The next huge step for the mobile business, including the manufacturers of mobile phones, the mobile operators and the content providers (value added service providers), is the mobile internet i.e. supplying their mobile customers with Internet connectivity (mobile web). To be successful in this business supliers are developing new devices (generally referred to as smartphones), the western mobile operators will have to adjust their business models and service providers will have to create business models, which benefit from the Internet and do not compete with it. Finding a migration path into this new paradigm will be key to the survival of incumbents and will provide new emerging companies the opportunity to disrupt the present market and to achieve success.
This website, published by Ville Saarikoski PhD, suggests some practical steps and gives also some scientific arguments and evidence, which are based on research work published in his PhD thesis.
The end user can drive change (see chp 7). The operator (service provider) is however at the center stage in a pivotal position. This site focuses on suggestions an operator searching for future growth might consider. Manufacturers and companies creating content to the user are part of the operators value chain.
Many western observers are keen to point out that consumers love the SMS. These observers should ask themselves, what part of the SMS protocol do the consumers love? I would argue that consumers do not love the SMS. Consumers love sending text based messages and one should be open minded in respect to choice of technology i.e. email and instant messaging are also possible technologies.
Many western observers are keen to point out that mobile is migrating toward the Internet. However, when saying this, they forget to point out that the SMS has nothing to do with the Internet. If one argues that the Internet is the future of mobile, one should also at the same time mention that the SMS is not Internet based and start asking questions, what should one do with the SMS?
Western observers naturally continuously monitor the amount of SMS messages sent per person per month. However this should be compared with e.g. the amount of emails sent/per user/ per month from a mobile device. In Japan, in 2004, (and please keep in mind that in Japan mobile email is dominant) the amount of emails sent from a mobile phone was quadruple (4 times) the amount of SMS sent in Finland. Having said this, the amount of SMS is on the increase even in advanced mobile countries, Finland included. This is mainly due to SMS bundles (e.g. 500 messages fixed price). The SMS is flexible and can to some extent, be adapted into new business models. However the SMS has its limits and it is these limits one should focus on.
One should not only focus on the amount of messages per person per month. Very important is the content of the message. Emails can and generally do contain links whereas an SMS message does not. Hence an email message generally opens up an opportunity to connect into other worlds. In particular, in Japan, phone numbers are sent and arrive as links that can easily be clicked on.
Second one should not only focus on averages (per month), but on the deviation i.e. the minimum and the maximum. In a networked world the maximum user is very often a user with an extensive network, sending messages to hundreds. These hundreds then in turn react to the message. The super user - the networker - is the amplifier of network traffic. If you want usage, focus - also your business model - on the networkers.
Many observers are also very keen to point out that mobile email has already for some time existed in the Western market. Email was and is a key feature of the Nokia Communicator and email is the key feature, which made the BlackBerry popular first in the US and now for some time already also outside the US. The western market has hence been slowly evolving toward email usage. But this is very much a start up problem. You need critical mass for the business to get started. The critical mass of e.g. the Nokia communicator has simply not been enough. Professor Jeffrey Funk points out that the startup problem was solved in Japan, because email was adopted, by all of the mobile population.
More recently push email software and corporate email solutions are helping the diffusion of mobile email also in western markets.
However one should keep in mind that network externalities have the ability to lock a market. In other words as an example, if all my friends have SMS, I have in practice no other option than to communicate with them with SMS. The West is locked into an SMS world in the same way France was locked in with the Minitel. Disruptive operators looking for a future markets should actively look for ways to break the networl externalities lock in.
This lock in can be prevented by building bridges between the SMS world and the email world. For some time it has already been possible for users to send e.g. SMS from their computer, but in most cases this requires the user to be especially active and aware of the possibilities and the user also needs to pay per message sent. Interestingly in the US market some operators apply the business model of receiver pays. For these operators it makes business sense to provide free of charge transparent gateways between SMS and email and vice versa, because the user pays for every message received. It would seem the US market is better positioned than Europe (which relies almost purely on a sender pays model) in a migration toward more Internet based business models.
In the West the SMS was adopted prior to the diffusion of mobile email and thus the SMS has grown into a huge business and it has not made business sense for the operators to migrate into using mobile email. Western incumbent operators are very much concerned in keeping the current revenues of SMS.
It is actually surprising that the world of the fixed Internet and that of the mobile can presently be so different from each other. Mobile operators should be asking themselves, how can two so different business models (paradigms) exist simultaneously?
In building a networked world one should be on the look out for super users, with huge networks of personal friends and business partners.
If the pricing for a super user is the same as it is for the average user, the probability that the average user will ,when the occasion demands, become a super user increases.
This is easily demonstrated by an example from the flat rate fixed Internet world. In this example grandma has a fixed flat rate tariff for her internet connection. The operator is happy, because grandma uses the network for only the occasional email and some browsing. However further study would show that this particular grandma has ten grand children and when they visit her, there is a sudden and drastic increase in her traffic. The operator should learn from this example that as a user and customer, grandma would make her choice of service based on her maximum usage, not on her average usage. This being the case especially if the price difference is not huge and grandma also benefits in the predictability of her bill.
This same rationale makes sense also in the mobile environment. The mobile will not migrate over night to flat rate, but the direction is clear: mobile is adopting new bundles and packages and thus migrating toward a flat rate model. Service providers should also give their users all the possible tools to enable them to predict their bills.
In the long run also flat rate packages will become popular. Perhaps these packages will at first be limited to mobile data and only a few users will adopt them, but the business model will also migrate further and be applied in mobile calls, roaming traffic and also in charging content. Mobile communications will face the same paradigm change as traditional fixed line telephony.
One of the more interesting questions is the role of the SIM (subscriber identity). By definition it is an identity module. However in practice it is a module, which enables micropayments. On the Internet it is almost impossible to create a bill without using a credit card. The Internet has no SIM card. I would predict that the mobile market will have to evolve into a situation in which a more clear distinction is made between identity and payment method.
The executive of a mobile operator is interested in his key customers. In the traditional world of transaction based pricing the customer with the highest bill was not only the key customer, but also in many cases also an early adopter.
The mobile executive should be prepared to change his paradigm and I believe he should be on the look out for the user, which most effectively uses his present limited resources. This new early adopter is probably also a very efficient communicator and an individual with a very diverse network.
Those executives and mobile operators, which can find these new users and best cater to their present needs and build on these emerging needs, will be able to disrupt present markets and challenge present incumbents. They will be able to follow the path of disruptive innovationsas described by Harward professor Clayton Christensen.
Commons-based peer production is a term coined by Law professor Yochai Benkler to describe a new model of economic production. This model has existed earlier, but generally on the micro level of societies. The Internet has amplified the model and made its existence possible on a global scale.
The Internet is in a sense a huge global commons. New business models should take into account the possibility of commons based peer production, but also build new business models on top of the commons.
In the physical world supply is limited by e.g. the physical cost of transportation and space. In the digital connected world this cost no longer exists. Chris Andersson in his book The Long Tail describes the emergence of a new business logic, which thrives on building the Long Tail. Good traditional examples of Long Tail business is e.g. the book shop Amazon. I would list XboX live as a particularly interesting example, which builds a (paying) society on top of the Internet. The next step would be to make this society mobile
A long tail business can be built on top of the mobile Internet commons. Lets see what the future will bring.
Check, if your present mobile operator is providing a flat rate price for mobile data. In Finland 128 kbit/s flat rate is currently (15.5.2007) offered at 14,95 Euros by Saunalahti. Higher speeds are available for slightly higher prices.
If you feel the price is still too high, I suggest you: - buy a data package, package deals are generally far more reasonable compared to the list price per kilobyte - use the data traffic counter available on your mobile phone (check that it is available before you buy the phone) to monitor the amount of data traffic you use - when your data usage grows move to the next biggest package
To minimize data consumption set the phone so that the browser does not show images (ask your dealer how to do it before buying the phone).
I would recommend not to use wap sites and to generally avoid paying transaction based fees for content. That is if you want to minimize your bill. The Internet is full of free content and many companies (e.g. travel information) will want to reach you – without cost to you the user – on your mobile phone.
I would recommend that you do not to use the phone abroad for data traffic. International data roaming prices are ridiculously high.
I would recommend that you set up the phone so that you can access the Internet also through an open wlan. This will be a handy option, when traveling abroad.
To be successful with the mobile internet one needs to understand the key feature of the Internet. The key property of the Internet is embedded in it structure. It is a scale free network. The key property of the Internet is not the fact that it is digital, nor the fact that it uses Ip protocols. Think about it in this way: scale free structures exist in nature, ip or digital do not.
The PhD thesis concludes with the following hypothesis:
The western mobile Internet has contained no elements, which are efficient in a scale free sense. By adding elements, which are efficient in a scale free sense, a successful mobile internet business can be created.
This is a cause and effect relationship. Some times one needs to understand the underlining cause and effect relationship, before success is plausible. This was the case for example, when man learnt to fly. Bernoullis experiments with fluid mechanics, which he did in water – not in air - helped to understand, how to fly. Understanding scale free structure and how to enable it, will perhaps push and speed up our migration toward implementing a mobile Internet.
The ability to create scale free networks can be given to individuals and it can be captured into individual products. It would seem that in the West we need to focus on understanding scale free structures so that we can push our business models into the optimum direction. In some cases we need to abandon old models and this can not be done without strong and scientifically proven beliefs, which will hopefully convince us that following a different path will lead to a more effective solution. It will also change existing value networks and hence it is understandable that there are considerable forces, including established institutions, trying to slow down change.
The i-mode product, introduced by NTTDoCoMo in February 1999 can be regarded as the first mobile internet product. Instead of choosing SMS as the key messaging media, NTTDoCoMo chose email as the key messaging media.
The choice to adopt email instead of SMS was made in 1998 prior to the launch of i-mode and Mari Matsunaga, one of the key developers of i-mode, shows in her book (Matsunaga 2000), very clearly, that it was a surprise decision, at least to her and her team, to choose email instead of SMS.
By 1998 email had become a popular messaging media on the Internet and since the Japanese had no popular messaging media on the mobile, it made sense to choose email instead of SMS. The Japanese also had difficulties in the interoperability of SMS between operators. Choosing email was also in some sense a way to avoid the interoperability problem of SMS.
The concepts of path dependence and bounded rationality help explain why timing and context matter. Choosing email instead of SMS made business sense in Japan, but not in the West.
One should also note that in 1999 the Japanese did not have a SIM card on their phones. Thus they did not have a convenient micro payment method for their business model and thus, instead of a transaction based business model, the Japanese adopted a more flat rate type business model for their content business. This business model did not substantially change when the SIM was adopted in Japan in connection with 3rd generation phones.
In a sense the Japanese were extremely lucky, because of the timing of their choices. In the West, the SMS had grown into a huge business and was continuing to grow and it made no business sense for western operators to move away from a very profitable transaction based business model. The West continued on its chosen path by standardizing the multimedia messaging service (MMS). The west will however ultimately have to face the fact that a transaction based business model is not the key and principal model of the Internet - scale free - world.
Ville has a background as a pioneer, business developer and innovator in the telecom environment and a career in working with disruptive opportunities in the market.
Working with Nokia in 1980s, he was among the first to introduce mobile networks to South East Asia.
From 1989 to 1996, at the time when the Finnish market was among the first in the world, being deregulated and opened for competition in long distance, mobile and international telephony, he was head of sales of the SME market at the challenger operator (presently known as Elisa).
From 1999-2003, during the boom of the industry and the time when high prices were paid for mobile UMTS (3G) licenses, he was in charge of mobile R&D in the operator Sonera. During this time his unit contributed with c 100 patent applications.
He has lived in Japan on two occasions (1985-86 and 96-99) and witnessed Japan emerging from a non existent mobile market to a global leader in the mobile field.
The Financial Times, originally published on 9.6.2004 Secrets of success for going mobile
The Feature 7.4.2006 Email, scale free networks and the mobile internet,an interview by Howard Rheingold
PhD Thesis, Accepted Oulu University 15.12.2006, The Odyssey of the mobile internet, the emergence of a networking attribute in a multidisciplinary study
Having concluded my PhD thesis, I am now looking for opportunities to create the market I preach. I am looking for and open to short term or long term projects and employment opportunities, for lecturing, teaching and writing opportunities, preferably in an international context.
Please give me feedback, let me know of recent market developments and let me know how you are progressing on your migration path.
Ville.saarikoski (AT) welho.com