Subscriber Identity Model (SIM) kits
Ever since the development of GSM in the early 1990s, each GSM phone has a Subscriber Identity Model (SIM) card. This card makes it possible to develop a range of value-added services. During most of the 1990s, however, this market has failed to get off the ground, as most operators did not agree to link their networks to allow roaming services to operate. Furthermore, they were too busy providing basic access, and did not bother at that time to look at the more complex Value Added Mobile Services (VAMS). It was not until competition started to bite into the ARPU that operators started to pay more attention to VAMS. By that time, others such as the virtual mobile operators had started to develop more sophisticated VAMS based on SIM kits. It will be interesting to see if the large incumbent celcos will ever be able to offer the level of sophisticated customer service that is necessary to successfully operate in this market.
Dual slot applications
Dual Slot Technology for Mobile Handsets – a second SIM card is simply added to the mobile phone, operating as a ‘set-top’ box to provide access to applications.
Proprietary based services
In order to profit from the emerging e-mobile services markets, new platforms need to be added to the traditional infrastructure. Companies that can offer a ‘Dual Slot Technology for Mobile Handsets’ based on the SMS for GSM are now jockeying themselves into position.
These applications-based platforms can be rapidly configured to facilitate a range of applications; banking, ticketing, enhanced voice, call re-routing, online information services and so on. All these applications can be ordered from the operator’s (or the customer company’s) Internet Website. From here, the application can be activated over the GSM network.
As in most telecommunications markets, the battle will take place between proprietary-based services operated by the incumbent telcos (using their proprietary SMS systems) that are trying to protect their markets and open systems introduced by new companies. In the long run, however, the open systems will, of course, have a much better chance of surviving and thriving.
Pioneers, such as Australian-based Newcom, started to launch open systems for other companies (content providers) to participate in the new world. In September 1999, this company introduced its platform Funge in Italy, with a large financial institution introducing Funge-based applications to its customers. However, in order to grow the business, the owner took the technology to the USA in early 2001, looking for funds to further develop Funge into m-commerce applications. However they failed, and the company filed for bankruptcy (see chapter 7.2.5).
Incumbents often see content providers as potential competitors, and therefore either start operating content services themselves, or try to monopolise the market is such a way that the customers’ content gets packaged into the telco content, and is then sold as a so-called telco product.
Increasingly, this strategy is losing ground as more and more content providers begin to treat telecommunications as a strategic business tool, and require far greater control over their products and services that are based on these networks. This is exactly where open systems come in. They provide an open platform for mobile e-services. Not surprisingly, their major competitors are either the telcos that want to operate proprietary services (SingTel, Sonera, Telstra), or their suppliers that are only too happy to build proprietary systems for their key customers (Motorola, Alcatel, etc).
Lack of user-friendly technologies
As cash-rich telcos are eager to get involved, they spend big money on proprietary developments and are therefore in a good position to hamper the developments initiated by independent companies that built their systems on open architecture.
Telcos, however, will have to accept that their major customers don’t want to wrap their e-services around telco-branded products and services. Furthermore, customers who understand the strategic value of e-services want to be independent for the reasons mentioned above, as well as for security and management reasons. Increasingly, therefore, we will see companies endeavouring to extend their reach for new e-customers, and implement their own e-strategies based on wireless, Internet, information highways, e-commerce etc.
Several of the current mobile data applications (eg SMS and WAP) are severely hampered by very unfriendly technologies – only totally dedicated users will be willing to spend the time necessary to familiarise themselves with these technologies, and only frequent users will be capable of mastering them.
Operating SMS is more difficult than operating a VCR. 80% of VCR users don’t know how to program their recorder – a bad omen for SMS operators.
New business models are needed
Platforms such as the now defunct Funge were also moving away from the traditional time-based telco services. The trend is very much towards flat-based charges. Services and applications such as share trading, brokerage deals, transactions and ticketing are often already charged on a flat fee basis. It is the content and service providers that want to stay in control of the application. They want access to the networks to provide such service, but don’t necessarily want to hand over the application to the telco for them to run and operate the service.
Depending on the nature of the actual service and the level of service required by the end-users, these packages are often available at different price levels. Dual Slot based applications can be packaged similarly to the way companies currently market their services to their customers. Free applications can be provided under the permission based marketing model (see separate report Global – Mobile – Marketing and Business Developments).
In most situations, the telecommunications cost element is a minor part of the overall costs of the application. In a large number of situations, customers will make the Dual Slot ‘set-top’ box available at no extra cost to their customers as it is packaged into the overall service and the overall price. On the other hand, in the competitive telco market, bureaux facilitating Dual Slot services can negotiate very attractive deals with the operators for bulk airtime, messages, etc.
Currently, market action for ‘Dual Slot Technologies ‘is taking place in Europe, especially in those GSM countries with a minimum of 4/5 competitors. Some Asian countries, like Hong Kong and Singapore for example, are also offering good potential and for a market like China, with a monthly growth of one million GSM subscribers, the sky is the limit!
The Funge Smartcard (defunct)
While the company filed for bankruptcy in June 2001, the concept is sound and can be used as an example for the push for open systems.
The Funge Smartcard, aimed to be customised for any application developers, was meant to unlock preferred services and content, acting as a credit, debit or stored e-purse facilitator and recognised the consumer as a preferred customer anywhere in the world. Developers could access source code to the Funge platform for a $1.00 fee, which ensured the developer take up the file structure and e-purse of the Funge system. Application developers using the Funge system would not be charged a merchant’s fee, but would receive $0.30 for every wireless transaction performed. Consumers utilising the new transaction platform would pay $0.50 for a wireless transaction and nothing for a wired transaction. The flat fee structure would be simple to administer and transparent to all who use it (prices are based on the 1998/1999 market situation, and are used as an illustration).
The Funge Smartcard would be able to be used through the existing international ATM network, as well as enabling transfer of funds from bank to bank and payment for services directly without going through credit card systems. When used in conjunction with the Funge dual-SIM multi-slot mobile phone back, it would be able to immediate display current information and services, such as stock market figures and airline flight availability and ticketing. It would also free mobile commerce users from the constraints of relying on only one carrier, allowing the consumer the ability to choose a carrier for each transaction or call made on their mobile device.
The Funge transaction infrastructure was secured through the latest encryption technology from Certicom, and has been developed on an open platform that can interface with any existing transaction system. After the bankruptcy, it therefore did not come to a surprise that a brawl erupted over the intellectual property rights of Funge.
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