Where’s the Wireless Opportunity?

The best place to get the pulse of the wireless industry is at the annual CTIA show, and this year was no exception. Other than hearing the wireless carrier executives predict that data traffic will exceed voice in two years, as they have been predicting over the last five years, here’s what I walked away with at CTIA 2001 in Las Vegas.

TOP 10 WIRELESS LOSERS

For every drop of new wireless business opportunities absorbed at CTIA 2001, there were thundershowers of bad news uncovered. So here’s the bad news—or the losers—first.

Spectrum for 3G
The wireless industry has been lobbying Congress for years to get more spectrum for 3G. Over the past month this prayer has not been answered. The broadcasters have convinced the Bush administration that they need UHF channels 60 to 69 (the 700 mHz MHz spectrum) for 1950s movie distribution, so that’s out for 3G. The Department of Defense convinced the Department of Commerce that the 2 GHz spectrum it holds to control military satellites and the like is more in line with U.S. interests than releasing it for 3G so teenagers can send more jokes of the day and track their rock stars like they are doing in Europe today. Yes, Verizon and the other giant wireless carriers won PCS C and F band spectrum from recent auctions. But getting that spectrum anytime soon or ever is unlikely, because it was set aside for small businesses and Verizon and the others are not small. In short, this spectrum will be backed up in court challenges for years.

Bottom line is that if you classify 3G as the next generation of high-speed (384 Kbps) services, there is no politically correct spectrum for 3G, period. The best you are going to see in the United States for the next five years is low-speed wireless or 2.5G data.

2.5G Data at 144 Kbps?
OK, so you won’t see high-speed wireless data, but what about the lower-speed baby step to 2.5G? Its performance is overhyped. Here’s how you can tell, without getting into the technical details. When carriers say, “We are upgrading our systems to 3G [actually 2.5G] because we need voice capacity” or “We believe coverage is more important than terminal capacity,” they are actually saying to the investment community that they don’t need new enhanced data services to justify a return on new 3G infrastructure investment. In truth the promised data services can’t be delivered anytime soon, or at least nowhere near the rates (115 or 144 Kbps) often quoted.

Here’s why. Take General Packet Radio Service (GPRS): it gets its higher data rate (maximum 115 Kbps) by upgrading the modem to 8-PSK. The gain in burst rate comes with a negative: the terminal must transmit at higher power, which means lower overall capacity, because you reduce the use of the frequency—the other terminals sharing the same frequency must be operated farther away. Also, to get 115 Kbps you need to use every time slot on the 200 KHz frequency, or 8 times the capacity of a voice call. Does this mean 115 Kbps will cost 80 cents a minute if a voice call is priced at 10 cents a minute? The same problems—overstated terminal data burst rates and spectrum take away from voice capacity —can be made with the other 2.5G North American option, CDMA 2000 1X.

In short, don’t expect next-generation wireless data service greater than 20 Kbps to 30 Kbps at least for GPRS to appear in the U.S. market for years to come. And by the way, try and find a commercially available handset that can send 2.5G data rates using North American frequency assignments today! You can’t offer wireless data service without terminals.

i-mode Dollars
The wireless industry is still abuzz about DoCoMo’s i-mode success in Japan. Roughly one-third of Japanese Internet users access the Internet solely on wireless devices available today—low-speed 2G terminals. DoCoMo is adding 1 million or more users per month, and it’s making big yen doing it. Sounds exciting, but forget this opportunity in the United States. Here’s why.

First, 80 percent of the traffic in Japan is generated by teenagers accessing “jokes of the day” or horoscopes. To top that off, these teenagers have no other access to these content sites, such as wired Internet. Further, DoCoMo is the dominant wireless carrier, using one wireless standard, and it is the largest ISP in Japan. No U.S. wireless carrier is anywhere nearly positioned like DoCoMo is in Japan. So forget big i-mode-generated dollars in the United States.

SMS Dollars
The wireless industry is still buzzing about Western European success with short messaging services. The services consist of sending short messages (less than 160 characters or letters) between subscribers using a regular 2G wireless digital phone. So with SMS forecasts of 200 billion messages expected to be sent this year at 10 to 15 cents per message, U.S. carriers obviously have taken notice. But forget the big bucks for now, because this won’t happen in the United States anytime soon on a grand scale. And here’s why.

Like i-mode, SMS traffic is generated almost entirely by teenagers. And in Europe, you don’t pay for receiving SMS messages, but you pay per minute to access messages via the Internet. In the United States, most teens whose families can afford a wireless phone have Internet access at home at a flat rate for unlimited use. These teens have their own wired phone at home, and in the United States you pay for incoming wireless SMS messages. Besides, most U.S. teens are like business executives: they don’t like to be unconvinced—they don’t like to wait and they don’t pay for services. The equivalent to SMS for teens in the United States is AOL’s instant messaging, which is wrapped into a flat-rate price of $19.99 per month.

The final pin in the big SMS bucks balloon for U.S. wireless carriers is SMS incompatibility. Yes, a Verizon customer could send an SMS message to another Verizon customer with SMS. But that customer couldn’t send the same message to an AT&T, Cingular or Sprint customer. In Europe, there is one 2G standard: GSM. In the United States, there are four 2G standards, and they are all SMS-incompatible today.

WAP for Internet Access
For years the wireless industry has been working on the Wireless Application Protocol (WAP) standard for Internet access. Its finally here, and it’s a total flop. You know this when the style section of your daily newspaper carries stories of a consumer taking an hour to order a book online via a WAP-enabled wireless phone. You also know WAP for Internet access is dead on arrival when the CEOs of Dell, Microsoft and Intel say to the wireless industry “There’s only one Internet,” as they said in their keynote CTIA addresses. They mean that corporate America is not going to modify its Web sites for a wireless WAP-enabled phone, period.

Data Roaming
OK, suppose you only see low-speed packet services from 2.5G, and my point No. 2 above is right on the mark. So why isn’t roaming wireless data services and opportunity? The problem is, there’s no intercarrier settlements process in place to handle a user roaming into another area. It’s not even clear whether a carrier can support roaming in areas where it provides service.

For example, Verizon to some degree serves practically every state in the United States. But it has three infrastructure vendors (Lucent, Nortel and Motorola). It’s hard to get a straight answer from these vendors regarding CDMA 1X interoperability for data. Besides, is Verizon going to implement CDMA 2000 1X in every area where it has 2G coverage? It’s doubtful for years to come.

Location
For the past four years the FCC has been pressuring the wireless industry to implement E911 with automatic location identification so the dispatch operators know where you are within 100 meters when you dial 911. The FCC has required this to be in place by October 2001—about 5 months from now. Of course, once location services are in place, the wireless carrier can charge you big bucks to tell you where the nearest Starbucks is located, or charge the vendor for bringing you into the shop.

Sounds great, but it’s not going to happen anytime soon, either. Ask equipment vendors about their equipment readiness for E911 location and they’ll say they are ready to go. The stuff has been tested, but it’s sitting on the shelf. Why? The wireless carriers haven’t figured out how they will recover the investment if they implement a network solution (in which the network figures out where the E911 requester is), or how to convince the customers to buy a wireless phone with Global Positioning Satellite features.

But aren’t there commercial location services available today? Yes, but in 95 percent of the location database hits the wireless consumer has to enter the zip code of the point on earth they are at the given time. Not very useful unless you are at home or work, where you know the zip code. Everywhere else, it gets tough—especially when you are moving down the highway at 55 mph. Bottom line: wireless location service revenues are years away for wireless carriers.

Advertisement
Yes, today new 2G phones can display information, so why not “push” ads to wireless consumers and charge advertisers? Well first, without location services, how is Starbucks going to send you an alert that one of its shops is on the street you are walking along? More to the point, what kind of ad could it display? With minimum graphic capability on a 1-by-1-inch screen, who would want their ads? And how are you going to design the ad database infrastructure to track in real time the whereabouts of millions of subscribers and their personal likes?

Speech Recognition
OK, data input and display capabilities are limited on wireless phones, but what about speech recognition, or a browser on your lips? Again, sounds like a money-making opportunity, and you can see great vendor demos at the trade shows. Using speech recognition to talk to a Web site works if you are in a nice, quiet place like your desk at work or at home—right where it has little consumer value. Where you need speech recognition is walking down the street or riding in your car. The problem is that these environments have background noise, and speech recognition today doesn’t work well under these conditions.

3G in the Laptop
Wouldn’t it be great for the wireless industry if the laptop vendors produced their products with 3G build in? Well they aren’t because they don’t believe that the wireless network is ready. But the key reason is that the computer industry wants to see one wireless Internet access standard, and the industry is already locked into it. It’s called IEEE 802.11b supporting 11 Mbps wireless Ethernet LAN access. Half the Dell laptops sold in the educational marketplace come with wireless 802.11b access, and zero with any 2G, 2.5G or 3G wireless interfaces.

TOP 10 WIRELESS WINNERS

OK. There are thunderstorms of losers. So where are the winners, particularly for wireless billing executives and their vendors? Here’s my Top 10.

Mobile E-Commerce
You don’t need 2.5G or 3G to make purchases via wireless devices or using wireless currency (buy a Coke and have it billed as minutes of usage). For mobile commerce, you need a rating engine, a fraud control system for the Three A’s (authentication, authorization and accounting), and a revenue assurance program.

Financial WAP Gateway
WAP has bombed and will bomb for Internet access, but it can support mobile e-commerce. This opportunity will be highly accelerated, if the wireless industry lets the banks own the WAP gateway, because that would largely solve the security issue. Banks don’t want the wireless carrier between them and the mobile e-commerce consumer. The opportunity here is a financial WAP gateway performing the above-mentioned Three A’s.

Information Services
Information services as associated with i-mode-type services will not be the killer app as they are in Japan, but nonetheless will be a revenue opportunity for wireless carriers in the United States. All you need is a billing system to charge by the kilopacket of information, a rating engine to differentiate the content sold, and an electronic bill presentment system that lets consumers see on-line what they are being charged.

SMS Interconnection.
Today’s carriers cannot exchange SMS messages, so obviously they will not be able to perform intercarrier settlements and financial clearing. Eventually the wireless carriers will solve the SMS intercarrier issues, and third-party settlement houses will be needed.

Billing for 802.11b
As mentioned above, the laptop vendors are shipping products with 802.11b wireless LAN interfaces. The problem is hotels, airline travel lounges, coffeehouses, and the like will have to install 802.11b common LAN receiving infrastructure, and will have to recover equipment costs and Internet access fees. Again, to do this carriers need the Three A’s, and rating and billing support.

Billing for Bluetooth
Ditto for Bluetooth. Eventually Bluetooth intelligence will be built into laptops when chip prices fall and wireless handsets replace today’s PCMCIA cards with wired interfaces. Note that 802.11b wireless LAN interfaces drain too much electrical power for handheld wireless terminals. Future Bluetooth-enabled devices will be used to support mobile e-commerce. Again, the Three A’s and rating engines will be needed.

Scalable Content
If you believe online content access via the Internet will be billed per access and you believe Web sites will be designated for multidevice access (PC, laptops, PDA or wireless handsets), you have to believe in scalable Web sites. Users will get more information by accessing the sites with a Pentium 4 PC instead of a 2G phone. Carriers will need a rating engine to bill for scalable content delivery to wireless devices.

Telemetrics
Communication between cars via wireless infrastructure is called telemetrics. The auto industry will be jumping in with both feet this fall, with BMW, Mercedes-Benz, Lexus, GM and others offering 2002 models with mobile email, traffic alerts, dozens of Internet-related sources, and location-based services with GPS capabilities. This is a true wireless carrier opportunity, enhanced with the new billing and rating capabilities of telemetrics.

Private Wireless Networks
Although rolling out 2.5G for the mass market will be problematic, there will be ample opportunities in the private network market, with FedEx and UPS type-applications.. Wireless usage will be measured and must be billed, of course. The billing metrics and rates will be dramatically different for this vertical market, as opposed to today’s horizontal consumer market.

SS7 and Number Portability
Finally, wireless number portability will be implemented by wireless carriers before year’s end, and you will see a host of new wireless intelligent network (WIN) services supported because of wireless SS7 network upgrades. And again, new billing and rating engines will be needed. For example, my wired home phone number has been ported to my wireless device for my week’s vacation. I want the charges (long distance and wireless) deducted from my wireless bucket plan.

These are my wireless winners and losers. We will keep you up to date on these wireless opportunities in Billing World from a billing and OSS perspective in future issues. In the meantime, for firsthand updates of what is available today, please join us and 150 exhibitors in Orlando, Fla., June 25-28 for Billing World 2001, or if you wish to take part in our Web seminar in May that will cover these wireless winners and losers check out our Web site. Online registration is at www.telestrategies.com, or call 703.734.7050.