Mobile Revenue Generation
by John Whelan.
(DOT.IE Magazine, 20 May 2001)

Mobile operators are under greater pressure than ever. Intense competition has lead to severe downward pressure on voice traffic margins and WAP has failed to capture the customer's imagination as a result of unrealistic expectations, fuelled in part by the operators although the problems with the technology should be blamed on the underlying technology (data over GSM) rather than on WAP itself.

Now the emergence of higher speed connections and the promise of 'always on' access through GPRS (general packet radio service) and the ongoing popularity of the short message service or SMS are combining to show the way forward. The timing will vary depending on the location of the customer, but many Europeans will have access to GPRS services this year. Network rollout has commenced in UK, Denmark and Germany and it appears that operators have also learned the lessons from their marketing of WAP. GPRS is not being over-hyped and the first phase of the service is being targeted at business users, a sensible approach that has produced mostly positive feedback from early adopters. But there are several barriers to be overcome before it can be introduced into the mass market.

Firstly, the 'always on' connection is proving somewhat elusive in practice. In tests conducted by Alatto we have experienced connection times of up to 20 seconds as the norm. Secondly, there is a severe lack of handsets - only Motorola has produced a commercially available handset in significant numbers. Thirdly, there are many questions marks over the cost of using the service. For example, German operator T-Mobile is charging DM69 for one megabit of data where a single MP3 track could require three times that amount of data. There are going to be few takers at DM217 for a single!

However, there are revenue opportunities for operators. Several applications offer the possibility of generating significant revenue, such as gambling/gaming and messaging (messaging being the ultimate 'killer application').

You might wonder why betting is considered such a sizeable opportunity. One reason is that the margins are so high - research from Merrill Lynch shows that the average profit margin for those providing horseracing betting services is 20 per cent, while lotteries are even more lucrative with an average mark-up of 35 per cent. It is estimated that one per cent of global consumer spending was made (or lost!) through gambling last year. If the mobile operators can tap into that market the search for sources of revenue will have found at least one destination.