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Report looks at the prospects for the convergence of mobile and Internet technologies and 3G take-up

23 October 2002 News

The International Telecommunication Union released its first mobile/Internet index as part of a research report entitled 'Internet for a Mobile Generation'. The index measures how each of more than 200 economies are performing in terms of mobile and Internet technologies and how likely they are to be able to take advantages of new developments in this field.

"Individually, mobile communications and the Internet have been the two major drivers of consumer demand for telecommunication services in the last decade of the twentieth century. Put them together and you should have one of the major demand drivers of this century," states Dr Tim Kelly, head of ITU's Strategy and Policy Unit. However, he cautions that while it takes "no great leap of imagination to believe that the convergence of mobile communications and the Internet will produce something big, it may take longer than we think."

Exploiting the new opportunities offered by the mobile Internet will require high levels of capital investment. For example, knowing the location of a particular mobile user, combined with targeted advertising, may make it possible for local businesses to attract users that are passing by. Investors want to see concrete evidence that a market for mobile Internet services exist. But operators cannot provide that evidence until they build the networks. Because of this 'chicken and egg' situation, the mobile Internet could potentially be the biggest gamble the telecommunication industry has ever taken on.

Nonetheless, the combination of mobile and Internet technologies, such as SMS and i-mode, is already transforming the way people interact and the way business is done. Some 24 billion SMS messages were sent worldwide in the first quarter of 2002.

Determining which economies are likely to provide the most fertile ground for the development of the mobile Internet is not an easy task. Countries that are doing well in terms of mobile services (for example, the Philippines) may not be doing so well in terms of Internet penetration. On the other hand, countries that are leaping ahead on Internet use, such as India, may have a sluggish mobile sector. Again, countries that have the most potential in terms of infrastructure development may be the most closed to foreign investment. It should also be noted that although the economies that score highest in the report, like Hong Kong, Denmark or Sweden are all high income, there are many low, lower-middle and upper-middle income economies doing much better than their relative GDP per capita would lead one to expect.

Market trends

There are a number of factors that will enable the rapid growth of the mobile Internet. First and foremost, the timely deployment of high-speed 3G networks will be a crucial catalyst for the generation of diversified multimedia services. Second, the availability and affordability of adequate Internet-enabled handsets will be a prerequisite for mass penetration. Finally, the development of unrestricted and non-proprietary mobile Internet content needs to be actively fostered.

Mobile phones are already pervasive in all major developed economies and in an increasing number of developing ones as well. However, with the advent of the mobile Internet, wireless gadgets are set to invade new areas of personal life and work.

The average car now has as much computer power as some of the early Apollo rockets and most families in developed nations own dozens of microchips embedded in different devices. The next stage of development is for microchips to gain the ability to communicate with other devices and to report on their location and status. Such is the vision of 'pervasive communications'. By using existing technology (eg, nanotechnology, location tracking systems) over new networks, the mobile Internet can make this happen.

Consider the following scenarios:

* Future medical devices may be so small that they could be swallowed to provide health status reports from inside the body, for instance on blood pressure or on the workings of a heart pacemaker.

* Miniaturised GPS chips could be located in cars to assist with road charging schemes. They could record, for instance, whenever a car uses a particular road, or crosses into a particular urban area, allowing the motorist to pay on a monthly basis rather than having to queue to pay at toll stations.

* Every valuable item we own may in future have a positioning device embedded in it, to help track it if it is lost or stolen. People may no longer invest in insurance against theft but in private security companies to trace and recover stolen goods.

* Inventory management systems will help factory-owners to track the location and quantity of spare parts by pinging out messages to 'intelligent bar codes' that are added to each item that passes through the factory.

Teenager-driven

Teenagers appear to be the most avid users of the mobile Internet, notably in markets where it is at an advanced stage of development, such as the Republic of Korea and Japan. In Korea, for example, as much as a third of a user's mobile phone bill stems from data services. The major uses of mobile data tend to be 'flirtatious and frivolous', such as downloading cartoon animations or 'avatars' to represent the user when entering chat rooms or sending messages.

One challenge for telecom operators is that teenage users generally have less to spend than older age groups. But while teenagers may send more text messages than they receive, they probably receive more voice messages than they send. Thus they are a more profitable market than their disposable incomes would suggest. However, the report points out that if teenagers are driving the market for the mobile Internet, it may be because advertisers are ignoring other segments of the market. The 'grey market' (senior citizens), for instance, can prove to be a highly profitable one. The Japanese 'Raku-Raku' (Easy-Easy) handset with a bigger keypad and an easier-to-read screen proved an instant hit in Japan, selling more than 200 000 units in the first two months.

For more information on the report see http://itu.int/mobileinternet





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