Asia Leads the World in Wireless Internet Technology, Markets
Madanmohan Rao reports from the Wireless Internet World 2001 conference in Singapore.
A new breed of players is arising from the ashes of the first generation of dotcomsmore focused, more result oriented, and more targeted on emerging technologies like the mobile Internetthe mdotcoms.
And the largest and fastest-growing markets in the world for the wireless Internet are right here in Asia, particularly East Asia. "Asia is beating Europe and North America in pure wireless markets and will lead in the wireless Internet as well," said Emmanuel Sauquet, Asia director of wireless product solutions at Nortel Networks, at the recent Wireless Internet World Asia 2001 conference (www.internetworldasia.com) in Singapore.
Wireless communication standards and capabilities are evolving rapidly across the spectrum, from 1G (voice only) in 1979, 2G (GSM/TDMA, with speeds of 9.6 to 14.4 Kbps) in 1992, 2.5G (GPRS, with speeds capable of 115 Kbps in 2001; EDGE, capable of 384 Kbps, in 2002), and 3G (WCDMA, 2 Mbps) this year.
The wireless Internet industry is also moving rapidly beyond WAP. "WAP has been one of the biggest failures in the industry. Wireless Internet has to be a real multimedia experience, not just a few lines of text," said Sauquet, though WAP certainly has its share of the faithful.
"WAP is complex to set up and slow to use. It has discredited the industry," argued Sauquet.
The paradigm of the 3G world will be any device, any network, any content. "As for devices, we will see both a convergence and a divergence," he said.
Dedicated devices will soon converge between the home and the office environment in a Swiss Army knife fashion, as handheld computers double as cell phones and even digital cameras. At the same time, there is a divergence of devices according to functionality: communications (pagers, phones), computation (PDAs, PCs, palmtops, notebooks), and entertainment (cameras, games, MP3 players).
New opportunities are arising for start-ups and big operators along the wireless Internet value chaininterface devices (voice, stylus, and earpieces), content, m-services, aggregation, and systems integrationespecially in bridging networks, security, billing, and customer care systems. "There will a marked difference in markets, needs, applications, and devices," said Sauquet.
Revenue streams will accrue from m-commerce, entertainment, news, location-based services, messaging, intranet access, and Internet browsing. "The interesting game will be in the overlap between m-dotcoms and operators along the new value chain," Sauquet said.
The three trump cards that operators hold include location data of customers (for pitching location-based services, for selling this data to other service providers), billing relationship (one consolidated bill, transaction fees), and customer databases (demographics and usage).
"The networks know who you are and where you are. This has enormous leverage potential," said Sauquet. Numerous opportunities will open up for alliances, and big Internet companies will soon start partnering with the big cellphone operators.
The research firm Strategis Group predicts that the majority of Asia-Pacific inhabitants will first experience the Internet through wireless rather than traditional wired means. The global market for wireless Internet software, content, and commerce will exceed $25 billion by 2005, with more than 80 percent of the 2 billion wireless subscribers living outside the United States, according to Merrill Lynch.
The worldwide user base of wireless phonesestimated at about 600 millionalready exceeds the Internet user base of about 420 million, out of which 10 percent use the wireless Internet .
Asia has an estimated 250 million cell phone users today, increasing to 600 million users by 2005. In Asia the number of mobile phone users is double the Internet user base, and mobile units are fast overtaking fixed-line installations.
"The 3G world belongs to the Asian people," said Sauquet.
Japan will lead in 3G adoption, with services expected to be rolled out in May 2001, followed by Europe and other parts of Asia in 2002 and the United States in 2003. Japan, South Korea, and the Scandinavian countries are thus in the lead; the other surprise mover in Europe in Spain, which is aiming at rolling out 3G services in August this year.
South Korea has 27 million cell phone users, out of whom 15 million use the wireless Internet for applications like stock trading, said Greg Tarr, chief investment officer at M-Werks Mobile Internet Fund in South Korea.
Korean companies are also looking to form tie-ups with wireless Internet players in other major international markets like Brazil, which share characteristics similar to some Asian countries.
The challenges for start-ups, operators, and investors lie in increasing ARPU (average revenue per user), on resolving standards issues so that one single device can be used in multiple international telecom circles, and in recovering carriers' 3G capital expenditure costs for technology and licenses.
"For start-ups to succeed in the long term, they must be able to scale outside region while also having demonstrated success with at least one local blue-chip customer. A multinational management team also helps," Tarr said.
Seoul-based SK Telecom and Japan's NTT DoCoMo are players to watch, as is Finland's Sonera. Other venture capital plays include monetizable applications such as gaming and security.
"Technology companies also need to develop solid core intellectual-property-rights strategies. They need to tap into stock markets around the world. For instance, 120 Israeli companies are listed on the Nasdaqbut only a handful from India," said Matei Mihalca, head of software Internet research at Merrill Lynch in Hong Kong.
Asia also has extremely high turnover in new models of cell phones. "In Japan, cell phones are changed by users every three to six months as compared with an average of nine months in Hong Kong," said David Almstrom, vice president of Ericsson China.
China had 85 million cell phone users at the end of 2000 and will exceed 100 million by the middle of this year. China also has an estimated 22 million Internet users today and is expected to cross the 100-million-user mark in 2004, according to Almstrom. "Mobile Internet will be the key to accessing cyberspace in large Asian countries like China," he said. A record-breaking 10 million SMS messages were sent out on Chinese New Year's Day earlier this year.
New complexities are arising in tracking the usage of prepaid cards and in shared handsets, said Almstrom.
Numerous start-ups are emerging in the wireless Internet space, such as Linktone, Wcities, ByAir, NewPalm, and RedCyber. One of the more innovative players here is Hong Kongbased Black Octopus, which is building middleware for two-way gateways between the 200 million ICQ users and the 500 million GSM users around the world.
ICQ is a killer applicationbut is hot only when you're on your PC. Mobile users, however, are always on, according to Steve Haslett, CEO of Black Octopus.
"The reply path to an ICQ message sent to a mobile user will entail making a call, and the size of this market is enough to make any cell operator sit up and take notice at the ARPU numbers. Very little direct revenue is reported for ICQ sites, but SMS is already an $18-billion market," Haslett said.
"The key is to leverage buddy listsof friends, team members, colleagues, and other community members. People are more likely to reply to a message from a friend than from other people. Messages from friends will be the killer content on cell phones," said Haslett.
Fifty billion instant messages on PC platforms were sent in December 2000; 20 billion SMS messages were also sent in the same month. SMS messages are expected to mushroom to 100 billion per month in 2004, according to Haslett.
The company is expanding across Asia and Europe. "Our business model is to sell it free to one operator, and the next one will have to pay up to catch up fast," said Haslett.
The United States has a very high installed base of PCs and has not paid as much attention to mobile Internet content. This is beginning to change, with teens and corporate mobile users (CMUs) coming on to this, Haslett observed.
In addition to the consumer market, another exploding sector is the wireless LAN (WLAN) market, which is expected to grow from $624 million in 1999 to $3 billion in 2002.
Kent Ridge Digital Labs and Ngee Ann Polytechnic of Singapore have incubated WLAN start-ups like yLez Technologies. Other players here include WenEdge, Earth9, Edge Matrix, and Vivid Technologies.
"We offer mobile service platforms across networks, and we operate in middle space. To scale globally, you have to have a global product," said Adrion Stewart, cofounder of Singapore-based Edge Matrix, which has offices in India, Hong Kong, Australia, Taiwan, and Malaysia.
Another hot technology direction is Bluetooth, which focuses on low-power wireless delivery of content and services for the so-called last meter. Eleven million Bluetooth units will be released in 2001, accounting for revenues of $2.5 billion, according to market research firm Frost and Sullivan.
Launched by a consortium of information technology and telecom companies in February 1998, Bluetooth came out with Spec 1.0 in July 1999 and Spec 1.1 this past February.
"Bluetooth has over 2,000 adopter companies, and industry acceptance is increasing fast," said Ajith Narayanan, engineer at the IBM Emerging Technologies Centre, Singapore. IBM's labs in the United States, Japan, and India are collaborating on this front.
Typical Bluetooth communication ranges for device discovery and service recovery protocols are less than 10 meters (33 feet), and frequency hopping prevents eavesdropping.
"Within enterprises, Bluetooth has a lot of potential for conferencing, badge checking, and inventory monitoring. There are huge growth opportunities for the personal area networks," said Narayanan.
There is also a huge market for voice-enabling wireless Internet applications. "Ninety-two percent of users prefer to access the Web in their local language," said Pascale Fung, founder and chief scientist at Hong Kongbased start-up Weniwen, which integrates Web functions and VOXML with IVR systems to create voice browsers. "China is the world's third-largest telecom market," said Fung.
The m-landscape is covering new turf and furiously offering up new jargon such as LBS (location-based services), which in turn are divided into m2s (mobile to static), m2m (mobile to mobile), and s2m (static to mobile).
"We use a location server, application server, and content server to leverage geocoding techniques and provide yellow pages locator information, routes, maps, and other services that are critical for these m-platforms," said David Singer, vice president of Gravitate Inc.
The company offers platforms called CLOUDS (client locator and user discovery system) and LEAP (location-enabling application platform). "Location is the killer app in m-space," said Singer. Attention should be paid, however, to issues like protecting user privacy, he warned.
Some of the more popular wireless Internet services include real-time stock quotes, stock trading, weather updates, traffic alerts, sports scores, flight confirmation, news flashes, currency conversion, online yellow pages, games, m-banking, and other location-based, time-sensitive information. For business users, sales tracking for mobile salespeople via intranet is a useful application.
"But it is absolutely clear that for the wireless Internet services market to really take off in a country, there will have to be close cooperation between carriers, handset companies, content providers, and m-service companies that will have to work together," said M-Werks' Greg Tarr.
Japanese telco NTT DoCoMo, whose i-Mode wireless Internet service is the world's leader, has got its business model perfectly right, according to Tarr: revenues are proportionately shared with the content providers. In other markets, operators even expect content providers to pay to get featured on their networks, he lamented.
In sum, then, the United States may have started off the global Internet race in the PC era, but East Asia currently leads in the mobile Internet race. The International Telecommunications Union (ITU) predicts that the Asia-Pacific region will ramp up Internet-enabled wireless phones before the rest of the world does and that the region is poised to become the world's mobile powerhouse.
The ITU also predicts that by 2010, more than 50 percent of all mobile-phone users in the world will be in the Asia-Pacific regionup from 35 percent in 2000. Hong Kong, Japan, South Korea, Singapore, and Taiwan now have more mobile subscribers than wireline subscribers.
But the ITU also observes that the rest of the Asian countries are not moving as fast, and many have restrictive government policies in this regard.
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