Towards the Next Wave of Mobile Communication
Transcription
Towards the Next Wave of Mobile Communication
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 Helsinki University of Technology Telecommunications Software and Multimedia Laboratory 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. Helsinki University of Technology 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 summarized in Table 4. 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, viewed 20 March 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, viewed 20 March 2005, 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, viewed 20 March 2005, 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, viewed 20 March 2005, 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, viewed 20 March 2005, 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 Helsinki University of Technology 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 (Referenced 20.03.2005) 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 (Referenced 20.03.2005) 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 (Referenced 30.04.2005) 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 (Referenced 20.03.2005) 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 (Referenced 30.04.2005) WiMAX Forum, 2005 (a). WiMAX’s technology for LOS and NLOS environments. Available at: http://www.wimaxforum.org/news/downloads/WiMAX NLOSgeneral-versionaug04.pdf. (Referenced 20.03.2005) Nokia, 2005. WLAN (Wi-FI). Available at: http://www.nokia.com/nokia/0,,62531,00.html (Referenced 30.04.2005) 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 (Referenced 20.03.2005) 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 (Referenced 30.04.2005) 21 MOBILE SOLUTIONS IN BUSINESS PROCESSES Maija-Kerttu Sarvas Helsinki University of Technology 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 http://www.nokia.com/nokia/0,,48276,00.html 27 MOBILE BROADCAST RADIO TECHNOLOGIES: FACTORS AFFECTING THE EMERGENCE OF DOMINANT DESIGN Toni Paila Helsinki University of Technology [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 Helsinki University of Technology 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 http://www.nokia.com/nokia/0,,55739,00.html Nokia, 5140 RFID phone. Nokia external material http://www.nokia.com/nokia/0,,72324,00.html 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 Monitoring, maintenance, home and building automation, transportation and logistics Business & Consumer Monitoring, maintenance, building automation Business Monitoring, maintenance, home and building automation Business & Consumer Billboards Maintenance, infotainment Business Amusement machines Maintenance, infotainment Business Industrial machines Photocopiers Monitoring, maintenance, transportation and logistics Monitpring,maintenance Business Business Traffic signs Monitoring, infotainment, transportation and logistics Business Monitoring, maintenance, transportation and logistics 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 Helsinki University of Technology 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. http://www.nokia.com/nokia/0,,46939,00.html 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. http://www.digitoday.fi/showPage.php?page_id=12&ne ws_id=29244 Viitasaari, J. 2004. Nokia ja kilpailijat taistossa push-totalk –standardista. Digitoday Finland. Retrieved 10.3. 2005. http://www.digitoday.fi/showPage.php?page_id=12&ne 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 Helsinki University of Technology [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 Helsinki University of Technology 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 summarized in Table 4. • 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: http://www.nokia.com/nokia/0,,53708,00.html 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 Helsinki University of Technology Telecommunications Software and Multimedia Laboratory 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.) Helsinki University of Technology 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