Clasificaciones

To understand the context of the following two case studies, this section provides basic information on Mobile Location Services. After segmenting the different MLS services, their revenue forecasts are provided. The third part sets the growth prospects in context with existing barriers to mass marketing. The last part closes this section with a discussion of the status quo and future perspective of MLS in Western Europe.

Segmentation

MLS (also known as Location Based Services [LBS]) include different applications and services, which use location information of mobile devices. According to a segmentation provided by Gartner Dataquest (2002a), the market can be divided into the following four segments:

Information services: This is an already established market, with information directory companies such as yellow pages (e.g., YellowMap). Up until now, most of these types of

services are either voice activated or require users to dial a service area code or type in a postal code.

Emergency and security: This includes the emergency services plus security-type applications for motorists such as roadside assistance, automatic vehicle location services, navigation, and route guidance.

Tracking: An established, albeit small market, tracking involves the use of GPS devices for mainly vertical market applications, such as mobile workforce and fleet management.

Consumer applications include the tracking of people and assets.

Zone-based billing: This form of billing is attractive for mobile operators that want to capture wire-line minutes by offering less-expensive rates (e.g., the Genion²⁰ service from O2, former Viag Interkom). Zone-based billing can be used to promote off-peak traffic and will benefit from improved accuracy, enabling mobile operators to target subscribers outside regions with the densest cell sites. Zone-based billing offers an additional form of price differentiation. Most opportunities are likely to be in the corporate sector.

The following table summarizes the segmentation:

Segment Applications Customers

Business traveler Information services Restaurants, ATMs, weather, traffic

information, entertainment, and

advertising Tourist

Emergency and security Emergency 112, roadside assistance, automatic vehicle location, automatic crash notification, and navigation, and routing

All

Verticals

Tracking Mobile workforce management,

elderly, children, friend finding, fleet management, asset tracking, and location-based games

Consumer

Corporate Zone-based billing Home zone, shared zone (e.g., offices)

and other zones (e.g., airports and

stadiums) Consumer

Source: Gartner (2001)

Table 7 Segmentation of mobile location services

MLS Revenue Forecast

Business analysts forecast approximately 103 million MLS subscribers in Western Europe by the end of 2006, representing a 31% penetration of the mobile subscriber installed base.

An MLS subscriber is defined as any mobile subscriber that uses MLS services at least once per month. Revenue from MLS is forecasted to reach € 12.2 billion by the end of 2006 (see

20 Home zone tariff from O2

Western European MLS Revenue, 2006

Source: Gartner (2001a)

Billing

Informati on

Tracking

Emer-gency &

security

Total MLS revenues, Western Europe, 2006

€ 12.2 billion 16%

26% 40%

18%

figure 17). The forecast includes both, business and consumer segments. In both segments, the highest revenue segment will be the emergency and security market segment (Gartner, et al., 2002a).

Although the business segment will comprise only approximately 14% of the totally installed base of MLS subscribers by the end of 2006, revenue from this segment is expected to account for almost 32% of the total MLS revenue forecast.

Mass adoption of MLS will not occur before 2007 because of the lack of adequate terminals and high-accuracy location technology in the networks (Gartner, et al., 2002a).

Figure 17 MLS sales forecast 2006

Barriers to Mass Marketing

Although the first location-based services were launched in Europe more than two years ago, very few have lived up to expectations. Early services have been limited to local information and mobile workforce management-type services, and are based on SIM Tool Kit (STK) and WAP over circuit-switched data links. During the past year, many of the trials carried out by operators had mixed results and subscriber acquisitions of the few available commercial services have been moderate, if not disappointing (Gartner, et al., 2002a).

Industry analysts believe that many of the prerequisites for mass-market adoption of mobile location services are not yet in place, which will inhibit market growth in Europe for another two to three years. To succeed with MLS, operators must be able to offer a broad portfolio of services with compelling applications and content that is attractively priced. Presently, there is a shortage of applications and content, particularly local and business content, although this should change with the recent release of the Mobile Location Protocol (MLP).

MLP established an open application-programming interface and should also result in a reduction of development time for applications.

Apart from applications and content, other factors that will inhibit market growth over the next two to three years include the following:

• Unavailability of terminals: the market for MLS in Europe will not develop until GPRS terminals become widely available. Industry analysts believe that GPRS

handsets will not be available in commercial quantities until the middle of 2003 (EITO, 2002, p. 197). The availability of handsets with large color screens will enhance user experience, for example, through the ability to download color maps.

Such handsets have already been available in Japan since mid-2000. A stable, reliable packet data network is also essential. It is the ‘always-on’ feature that is important, rather than the bandwidth, although many vertical applications will need higher bandwidths.

• Unavailability of high-accuracy terminals capable of providing location accuracy of less than 50 meters: although many services can be offered using basic cell-sector accuracy (approximately 300 meters in city centers), other applications (particularly those involving car navigation and security) will require much higher accuracy. An accuracy of 10 km to 20 km, which is typical for cell-sector in a rural environment, is practically useless for the aforementioned applications. Industry experts believe that EOTD²¹ and A-GPS²² phones will not become available in commercial quantities until the end of 2003 (Gartner, et al., 2002b).

• Lack of ubiquitous service: subscribers will expect to be able to access location-based services wherever they go. In particular, business subscribers are most likely to use location-based services when traveling, that is, while roaming other networks, rather than in the office. As such, operators must solve numerous technical issues concerning the interoperability of location-based services on different networks.

Interoperability issues regarding roaming between GPRS and UMTS will also need to be resolved as 3G handsets start to become available in 2004. However, given the fact that the major European MNOs operate in multiple markets, this issue is likely to be resolved.

• High prices: services need to be attractively priced. In general, mobile data services in Europe are more expensive than similar services in Japan. For example, for yellow pages directory-type applications, the cost per request in Europe varies between € 0.45 and € 1.00 (see table 5) compared with prices from € 0.18 to € 0.30 in Japan. New terminals will need to be heavily subsidized (Gartner, et al., 2002c).

• Poorly designed applications: applications should be dynamic enough to respond to the needs of the user at different times and locations, and must be easy to use, bearing in mind the limitations of small screens. Subscribers should be able to

21 Enhanced observed time difference

22 Assisted global positioning system

request the desired information in a maximum of five ‘clicks’ of their mobile phone, and should receive the requested information from the network within five to seven seconds (Gartner, et al., 2002a).

• Privacy and security concerns: subscribers need to be assured that privacy and security (for m-commerce transactions) are guaranteed. However, industry experts believe that the privacy issue is being exaggerated. This belief is supported by early operator experiences indicating that subscribers are not particularly concerned about the privacy issue. This may change as the accuracy of position determination improves (to less than 10 meters) or if operators start to sell the location information to third parties. Nevertheless, it is believed that subscribers will ultimately want to have full control of the location finding capability, and will prefer to buy handsets where this facility can be switched on or off at will.

Mobile location-based services have great potential to be successful in the future. Location services may help to overcome the greatest limitation of mobile services—the lack of user-friendliness. Depending on the user's geographical location, mobile services can be highly personalized, greatly reducing the need for users to interact with small mobile devices and giving them immediacy of use. The mobile market players are aware of this and have started to develop mobile location services.

Status quo and outlook

More than 50 mobile operators worldwide, with more than 300 million subscribers in total, are offering preliminary MLS or testing deployment in target markets. More than 2 million users are estimated to be using MLS already (Gartner, et al., 2002b). In Europe, commercial testing and trials of MLS have been ongoing since 2000. For example, E-plus and Sonera are offering informational MLS to their clients, mainly to test market interest and reactions (Gartner, et al., 2002a). In general, all market surveys on MLS performed since 2000 have generated encouraging results concerning the positive attitude of mobile users toward MLS.

In 2001, a focus-group survey performed by Gartner (Gartner, et al., 2001) in the United States indicated that more than 30% of all subscribers are willing to receive location-based advertising messages in exchange for coupons or discounts (compare chapter 3.4).

Because of the continuous evolution of wireless technologies, location sensing and awareness are expected to become common capabilities in all future devices, applications, and services. This will enable new processes and businesses and be widely adopted by mobile users.

Mobile devices will acquire the capability to sense geographical location with increasing accuracy. Devices will include not only PCs, mobile phones, and PDAs, but also game consoles, hi-fi devices, home devices, medical monitoring equipment, and on-board car equipment. By 2008, any device enabled for wireless communication will sense location and be traceable within 20 meters.

The number of MLS subscribers is expected to increase during the next few years. Among the 1.5 billions mobile subscriptions predicted worldwide by 2005, almost 40 percent will also include MLS. Location sensing will also spread to many machines and other physical objects with wireless communications capability (Gartner, et al., 2002a).

Thanks to this progressive adoption of location, the emerging ‘always on’ society will also become a ‘location-aware’ society. A new generation of location-aware applications and mobile services will appear, improving users' experience and minimizing the inconvenience of interacting with small devices while on the move. The need for location-based services will grow quickly, as soon as more people start using mobile devices to access information and data services. Combining location-aware applications with user preferences, it will be possible to personalize access for end users and optimize user experience.

Many different forces are driving the creation of the MLS market. Some are ‘push’ drivers, forcing the deployment and adoption of such services; others are ‘pull’ drivers, arising from the needs of end users or environmental conditions.

Competition:The mobile voice market is approaching saturation. Operators have to reduce prices to decrease ‘churn’ (the turnover of customers). This lowers the average revenue per user. Differentiation through new compelling services, such as MLS, is vital.

Technology: Mobile networks are evolving to a packet-based paradigm, moving from positioning to pinpointing. Multimedia messaging, Java 2 Micro Edition (J2ME) devices, body-heat batteries, fuel cells, and implants from Digital Angels are emerging. These technologies are basic enablers for the take-off of MLS.

Social trends: Mobile phones have become a mandatory lifestyle accessory in many societies, especially among young people. MLS enables new mobile communication and entertainment styles.

Security: Ongoing threats have increased anxiety about personal safety, as well as the security of personal belongings and corporate assets. For safety, people are willing to restrict privacy boundaries. This is pushing emergency and enhanced surveillance services.

INDUSTRY SEGMENT: MOBILE LOCATION SERVICES

Sales, industry rules, deal structure and user penetration

Connecting location information (POIs, business addresses ...) with actual information (events, weather, special offers ...) and user location and preferences (hobbies, age ...) to create highly customized and integrated services as:

- Mobile information services (i.e., yellow-pages, mobile travel and city guide) - Emergency and security services - Tracking and navigation - Zone-based billing

Services can be offered as:

• pay per use services

• premium services for a flat fee

More than 40% of Germans are willing to pay

> € 14/month for location based services⁽²⁾ 0

Global service sales ($ Mio)

Industry growth⁽¹⁾ Mobile Location Services axiom

Year

(1) IDC (2002), Gardner (2001a) (2) Mori Polls (2000) (3) IZT et al. (2002) Source: Author

600

5.000

12.200

Business: Poor economic conditions and increasing competition force enterprises to seek solutions that increase profitability and service quality, improve customer relationships and business process efficiency, and reduce costs.

In summary, operators will have to solve their international roaming issues if they are to offer high-value services to business travelers, particularly if they own networks in several countries. Enterprises should start examining where opportunities as well as possible threats for their businesses are, in relation to MLS adoption. When planning their mobile strategy, they should definitely include location as medium-term priority, to be tackled by 2004.

The following figure summarizes the key issues of the MLS segment.

Figure 18 Segment overview mobile location services

In conclusion, this market segment offers excellent growth opportunities. Despite limited industry sales in the short term and technical obstacles such as the introduction of new communication standards and the limited availability of suitable handsets, barriers to mass marketing are only temporary and can be solved within the next 12 – 24 months. Already high interest in location services of more than 60% should let the market penetration rise up to 40% by 2006 and revenues up to more than € 12 billion. This offers an interesting market perspective for the case-study companies, even when they have to cope with technical and sales problems in the short run. How the two case study firms manage these challenges is covered in the next section.