
mobile music market, specifying the value chain
participants, and studying potential revenue sources.
2.1.2 Synthetic Audio Formats
Table 3 describes file formats for synthetic mobile
audio. Synthetic audio formats are mainly used for ring
tones and other downloadable synthetic sounds.
2.2 Mobile Music in Different Networks
“Vodafone live!” service is studied further as a case
study, as it is being extensive service aimed for the 3G
network and offering more than 500 000 songs for its
users (Vodafone 2005). Finally, the conclusions about
mobile music are explained.
Digital communication data rates on mobile phones in
GSM network are between 9.6 and 19.2 Kbps,
depending on service (Messerges 2003). This bit rate is
far too slow for the convenient transfer of most digital
items. A theoretical limit for a GRPS connection is
171.2 Kbps, but a realistic bit rate is between 30 and 70
Kbps, which still quite slow for downloading music
tracks. The data rate for 3G mobile phones is expected
to reach 144 Kbps, 384 Kbps, or 2 Mbps, depending on
the mode of operation (vehicular, pedestrian, or fixed
location, respectively). With these data rates, a complete
MP3 track (about 4 MB of data) can be downloaded to a
mobile phone in 16 to 222 seconds. Furthermore,
2. Technical Background
The following sections explore the technical
background of mobile music. First, the audio formats
are introduced. Thereafter, the different networks
supporting mobile music are listed.
62
Table 3 Formats for synthetic mobile audio
Table 2 File formats for natural mobile audio
Description
File
extensi
on
*.AMR
AMR
Mobile speech, very high quality
for speech signals
AMR-WB
Extension to AMR, very high
quality for speech signals
*.AWB
AMR-WB+
Very high sound quality for both
speech and music
*.AWB
MPEG-2
AAC
High-fidelity radio, very high
sound quality for music signals
*.M4A,
*. MP4
MPEG-4
AAC+
Based on MPEG-2 AAC but more *.M4A,
efficient
*. MP4
EAAC+
Based on MPEG-4 AAC+, mobile *.M4A,
speech and music
*. MP4
MPEG-1
Predecessor to AAC high-fidelity
Audio Layer radio (Bradenburg 1999)
III (MP3)
Real Audio Generic speech and music coding,
proprietary of RealNetworks, uses
AAC for high bit rates (Real
Audio 2005)
Windows
Generic speech and music coding,
Media
proprietary of Microsoft, version
Audio
9 is compatible with AAC
(Windows Media Audio 2005)
Description
File
extension
SP-MIDI
Mobile synthetic audio with no
sampled sounds, flexible and
portable polyphonic handling,
fixed CPU and memory
requirements
Mobile DLS Instrument content format for
synthetic and downloadable
sounds used for storing
wavetable instrument sample
data and articulation parameters
(Nokia Forum 2005)
Mobile
Mobile synthetic and extensible
XMF
music format, that combines an
SP-MIDI sequence and Mobile
DLS instruments (Nokia Forum
2005)
MOD
Synthetic audio file format in
PC Sound Tracker programs
*.MP3
*.RM,
*.RA
SMAF
*.WMA
i-Melody
Synthetic audio format for ring
tones and mobile audio that can
also include text and graphics.
Proprietary of Yamaha
(Yamaha SMAF 2005)
Synthetic audio format,
proprietary of NTT DoCoMo
*.MID
*.MDLS
*.MDMF
*.MOD,
*.XM,
*.MED,
*.S3M…
*.MMF
*.IMY
Table 4 Different connections, their bit rates, and
downloading times
Music
listening
EAAC+
Streaming
AMR-WB+
Messaging
AMR-WB
Telephony
AMR
8
24
Bit rate
Downloading time for
4MB music track
GSM
GPRS
3G
Bluetooth
WLAN
9.6 - 19.2 kbps
30 - 70 Kbps
144 Kbps - 2 Mb
723 Kbps
2 - 54 Mbps
28 - 58 min
7 - 18 min
16 - 222 s
44 s
0.6 - 16 s
3. Business Models for Mobile Music
Bit rate (kbps)
12
Connection
64
In this chapter, business model scenarios for mobile
music are introduced. These are defined by setting the
pre-conditions for mobile music market, specifying the
value chain participants, studying potential revenue
sources, and exploring digital rights management
(DRM) concerning mobile music.
Figure 1 Mobile audio formats for different services
WLAN is offering bit rates from 2 to 54 Mbps, which
makes the downloading times even shorter.
Digital items can also be transferred between peers
using messaging services, such as Multimedia
Messaging Service (MMS), or by streaming. Newer
mobile phones will also be equipped with personal area
networking capabilities, such as Bluetooth, which can
manage bit rates up to 723 Kbps. Thus, peer-to-peer
sharing of digital items over short-range networks will
also be possible. At the same time, the number of
mobile phones with Internet connectivity is growing so
rapidly that soon there may be more mobile phones than
desktop computers connected to the Internet.
3.1 Pre-conditions
The following pre-conditions are defined to describe,
how mobile music can drive successful end consumer
business models (Zedrick 1999):
•
•
The different network connections, their bit rates, and
downloading time of a music track (4 MB) are
•
63
Consumers are accustomed to mobile music.
Additionally, listening is a key functionality of
phones.
Music consumers and wireless pioneers are
congruent (under 25 years).
Little input functionality for linear content is
required (play, pause, fast forward, etc.).
•
•
3.2.4 Handset Manufacturers
Formats and rendering devices are already
available.
Content preparation efforts are limited to the extent
that audio content is digitally available as compared
to books and graphics, and therefore little
conversion is required for music or audio books.
Handsets can be differentiated by providing more
functionality that the consumer would be willing to pay
(instead of the provider subsidizing it). At the same
time, handset manufacturers, just as carriers, have to
increase their brand loyalty by providing attractive
services and applications to consumers. In order to
compete with rising unfamiliar manufacturers,
established brands have started to provide content
through their online–clubs and –portals.
As billing systems are integrated in handsets, security
has to be higher as compared to PCs. This way, digital
rights management (DRM) might as well leverage the
same secure infrastructure. Billing for content will
become much more convenient and trustable for the
consumer with existing billing and trust relationships.
Also, privacy and data protection on the consumer side
seem to be perceived as less of an issue compared to the
Internet, where consumers fear that personal and
payment data might be accessible to unauthorized
parties. At the same time, security implemented on
Subscriber Identity Module (SIM) cards or on chips
seems more secure than software implementations on an
application or even system level.
3.2.5 Consumers
The consumption of mobile content has always been an
attractive proposition to consumers and is deeply
interwoven with today’s media consumption behavior,
including books, newspapers. Increasingly, consumers
are demanding content be transferable across multiple
(mobile) devices.
3.3 Potential Revenue Sources
3.2 Value Chain Participants
Additionally, a number of different revenue models for
mobile music are possible:
Mobile content owners or copyright holder, aggregators,
carriers, handset manufacturers and consumers are
involved in the value chain of mobile content with joint
interests in successful mobile content (Becker 2003).
•
3.2.1 Content Owners
•
As content is already available, mobile music can be a
very profitable business due to little upfront investments
required for content creation. The major challenge is
probably going to be piracy and illegal copies, which is
also the case on the Internet. Mobile content owners can
only earn back their investments in mobile content if
their copyright and content are protected. Content
owners are unlikely to allow premium content to be
distributed without effective DRM.
•
3.2.2 Aggregators
•
Aggregators create traffic with attractive content and
their own brand value. Aggregators may take any form
in the wireless world: carriers, portals, device portals
and Internet–based portals. Revenues are generated
mostly from commerce transactions and advertising.
Aggregators also have to fight with the same problem as
content creators, namely, the distribution of mobile
content without the risk of overwhelming piracy.
•
3.2.3 Carriers
Carriers (and mobile network operators) want to
capitalize on their heavy investments by using their
networks for services beyond providing bandwidth for
voice. The re–use of billing capabilities and bandwidth
for mobile content is expected to drive profitability in
the future. By providing unique, differentiated content,
carriers can increase average revenue per user and
significantly lower their churn rate.
Airtime sharing refers to the participation of
content suppliers in connection revenues (per time
unit or per data packet).
Promotions and sponsorships: The mobile phone
can deliver highly effective and targeted marketing
messages. Mobile music can even include
marketing or advertising messages, and can link
directly to a purchase portal that allows the user to
buy more.
Transaction–oriented revenues will play a key role
in the mobile environment enabling content
providers and aggregators to recoup their
investments. At the same time, content can be
forwarded to other consumers with specific
restrictions attached (in DRM terminology, this is
referred to as “superdistribution”).
Content aggregation and subscription describe the
sale of content to consumers based on a flat
periodic fee for unlimited consumption (or with
upper limit). Content can either be generated
specifically for the purpose, or comprise a selection
of previously existing content that is otherwise sold
unbundled. Mobile content subscriptions can be
sold with the provider contract at sign–up.
Levies or taxation on devices or bandwidth: In
some countries in the EU copyright levies are also
applied, for example, to blank media and recording
equipment. The same could apply to handsets or
mobile memory. Clearinghouses would then
compensate the collected levies to the copyright
holder.
3.5 Business Model Scenarios
The business model scenarios for mobile music are
defined using a matrix defined in Table 5. In the table,
64
charging the consumer directly for the usage of these
services and application fees and not based on the
consumed content, for example, a flat-rate monthly fee.
revenues are divided into two categories: direct
revenues, which result from the consumer, and indirect
revenues, which come from associated products via
public or private entities. Public goods are non–
excludable and non–rivalries in consumption, while
private goods are sold to those who can afford to pay
the market price. In the music market, broadcasting as a
public good is used to promote songs, while CDs
function as a container for music sold as private good.
Personalization plays a crucial role in attracting
consumers and providing lock-in. In the networked
economy products and services for personalization are
achievable due to smaller transaction and production
and service costs. These services may include
generation, recommendation, updating and sharing of
personal play lists among other users.
Table 5: Scenarios for Mobile Music
Indirect revenues
Direct revenues
Public Good
Private Good
Filesharing
and beaming
Music service
providing
Combined
subscriptions
Superdistribution
3.5.3 Third Scenario: Combined Subscriptions
Protection technologies play an important role in
determining whether a media product is a public or a
private good. In scenarios three and four, mobile music
is considered a private good, as content owners are able
to restrict access to the content, thereby introducing the
possibility of excluding free riders and charging for
their mobile music.
3.5.1 First Scenario: File Sharing And Beaming
At a very high level, file sharing systems or peer-topeer-networks aggregate and distribute information.
With either central or de–central listings, files be can
searched for, transferred and stored locally.
Subscriptions bundle a large number of information
goods for a fixed price, which means that a monopolist
having multiple products has an opportunity to gain
substantially higher profits by offering one or more
bundles of information goods than by offering the same
goods separately. At the same time, bundling can be
used to introduce new artists as a strategy to overcome
the information paradox stating that the value of
information cannot be determined a priori of
consumption.
The purpose of open source file–sharing systems is to
freely distribute information beyond any control and
commercial interest. They are designed to run decentralized, which makes it almost impossible to control
or to shut down. The main challenge of these systems is
that they can only scale with resources such as content,
bandwidth and storage from their users. Because this
content can be viewed as public goods, people may be
unwilling to give any contribution in return. As a
downside, peer-to-peer sharing introduces a significant
loss of system performance with longer search and
downloading times. However, file-sharing systems
seem to be able to overcome today’s challenges and will
play an important role in the distribution of mobile
music.
In this scenario, the music industry has the change to
create a continuous relationship with the end consumer,
which has not been possible earlier. Through this
relationship mobile music can generate substantial
revenues. Revenues can be considered indirect when
charged independently from the usage, for example, in
combination with a monthly plan. Nevertheless, the
subscription model represents a combination between
indirect and direct revenues. A premium membership
might offer a flat rate, eventually combined with
services from the second scenario, while a membership
based on advertising might limit access in time or the
amount of content.
The music industry can generate revenues in this
scenario by grabbing the attention of a customer, and
use it to promote either the physical album or the artist
in order to increase popularity and thereby earn higher
merchandising and advertising revenue as well as from
live events. As a result, the integration of mobile music
and traditional marketing and distribution seems a
profitable business model.
3.5.4 Fourth Scenario: Superdistribution
The fundamental idea behind superdistribution is to
allow free distribution of digital content, and yet control
the access to usage and changes by the terms defined by
the content owner. After encrypting the music with a
key, the package can be digitally delivered to the
consumer’s end device. In the consumer’s device, the
locally installed trusted tool uses an unlock key, which
leaves the file locally encrypted and streams the digital
content into the memory for “on the fly” decryption.
The user, who has agreed to the terms and conditions of
use, now has the license to access the content. The
usage is recorded and the transaction is reported to a
clearinghouse to initiate payments and backup system
information. Using the superdistribution concept,
3.5.2 Second Scenario: Music Service Providing
In this scenario, mobile music is a public good being
offered in exchange to direct payments. However, the
content alone is not enough, and the value lies primarily
in the functionality and services rather than in the
content itself. Instead of copy protection, serviceoriented new business models are developed to
eliminate the motive to copy. Besides content, these
services and applications offer convenience, reliability
and fast access to music almost anywhere and anytime
as a universally present jukebox including community
and search services. Revenues would come from
65
consumers can recommend and share files among each
other. Still the copyright is being maintained and the
content owner has control and determines payment
collection.
shows the user numbers of each operator as of 31 March
2005 KDDI being the biggest operator of 3G networks.
Table 6 Japan subscribers (Wireless Watch Japan
2005)
Under the third scenario bundling was mentioned as a
way to extract higher profits for content companies. In
the music industry, traditionally only one or two hits
from an entire album initiate the purchase. Digital
products possess optimal de-bundling capabilities,
where songs are bought separately, which in turn can be
re-bundled
for
customized
mixes.
With
superdistribution, consumers might start “cherry
picking” their hits thereby endangering the traditional
revenue model of album sales.
Operator
Number of 3G
subscribers
Mobile data users
Vodafone
KDDI
NTT DoCoMo
917 300
17 934 900
11 500 600
12 874 100
18 258 800
44 020 900
Chaku-Uta-Full is a service offered by KDDI that
enables downloading of a full song to mobile phones
via 2.4 Mbps 3G mobile network. Its users have access
to 10 000 tracks, and content fee per song is on average
around 315 yen, which is about €2,3 (Wireless Watch
Japan 2004).
4. Case: Vodafone Live!
Vodafone launched a 3G music download service in
November 2004 under its “Vodafone live!” brand in 13
markets. Licensed by record companies, full-track and
video downloads as well as audio and video streams are
available on the service. Vodafone announced four
months after the service was launched that one million
individual full-track songs has been downloaded
(Fitchard 2005).
Chaku-uta-full started on November 19, 2004 and
achieved 1 million downloads within 48 days (i-mode
Business Strategy 2005). Chaku-Uta downloads on
KDDI mobile phones, which contain 20 to 30 second
long parts of songs in MPEG format, have similar
download numbers as iTunes in the US with a very
much smaller potential user pool (Eurotechnology
2005). Figure 2 introduces the number of music
downloads of Chaku-uta-full, Chaku-uta and Apple’s iTunes from January 2003 to April 2005.
Depending on the Vodafone country of the customer, up
to 20 full CD-quality tracks can be stored. The service
is located in the “Vodafone live!” mobile service portal
in the device of the customer. The customer does not
have to download whole albums but single tracks, of
which he or she can build his or her own music mix.
The track is stored on the phone in AAC format for later
use, and the customer may play it as often as wanted.
The cost of downloading each full track through
“Vodafone live!” with a 3G connection is around €1.5
depending on the country, and the rate is a single price
per content. There are also monthly packages, with
which the customer can order a bundle of tracks and get
a discount price for each track compared to ordering
them separately. Once the customer is connected to
“Vodafone live!”, all surfing, searching and
downloading is free. Content purchases are charged on
an event basis, rather than according to volume.
Figure 2 Music downloads in Japan
(Eurotechnology 2005)
This points out that the mobile market and especially
mobile music is much bigger business today in Japan
than, for example, in Europe. Mobile music is and
becoming the largest category in mobile content
markets, and is expected to increase rapidly also in
Europe and the US in near future according to, what has
happened in Japan.
Vodafone uses the implementation of CoreMedia’s
DRM infrastructure for its global service delivery
platform. The solution has been developed in
accordance with the Open Mobile Alliance’s (OMA)
DRM specifications (Open Mobile Alliance 2005).
The business model behind “Vodafone Live!” is as
previously defined in scenario three. The content is
protected by DRM, and the customer subscribes to the
service. Revenues are generated from the content and
subscription payments.
5. Conclusions
There are various formats for mobile music driven by
different standardization parties and companies, which
also might their own proprietary formats. Mobile phone
companies and operators must ensure the compatibility
between the formats and devices to make certain that
mobile music has an opportunity to succeed and create
revenues.
4.1 Comparison to Chaku-Uta-Full
In Japan, there are three operators that offer 3G mobile
network: KDDI, NTT DoCoMo and Vodafone. Table 6
66
Messerges, Thomas S. et al. 2003. Digital Rights
Management in a 3G Mobile Phone and Beyond.
DRM’03, October 27, 2003, Washington, DC, USA.
ACM 1-58113-786-9/03/0010.
Mobile networks are speeding up enabling downloading
of a track in a matter of seconds. 3G networks are
already up and running and WLAN networks ensure
fast connections in the near future.
Nokia Forum. 2005. MIDI And True Tones In Nokia
Devices.
http://forum.nokia.com.
[Referenced
20.03.2005].
Four different types for business models can be defined
for mobile music markets. In the first type, mobile
music is used to promote the traditional offline
business. The second category proposes a model in
which consumers were willing to pay for additional
services to access mobile music. The third and fourth
scenario significantly differ from the previous two, as
music providers are considered to protect their content
by using DRM technologies. While in the third
scenario, consumers access content using subscription
systems, in the last category, secure peer-to-peer
technologies (superdistribution) enable consumers to
share and recommend copy–protected songs.
NTT DoCoMo. 2004. i-mode User’s Manual.
http://www.nttdocomo.co.jp/english/p_s/imode/charges/
user/images/PDC_E.pdf. [Referenced 20.03.2005].
Open Mobile Alliance. 2005. OMA Digital Right
Management.
http://www.openmobilealliance.org/release_program/dr
m_v10.html. [Referenced on 22.03.2005].
2005.
RealAudio
10
Codec.
Real
Audio.
http://www.realnetworks.com/products/codecs/realaudi
o.html. [Referenced on 20.03.2005].
The most preferable revenue source for mobile music
seems to be generated from transactions, as it is
independent from bandwidth use, and allows more
flexible pricing schemes. Scenarios three and four are
suitable for controlled environments like carrier
networks existing today, as mobile music is being
protected with DRM to gain higher transaction revenues
for all value chain participants. These scenarios include
revenue streams from subscription plans and
superdistribution. Meanwhile, scenarios one and two are
targeted for less controlled environments like network
access via WLAN to the Internet, where adoption of
DRM is more difficult. Revenues can be generated by
promotions, sponsorships and the license of mobile
music services mainly based on application fees.
Seppänen, J. 2004. Mobile audio
http://www.tml.hut.fi/Opinnot/T111.550/Mobileaudioformats2004-10-26.pdf.
[Referenced 13.03.2005].
formats.
Vodafone. 2004. Global launch of Vodafone live! with
3G.
http://www.vodafone.com/article_with_thumbnail/0,30
38,CATEGORY_ID%253D200%2526LANGUAGE_I
D%253D0%2526CONTENT_ID%253D249634,00.htm
l. [Referenced on 13.03.2005].
Vodafone. 2005. Unlimited Music Fun: 500,000 Songs
are already available from Vodafone MusicDownloads.
http://www.vodafone.com/article_with_thumbnail/0,30
38,OPCO%253D40005%2526CATEGORY_ID%253D
20204%2526MT_ID%253Dpr%2526LANGUAGE_ID
%253D0%2526CONTENT_ID%253D255361,00.html.
[Referenced on 13.03.2005].
References
Becker E. et al. (Eds.). 2003. Digital Rights
Management, pp. 271–287.
Bradenburg, K. 1999. MP3 and AAC Explained.
http://www.aes.org/publications/downloadDocument.cf
m?accessID=14703162000122117 . [Referenced on
20.03.2005].
Windows Media Audio. 2005. Windows Media 9 Series
Audio
and
Video
Codecs.
http://www.microsoft.com/windows/windowsmedia/9se
ries/codecs.aspx. [Referenced on 20.03.2005].
Eurotechnology. 2005. Mobile Music Japan - FAQ.
http://www.eurotechnology.com/mobile_music_japan/ .
[Referenced on 27.04.2005].
Zerdick, A. et al. 1999. Die Internet Ökonomie –
Strategien für die digitale Wirtschaft. Springer, Berlin,
Heidelberg. pp. 170.
Fitchart, K. 2005. Mobile Music: Huge in Europe.
Telephony; Mar 14, 2005; 246, 5; ABI/INFORM
Global. pp. 28.
Wireless Watch Japan. 2004. Telephone Tunes: KDDI
Launches
Mobile
Music
Downloads.
http://www.wirelesswatch.jp/modules.php?name=News
&file=article&sid=1022. [Referenced on 27.04.2005].
i-mode Business Strategy. 2005. 1 Million full-song
mobile music downloads in 48 days – Japan.
http://www.imodestrategy.com/2005/01/1_million_dow
nl.html. [Referenced on 27.04.2005].
Wireless Watch Japan. 2005. 3G Japan Subscribers.
http://www.wirelesswatch.jp.
[Referenced
on
27.04.2005].
IFPI
Digital
Music
Report
2005.
2005.
http://www.ifpi.org/site-content/library/digital-musicreport-2005.pdf. [Referenced on 08.03.2005].
Yamaha SMAF. 2005. Yamaha SMAF Global.
http://smaf-yamaha.com/. [Referenced on 20.03.2005].
67
MOBILE GAMES
Alexei Semenov
Telecommunications and Multimedia Laboratory
Helsinki University of Technology, Espoo, Finland
[email protected]
Abstract
2.1 Who?
Mobile games industry is developing quickly.
Traditional game industry players and newcomers are
pushing the evolution of mobile games in order to
increase this immature market. In this paper we review
the history of mobile games, look at the business
potential of mobile games and different business models
and, review a couple of the field’s success stories.
So who are the mobile gamers? One can assume that
mobile gamers are mostly teenagers, but studies show
the opposite. According to the study by Ballard, more
than 60% of mobile gamers are between ages 18-26 and
single. Ballard divides mobile gamers into several
groups depending on their addiction to gaming: casual
gamers, youth and core-gamers.
Key Words
According to the research by Telephia, although teens
do not form a majority of mobile gamers at the moment,
they represent a big potential group of future gamers.
Up to 41% of US teens are interested in having online
gaming capabilities on their next mobile device. Current
mobile teen online gamers demonstrate twice as heavy
usage of mobile phone as compared to those teens, who
do not play online games, and with introduction of more
games this usage can grow further.
Mobile games, gaming, N-Gage, Gameboy
1. Introduction
Although mobile games have been around for a very
long time, they did not receive wide attention until the
appearance of new color-screen handsets offering
greater usability, polyphonic sounds and Java
technology. The introduction of phones that are
specifically designed for gaming attracts even more
attention to this field.
2.2 When?
30% of all gamers play games more than three times a
day. Over 70% play for more than 10 minutes at a time,
including core-gamers who play for more than 20
minutes and as much as two hours at a time. More than
60% are playing games at home and more than 70% are
sharing mobile gameplay with their friends or family
members. These figures explain the interest of
traditional game industry players in mobile gaming,
they simply do not want to loose their clients, so they
need to enter the mobile gaming market
According to a study made by ARC corporation, about
850 million people worldwide will play games using
their mobile devices by 2006 (Hartley 2002). This
means that more than 43% of mobile users are expected
to play mobile games in the future. A report by Juniper
Research shows that SMS-based games and rich-media
Java games will generate a revenue of over $9.7 billion
by 2008. Games themselves are expected to become
real-time and multiplayer.
2.3 Why?
In Chapter 2, we look at the potential market and
answer the following questions: who plays mobile
games, when do they play them and why? In Chapter 3,
we look at history and evolution of mobile games from
the very beginning in 1980s to the present time. We also
look at the future trends in the mobile gaming field. In
Chapter 4, we look at different business models and the
way the revenues are generated in these models. Finally,
in Chapter 5 we look at three successful mobile games.
For the majority of the gamers mobile gaming is
supposed to fill “slack minutes” of the day, e.g.
traveling, staying in line, etc. However core-gamers on
the other hand play at any time of the day, while
teenagers play mobile games socially, often in groups.
This motivation to play games distinguishes average
mobile gamers from average PC or console gamers. PC
or console gamers are playing for entertainment, while
mobile gamers typically play to kill time.
2. Potential market: Who, When and Why?
2.4 What brings attention to mobile games market?
To understand the market it is important to know who
the gamers are, when do they play and for what reason
do they play. It is also important to understand why is
mobile games market attracting both the industry
players and gamers. In this chapter we will answer these
questions one by one.
From the point of view of the industry there are a
number of advantages. Increased bandwidth results in
higher profits for bandwidth providers. Game
manufacturers get new business models. Mobile device
manufacturers benefit from selling new and more
68
expensive mobile devices. While for service providers
mobile games can be the new killer application that they
have been looking for lately (Kalyanaraman 2002).
that were developed by third-parties. As regards to
SMS-based games, they became popular, especially
when they were supported with television broadcasting.
From the users’ point of view mobile games have
several advantages. First of all, players are not bound to
PC or console and TV, meaning that they can play
anywhere anytime. Mobile phone is often among the
only things that you take with you when leaving home.
Second of all, the price for the mobile game is
significantly lower than the price for PC or console
game, meaning that players can try out and play more
games.
In 2001, the history of mobile games took another step
ahead when mobile phones became equipped with color
screens and downloadable Java games were introduced
to the market. Mobile phone manufacturers realized that
in order to make consumers interested in mobile gaming
they had to develop more advanced phones (referred to
as smartphones ) capable of supporting 3D-graphics and
natural sounds.
The latest development in the field of mobile gaming
was again made by Nokia. In 2003 it introduced its NGage platform and wireless online gaming with N-Gage
Arena. N-Gage is a full-scale game console with
changeable cartridges and smartphone functionalities. It
was launched with big promotion campaign, but didn’t
receive the predicted popularity, only 1.5 million units
were sold to date. N-Gage had usability flows and was
really expensive with initial cost of 350$. It also
provided lower battery lifetime, display size and display
resolution than Gameboy Advance. Gameboy Advance
also offered a lower price of 100$. In 2004 Nokia
introduced a new redesigned N-Gage platform with
increased usability and lower price of 200$. Nintendo
has replied with cutting the price of Gameboy Advance
to 80$.
As disadvantages are supposed to be eliminated when
time passes by, the attractiveness of mobile games is
supposed to become even stronger.
3. History and Evolution: Past, Present and
Future
In this chapter we look at history and evolution of
mobile games from the very beginning in 1980s to the
present time. We also look at the future trends in the
mobile gaming field.
3.1 Past
Mobile gaming history starts back in 1980s when
Nintendo introduced its portable LCD game series
“Games & Watch” (Pelkonen 2004). Already back then,
Nintendo introduced a well-known character from a
console game into the mobile gaming, of course it was
Nintendo’s own Mario. “Games & Watch” gave players
a possibility to play 70 different games and enjoyed
large popularity. During next decade more LCD game
manufacturers have entered the market with similar
products. In order to keep its leading position in the
field, Nintendo introduced a new kind of game console:
Gameboy-console
with
changeable
cartridges.
Gameboy was a huge success and dominated the market
to such extent that it became a synonym to mobile game
consoles. Nintendo has developed hundreds of games
for Gameboy and its advanced versions, including
Gameboy Advance.
3.2 Present
According to Eurogamer, Nokia has announced that it is
going to drop the price of N-Gage in US down to 100$.
Prices for the games will also drop down to 15-25$,
making them cheaper than most games for other mobile
consoles and close to the downloadable games. In
March 2005 Gerard Wiener, Nokia’s director and
general manager of the games business announced that
in addition to decreasing the prices, Nokia is also
considering a second redesign of the N-Gage platform.
Other major companies also enter the market with
similar products that support advanced mobile games.
Personal Digital Assistants (PDAs), portable game
consoles, and smartphones made by different companies
are either already on the market or will be introduced to
the market in the nearest future, resulting in
fragmenting of the market.
In 1997 Nokia has developed a new kind of game that
could be played by using a mobile phone. The first
game to emerge was Snake, although it was very simple
it became surprisingly popular and Nokia developed
more similar games for their phones. At that time games
were permanently installed on the phones, but the
situation changed later.
3.3 Future
Until recent years, mobile gaming market has
concentrated on single player games, but currently the
situation is changing with introduction of multiplayer
games. Multiplayer games change the mobile gaming
experience, because gamers are able to challenge real
people instead of machines. This is particularly
important for young gamers, who play to socialize.
Another important issue that needs to be addressed by
the developers is the creation of mobile gaming
community. As we can see now, different kinds of
Internet portals and forums are providing PC and
In the end 1990s new types of mobile gaming emerged,
developers were looking for a way to provide gamers
with possibility of multiplayer gaming. These were
WAP-games and SMS-based games. WAP-games,
played using phones with WAP-browsers (e.g. Nokia’s
7100-series) did not gain popularity in Europe due to
slow connection speeds, but were successful in Japan,
where NTT DoCoMo was selling games for its I-mode,
69
console gamers not only with the latest news, but also
with opportunity for gamers to communicate with each
other, stimulating their interest in the gaming process.
This will also change the motivation of the mobile
gamers from killing time to entertainment. The final
result of this will be the increase of revenue. In Korea
and Japan leading countries in this field, all major
games are already online.
generated based on the used air-time or data-transfer
rates, as in Browser games.
4.4 Native OS Games
In Native OS games, developed for handsets that
support operating system such as Symbian OS,
revenues are also generated on an application-sale basis.
The problem with this type of games arises from the
fact that usually Native OS games are larger
applications than Java games and it is impossible to
send them over the air. And when such game is
downloaded to a PC, it can be then distributed among
other people for example by email, thus seriously
decreasing the amount of revenues.
The popularity of mobile gaming among users will also
strongly depend on further evolution of hardware. The
following parameters will form the basis of this
evolution: display size, display resolution, bandwidth
from the network to the handset, amount of memory in
the handset and the cost of the handset. With
introduction of more advanced hardware game
developers will be able to add greater detail to their
games, making them more attractive to potential users.
4.5 Nokia’s N-Gage Games
Nokia’s N-Gage games, also known as “rich games”
developed for Nokia’s N-Gage mobile game deck are
supplied in the form of 8 MB (or larger) memory cards,
sold through retail stores in the same way as PC or
console games.
4. Business Models and Value Chain
Mobile games market is closely related to two other
business areas: mobile content business and computer &
console game publishing business (Pelkonen 2004). The
key players in the market are game developing
companies and game distributors. Games can be
distributed either by telecom operators and portals, or in
retail stores (e.g. N-Gage games). According to Nokia,
the way revenue is gained from mobile games is based
on the type of the particular game. 3 types of Value
chains are also discussed in this chapter.
4.6 Value Chain with Operator
“Value Chain with Operator” is used in SMS games,
Browser games and Java games in Asia and North
America. Here the consumer pays for access to the
game, which differs based on the business model as
described above. The operator shares a part of this fee
with aggregator, who may be a wireless portal, handset
manufacturer or mobile games publisher. Depending on
the game type, region and operator, the portion of
revenues shared with aggregator may vary form 5 to 89
percent. The aggregator then shares a portion of the
received money with the game developer, who can get
10 to 50 percent of aggregator’s revenues. It is also
worth mentioning that sometimes aggregators develop
some of the games themselves, removing one link in the
value chain. And in some cases the operator uses a
third-party billing, which takes about 3 to 10 percent of
revenues.
4.1 SMS Games
In SMS games mobile operators charge users some
per sent message. This fee is typically larger than a
for a normal message. Mobile operators then share
collected revenue with game developer who can
from 20 to 50 percent.
fee
fee
the
get
4.2 Browser Games
In Browser games, based on XHTML or WAP
technology, mobile operators charge users based on
amount of used the air-time or data-transfer. In case of
browser games, the portion of revenue that is then
shared with the developer of the game can vary greatly.
In North America developers get about 10 percent,
while in Japan they get up to 90 percent.
4.7 Value Chain without Operator
“Value Chain without Operator” is used in Native OS
games and Java games in Europe. Here the consumer
pays a one-time fee to install the game to his handset.
The aggregator shares a portion of its revenues with the
game developer. The portion is typically 15 to 50
percent of the revenues.
4.3 Java Games
4.8 N-Gage Value Chain
In Java games, based on J2ME technology, revenues are
generated on an application-sale basis, that means that
users pay a one-time fee for downloading and installing
a particular game on their handsets. Games are typically
delivered to user over the air, but sometimes they can be
downloaded to a PC and then hot-synced to the handset.
Java games usually cost about 5-7 euros. The collected
revenues are then shared with the developers such that
developers receive 20 to 50 percent of the revenues. In
case of Multiplayer Java games, revenues can also be
In “N-Gage Value Chain” the retailer purchases the
game from a publisher and the consumer purchases the
game from the retailer. The portion of retail price that is
paid to the publisher varies from 15 to 80 percent. The
publisher pays a platform royalty to the device
manufacturer and shares a part of its revenues to the
game developer. This portion also varies widely, from
70
15 percent for new developers to 50 percent for
proficient developers.
launched in Moscow region by mobile operator Sonic
Duo, who used an active marketing and community
managing activities to achieve high penetration in the
subscriber base. At the peak of popularity, traffic levels
in Russia alone reached 1 million SMS per week. At the
moment BotFighters is generating 1 million SMS per
week in all 5 countries altogether. It’s Alive! is
currently working on a sequel to their successful game.
Figure 1: Three kinds of Value Chains
5.2 Sumea Ltd.: Racing Fever
Sumea Ltd. is a game development company that is
based in Helsinki, Finland and was founded in 1999.
Sumea develops Java games for mobile devices, which
are available for download through leading mobile
operators and independent portals in more than 50
countries around the world. Racing Fever, launched in
2002 is Sumea’s most famous game to date. It is a 2D
single player racing game, where player drives a car
against the clock trying to avoid hitting objects on the
way to the next checkpoint. Racing Fever might be
considered the most popular mobile racing game to
date, with over 700 000 downloads globally by
November 2004. But who knows, may be the already
launched sequel to this game will break the record. In
Racing Fever 2 developers came up with a story to
backup the gaming process. Now player drives a car
against computer players in different weather conditions
and different tracks with the final goal of being the best
racer in town.
5. Success Stories
In this section we look at three successful mobile games
that illustrate the potential of the mobile gaming market.
BotFighters is an SMS-based game that uses location
determination technology, a pioneer of this kind of
games. Racing Fever is a classical example of a
downloadable Java game. While Worms is a good
example of mobile game that was based on a classical
PC game developed by a company from PC gaming
industry that entered the mobile gaming market.
5.1 It’s Alive!: BotFighters
It’s Alive! is a game development studio that focuses on
pervasive games, massive multiplayer online games
where players use the real world as their game arena.
The company is based in Stockholm, Sweden and was
founded in 2000. At the same time the company
launched the game called BotFighters, which is the first
location-based mobile game in the world. In this game
players use location determination capabilities of the
network and SMS-messages to locate and “shoot” other
players. What distinguishes BotFighters from other
mobile games is that the actual game happens in the
streets of the real world at any time, in other words you
are constantly playing the game.
The only requirement for Racing Fever is a mobile
phone with Java technology. The game can be
downloaded at a price of 3-5 euros depending on the
country. The revenue share for the developer also varies
depending on the country: from 35-60% in 60-80% in
the USA
5.3 THQ Wireless: Worms
THQ Wireless Inc. is a mobile gaming division of THQ
Inc., a well known player of the gaming industry since
1994. THQ Wireless was founded in 2001 and has
offices in US, EMEA and Asia. THQ Wirelss develops
games on Java, Symbian and Brew platforms, which are
distributed on more than 60 channels around the world,
including service operators, portals and service vendors.
Worms is based on the classic PC game Worms, created
by Team17. In this arcade game you control a platoon
of worms and have to eliminate all worms from your
opponent’s team by using different kinds of weapons,
from baseball bat and pistol to napalm cannon. Worms
is a turn-based game, where up to four players can
participate in any match. It is possible to play against a
computer opponent or to share a mobile phone to play
with your friend(s). Original PC game was a huge
success and was sold with over 8 million copies
worldwide, while wireless Worms were downloaded
285 000 times across EMEA during the period of
January-September 2004 and became a best selling
mobile game on Vodafone Live!
The game has a robot theme. Players use the game’s
website to register and create their own robots. Then
they can “scan” nearby territory in order to find other
players, when an enemy is found the player can “shoot”
only if it is within the required range of the target (this
range might differ depending on the used weapon). In
order to get closer to the target, the player has to
physically move in the real world: by foot, bike, car or
otherwise. The game’s website is also used for
community building and creating the game atmosphere.
It gives gamers an opportunity to chat, upgrade their
robots, buy weapons, view highscores and join
competitions. The only requirements for playing
BotFightes, is a regular GSM phone, capable of sending
and receiving SMS messages and mobile operator’s
subscription or prepaid card.
BotFighters was first launched in Sweden together with
Telia Mobile, who was the first operator in the world to
launch such kind of a game. Later it was also launched
in Finland, Ireland, China and Russia, and enjoyed a
huge success, especially in Russia. There the game was
71
Later THQ Wireless developed 2 more Worms games
for mobile devices: Worms Golf and Worms Forts.
Worms Golf is an arcade sports/action game, a
combination of golf simulator and Worms where a golf
ball is replaced with a grenade. Worms Golf supports
single player or up to 4 players on one mobile phone.
Worms Forts is a latest sequel of Worms, its counterpart
on PC and console markets is still under development.
The only requirement for Worms, Worms Golf or
Worms Forts is a mobile phone with Java technology.
The game can be downloaded at a price of 4-6 euros
depending on the country.
6. Conclusion
Mobile games industry shows signs of rapid growth, but
the critical mass of customers is still missing.
Nevertheless more players are entering the market
exploring different new opportunities the technology is
providing them. Despite initial failure, Nokia with its
N-Gage platform has showed other device
manufacturers that there exists a potential market and
encouraged them to work in this area and we are going
to see more game specific mobile devices in the nearest
future. Such companies as It’s Alive!, Sumea Ltd. and
others have also shown that it is possible to achieve
high revenues if you have the right product for the
market.
References
Ewirelessnews.com 2004. Youth critical for the
growing mobile games market.
http://www.ewirelessnews.com/pdfs/w2n%202004-0319.pdf
Hartley, McQueen. 2002. Wireless JAVA 2002 – from
potential to reality. ARC Group.
Kalyanaraman. 2002. Mobile Entertainment services –
A perspective. Wipro Technologies.
http://www.wipro.com/pdf_files/Mobile_Entertainment
_Perspective.pdf
Nokia Corporation. 2003. Introduction to Mobile
Games Business.
http://nds2.forum.nokia.com/nnds/ForumDownloadServ
let?id=2896&name=Introduction%5Fto%5FMobile%5F
Games%5FBusiness%5Fv1%5F0%2Epdf
Pelkonen. 2004. Mobile Games. E-Content Report by
ACTeN.
http://www.acten.net/uploads/images/382/IR3_0103042.pdf
72
Business Study of Mobile Peer-to-Peer Content Distribution
Marcin Matuszewski
Networking Laboratory
Otakaari 5, 02150 Espoo, Finland
[email protected]
development and presenting current trends that can
impact the future of the mobile services market.
Abstract
Mobile operators are seeking for new sources of
revenue to cover high 3G license and network
equipment expenses. The services that are promoting
3G networks like video call or video streaming are not
appealing to the customers. In the meantime the
enormous popularity of internet Peer-to-Peer (P2P)
content sharing applications can rise a question about
their adoption in the mobile environment. The paper
presents a feasibility study of mobile P2P file sharing
services. It analyses possible value network scenarios
and evaluates conditions necessary for deployment of
such services taking into consideration current trends in
the mobile industry and experience gathered from
deployment of internet P2P services.
Mobile, Peer-to-Peer, Pricing, Content, 3G, Strategy.
The paper is organized as follows. Section 2 describes a
P2P networking concept and presents different network
architectures that have impact on performance of
Mobile P2P services. Section 3 presents some of the
mobile P2P applications. Section 4 tries to review
previous research results analyzing impact of the
internet P2P services on dynamics of content industry
business models. Section 5 presents platforms that are
natural competitors of Mobile P2P systems. The
technological feasibility study of mobile P2P file
sharing services is presented in Section 6. Sections 7
and 8 give an overview of a value network and present
value propositions to the main players in the value
network. Pricing schemes are discussed in Section 9.
The last chapter concludes the discussion.
1. Introduction
2. Peer-to-Peer
Peer-to-peer (P2P) systems have altered the landscape
of content retailing and distribution. According to some
market research companies, in 2003, the number of
internet music downloaders reached almost thirty
percent of U.S. population (Matuszewski 2004). P2P
content downloading activity becomes more and more
popular, especially among young people that have
grown up in the Napster era. They appreciate the
possibility of getting content from the Internet. P2P is
an early sign of entertainment over IP.
Before we introduce the concept of Peer-to-Peer
networking, let us consider what “Peer” term means.
According to Encarta online dictionary Peer is:
Key Words
“a person who is of equal standing with another”
Keeping in mind this definition and the fact that we all
live and interact inside communities, we can claim that
person to person communication is synonymous with
peer-to-peer communication. Therefore, as we
understand, the concept of peer-to-peer communication
is not new. The telephone connections use this model
for decades. Even chatting on WWW pages can be
considered as peer-to-peer communication, since parties
that take part in such a conversation have equal standing
and communicate with each other.
However, such a spectacular success of the P2P systems
would have not been possible without technological
change in the ICT industry. Faster residential Internet
connections, more powerful desktops, and cheaper
storage were the main drivers stimulating the P2P
growth. A similar technological change can be observed
also in the mobile industry. Introduction of 3G and
WLAN high capacity networks, more powerful
handsets with larger capacity memory chips and
multimedia extensions provide good basis for the
development of peer-to-peer applications also in the
mobile environment. However, it is not certain if the
P2P services that were very well adopted in the fixed
internet can also be successfully lunched in the mobile
environment. Is there any real customer need to use
such services? Is the idea feasible from both business
and technical perspective? The paper addresses these
questions, analyzing a current state of mobile industry
A peer-to-peer concept, that has been gathering a lot of
attention during recent years followed emergence of the
peer-to-peer internet content sharing applications such
as Napster, has much more narrow meaning. From the
technical perspective peer-to-peer is communications
model in which:
• each communication node (peer) has both a server
and a client capability,
• either party can initiate a communication session,
• applications connect with each other directly.
73
centralized
architecture.
The
semi-centralized
architecture seems to be the most efficient in terms of
mobile resource usage and control. Figure 1 presents
semi-centralized peer-to-peer network created by
mobile peer-to-peer nodes that reside in three different
mobile networks.
2.1. P2P Architectures
The peer-to-peer concept has several advantages over a
traditional client-server architecture well know from
Web browsing. P2P systems are able to scale well
without a need for upgrade of costly centralized
resources. In these systems a storage capacity,
processing and networking power are distributed among
nodes participating in a network. Since content storage
is distributed, each new node adds potentially new
content to the network. Therefore the more users of
certain P2P content sharing application, the wider
variety of content is available. However distribution of
resources like computation and networking power
create a huge challenge in the mobile networks. Besides
a battery and radio capacity is limited and have to be
optimised.
The following sections present different P2P
architectures that can have impact on the result
performance of the P2P systems in the mobile
environment. The common principle they all share is
that a search mechanism is separated from a download
process. The download process is always between peers
without help of any P2P server.
2.1.1. Centralised architecture
Figure 1. Semi-centralized mobile P2P architecture
In a pure P2P architecture both search and data
download processes are distributed. There are no central
entities that could control the network. In this
architecture peers are not aware of mobile content that
is stored in other peers. Because of this design decision
the search process is bandwidth and time consuming.
On the other hand the network is resilient to node
failures however any policy implementation and
advanced charging is very difficult.
3. P2P Applications
There are many types of mobile peer-to-peer
applications starting with peer-to-peer online gaming,
Skype - voice over P2P, and ending on the most
common P2P application on the Internet such as P2P
content sharing.
3.1. Online mobile peer-to-peer gaming
2.1.2. Centralised architecture
The peer-to-peer concept can be utilized by mobile
game developers. The idea is quite fresh, mostly
promoted by researchers (McCaffery 2004) and mobile
equipment vendors such as Nokia (Nokia 2005).
However it is not sure if such games will ever be
successfully deployed in mobile networks.
A centralised architecture assumes the existence of a
central entity that could control the network. In this
architecture the central node have to keep all of the
information about all of the peers in the network
namely: they presence status, what sort of content they
are willing to share with others etc. This architecture is
in many cases more optimal in terms of resources usage
than the distributed one. However, in a situation when
P2P users are distributed among different operators,
even different countries, this solution faces a big
scalability problem. In some situations can be even less
optimal than the distributed architecture.
3.2. Skype – Voice over Peer-to-Peer
Skype provides internet telephony service that is based
on the P2P principles (Skype 2005). All of the Skype
users act as peers in a distributed P2P network. The
only centralized element of the entire system is a login
server. When Skype launched its service in 2003, the
internet telephony market was (and still is) very
fragmented. Since basic telephony service is a
commodity, therefore entering the highly fragmented
market Skype expected a price war. A strategy that
company could pursue in such a situation was to
differentiate the service, but how to do so if service is a
commodity? Skype decided to make money out of value
added services that were going to be provided as a
addition to a free basic telephony service. Since Skype’s
concept could be easily copied, in order to build
2.1.3. Semi-centralized architecture
A semi-centralized architecture represents the
compromise between the pure and the centralized
architecture. This architecture assumes the existence of
a pure P2P network of super-peers. The super-peers
reside in the fixed part of mobile networks and are
controlled and maintained by mobile service operators.
Mobile terminals are classifies as ordinary peers that
connect to the super-peers in the same way as in the
74
competitive advantage Skype decided to grow a
network very fast to increase a switching cost. Skype
inventors have chosen the P2P architecture because it
was the only solution providing good scalability and
guarantying low OPEX because the peer-to-peer
network could be managed by its users themselves.
Since August 2003 102 Million copies of Skype’s VoIP
software has been downloaded worldwide proving
effectiveness of P2P technology (Matuszewski 2004).
A diffusion rate of the Internet P2P content sharing
applications was much grater than diffusion rate of most
recent technologies (Ghosemajumder 2002). Many
researchers has studied this phenomena.
Matuszewski suggested positive impact of free content
sharing in the P2P networks on the music industry after
analyzing market research data and performing macroand micro-economic analysis of music industry product
sales (Matuszewski 2004). (Ghosemajumder 2002)
identified four possible future scenarios that music
industry may contend with namely: (1) online selling
will become a standard while the legal system and
social pressure will prevent existence of the P2P
systems, allowing big industry players to retain their
market power and even to increase sales, (2) P2P
systems will capture market power increasing
competition on the market and changing the business
model that would be based on revenue from life
performances, (3) future technologies can make
individual music purchases absolute introducing digital
radio that would become a primary source for the
insertion of music into networks of communal
ownership making P2P obsolete, (4) the internet will
redefine the nature of intellectual property since
policing content on the Internet seems to become less
possible rather than more possible.
Skype is trying to enter the mobile market. It has
already developed a client for PDA devices with
WLAN interface. Recently Skype and Motorola
announced a new partnership in a corporate market
(Kerner 2005). The new partnership is set to develop
connectivity options and access for Skype users on
Motorola devices. Products are expected to include a
variety of Bluetooth devices, as well as enable Skype
internet telephony of certain Motorola devices. The first
Skype-ready products are expected to be launched in the
first half of 2005.
3.3. P2P Content Distribution
Napster launched the peer-to-peer revolution in October
1999. In just three days, over 4000 people downloaded
the software and proved Napster’s potential industry
power. Its easy to use interface, that enabled access to
unbounded free music resources, induced its widespread
popularity and an extremely fast growth. The increasing
number of its users provoked concern about the future
of the music industry. It was a possible threat to labels
and the Recording Industry Association of America
(RIAA). A couple of months later RIAA sued Napster
for the copyright infringement. The industry argued that
this file-sharing service was contributing to massive
copyright violations, as Napster users trade tens of
thousands of songs every day. In February 2001 9th a
Circuit Court decided that Napster violates the
copyright law and ordered Napster to install filters and
blocks to prevent transfer of copyrighted material.
Wilde at al. criticized content owners’ legal actions that
prevent internet users to share content freely suggesting
that law combined with increasing technical control
shifts the balance between the interests of users and
copyright owners towards the latter (Wilde 2004). (Rao
1999) suggested that the music industry has been caught
unawares by the revolution in online distribution.
According to his research the development in
distribution of digital music threaten to change the
relationship between artists, labels, distributors, retailers
and consumers, shifting power from big labels to artists
and info-mediaries. The info-mediaries defined as a
music portals are those that will keep tabs on changing
consumer tastes and influence music selection and
consumption. They will evolve to play a combination of
roles from online retailing, through online labels to
informational and community resources. We have
considered his findings developing the possible mobile
P2P content sharing value network presented later in
this paper.
Napster trial has not finished music industry headache.
New services such as Gnutella and Freenet, whose
decentralized architecture makes more difficult to shut
them down, have been launched. Napster has not only
changed the conditions under which the copyright law
is applied, but what is more important, it has altered the
landscape of music retailing. New possible business
models that have emerged together with free filesharing services have caused big changes in the
economics of music distribution. It was only the
beginning of the internet revolution in content
distribution (Matuszewski 2004). The P2P content
sharing applications are still driving development of
internet technology. They are causing an enormous
increase of internet traffic. Currently P2P accounts for
the lion's share of rising bandwidth consumption. The
research on mobile P2P file sharing application is still
ongoing.
The rest of the paper concentrates only on mobile
content sharing applications, however many of the
discussed concepts and solutions can also be applied to
other P2P applications.
5. Competing architectures/solutions
The market for content sharing applications is
emerging. It is still in the early state of development.
There are only few companies offering those type of
applications. Operators are testing those new concepts
trying to assess their market acceptance and business
potential. Mobile application developers have presented
competing solutions to P2P technology that
4. P2P content distribution on the Internet Previous research
75
Table 1. Content distribution systems classification according to the modified Alter’s model.
Centralized
content servers
Blog-type of
systems
++
+
P2P with DRM
P2P without
DRM
Marketing
platform
Information Quality
Accuracy
+
Precision
Age
++
Completeness
Source
+
++
++
+
++
++
+
++
+
++
++
+
++
+
++
+
Timeliness
++
++
+
Information Availability
Availability
+
+
Admissibility
++
+
Information Expense
++
Information Security
++
+
+
+
++
Information Presentation
++
++
++
++
Information Standardization
Experimentation
allow for content sharing between mobile users. Some
of those are presented in this chapter.
browser. Blog-type of systems are mostly used for
sharing private content.
5.1. Server based content distribution platforms
Some of the examples of Blog-type of applications are
FoneBlog developed by NewBay and Futublog
developed by Futurice. FoneBlog has been deployed by
some of mobile operators including T-Mobile USA, O2
Ireland and SETAR NV. SETAR in Aruba launched
this service under a service name Waw!Blog
(Waw!Blog 2005). The average service subscriber
sends 4 MMSs per month. Service has generated 5
million MMS messages over 6 months and average
WAP traffic of 4.8 MB/active user/month (Nokia,
2004). Other Blog-type application has been created by
Finnish mobile application developer Futurice. The
purpose of Futublog is to enable mobile phone user to
share and store the photos they have taken with their
camera phones (Futurice 2005).
The most of the content distribution systems are based
on the concept of a centralized content server. Vodafone
Life!, or iMode services utilize this type of architecture.
The concept assumes that a user searches for content
navigating through WAP pages using a WAP/iMode
interface and when content is located the download
process utilizes a direct file transfer connection between
a server and a mobile or SMS, MMS messaging
services. The main drawback of this type of solution is
that it does not allow for experimentation, while there is
a high uncertainty on the marker (Gaynor 2003).
5.2 Content sharing solutions
Both Blog-type of applications assume that mobile
users want to upload their pictures to the server paying
for data transmission without knowing if anyone would
like to retrieve their content from the server. Besides the
assumption is that user trusts the service provider that
server is well protected from security attacks.
NewBay, an Irish company located in Dublin, has
created FoneShare, a mobile content sharing application
that enables users to find, buy, and recommend mobile
content to other mobile users. The concept is build
around communities utilizing marketing platform
approach. The system tracks what mobile content
consumers are purchasing and encourages them to
recommend the content to their group mates. Using this
solution mobile operator subscribers instantly become
powerful sales forces generating profit to all
participants of the mobile content value chain. This
system is limited only to professionally created content.
Both of the solutions share a common principle that is
taken directly from a real life. A content provider e.g. a
traditional paper-photos taker decides on behalf of other
party what pictures the other party wants to see. If
photos taker do not know what photos would be
interested to others he/she creates a portfolio of pictures
that are likely to be attractive to content consumers,
known as photo album, and makes it available to them.
The concept has also been utilized by commercial
content providers, however they use marketing
mechanisms in order to build a community around the
certain content and as a result create demand. In normal
life photo taker also tries to build interest among his/her
friends around the photos he/she has token. He does it
using traditional forms of communications like a direct
The other type of content sharing applications that is
gaining popularity is a Blog-type application. These
applications allow mobile phone users to post
photographs, audio, text and video using MMS
technology to their Blog or album that is stored in the
centralized server. The content stored in user’s Blog is
immediately viewable using WAP or a standard web
76
conversation, a phone conversation, and sending
messages.
provide cell phones with full motion video conferencing
and game capabilities.
Those mobile applications developers can see P2P
concept as a threat, rather than an opportunity.
6.3. Battery life
Even though battery life is growing, a battery is going
to be a technological bottleneck. Battery life is still
behind of expectations. When 3G handsets are concern
their battery life is much shorter than 2G handsets and
is below user’s expectation (Deloitte 2005).
5.3 Content distribution platforms comparison
In the previous chapters we have presented different
solutions that can be utilized for providing the content
distribution services. This chapter tries to compare those
solutions using a modified Alter’s model for evaluation
of e-commerce systems. Our evaluation assumes that a
user interface cannot be used as a differentiator between
the presented services since the same level of usability
can be achieved in all of the services. We have also
introduced one additional category that evaluates
possibility of experimentation. According to the results
of the comparison presented in Table 1 the centralized
content server approach is the most suitable when
professionally created content is driving the industry
and content providers are targeting only main stream
customers without addressing niche segments. However
seeing
high
importance
of
person-to-person
communication and a sociological aspect of human
existence such as sharing life with others we can expect
that private content will drive the content industry in the
future. Besides globalization that drives movement of
labour forces between culturally different regions
require wider scope of an offered content portfolio.
Assuming the dominance of private content in the future
and the need for experimentation in period of high
market uncertainty, the presented results clearly show
superiority of P2P systems for sharing both types of
content. The more detailed analysis can be found in
(Matuszewski 2005).
6.4. Mobile phone capabilities
In order to create and display digital content, mobile
phones have to support many software functionalities
like photo taking and displaying, video and sound
playing and recording as well as colour screens.
According to the market research companies the
number of shipped feature-reach phones is increasing
continuously. "Global camera phone sales grew by an
impressive 200 percent year-over-year in 2004" said
Neil Mawston, Associate Director of the Wireless
Device Strategies (WDS) service at Strategy Analytics
(Tekrati Camera Phones 2005). Overall global shipment
of mobile devices were up 51 percent year-on-year in
Q4 2004, according to Canalys. The increase of
shipment was driven by voice-centric devices such as
smart phones and feature phones (Tekrati Smart Phones
2005). According to the latest research from Strategy
Analytics, 257 million camera phones were shipped
worldwide, representing 38 percent of total handset
sales, in 2004. Camera phones outsold digital still
cameras by almost 4 to 1 (Tekrati Camera Phones
2005).
6.5. Data access technologies
6. Technology – Peer-to-Peer enablers
The recent development of mobile data access
technologies have increased data rates from 9.6 kbps up
to tens of Mbps. Typical data rates are presented in
Table 2.
The peer-to-peer architecture is the only one counterpart
of the overall system that enables to create the mobile
P2P content sharing applications. The other issues that
have to be considered and have a big impact on
technological feasibility are: a battery, a memory, data
access technologies, software functionalities and
supporting systems like Digital Rights Management.
Table 2. Access data rates
Access technology
HSCSD
GPRS
EDGE (4+2)
6.1. Memory
WCDMA
A memory size is continuously increasing. Large
capacity memory cards, up to 1GB of memory, have
already been introduced. It seams that the size of
memory is not an issue nowadays at least in relation to
battery limitations. However one has to remember that
most of the mobile phones have still only small memory
chips inbuilt.
HSDPA/HSUPA
WLAN
1
Bit rate
Up to 43.2 kbps
43.2
236 kbps DL1/ 118kbps UL2
Up to 384 kbps DL1/128kbps UL2
(384 kbps UL2 soon)
Max 13.3 Mbps, expected 3.36 Mbps /
expected
max
5.671
Mbps3,
1.46Mbps3
Max 112Mbps, typical 12 Mbps
DL – downlink, 2 UP – uplink, 3 on physical layer
Maximum data rates in peer-to-peer services have to be
calculated taking into consideration an uplink
connection of content producer (the one that is sharing
content) and a downlink connection of content
consumer (one that is downloading the content). The
lower from the available data rates form a bottleneck
e.g. if HSDPA and HSUPA are used by both peers than
the maximum data rate with which mobiles can
6.2. Processor power
Processors computation power is also increasing.
Processors can handle multiple forms of wireless
broadband access with enough computing power to
77
exchange content is the maximum of HSUPA data rate
that is going to be equal to 1.46 Mbps.
interoperable, platform- and business modelindependent digital content distribution. The key
members of this forum are companies like Microsoft
Corporation, Universal Music Group and VeriSign, Inc.
Analyzing the data presented in Table 2, we can notice
that real-time downloading can be facilitated only in
WCDMA and WLAN networks. The work on 3.9G
UTRAN data access technologies is ongoing in 3GPP.
We can expect higher capacity technologies to be
deployed in the near future. The feasibility study of fast
data access technologies with assumptions about peak
rates in order of 50/100Mbps has already started in
3GPP. However, the lack of real-time downloading may
not cause a negative attitude towards the service among
service users. The users of the internet P2P file sharing
services accustomed to wait for content to be
downloaded hours and even days.
Content
consumer
(Peer)
Mobile
Service
Operator
Application
provider
We have to also remember that higher bandwidth will
lower the per-byte network operator cost of transferred
data which in a competitive environment leads to lower
usage charges and consequently more usage.
Content
provider
(Peer)
End-ser
equipment
vendor
Mobile
Network
Operator
Mobile
equipment
vendor
Content
aggregator
Content
provider
6.6. DRM
Figure 2. Mobile P2P value network
Digital Rights Management (DRM) is one of the most
advanced concepts of intellectual property rights
protection. DRM allows content owners to securely
attach the right management information to each piece
of distributed content. Retailers can easily determine the
conditions of a transaction, like price, a subscription
package or just a pay-per-run option. DRM benefits also
a customer who can pay based on his or her own
preferences. Let us take, as an example: file sharing
among a group of friends. One group member buys a
song of a recently discovered group. He likes the song
and decides to share it with friends. Based on DRM
information attached to the file or downloaded
automatically from the Internet, his friends are allowed
to play this song n-times for free and finally decide that
this song or even album is worth of purchasing.
7. Value network
Figure 2 presents a possible value network of the
mobile P2P file sharing services. The value network has
been created with an assumption about a dominant
position of a mobile operator in the mobile content
value network according to Rao’s research results
presented in the fourth chapter. One could suggest a
dominant role of content provider reducing the role of
mobile operators to bit pipe providers. This is a good
suggestion especially in times of a high market
uncertainty when operators and content providers are
moving towards each other in the mobile content value
chain (Juosila 2004). However this outlook
marginalizes, in author’s opinion, a role of
authentication and billing provided by mobile operators
that play a crucial role in any feasible mobile content
business model (JETRO 2004).
The development of DRM systems is, however, still ongoing. There are many attempts around the world to
make this system working. Open Mobile Alliance
(OMA) standardization body published the first version
of DRM specification, however problems with security
and robustness caused a need to continue the work on
the second version of the specification. The second
version has solved many of the design flaws of the first
version however there are still some issues relate to
licensing of this technology (The Register 2005). A
Norwegian company BeepScience and Sony Network
Services Europe developed StreamMan, a mobile
streaming music service that features on-demand
streaming as well as downloads and radio-style music
channels. Their solution is based on OMA DRM 2.0
specification (DRM Watch 2004).
The particular roles of actors in the value network are as
follows:
Another initiative to facilitate the distribution of
legitimate content is The Content Reference Forum
(CRF). The CRF promotes the adoption of
specifications and design guidelines, leveraging existing
standards to create an open framework for
78
•
A content consumer is a participant of the peer-topeer network. He/She consumes content provided
by professional content providers as well as by
other peers (professional and private content).
He/She can be a corporate customer purchasing
P2P service for an effective content distribution
between company employees utilising a virtual P2P
corporate content network, or a private customer
aiming at acquiring private content as well as
professionally produced content.
•
A content provider is a participant of the peer-topeer network that shares content with other service
subscribers. He/She can share content he/she
downloaded from other peers, other networks
said: “Warner Music would like to explore the business
opportunities connected to secure peer-to-peer
superdistribution of music over wireless networks”
(BeepScience 2003).
(including ad-hoc, or local connection to a PC),
content portals or content created by him/herself.
•
A P2P service operator provides the service. It can
work in tandem with a network operator to provide
the service. It has a direct relationship with enduser. It plays a key role in the value network.
•
A content aggregator is a part of peer-to-peer
system. It runs a portal that is visible as another
peer that shares professionally produced content
from content providers.
•
A content provider provides professional mobile
content.
•
A mobile network operator provides basic transport
network services to the P2P service operator.
•
An application provider develops a P2P mobile
content sharing application that is likely to be
partly implemented as a network node (super-peer)
operated by the service operator and partly
preinstalled in the end user terminals enhancing
their value or downloadable from a service
operator’s webpage.
•
An end-user equipment vendor provides end-user
equipment possibly with the P2P functionality
inbuilt. He can act as a mobile equipment vendor.
•
A mobile equipment vendor provides mobile
infrastructure.
The value proposition directed to professional content
providers is a reduction of marketing expenses and a
possibility to increase sales by leveraging the new
mobile distribution channel. Letting people to share
content in a controlled way has a strong marketing
power. Customers, who share content with friends,
become marketers encouraging their colleagues to
purchase certain piece of content. On the other hand
private content can form a competition for
professionally created one (JETRO 2004).
8.2 Mobile application/equipment providers
The peer-to-peer concept has created a technological
discontinuity that leads to a substitution and design
competition, as new entrants compete through
innovations. This new technology is an architectural
level, competence enhancing innovation. Therefore, we
can expect new entrants coming, the competition
becomes fiercer. The incumbent mobile application/
equipment vendors like Nokia, Siemens, Ericsson are
developing new systems utilizing this new technology.
Since Peer-to-Peer represents a threat to the matured
centralized technology they are not willing to
cannibalize their own revenue until it is really needed.
However since there is no so fierce competition on the
market and there are only few serious entrants that can
be easily controlled and acquired if needed, probably
we will not see any spectacular breakthrough in the near
future. Incumbent’s position is additionally secured by
the lack of investment in the telecom industry having a
reason in huge industry losses after the Internet bubble
burst in the late 90s.
The roles of the value chain participants can change
depending on an assumed business model.
8. Value proposition
However seeing higher revenue of mobile network
operators, that can be partly invested in new data
services that are expected to reverse the trend of falling
ARPU, we can expect fiercer competition in the future
leading to a dominant design (Abernathy & Utterback
1978). Companies that will adopt the dominant design
will grow more rapidly than others (Tushman &
Anderson 1986). From incumbent perspective P2P is
not as interesting as for new entrants. However faster
adoption of 3G services can lead to higher investments
in better service coverage and as a result higher revenue
for mobile equipment vendors.
In order to provide successful P2P content sharing
services many different players have to work together to
create a value. This chapter presents value propositions
for main players in the value network.
8.1 Content providers/media houses
The mobile content market is emerging however its
future looks rather bright according to market research
reports. According to the report released by Jupiter
Research, European consumers will spend 3,3bn Euro
for mobile content by 2006 compared to 1.7bn on their
PCs (Telecommagazine 2005). A successful
commercial launch of mobile content sharing services
cannot take place without support from the content
industry. The content industry giants are observing the
mobile content market. Before the decision about their
commitment, they want first to make sure that their
content, and the income generated by it, can be secured.
The most of the industry players opt for DRM based
solutions such as one developed by Norwegian
company Beep Science. Warner Music Finland’s Mr.
Tuomo Korpinen, New Media Manager Scandinavia
8.3 Mobile operators
Mobile operators invested heavily in 3G technology.
Slower than expected users’ adoption of this technology
was mainly caused by lack of attractive services. The
main advantages of 3G networks that were promoted by
operators like video calling, video streaming, are not
compelling to customers (Deloitte 2005). In order to
recover they investments and make profit out of this
new technology they have to start providing new
interesting to users data services. Besides, ARPU in
79
The published market research studies are related to the
internet P2P content sharing applications. The IDC
survey which results are presented in Figure 3, presents
respondents’ opinion concerning sharing professionally
created content like music tracks of famous musicians
using Napster, peer-to-peer internet content sharing
software. According to this survey, Napster users
indicated that choice and convenience, rather than price,
are the key drivers of peer-to-peer systems. The result
of this research shows that twenty four percent of
respondents believe that P2P systems are the only
market places where they can acquire hard-to-find
content. This result shows one of the main advantages
of the P2P systems. There is no other such type of a
system that could store so much information and make
it available to a large group of users. Convenience is
another advantage of the P2P systems, the private
content providers do not need to send their content
directly to other people using e.g. MMS service and
decide on their behalf what to share.
second generation mobile networks is falling in many
markets mainly because voice service saturation. 2G
operators foresee possibility to hold this process back or
even reverse this trend by promoting data services. The
peer-to-peer services if proved to be compelling and
viable from a business and a technical perspective can
drastically increase data traffic in mobile networks.
Besides their distributed architecture allows for
experimentation, that is crucial in case of high market
uncertainty (Gaynor 2003).
Replaces buying music: it's
cheaper
10%
11%
35%
20%
24%
More convenient
Can acquire specific songs I
otherwise wouldn't buy
Can get hard-to-find music
Besides according to (P2P 2003) the peer-to-peer files
sharing system users see P2P applications as a platform
enabling them to meet new friends, so the file sharing
activity can have also sociological backgrounds in itself.
It's like a public library
Figure 3. Reasons for using P2P professional content
sharing services
Table 3. Estimated cost of content download
A Korean operator SK Telecom has decided to offer
peer-to-peer based content sharing application that
would allow users to swap pictures, music (including
ringtones) and video, regardless of whether the content
is copyrighted or not (Computerworld 2004). However
this is only one case of the operator that tries to launch
service even though content owners do not support his
business logic. Mobile operators have to partner with
content providers in order to be able to differentiate
they content services.
Service/dow
nload cost
(in Euro
excl. tax)
PTC Poland:
Blue connect
GPRS/EDGE
3G/WLAN
Three
Sweden:
NetConnect
Free
GPRS/3G
8.4 Service Users
Three
Sweden:
NetConnect
Flex
GPRS/3G
Humans spend most of their lives interacting with other
people. People act in communities. They share they
lives with other. From this perspective the interaction
between humans has a high value. This notice is in
accordance with popularity of person-to-person, personto-group, group-to-person, and groups-to-groups
communication services like voice conversation, SMS,
email. Actually only those applications are driving the
mobile industry and will probably continue shaping it in
the future. According to the author’s opinion the main
advantage of the mobile P2P content sharing
applications is that they enable people share their lives
with others in terms of photos, videos, and sound
records taken and recorded with use of mobile phones.
Cost
per
month
Cost per
MB over
the limit
Cost of
MP3 file
download
(3MB)*
Cost of
Photo
download
(60kB)*
Flat
rate:
23.6e
(2GB
guaranteed)
0.472e
0.0009e
87,1e/
GB
0.4e
1.742e
0.0033e
2.506e
0.0048e
5.3e
0-25MB
0.9e
26-100MB
0.7e
100MB <
0.4e
Vodafone
0.7e
Sweden:
61e/
(charged
3.32e
0.0064e
150MB
Data
per 1kB)
GPRS/3G
Orange UK:
400M/
World
0.73e
1.314e
0.0025e
Access 400
77.3e
GPRS/3G
Orange UK:
1000M
World
B/
(fair usage
2.19e
0.0042e
Access Max
128.9e
policy)
GPRS/3G
*Assumptions: user downloads 300MB of data per month (100MB
data over P2P, 50MB WEB surfing, 50MB Email). P2P data charges
are calculated taking into consideration outgoing (content producer)
and incoming (content consumer) traffic. P2P signalling and protocol
overhead is not included.
There is lack of market studies related to the peer-topeer mobile content sharing applications or they are not
publicly available. A market research study is currently
ongoing in the Networking Laboratory of Helsinki
University of Technology and its results will be
available shortly.
9. Pricing
We have to remember that at early stages of technology
development better performance is sufficient to satisfy
consumer requirements and price is less relevant. Even
80
battery life and the nature of this architectural
innovation.
though, pricing of data services have to be rationalized
in order to make the mobile P2P services viable.
According to the simple calculation presented in
Table 3, the pricing schemes of the data access services
offered by European 2G/3G operators does not allow
for wide adaptation of P2P file sharing services. In most
of the cases the cost of data transmission of one music
file between mobiles would account for more than the
price of content purchased in the internet content
services that offer one music file for around $1. The
lowest rate provided by Polish 2G/3G operator PTC
accounts for 50% of the content price with assumption
of a very optimistic usage model that would fit probably
only high-end customers.
The proposed mobile P2P architecture that seems to be
the most feasible from a business and a technical
perspective gives a service operator control over a
distributed network but at the same time allows all of
the mobile P2P users easy access to wide content
resources both private and professionally created ones.
The paper presents a possible mobile P2P content
sharing value network and describes a value proposition
to all main business actors. It also applies an experience
taken from fixed Internet file sharing services to the
P2P content sharing services in the mobile environment
suggesting that with technology development, more
rational data pricing models and increasing revenues in
the mobile industry we could expect the P2P services to
be offered by mobile operators in the next couple of
years.
9.1. Bundling
We have to point out that mobile operators would
bundle P2P services with data access services charging
lower prices in order to stimulate service adoption.
Actually according to our analysis most of the
considered operators allowed free access to their
content services through WAP. The operators could also
cross-subsidize peer-to-peer services bundling them
with voice service in order to differentiate they offer
and encourage more 2G users to switch to 3G services.
References
Alter S. 2002. Information Systems: The Foundation of
E-Business. Prentice Hall.
Anttila A. 2003. Peer to Peer and ISPs´ Survival
strategies. Helsinki University of Technology.
9.2. Lesson learned from ISPs
BeepScience 2003. Online:
http://www.beepscience.com/news/2003/Beep%20Scie
nce%20Press%20Release%2010Oct2003.pdf
Flat rate is a widely adopted pricing model for the
residential internet access services. Internet Service
Providers (ISPs) generate revenues by connecting
residential/business customers to Internet backbone
operators. A large part of they OPEX is coming from a
cost of international transit connections. ISPs priced
their internet access services with assumption of normal
Web usage profile, where WEB browsing is a dominant
application. When the P2P content sharing applications
emerged, it turned out that a small percentage of users
generate most of the traffic decreasing quality of service
to other users. An international transit connection has
became a bottleneck eating ISPs revenues (Anttila
2003). If we assume the dominance of architecture
presented in Figure 1, the same problem can be faced by
mobile service operators that will decide to charge flat
rate for mobile P2P services. Of course it is possible to
charge flat rate assuming heavy usage profile but too
high price can form a barrier to service adoption but on
the other hand if done right could form a positive loop.
Computerworld. 2004. SK Telecom previews file
sharing for 3G phones, computer world
http://www.computerworld.com.au/index.php/id;25692
4457;relcomp;1
Deloitte 2005, TMT trends
DRM Watch 2004. Online:
http://www.drmwatch.com/ocr/article.php/3412081
Futurice 2005. Online: http://www.futurice.com
Gaynor M. 2003. Network Services Investment Guide:
Maximizing ROI in Uncertain Times, Wiley Publishing
Inc.
Ghosemajumder, S., P. Bangayan, G. Bonet 2002.
Digital Music Distribution. MIT Sloan School of
Management, Digital Business Strategy Track. Online:
http://shumans.com/digital-music.pdf
10. Conclusion
Introduction of 3G and WLAN high capacity networks,
more powerful handsets with larger capacity memory
chips and multimedia extensions provide good basis for
the development of peer-to-peer applications in the
mobile environment. The paper studies possible drivers
that could positively affect the Mobile P2P service
adoption. According to the presented analysis the main
barriers that are stopping wide P2P deployment are too
high mobile data access tariffs, lack of fully
standardized and functional DRM solutions, shortage of
Juosila J. 2004. Network as a Content Channel. Online:
http://www.netlab.hut.fi/opetus/s38001/s04/pres/7.shtml
Kerner S. M. 2005. Skype, Motorola Push. Online:
http://www.wi-fiplanet.com/news/article.php/3483021
McCaffery D. J., Finney J. 2004. The Need for Real
Time Consistency Management in P2P Mobile Gaming
Environments. ACM SIGCHI ACE 2004
81
Tekrati Camera Phones 2005. Camera phones outsold
digital still cameras by almost 4 to 1in 2004, Says
Strategy Analytics. Online:
http://www.tekrati.com/T2/Analyst_Research/Research
AnnouncementsDetails.asp?Newsid=4852
Matuszewski M. 2004 Peer-to-Peer content distribution.
ICTSM12
Matuszewski M. 2005. Aligning Mobile P2P content
sharing services with a customer process. Unpublished
Tekrati Smart Phones 2005. Global Mobile Device
Shipments Hit New Peak in Q4 2004, Says Canalys.
Online:
http://www.industryanalystreporter.com/T2/Analyst_Re
search/ResearchAnnouncementsDetails.asp?Newsid=44
09
Matuszewski M., Yanagida H. 2004. Skype – Business
model analysis. Helsinki University of Technology.
Nokia 2005. Rapid Java peer-to-peer application
development. Online:
The Register 2005. Mobile DRM levy hits operators
where it hurts. Online:
http://www.theregister.co.uk/2005/01/19/mobile_drm_l
evy/
Nokia 2004. Online:
http://www.nokia.com/BaseProject/Sites/NOKIA_MAI
N_18022/CDA/Categories/Developers/PDF/_Content/_
Static_Files/dev_succ_newbay.pdf
Waw!Blog 2005. Online: http://www.wawblog.aw/
Rao B. 1999. The Internet and the revolution in
distribution: a cross-industry examination. Technology
in Society 21 (1999) 287–306.
Wilde E., Schwerzmann J. 2004. When Business
Models Go Bad: The Music Industry’s Future. ICETE
2004
Skype 2005. Online: http://www.skype.com
JETRO 2004, Japan’s Mobile Content Industry
82
MOBILE BROADCAST BUSINESS IN FINLAND
Eino Kivisaari
P. O. Box 5400, FIN-02015 HUT
Tel. +358503363603, Fax +35894515014
[email protected]
Abstract
2
Recent developments in digital broadcasting technology
and infrastructure, the emergence of DVB-H standard
for mobile broadcasting, and the ongoing evolution of
advanced mobile handsets have opened the way for
digital broadcast services for mobile users. Mobile
television and digital radio are the most promising
applications but many other services can make use of
digital mobile broadcasting as well.
The results and findings of this paper have risen from a
round of research interviews made in January 2005 in
Finland. Six Finnish companies (YLE, Nokia, Elisa,
MTV3, Digital Media Finland, Ministry of Transport
and Communications) were interviewed about their
plans and current activities related to DVB-H and
mobile broadcasting. The interviewees, one from each
company, represented several viewpoints ranging from
R&D to general management. Thus, in order to obtain
more solid data on the market development, additional
interviews are needed. In addition to the before
mentioned interviews, this study is based on a literature
study and continuous monitoring of both Finnish digital
broadcasting field and international developments.
This paper discusses the market situation in Finland in
spring 2005 concentrating on the roles, plans, and
possibilities of the key players. Based on research
interviews, a literature study and continuous monitoring
of the field, this paper depicts the current situation and
suggests a scenario for successful roll-out of mobile
television services in Finland.
3
Key Words
Mobile TV Market Situation in Finland
This paper focuses on the potential Finnish mobile
broadcasting market, and therefore Finland’s special
characteristics are taken into account all the way.
However, the majority of results are applicable in other
countries as well.
DVB-H, Finland, Mobile television, Mobile broadcast,
Business strategy
1
Background and Methodology
Introduction
3.1
Finland has a special role in the introduction of mobile
broadcasting services and mobile television for two
reasons. Firstly, Finland is one of the pioneering
countries in the making use of the DVB technology: we
have established a nationwide DVB-T network, and
Finland is going to shut down the analog TV
transmissions during 2007, among the first countries to
do so. Secondly, as a Finnish company, Nokia has taken
DVB-H (Digital Video Broadcasting – Handheld) and
mobile television to the core of their product strategy.
Being the largest cellular phone manufacturer in the
world, Nokia’s influence on technology selections,
standardizing processes and the diffusion of new
technologies to end-users is significant.
Special Characteristics of the Finnish
Mobile TV Market
Finland is at the same time an appealing and
challenging market with regard to mobile broadcast
business. With a good DVB-T coverage, the existence
of Nokia, and the techno-positive attitude of the public,
Finland seems a good test field for mobile TV.
Furthermore, the Finnish television viewing habits are
rather homogeneous in comparison to many other
European countries: the five biggest national TV
channels get more than 95% of all audience attention.
At the same time, Finland’s large geographical area and
a relatively small population together decrease the
probability of an easy success in launching mobile TV
services. Mobile reception of DVB-H signals requires a
significant number of gap-fillers, and indoor coverage
can in some cases require in-building repeaters. With a
more dense population the demand-side economies of
scale would add momentum to the slowly but steadily
proceeding mobile TV projects in the Finnish
companies.
On the other hand, Finland received a lot of positive
publicity during the 1990’s as the country of
exceptionally high mobile phone penetration and
modern services and advanced users. Perhaps Finland
could once more become the country where new mobile
services are for the first time transfigured into
successful business?
83
3.2
entirely new business opportunities. Television in a
mobile phone brings up a new audience with a special
characteristic (on the move) and new potential peak
hours, as people do not have to wait until they come
home to start watching TV. These opportunities can be
divided as follows, not forgetting that for example
current mobile operators can in the future take the role
of a broadcaster and vice versa.
Current Plans of Domestic Key Players
Along the interview round, there was almost a
unanimous acceptance of mobile television as a feasible
service with good probability of success. The usage
scenarios were said to make very much sense, and the
public interest towards mobile television was estimated
to be high or very high. These findings are well in
accordance with the results from other recent studies,
such as the BMCO user survey (BCMO Project 2004).
5.1
However, mobile television was quite interestingly seen
as a good thing in general but not as such a brilliant
opportunity for any of the individual companies.
Despite the very positive basic attitude, most of the
companies were only secondarily interested in starting a
mobile broadcasting business: everybody wanted to
make use of a DVB-H network, but only after the
network investments had been paid by someone else.
For broadcasters mobile TV offers an enlarged
audience, new peak hours, and possibilities to reuse
existing contents. Commercial TV channels can start
selling airtime campaigns targeted at mobile audiences,
and create new mobile-specific service offerings.
5.2
All in all, the industry is now taking part in field tests,
focusing both on technical and business model related
issues, and right now there are no quick moves
anticipated.
4
New Business for Mobile Operators
Mobile operators can make use of their ownership of
the mobile phone users: operators have a fully enabled
toolset for mobile TV charging solutions. Another
suggested benefit for mobile operators was the
possibility of increasing cellular data traffic: as mobile
phones become more and more “visual” devices by the
introduction of mobile TV, users could take
photographs and videos using their handsets and eg.
send them to a mobile TV chat channel. In addition,
users could take TV screenshots or record short
program clips using their phone, and share these files
with their friends.
DVB-H Services
According to the majority of interviewees, there are two
main types of content which will be most successful in
mobile TV networks. The first type is a selection of
traditional TV programs: the ones that are best suited
into the mobile context but can be reused in their
existing format. Examples include news, drama series,
music videos and so forth. During the FinnPilot field
test (Nokia 2003), a joint project of Finnish
communications and broadcasting companies, a number
of traditional TV channels were broadcasted and
received by mobile handsets. In this test setting, the
traditional TV content, especially the drama series, were
experienced to fit the mobile usage scenario
surprisingly well.
Another more sizeable opportunity for mobile operators
is the option to start operating an entire mobile TV
channel. With customer base and charging mechanisms
in place, mobile operators could make a jump start to
the field, however not avoiding the cost and trouble of
setting up a daily stream of TV programs.
5.3
New Business for Handset Vendors
For mobile handset manufacturers mobile TV is a core
strategic issue. It seems that the evolution that started
with FM radio, color screens and multimedia messages
continues via embedded (still and video) cameras
towards mobile TV reception in mobile handsets.
The second type of content, essential for mobile TV, is
tailor-made, fast-paced content aimed at mobile
reception. Examples include different kinds of
entertainment clips, news channels, video-enhanced
chat channels and so forth. These contents have to be
specifically produced for mobile TV, a feature which
will probably reduce their applicability during the initial
stages of the mobile TV market. For content integrators,
or TV channels, the production of mobile-specific
content requires extra resources—the allocation of
which may be difficult to justify as long as a subscriber
base big enough has not formed.
5
New Business for Broadcasters
DMB (Digital Multimedia Broadcasting), a rival to
DVB-H, has been rather successful in Korea and being
based on DAB (Digital Audio Broadcasting) networks,
it has similar advantages as DVB-H in many countries:
it can reuse existing network infrastructure. However, in
the long run DMB is likely to have problems competing
with DVB-H due to the much lower bandwidth, which
practically means lower quality and fewer channels. LG
Electronics has already launched a DMB-enabled
mobile phone, and Nokia has its DVB-H terminals in
test use. Anyhow, for countries that have already
invested in DVB-T infrastructure, DVB-H seems to be a
very strong candidate.
New Business Opportunities
Mobile broadcasting builds partly on existing
technologies and existing contents but it also offers
84
combined with a push-type news message service)
opens up new possibilities for commercial TV channels
and especially for public broadcasting companies that
may have certain duties for example in delivering
emergency information to the public.
For handset vendors the significance of mobile TV is
highly dependent on the actions of TV channels, mobile
operators, and broadcast network operators. If these
parties will push the services forward and hence create
demand for mobile TV handsets, mobile television can
become a must feature for advanced phones. If realized,
this phenomenon could further increase the strength of
the few biggest handset vendors because of the sizeable
R&D effort required to implement smoothly
functioning mobile TV handsets—with good usability
and low power consumption. Already the current level
of expertise required in the technical know-how and
manufacturing efficiency seems to be so high that many
of the smaller handset manufacturers have struggled to
keep up with the competition (Cellular News 2005).
7
Pricing is the biggest question mark and the most
critical success factor—also for mobile handsets but
especially for TV channel subscriptions. People are
accustomed to getting all free-to-air channels to their
living rooms just for the TV license fee (194 € / year in
Finland in 2005), so why should they pay more for
getting the same content into their mobile phones?
Furthermore, the introduction of TV functionality into
the mobile handset makes the phone even more
attractive a point of convergence from the operator
point of view. With speech, data, messaging, Internet
browsing and TV channels integrated into the same
handset and the same mobile subscription, the operators
could create an innumerable selection of new fullservice subscription packages. And as the trend shows,
mobile operators have an ever increasing influence on
which handsets are sold together with their
subscriptions. For this reason mobile TV can become a
very strategic feature for handset vendors—to stay in
the competition, and to prevent handset prices to drop.
6
Service Pricing
Another issue is related with the mobile-specific
channels: even though they require significant effort
and resources in their production, they are likely to be
only a nice-to-have-service for the end-users. That is,
end-users will use mobile TV to fill in gaps in their
daily schedules: waiting for the bus, sitting in the train
et cetera. In these situations mobile TV competes with
other possibilities such as reading a book, listening to
radio, playing a mobile game or just watching out the
window. In these scenarios mobile TV might be an
appealing choice, but only if it does not inflict
significant costs. On the other hand, if the pricing is low
enough, there might be quite large audiences awaiting
the launch of mobile TV services. A logical choice
might be to keep subscription prices as low as possible,
thus maximize the popularity of mobile TV, and
subsidize the lower subscription income with higher
advertising revenue.
Success Factors of Mobile TV
The interview results related to what are the overall
success factors of mobile television were somewhat
divided. Some interviewees stressed the importance of
free-to-air channels: that they must be similarly
available as they are in the living room televisions. That
is, for the case of Finland, for the price of annual TV
license, already paid by most of Finnish households.
These well-known and popular TV channels would
create the “critical mass of customer demand” for
mobile television as well, and with only limited costs.
When asked, the interviewees gave estimates ranging
from 5 € per month to 12 € per month for a reasonable
mobile TV subscription which would include the basic
free-to-air channels and maybe some extra content,
tailored to mobile phone usage. Outside the official
interviews, also higher prices were suggested (10-20 €
per month), but these views were not sustained by
results obtained from interviewed companies.
Others claimed that the success of mobile TV cannot lie
solely on existing TV channel offerings because of their
unsuitability to the mobile context. Instead, providing
new high-quality services that would be exclusively
available in mobile TV would give the whole concept
the initial demand boost in needs.
8
Terminals
Terminal pricing was not seen to be quite as sensitive as
mobile TV channel subscription pricing because there is
now straightforward comparison to freely available
alternatives (as with free-to-air channels) and because
terminal prices can be dissipated into the mobile
subscription price, at least in many countries. In Finland
this linking between the terminal price and a longlasting mobile subscription is currently illegal but under
dispute.
Some argued that mobile TV itself is not as much a
means to increase the price of mobile handsets, but
instead a key technology that provides a long-lasting
upgrade path to high-end terminal manufacturers.
Mobile TV functionality is at first a differentiator that
Another factor that works in favor of mobile TV is the
value increase that mobile TV offers to all kinds of
direct telecast programs. A big part of the perceived
end-user value of direct telecasts comes from the very
fact that they are direct, or live: the events take place as
they are being watched, and all the information is real
time. Today direct telecasts can reach only limited
audiences during working hours, and hence many live
broadcasts are repeated during the prime time in the
evening when people are at their homes, ready to tune
in. Mobile television brings direct telecasts wherever
the users are, 24 hours a day, and this (perhaps
85
attracts some users, and as TV phones become more and
more popular, they can be gradually improved along a
product evolution path. Different generations of TVenabled phones will be equipped with higher and higher
quality screens (brightness, resolution, contrast and
power consumption), better user interfaces and
improved responsiveness, better battery life, and so
forth. This may become a big advantage for terminal
manufacturers, who now are struggling to find ways to
make significant enough improvements to mobile
phones which are already rather mature and well-shaped
for what they are currently used for: speaking and
messaging. When basic functionality, design, and
production efficiency (price) seem almost drained as
drivers for differentiation in the fierce terminal
competition, mobile TV looks as if it could provide a
sustained differentiation path for those companies that
master the required technologies.
9
Company, MTV3, Digital Media Finland and the
Ministry of Transport and Telecommunications of
Finland.
BMCO Project (Broadcast Mobile Convergence), 2004.
Press Release on October 13th 2004, http://www.bmcoberlin.com/docs/bmco_Pressrelease_english_041013.pd
f (Referenced April 25, 2005)
Cellular News, 2005. Mitsubishi To Discontinue Europe
Mobile Phone Sales. http://www.cellularnews.com/story/12562.shtml (Referenced April 25,
2005)
Nokia Corporation, 2003. Suomalaisyhtiöt tuovat
mobiililaitteilla vastaanotettavat televisiopalvelut
kaupalliseen testikäyttöön.
http://press.nokia.fi/PR/200312/928230_4.html
(Referenced April 25, 2005)
Conclusion
Looking at the entire industry, DVB-H and the concept
of mobile television seem to provide a promising new
platform for both content service business and terminal
manufacturers. The problem is that to build customer
demand for mobile TV handsets, the content services
should already be in place, and vice versa—the typical
chicken and egg situation. According to the interview
results, a common initiative is needed in order to build
sufficient DVB-H network coverage, and to start mobile
TV broadcasting services. In the current situation no
service provider is interested in paying the first-mover
costs, educating the users and building networks.
For the abovementioned reasons the service provision
should be started with as small an investment as
possible, but also as soon as possible. Acting fast on the
service provision side can speed up the terminal
manufacturers’ and users’ adoption cycle which in turn
works in favor of the service providers by increasing
potential audiences.
To achieve the requirement of smaller initial
investments on the service provision side, this paper
(based on interview findings) suggests a service launch
by simulcasting the existing national free-to-air
channels using the DVB-H test network that is already
in place in the Helsinki metropolitan area. That test
network could be transformed into a production-level
network with moderate adjustments, and by gradually
expanding the network to other large cities a reasonable
mobile coverage could be achieved. By transmitting the
existing channels in DVB-H mode from all currently
operational DVB-T masts, a very large additional
coverage could be obtained, however without indoor
coverage.
References
A round of research interviews carried out in January
2005. Participating companies were Nokia
Corporation, Elisa Communications, YLE Broadcasting
86
Internet Telephony Going Mobile
Anders Rotkirch, 50348V
Research Seminar on Telecommunications Business II
T-109.551, Spring 2005
[email protected]
interesting ways of how VoIP can be used in the short
term from a mobile terminal, but not necessarily a
mobile VoIP terminal.
Abstract
As Internet telephony is becoming more and more
popular in fixed networks, the interest of Internet
telephony in mobile networks arises.
Depending on the wireless access technology, whether
it is a TCP/IP connection or not and depending on the
connection speed, there are different ways or scenarios
of using VoIP.
There are many ways how we can use Internet
telephony or VoIP (Voice over IP). This essay will
begin with some concepts associated with information
technology goods. Then a short overlook at the
protocols associated with VoIP and with wireless
communication is presented. By looking at how mobile
VoIP can be used, three use case scenarios are
introduced. At the end of this paper the advantages and
disadvantages of each scenario will be presented.
This paper studies how VoIP can be used in mobile
networks, both existing and new. Some networks
provide greater mobility and some greater speed. Some
offer direct TCP/IP access, some do not. Making the
integration seamless is therefore an important point.
2. Success Factors in the New Economy
This paper emphasizes on how we use mobile Internet
telephony today and how we will use it in the future,
not on the in-depth technology or on specific business
cases.
In the book Information Rules, Carl Shapiro and Hal R.
Varian write about durable economic principles that
hold in the New Economy. As always there is a market
uncertainty involved when new services become
available. Even though new technologies constantly
arrive the principles remain the same.
Key Words
Mobile VoIP, VoWLAN, VoWiMAX
Creating a solution that binds the customer to that
solution is called lock-in effect. The lock-in effect is the
result of the costs that a user has to pay for switching to
a competitor. Knowing how to take advantage of this
effect is a huge competitive advantage. The lock-in
effect is usually easier for the first movers since they
enter the market first. (Shapiro and Varian 1999, p.11)
1. Introduction
Although VoIP is a relatively old technology it has
become somewhat of a hype today. Already in 1995
there was a free VoIP software client called PGPfone.
(Internet Calls (VoIP) 2005)
The positive feedback that arises from a service is when
the addition to the network benefits the whole network.
The classical example is the fax machine. If no one has
a fax machine, having one is pointless. On the other
hand as more fax machines there are the more useful
they become. Compatibility issues are important here. It
is of course harder to start a new market than to evolve
from a previous one. The dominant model is the set of
product and or service that has become the market
leader. Being compatible with the current dominant
model is always an advantage. (Shapiro and Varian
1999, p.13)
Flat-rate broadband Internet access and solving some
technical problems with firewalls are the two most
important factors for the VoIP gaining in popularity.
(Rudberg 2005)
The thought of free calls is an excellent selling
argument which also explains the current hype. The best
known VoIP client today is probably Skype. Skype has
today over 35 million active users and is gaining
150,000 new users each day. (Skype 2005)
Of course the calls are not totally free, but in the best
case the end user only has to pay for the Internet access
to cover the network costs. The convergence of
different types of media towards an all IP future has
clearly begun.
The basic pricing strategy is usually either
differentiation or cost leadership. Differentiation means
adding value to the product or service to be
distinguished from the competition. Cost leadership is
making the product or service cheaper than the
competitors by the means of economies of scale and
scope. (Shapiro and Varian 1999, p.25)
In mobile networks this convergence is taking a longer
time. Even though in the end all voice communication
might be VoIP, mobile or not, there are many
87
3. What is Mobile Internet Telephony?
company that has successfully integrated Mobile IP and
IPSec. (Secgo 2005)
3.1 What is VoIP?
Motorola, Avays and Proxim's solution for WLAN and
cellular convergence is called Seamless Convergence.
BridgePort Networks, IBM, Verisign and Cisco
announced their solution MobileIGNITE in January
2005. (Finneran 2005)
Wikipedia, the online dictionary defines Internet
telephony as the "technology that enables routing of
voice conversations over the Internet". Voice over IP or
VoIP, is the name of the technologies and protocols that
are used for Internet telephony. The most common
VoIP protocols are RTP, SIP, H.323, H.248, MGCP,
IAX, G.711, G.729 and iLBC. (Wikipedia 2005)
4. Different Ways of Using Mobile VoIP
The telecoms consultancy firm Analysys proposes five
different types of VoIP in a report for the European
Commission (Analysys 2004):
RTP or Real-time Transport Protocol is a IETF
application layer protocol used to deliver audio and
video packets over the Internet. (RFC 3550)
• Self-provided consumer: Usually free, PC-2-PC
(e.g. Microsoft Messenger and Skype)
• Independent of Internet access: Usually not free, but
cheaper than a normal phone subscription (e.g.
Vonage and www.laajakaistapuhelin.fi)
• Provided by broadband access service provider:
Additional service or included in a broadband
subscription (e.g. Sonera Puhekaista and
www.free.fr)
• Corporate internal use on business LAN/WAN: AllIP enterprise networks.
• Carrier internal use: All-IP operator (e.g. Song's
99577)
For signaling the Session Initiation Protocol (SIP) is
becoming more and more popular and is gradually
replacing ITU's H.323 umbrella of protocols.
The most common speech codecs are G.711 and G.729
which are both specified by ITU-T. G.711 is used for
DTMF and fax tones while G.729 is used for
compressing voice. iLBC is a license free codec which
is gaining popularity fast because it handles lost packets
well. (Internet Calls (VoIP) 2005)
There are also popular proprietary protocols. Cisco for
example, has Skinny Client Control Protocol but the
best known today is probably Skype's peer to peer VoIP
protocol and Global IP Sound's audio codec which
Skype uses.
This categorization does not include a separate view on
mobility. The Finnish Ministry of Transport and
Telecommunications has noticed this in their report and
has therefore proposed another categorization into three
different types. (Internet Calls (VoIP) 2005)
3.2 What is Mobile VoIP?
• Service at a fix location: Available only at a specific
location (e.g. Sonera Puhekaista)
• Nomadic voice service: Possibility to access the
service when there is a fast enough Internet access
(e.g. Skype and www.laajakaistapuhelin.fi)
• Mobile service: Wireless TCP/IP networks (e.g. 3G
and WLAN)
If the definition of mobile Internet telephony is
analogue with the definition of Internet telephony then
mobile VoIP could be defined as the protocols that are
used for mobile Internet telephony. This means that the
end terminal needs to be mobile (to some extent) but
not necessarily a true VoIP client.
Mobile VoIP is thus VoIP used from a mobile terminal.
The wireless connection can be for example Bluetooth,
DECT, WLAN, WiMAX, GSM, GPRS, EDGE or
UMTS. Notice that not all these wireless connection
methods support TCP/IP. In these cases there has to be
a VoIP gateway somewhere else in the network.
As noted in both categorizations above, VoIP can be
used in a wide variety of ways. Even though the
connection might not be TCP/IP from end to end, VoIP
can still be used effectively on the way. In the following
figure (Figure 1) three different ways of using and
accessing VoIP services from a mobile terminal are
drawn. These ways or scenarios, and examples of them,
will be explained in more detail next.
TCP/IP was designed with a fix network in mind, not
for mobile nodes. Mobile IP is one way of addressing
this problem (RFC 2002). Roaming between different
kind of wireless networks and making the integration
seamless is still a challenge. This is an important issue
since it makes new technologies compatible with older
ones.
Security issues are even more important in wireless
networks since eavesdropping is by default easier than
in fixed networks. IPSec is a generic Internet security
protocol. In addition to IPSec PKI needs to be used for
a system with public keys. Secgo is an example of
88
Freenet in Germany proposes such a solution which is
also compatible with traditional GSM. At home the user
installs Freenet's HomeStation which is a router,
broadband modem, VoIP client and Bluetooth access
point, all in one. Then Freenet's iPhone is capable of
calling VoIP calls via Bluetooth when it is reach of the
HomeStation. (Freenet 2005)
Figure 1: Accessing VoIP wirelessly
Operator/Enterprise
Network
Wireless non-TCP/IP access
Wireless non-TCP/IP access
Fixed TCP/IP
access
Internet
Another similar example is the Gigaset M34 USB
DECT adapter which Siemens has launched. This
adapter enables DECT cordless phones to access the
PC's Skype client. (Siemens AG 2005)
Wireless TCP/IP access
In the first example a router is the VoIP gateway and in
the second example it is a PC. In both cases the wireless
connection is free.
4.1 Scenario 1: Operator/Enterprise is the VoIP
Gateway
4.3 Scenario 3: Wireless End Terminal is the
VoIP Gateway
The most usual way today of using VoIP through a
mobile terminal is by accessing a traditional wireless
non-TCP/IP network such as GSM. The VoIP gateway
in this case is located at the operator. This means that
the user pays only for the first mile and possibly for the
last mile as well. Additional services that are often
associated with VoIP can also be available. For instance
presence and profile data can be synchronized with the
VoIP server over GPRS.
Having a wireless end terminal which has a VoIP client
is maybe the most interesting case. It is an all IP
solution. The wireless connection can be any TCP/IP
connection, e.g. GPRS, EDGE, UMTS, WLAN,
WiMAX or MBWA. Using VoIP over these
connections is called VoIP over GPRS, VoIP over
EDGE, etc. or Voice over GPRS, voice over EDGE, etc.
In both cases the abbreviation is VoGPRS, VoEDGE,
etc.
Many large enterprises have their own networks. That is
why big firms can be compared to operators and why
the two are equivalent in this scenario.
GPRS is too slow for full duplex real time VoIP, but
Push to talk (PTT) is a VoIP service which works over
GPRS. It is a good example of a VoIP client in a normal
mobile phone.
There are many examples of services that uses this
model. Telia in Finland, today TDC Song, has had for
many years a VoIP service for international calls. By
dialing the prefix 99577 the call is routed via VoIP
internationally. Only the last mile in most cases is
converted back to a normal telephone call. (TDC Song
2005)
Today WLAN is probably the most available broadband
wireless TCP/IP network. There are a few WLAN VoIP
phones on the market already from fabricants such as
Vocera, Spectralink, Telesym and net2phone. These
terminals are still not very user friendly. Since WLAN
requires more energy than GSM networks for example,
the standby times in these phones are much lower. Also
few of them are compatible with 2G cellular networks.
Telenordic recently launched a call back service in
Norway. The idea is that the user dials a predefined toll
free number and then hangs up. The service will then
call back the caller who will then enter the actual
number to call. The procedure is made easier in
smartphones by installing a software that integrates with
the telephone's contact lists. (Telenordic 2005).
One upcoming wireless technology that makes the news
regularly is WiMAX. The promises are many: large
operating area, thousands of users per access point,
handover & roaming capabilities, 268 Mbps speeds
both ways,... (O'Shea, Dan 2004)
Even DECT phones can have a direct connection to a
company's VoIP enabled PBX. Then the wireless
connection is DECT and the operator is the company.
3G networks, such as UMTS, are also suitable for VoIP.
These networks support TCP/IP natively and have
connection speeds that are fast enough for full duplex
real time VoIP. There is however a lack of VoIP
software clients for 3G smartphones. The pricing in
most countries makes it also hard to motivate the use of
VoIP over UMTS.
4.2 Scenario 2: Home or Small Office is the
VoIP Gateway
One step closer to the end user is having a VoIP
gateway at home or in the office. This gateway can be
for example a personal PC or a router connected to a
broadband Internet access. In this scenario the wireless
connection is non-TCP/IP as well but the gateway is
physically closer to the user.
5. How do these Scenarios Compare?
The dominant design today for wireless communication
is clearly the mobile cellular phone. With a 3-band
89
GSM phone it is possible to roam almost everywhere in
the world. The phones themselves are advanced with
long standby times and advanced functionalities.
Table 1: Advantages and Disadvantages
Feature
All three scenarios described in the previous chapter are
both compatible and complementary and in many cases
the products as well. Being compatible with the
dominant design is a key issue. This concerns the
second and the third scenarios. That is why it is
important that the new products support the old network
as well (as for example Freenet's iPhone does).
Roaming?
Moving
terminal?
(Handover)
The positive feedback network effect of VoIP is
evident. Since VoIP to VoIP calls are generally free (at
least within the same VoIP provider) the value of
adding a user benefits the whole network.
Interoperability between VoIP networks is not as good
as it could be. Even though most are based on the same
standards they are not always interconnected. Some
providers are not even interested in interconnecting with
other providers. For example Skype uses its own
proprietary, closed standard. In mobile networks
interoperability becomes even more important since the
network environment changes more frequently. In the
second scenario the mobility is already very limited
because it is set to the proximity of the VoIP gateway at
home or the office. The third scenario on the other hand,
would benefit greatly of a wide intercompatibility.
New end
terminal?
Flat-rate
plausible?
Add-on
services?
(presence,
profile,...)
Scenario 1:
Operator is
the VoIP
Gateway
Excellent
possibilities
Yes
No
Scenario 2:
Scenario 3:
Home is the
End Terminal
VoIP Gateway is the VoIP
Gateway
Very limited Good
possibilities
No
GPRS, EDGE
& 3G: yes.
WLAN: no.
WiMAX: in
the future.
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
For scenario 3 to really lift off one might compare it to
VoIP in fixed networks. There seems to be a demand
for a flat-priced data rate. WiMAX looks very
promising since it addresses many of the problems with
WLAN. In-Stat forecasts more than 4,4 million
WiMAX subscribers by 2009 (Voice over WiMAX
2005)
Having a proprietary solution, like Skype does, creates a
lock-in effect. The switching costs can be higher to
move to another network if it is not compatible with the
old one.
3G is also a good candidate for scenario 3 since it seems
that 3G in many countries is in need of a so called killer
application to get subscribers. If 3G operators would
charge a flat-rate for the data mobile VoIP would have a
bright future in 3G networks.
By rapidly acquiring a critical customer base the
advantages of being a first mover are achieved. As
noticed before, VoIP is a relatively old technology.
Even so, companies like Vonage and Skype have
become important players quite rapidly. Old
telecommunications companies might fall behind.
Having a practically free telephone system makes
telephone spam or SPIT (Spam over Internet
Telephony) a concern. In scenario 1 there is always a
small fee involved which eliminates SPIT.
In all three scenarios described in chapter 4 no player
has succeeded as an early mover gaining a lock-in effect
in mobile networks as Skype has done in fixed
networks. On the other hand, Skype was already
featured as an example in a wireless network in scenario
number 2.
The substitutes to mobile VoIP must not be forgotten.
Normal cordless and mobile telephones are both
excellent and cheap in providing voice service.
Especially in comparison with scenario 3 one should
remember the existing solution. In Finland mobile calls
are already free for big companies internally and for
consumers the lowest price per minute is currently at
0,069€. (Björn 2005)
The main reasons of switching to VoIP – fixed or
mobile – is cost savings. This means cost savings in
phone calls, cost savings in hardware and cost savings
in network management. (Internet Calls (VoIP) 2005)
6. Conclusion
To answer the this paper's title's question, the answer is
not only that Internet telephony is going mobile, but
that it already has. All three scenarios already exist and
will continue to expand. True wireless VoIP terminals
that can seamlessly roam in different networks are still
in the future.
Since users expect VoIP to be free, or at least
substantially cheaper, the market is going to be very
competitive. The need for differentiation is growing.
This can mainly be done through added value services
to the VoIP service. These services can be ENUM
compability, presence and profile synchronization,
roaming, seamless integration with other networks, etc.
Flat-rate pricing and broadband wireless networks seem
to be the enablers for true end to end mobile VoIP.
Meanwhile there are many ways of how the advantages
of VoIP can be used wirelessly with today's
technologies. At last, the 2G networks remain a very
In the table below is an overview of the differences
between the three scenarios.
90
competitive substitute, even though that may change in
the future.
TDC Song. 2005. TDC Song information webpage:
http://www.tdcsong.fi/index.php?path=99577_internetp
uhelut [Accessed 22 April 2005].
References
Telenordic. 2005. GlobalLife home page
http://www.myonephone.no/beta2/ [Accessed 22 April
2005].
Analysys. 2004. IP Voice and Associated Convergent
Services. Final Report for the European Commission,
January 2004.
Voice over WiMAX: The Key to Wireless Broadband
Profitability? 2005. In-Stat Report February 2005.
www.in-stat.com
Björn, Raoul. 2005. TeliaSonera Oy. Interview in
Helsinki, 5 April 2005.
Wikipedia (2005). http://en.wikipedia.org/wiki/Voip
[Accessed 22 April 2005].
Finneran, Michael. 2005. The Payoff From
WLAN/Cellular Integration. Business Communications
Review March 2005 Vol. 35, Iss. 3; pg. 22
Freenet. 2005. Freenet iPhone information webpage:
http://www.freenet.de/freenetiphone/zusatzseiten/iphon
e/index.html [Accessed 22 April 2005].
Internet Calls (VoIP). 2005. Ministry of Transport and
Telecommunications Finland Report 16/2005.
http://www.lvm.fi/scripts/cgiip.exe/WService%253Dlv
m/cm/pub/showdoc.p?docid=1971&menuid=97&chann
elitemid=10411 [Accessed 22 April 2005].
O'Shea, Dan. 2004. A Standard Argument: Why
WiMAX Will Rule. Telephony's Complete Guide To
WiMAX 31.05.2004
http://www.wimaxforum.org/news/press_releases/Telep
hony_WiMAX.pdf [Accessed 22 April 2005].
Restraints of Communications Services. 2005. Ministry
of Transport and Telecommunications Finland Report
17/2005.
http://www.lvm.fi/scripts/cgiip.exe/WService%253Dlv
m/cm/pub/showdoc.p?docid=1971&menuid=97&chann
elitemid=10412 [Accessed 22 April 2005].
RFC 2002. IETF. www.ietf.org
RFC 3550. IETF. www.ietf.org
Rudberg, Henrik. 2005. Interview with CellIP
(www.cellip.com), 13 April 2005.
Secgo. 2005. Mobile IP products webpage.
http://www.secgo.com/products/secgo_mobile_ip.html
[Accessed 22 April 2005].
Shapiro, Carl and Varian, Hal. R. 1999. Information
Rules : a Strategic Guide to the Network Economy.
Harvard Business School Press. Boston, Massachusetts.
Siemens AG. 2005. Gigaset M34 USB product
webpage.
http://communications.siemens.com/cds/frontdoor/0,22
41,hq_en_0_69566_rArNrNrNrN,00.html [Accessed 22
April 2005].
Skype. 2005. Press release 15.04.2005
http://www.skype.com/company/news/2005/skypeinsky
pevoicemail100million.html [Accessed 22 April 2005].
91
STUDY ON INCUMBENT OPERATOR STRATEGIC DIFFERENTIATION
AND FORMATION OF STRATEGIC GROUPS
Research Seminar on Telecommunications Business II, T-109.551, 26 April 2005
Kimmo Palletvuori (M.Sc.) and Sakari Luukkainen (Lic.Tech.)
P.O.Box 3000, FIN-02015 HUT, FINLAND
interpreted as can be perceived from their companies’
public communication and actions. Further, it is
important to note that country specific issues like
general financial status and state policies together with
significant differences in companies sizes make this
comparison challenging. When identified, such
differences are noted in the paper.
Abstract
Since the liberation of the European telecommunication
markets former state owned telecommunication
incumbents have faced the competition as any stockexchange listed company. As there are clear differences
on the financial performance of these companies, it is
interesting to ask if most successful strategy for an old
telecommunication incumbent can be defined in the
today’s fast evolving business environment. The
framework for this study comes from the theory of
strategic groups and strategic differentiation, and it
appears that some general classification can be done in
order to explain differences in the incumbent operators’
financial performance. As the big size seems to bring
some advantage on the current business environment,
expansion to other, not directly telecommunication
bound but IT related areas seems to support the
financial performance of the telecommunication
operators.
Previous research suggests very small amount of
differentiation on the behavior of European operators
(Stienstra 2004), but as level of competition has
increased during the four years it is justified to expect
that companies have been forced to sharpen their
strategies and level of differentiation.
European telecommunication incumbents considered in
this study are listed in Table 1. When company consists
of a group is corporations, the whole group performance
is used as a based of financial and differentiation
analyses.
Table 1: Incumbents covered in this study.
Key Words
Operator, Incumbent,
Strategic Groups
Strategy,
BelgaCom
Differentiation,
BT
1. Introduction
DT
European incumbent operators share the history of state
ownership, and thus quite similar origin. Together with
the liberation of European telecommunications markets
those incumbents have been privatized and as such they
face the markets as any company. The liberation of the
telecommunications markets has brought several new
comers to the market place, and this means increased
competition. As the barriers of entry have been set low
by regulatory authorities, the strategic choices of the
companies within industry have become increasingly
important. However it is important to note, that the
regulation of telecommunications industry sets also
some limits on how companies that utilize their
competitive advantages in the market place.
FT
KPN
OTE
PT
SwissCom
TA
TDC
TI
Telefonica
This paper examines a group of the European
telecommunication incumbents and their strategic
choices. The intention is to find if there are any strategic
choices that could be linked to the better financial
performance.
Telenor
TS
This study relies on the material that is publicly
available, and as such the strategic choices are
92
Belgium telecommunication incumbent
(Belgacom 2004).
British Telecom group (British Telecom
2004).
Deutche Telecom, German telecom
incumbent (Deutsche Telecom 2004).
France Telecom incumbent (France
Telecom 2004).
Royal Dutch KPN, Dutch telecom
incumbent (KPN 2004).
Greek Telecom incumbent (OTE 2004).
Portugal Telecom, Portuguese telecom
incumbent (Portugal Telecom 2004).
Swiss telecom incumbent (SwissCom
2004).
TeleAustria, Austrian telecom incumbent
(TelecomAustria 2004).
TeleDenmark, Danish telecom incumbent
(TDC 2004).
Telecom Italia, Italian telecom incumbent
(Telecom Italia 2004).
Spanish telecom incumbent (Telefonica
2004).
Norwegian telecom incumbent (Telenor
2004).
TeliaSonera, Swedish telecom incumbent
(Telia) that merged with Finnish telecom
incumbent (Sonera) (TeliaSonera 2004).
2. Incumbent Differentiation
Figure 1 below illustrates relative sizes of the analyzed
operators in term of revenue. In a case of a group (e.g.
British Telecom, BT) the figure refers to the group
revenue).
2.1 Theory of the Competition and Strategy
In order to succeed in the competition, and to gain a
sustained competitive advantage, the company needs to
create a strong position by making a fit among its
activities. The success of the company strategy does not
depend on any single factor or company activity, but the
seamless co-operation of several activities. This
formulation of the strategy is the base for the sustained
competitive advantage (Porter 1997). As the
corporations competing within a same industry needs to
have some means of differentiation (competitive
advantage) they tend to develop various means of
competing. Such companies try to make choices and
decisions that competitors can not be easily imitate
without significant spending of resources. Companies
that have chosen similar ways of differentiation form a
strategic group, and differentiators among the groups
are called mobility barriers (McGee et.al. 1986).
60 000
50 000
40 000
30 000
20 000
10 000
BT
TE
Sw
iss
Po
C
om
rt u
ga
lT
ele
co
m
O
tria
T
Au
s
a
Ita
lia
T
FT
Te
lef
on
ic
N
D
T
KP
Te
le
Te
li
aS
on
er
a
De
nm
ar
k
Te
le
no
r
Be
lg
ac
om
0
Figure 1: Revenue in Million €.
Figure 2 gives the relative performance figures for the
operators in terms of Profit / Revenue –ratio during
fiscal year 2003. Based on this very brief analyze
operators are divided in 3 categories: those who perform
over 10%, those who perform over 5% but not over
10%, and finally those who perform below 5%. This
segmentation gives the following grouping:
• Group A (10% <): SwissCom, FT, KPN,
TeliaSonera.
• Group B (5% … 10%): BT, OTE, Telecom
Italia, Telefonica, DT, Telenor, TeleDenmark.
• Group C (< 5%): Portugal Telecom, Telecom
Austria, Belgacom.
The theory of the strategic groups suggests that there
exist parameters within an industry that explain the
strategic selection of the corporations. Those selections
are by nature such that they are costly to reverse, and
this will have inertia impact to the strategic behaviour
of the corporations. As such they will also have impact
to the nature and methods of the competition within an
industry (McGee et.al. 1986).
This model can be used to analyse the strategic choices
that operators make while their business environment is
changing, and for example mobile value chain is going
trough an evolution (Maitland 2002).
BT
Portugal Telecom
7,8 %
2,4 %
SwissCom
10,7 %
OTE
8,3 %
T Austria
2.2 Judging Operator Performance
3,4 %
T Italia
6,0 %
Telefonica
9,5 %
FT
There are several different approaches on evaluating
company performance. As with the European
telecommunication incumbents we are talking about the
companies that are listed in the various stock exchange
markets it is logical to rely on the financial performance
indicators. The indicators that I’m using in this paper
are:
• Profit / Revenue ratio: this indicates how
efficient if the creation of value added within
the company business processes.
• Dept ratio: this indicates the ration among total
assets and the net dept of the company.
The financial information for the operators addressed in
this paper comes from the corresponding annual reports
2003 available from the web-pages of the corresponding
telecommunication operators, and comparable net
profit/loss figures are controlled from Total Telecom
ranking publication (Total Telecom 2004) in order to
avoid any misinterpretation of varying terminology
used in the annual reports. It is understood that single
year result is not sufficient indicator for the longtime
performance, but the intention is to classify operators
according to the financial performance, and see if these
classes relate to any significant differentiation factors.
11,5 %
DT
5,2 %
KPN
21,2 %
Belgacom
3,2 %
Telenor
9,3 %
TeleDenmark
5,7 %
TeliaSonera
13,0 %
0,0 %
5,0 %
10,0 %
15,0 %
20,0 %
25,0 %
Figure 2: Profit / Revenue Ratio.
Also dept-level of the operators varies a lot, as can be
seen in the Figure 3. Interestingly, the most both the
operator with the worst dept ratio (FransTelecom, FT)
and the best dept ratio (SwissCom) are both in financial
performance class A in terms on Profit / Revenue –ratio.
As can be read from the Figure 4 the “economies of
scale” do not explain the financial performance of the
operators, although the variation of the performance
seems to be bigger among the smaller operators.
However, this can be co-incidence, as also the total
number of small operators is larger.
93
The companies that are in the same line of business
form strategic groups based on the ways of
differentiation they have selected within an industry.
Selection of the ways of differentiating often includes
some costs that can not be reversed. Such selections are
referred as mobility barriers (McGee 1986).
BT
Portugal Telecom
SwissCom
OTE
T Austria
T Italia
Telefonica
FT
DT
KPN
Three types of mobility barriers have been identified in
the previous literature (McGee 1986):
1. Market Related Strategies: Product line, user
technologies,
market
segmentation,
distribution channels, brand names, geographic
coverage.
2. Industry Supply Characteristics: Economies of
scale, manufacturing process, R&D capability,
marketing and distribution systems
3. Characteristics
of
Firms:
ownership,
organization structure, control systems, size.
Belgacom
Telenor
TeleDenmark
TeliaSonera
0,0 % 10,0 % 20,0 % 30,0 % 40,0 % 50,0 % 60,0 % 70,0 % 80,0 % 90,0 % 100,0
%
Figure 3: Dept Ratio.
Bigger number of smaller operators is also likely
explanation to the fact that smaller operators are
dominant in the best performing class of operators.
25,0 %
When considering telecommunication operators
strategic choices, it is important to keep in mind that
even within EU the regulatory authorities have different
levels of activities: for example operators ability to
capitalize on industry supply chain characteristics e.g.
in terms of handset subsidization is impacted by local
regulators. As such market related strategies and
characteristics of the firms are the areas that are most
likely candidates for the strategic differentiation.
Efficiency if R&D capability that is categorized to
industry supply chain characteristics is highly linked
into characteristics of the firm.
20,0 %
15,0 %
10,0 %
5,0 %
0,0 %
0
10 000
20 000
30 000
40 000
50 000
60 000
Figure 4: Revenue and financial performance
comparison.
Table 2: Differentiation and financial grouping.
On the other hand, the better average performance of
the smaller operators may also refer to the fact that their
asset base is smaller, and smaller organization has been
easier to tune for better performance. And because of
the smaller asset base, it has been easier to reach good
performance. The other side of the coin is that smaller
operators are worst performers.
Operator
BelgaCom
BT
DT
FT
It is also interesting to note that only operator falling to
performance category C are the smallest ones.
KPN
OTE
2.3 Strategic Differentiation of Operators
As all the operators are already active in the main
telecommunications industry areas (mobile, fixed voice
& data, broadband, international carrier), and regulatory
environment has made it easy to enter that market by
net entrants, discussion will be targeted to the area on
mobility barriers and strategic differentiation within an
industry. Even as the literature suggests that there is no
clear indication of the company profitability and it’s
membership to the specific strategic group, the same
literature also suggests that group structures affect to the
conditions of rivalry and thus indirectly to the
profitability (e.g. Cool 1993). As practically all
operators refer to “increased competitive pressure” it is
expected that they will try to develop and enhance their
competitive advantage within an industry.
PT
SwissCom
TA
TI
TDC
Telefonica
Telenor
TS
94
Differentiating activities
N/A
Global company, ICT services
T-Online, mixed model, content &
access, created growth and increased
profitability. ICT services via TSystem Multinational
VoD, TV on adsl, Multinational
company, Content services, Driving
convergence among fixed and wireless
Business solutions (ICT services)
Satellite communications, e-commerce
services, consulting services, corporate
communication services, actively
expanding to South-eastern Europe
aiming to be leader there (ICT)
Instrumental Companies, Multimedia
mobile portal i9 – Inove
Enterprise solutions (ICT),
Broadcasting company (TV & radio),
WLAN
Interactive TV over broadband
Merger plan with Olivetti was
accepted, Latin America operations,
ICT
Operating in multiple European
countries (mobile), Directories,
Corporate solutions (ICT)
Satellite communications,
Broadcasting services (CanalDigital)
N/A
#
C
B
B
A
A
B
C
A
C
B
B
B
B
A
Table 4: Operators within strategic groups.
2.4 Reasons for Operator Performance
Strategic
Group
Small and not
differentiated
Expanding to
ICT
When evaluating operator differentiation, it can be said
that all operators have made attempts to operate in
bigger geographical area that is their “natural” footprint.
Most often this has been done via acquisitions. All have
also made brand marketing especially in terms of
mobile business, but the material available does not
allow analyses of relative brand effectiveness and
valuation.
Others
Table 2 lists differentiating activities that the companies
have wanted to emphasize by themselves when giving
annual reports to the public.
This study contains several error factors the may have
impact to the results. First and perhaps biggest is related
to the local conditions: former state owned incumbent
telecommunication operator has it’s core business
located in a specific country, and this makes it
dependant on the general economic trends on that
region. Further, it can be stated that national differences
have an impact to the sovereignty of the decision
making within ex-state-owned corporations, and this
study omitted the impact of the ownership structure
(level of state ownership in the companies).
Further, the specialization categorization is not
weighted with the actual revenue and profit generated
but the area. However, it can be argued that some of the
differentiation activities need not to be strong profit
generators by themselves, but they still create
competitive advantage on selling more traditional
services due the fore-runner image associated with a
company. It is also mention of noticing that analyses
based on single year performance are prone to the
fluctuation and do not represent general trend.
This grouping omits several aspects listed in Chapter
2.3 for the mobility barriers, but the intention is to find
out those that are significant on explaining the European
telecommunication incumbent performance and
successful strategy creation.
Taking into account the above mentioned limitations, it
can, however, be argued that two major strategic groups
can be identified from the material.
First group is worst performing group of small
incumbent operators who have not been able to
differentiate themselves. They are bound to traditional
telecommunication operator roles with some
incremental products. Being small and un-differentiated
appears to be bad combination in today’s competitive
markets. As such, it can be concluded that size brings
some benefits as no larger peer company locates in to
financial performance category C.
Table 3: Identified Strategic Groups
# of
operator
3xC
Others
2xA
2xB
2xA
5xB
C: BelgaCom, Portugal Telecom,
TeleAustria.
A: KPN, SwissCom
B: BT, DT, OTE, Telecom Italia,
Telefonica
A: TeliaSonera, FT
B: TeleDenmark, Telenor
3. Conclusion
Based on the data given in Table 2 it is possible to form
the following groups:
1. Small and not differentiated: Operators that are
relatively small compared to others, and have
no significant differentiation elements. This
group is also linked to class C performance.
2. Expanding to ICT: This group of operators has
diversification in terms of their size, but they
all identify themselves as being ICT service
house in the significant degree. The definition
of ICT services varies, but here it is interpreted
as “IT services outside of traditional
telecommunication business” (consulting and
IT planning services, server housing and IT
service production, e-commerce services, etc.).
3. Other: This group has no specific
diversification elements that would be shared
by more than one company. Interestingly, this
class contains two well performing companies.
Strategic
Group
Small and not
differentiated
Expanding to
ICT
Operators in this group.
Description
• Small
• No differentiation
• ICT as part of business,
expanding outside of
traditional telco-domain
• Size varies
• Not among smallest
• No differentiation
Second group is formed by telecommunication
incumbents who are offering information technology
services outside of the tradition telecommunication
services domain. These operators seem to be able to
create a better financial performance than their more
conventional peers, independent whether they rank as
small or large corporation. The expansion of the
business into the areas that are outside of the traditional
telecommunications business, but still allow utilization
of some knowledge already present in the company is
logical step when growth potential of the core business
is small and level of competition is increasing. For
example operators have been running their own IT
Table 4 below gives a listing where operators are
located into the strategic groups. It is interesting to note
that third group that contains “undifferentiated”
operators have two common nominators: none of the
operators falls into the worst performing category, and 3
out of four are small or medium sized Scandinavian
telecommunication incumbents.
95
Porter M. 1979. How Competitive Forces Shape
Strategy. Harvard Business Review. March-April, pp.
137-145
services for quite a long time, and they are also
experience on CRM, customer relations management,
and billing activities, so it’s logical to offer this
expertise to other companies as a service while
communication is becoming increasingly application
driven. It is also worth of noticing, that such evolution
bring telecommunication operators into the territory
where they are starting to compete with more tradition
ICT integrators, and not only with the other
telecommunication operators.
Porter M. 1996. What is Strategy? Harvard Business
Review. , November-December, pp. 61-78
Portugal Telecom, 2004. Annual Report 2003,
http://www.portugaltelecom.pt, checked 2005-Jan-9
Stienstra M., Baaij M., Van Den Bosh F., Volberda H.,
2004. Strategic renewal of Europe’s Largest Telecom
Operators (1992-2001): From Herd Behaviour Towards
Strategic Choice. European Management Journal. June,
vol. 22, no. 3, pp 273-280
The undifferentiated group that is still performing well
can be explained at least to some extent by geo-political
aspects. Scandinavia is rather fragmented markets area
with different languages and as such not very interesting
from the central European point of view. During the
year 2003 this has likely protected Scandinavian
incumbents from the fiercest competition from the big
European telecommunication companies. France
Telecom (FT) has been strongly backed up by the
France culture and political environment.
SwissCom AG, 2004. 2003 Annual Report,
http://www.swisscom.com, checked 2005-Jan-9
TDC, 2004. Annual Report 2003, http://www.tdc.dk,
checked 2005-Jan-7
Telecom Austria, 2004. Annual Report 2003,
http://www.telekom.at, checked 2005-Jan-9
The focus on future work is on tackling with error
factors mentioned above, and deepening the level of
analyses especially at the areas of firm specific
characteristics in the creation of competitive advantage.
References
Telecom Italia, 2004. Telecom Italia Group Annual
Report 2003, http://www.telecomitalia.it/, checked
2005-Jan-9
Belgacom, 2004. e-generations, Annual Report 2003,
http://www.belgacom.be, checked 2005-Jan-7
Telefonica, 2004. Annual Report 2003,
http://www.telefonica.es/, checked 2005-Jan-9
British Telecom, 2004. Annual Report and Form 20-F
2003, http://www.bt.com, checked 2005-Mar-6
Telenor, 2004. Annual Report 2003,
http://www.telenor.no/, checked 2005-Jan-7
Cool K., Dierickx I. 1993. Rivalry, Strategic Groups
and Firm Profitability. Strategic Management Journal,
vol. 14, pp. 47-59
TeliaSonera, 2004. Annual Report 2003,
http://www.teliasonera.com, checked 2005-Feb-28
Total Telecom. 2004. Global 100, Ranking Telecoms. A
Terrapin Publication, November, pp. 14-15
Deutsche Telecom, 2004. Spirit. Commitment.
Success. The 2003 Financial Year,
http://www.deutschetelecom.de, checked 2005-Jan-9
France Telecom, 2004. 2003 Annual Report,
http://www.francetelecom.fr, checked 2005-Jan-9
KPN, 2004. 03 Annual Report and Form 20F,
http://www.kpn.nl, checked 2005-Jan-7
Maitland C., Bauer J., Westerveld R. 2002. The
European Market for Mobile Data: Evolving value
Chains and Industry Structures. Telecommunications
Policy, 26, pp. 485-504
McGee J., Jones H. 1986. Strategic Groups: Theory,
Research and Taxonomy. Strategic Management
Journal, vol. 7, pp. 141-160
OTE, 2004. Annual Report 2003, http://www.ote.gr,
checked 2005-Jan-9
96