March 22 2004

Enhancing Usage of Mobile Phones

THE rising popularity of the multi-colour, polyphonic, high memory, fast processor handset provides a compelling platform to develop for. Deloitte Research's Mobile and Wireless Predictions 2004 Report explores how the inclusion of these innovative elements will enhance the mobile phone's personality and drive revenues.

MOBILE subscribers will continue to rise as new customer targets are identified. New devices that are tailored to meet the demands of currently under-served customers, such as the over 55s, will provide a rich source of revenue, as will the uptake of colour handsets that incorporate cameras.

Simultaneously, machines that traditionally have not included mobile characteristics will have embedded mobile devices, improving their productivity.

* Colour and polyphony will enhance the mobile phone's personality and drive revenues. By the end of this year, the majority of handsets being shipped into developed countries will feature colour screens and polyphonic ringtones. The inclusion of colour screens and polyphonic sound will allow the handset to become totally personalised.

Every element of the phone bar its shape, from the cover to the ringtone, can now be changed to the owner's taste.

The market for thematic mobile phone e-personalities, comprising a suite of wallpaper, screensaver, polyphonic ringtones and caller tones will gather pace over 2004. While built-in cameras will generate much of the imagery gracing phone screens, there will always be demand for professional content.

The growing availability of colour mobile phones with polyphonic sound, along with the improved processing power accompanying their introduction, is increasing the opportunity to sell content to phone owners. The industry must ensure that an infrastructure exists that offers a wide range of quality content, simple downloads, secure and transparent billing, and fair revenue shares. Only with these elements in place can colour's revenue opportunities be realised.

* Push applications will be far more effective than pull applications for cellular mobile. The year 2004 will see the launch and the continue use of a mix of both push and pull data applications.

The most successful applications will be push applications such as SMS (short message service), MMS (multimedia messaging service) and push e- mail. Data applications such as WAP (wireless application protocol) and mobile browsing will continue to under- perform both in term of usage and revenues.

Push - the communication of small-sized, relevant information suits the narrowband, variably available mobile network; pull - the selection and downloading of a wide spread of information - is more suited to a broadband environment. However, the industry in general will mostly fail to note the difference between push and pull, and will continue to offer pull-based mobile solutions that invariably flounder.

The industry should evaluate carefully the performance of mobile data applications and understand what prerequisites for success are. It is important to recognise the inherent, fundamental differences between the fixed and the mobile network, and the implications this has for applications that can be supported.

Adhering to this approach will lead to both a better return on investment for the industry and a happier customer. Carriers with mobile data portals should include content based on push technology to balance demand on the network. For example, customers could be encouraged to purchase regular subscriptions to ringtones - to be pushed out on a weekly basis.

* The mobile Internet, as a major revenue stream, remains an aspiration. Mobile phones will increasingly support Internet browsing, although this will remain a frustrating and expensive experience, with content downloaded in long strips, until content providers develop content specifically for the smart-phone format.

Mobile phones with Internet browsers tend to be targeted at Web sites optimised for personal computers (PCs). As content is paid for by the megabyte, downloading Internet pages onto mobile phones remains an expensive activity. A short browse could hence end up costing a few dollars. The majority of consumers won't want to pay for all-you-can-eat usage.

Operators should encourage content providers to develop content formatted specifically for mobile phones; this would ideally be pushed to customers wherever possible.

Operators should offer revenue share in return for the re- purposing of existing content. For this to happen, operators have to incorporate the facility to charge according to the value of content. Each page of content downloaded has a unique value; charging strictly per megabyte is equivalent to paying for a basket of supermarket purchases by its weight alone.

The mobile Internet could be a boon to operators - who could earn revenue both from network traffic and also from content charges; and also for content providers - who may not be able to charge for content over the PC-based Web.

* Wi-Fi hotspots will remain more froth than substance. Throughout 2004, the majority of Wi-Fi hotspots will remain unused for the majority of the day. Many Wi-Fi hotspot sites are located in areas where there is only occasional demand for wireless broadband access.

The majority of laptop PCs and PDAs (personal digital assistants) in 2004 will not feature wireless LAN (local area network). Wi-Fi hotspots will not generate significant traffic in public spaces until portable, always-on Wi-Fi devices are available, for example, when Wi-Fi access is largely integrated into PDAs.

However, this will not have happened by the end of 2004. Wi-Fi will compete only infrequently with either 2.5G or 3G. In 2004, the former will be used mostly for mobile specific downloads; the latter will be used predominantly for voice in 2004.

Operators, and any other party considering deployment of Wi-Fi hotspots, should study the business case for Wi-Fi hotspots vigorously. It is important to remember that throughout 2004, in most countries, only a minority of PCs will be laptops of which only a minority will be Wi-Fi enabled; only a minority of laptop owners will expense Wi-Fi usage.

* Wireless LAN will have most impact in non-office enterprise environments and homes. The major growth for wireless LAN, in terms of both number of deployments and volume of data carried, will be for private deployment in businesses and homes.

Wireless LAN will cause most disruption where it allows a broadband network to reach where the wired LAN currently cannot reach, that is, where it is not technically, practically or economically feasible to deploy a wired LAN.

In enterprises, this means the non-office, campus-based environment. This might be a hospital ward (to allow medical staff access to patient records on the go); it might be a retail space (to allow stock checks, product checks and ubiquitous point of sale); it might be an aircraft carrier to allow any time e-scheduling, technical reference, and other processes for engineers.

Wireless LAN has the potential to be disruptive in the home as it will facilitate the broadband enabling of multiple devices in the home, from the PC to home security cameras.

The industry should focus on deploying WLAN to those who will be most positively affected by it. In the enterprise and government space, WLAN provides only limited benefit to office workers. However, it allows significant process change for information workers that currently have little access to a network, due to the roaming nature of their work.

In the home, WLAN is a cost-effective way of deploying broadband connectivity within the house (most households could not justify flood deployment of CAT 5 cabling). Operators should understand how WLAN can justify or catalyse broadband connection to the home, and price WLAN base stations accordingly.

* Compiled by Deloitte's Telecommunications, Media and Technology Group (TMT) and Deloitte Research. Input was provided by clients, leading industry and financial analysts, and the 4,000-strong global Deloitte TMT team.

WIRELESS PREDICTIONS * Colour and polyphony will enhance the mobile phone's personality and drive revenues. * Push applications will be far more effective than pull applications for cellular mobile. * The mobile Internet, as a major revenue stream, remains an aspiration. * Wi-Fi hotspots will remain more froth than substance. * Wireless LAN will have most impact in non-office enterprise environments and homes.