Americans are accustomed to thinking of themselves as being on the leading edge of technology, adopting new gadgets–be they personal digital assistants (PDAs) or PCs–sooner, more enthusiastically, and in greater numbers than the rest of the world. But when it comes to wireless technology, the United States is practically a sluggard.
According to research firm Cahners In-Stat Group, the overall wireless market in western Europe will have 277.6 million subscribers at the end of 2001. That makes it more than twice as big a market as North America, which will have 134.5 million subscribers by the end of the year. But that’s nothing compared to what’s in store. By 2005, Cahners predicts western Europe will have 315.8 million wireless subscribers, while North America will lag at 223.9 million.
In mobile commerce, the story is the same. Jupiter Research predicts $22.2 billion in worldwide mobile commerce revenues in 2005, from wireless shopping, for-pay content, and advertising. Of that total, Asia and western Europe will account for the biggest slices, at $9.4 billion and $7.8 billion, respectively. By comparison, North America will account for a relatively small $3.5 billion in mobile commerce revenues, Jupiter estimates.
Europeans (as well as the Japanese) have already proven themselves avid users of short message services (SMS), sending one another wireless text messages with abandon. But Americans have been more reluctant to use SMS. Worldwide, 20 billion wireless text messages were sent in 2000, but only 750 million of those were sent in the United States, according to Mobile Streams, a United Kingdom-based research firm. (This year, 20 billion SMS messages are being sent worldwide every month.) Other wireless data services, such as Web browsing via Wireless Application Protocol (WAP)-enabled phones or wireless e-mail, have also been slow to catch on stateside.
What accounts for Europeans’ enthusiastic embrace of all things wireless? There are a number of factors, including differences in technology, the availability and expense of wired telecommunications, and variations in culture.
Setting a Standard
“One of the things that has really helped Europeans get a leg up on Americans is that everyone is using GSM–there’s one mandated standard, so there’s a common set of tools,” says Scott Goldman, CEO of the WAP Forum. GSM–the Global System for Mobile Communications–is the digital wireless standard used by carriers in Europe and Japan. “That consistency has bred a confidence in the wireless technology over there,” agrees Ken Dulaney, vice president of mobile computing for GartnerGroup.
In the United States, by contrast, consumers are faced with a bewildering array of possibilities, because each carrier uses a different digital wireless standard–Code Division Multiple Access (CDMA), Time Division Multiple Access (TDMA), or GSM. That means phones can’t easily roam from one network to another (unless you have a more expensive multiband phone). Also, for SMS messaging, the networks’ incompatibilities mean that you can’t send a text message to another wireless subscriber unless you first know which carrier that subscriber is using. In Europe, by contrast, all you need to know is the recipient’s phone number.
The Price Is Right
Pricing structures for wireless and land-line phones have also played a role. Americans have a strong incentive to continue using land-line phones, where all local calls are covered under a flat monthly rate. In contrast, American cell phone users are charged by the minute whether they are placing or receiving a call–which makes many reluctant to give out their mobile numbers, except to those they trust. In Europe, the situation is reversed. Local land-line calls are charged at per-minute rates, while cell phone users are only charged to place calls, not to receive them. That gives Europeans a strong incentive to use their cell phones as a primary means of contact. It also provides yet another incentive for the wireless Internet: Using the dial-up, wired Internet in Europe is relatively expensive, because your modem needs to place a local toll call to your Internet service provider.
The fact that wireless carriers cover smaller geographic territories in Europe makes it relatively easy for them to build comprehensive digital networks, says Gartner’s Dulaney. In the United States, building out truly nationwide digital network coverage is prohibitively expensive, which means that existing analog networks are likely to be around for a long time–particularly in low-density areas where there are only a few subscribers. Also, the smaller individual markets in Europe have allowed some carriers to be more innovative than the big American telcos can afford to be. “We still have the AT&T mentality in the United States. The carriers control our wireless future, but they provide very little insight. They don’t understand the new world very well,” says Dulaney.
A Certain Je Ne Sais Quoi
Finally, there are cultural and social differences that foster the growth of wireless in Europe. Significantly, the wide availability of mass transit means that Europeans spend a lot of time on trains–the perfect place to use a mobile phone for data services. Users can compose text messages while the train is underground, and these messages will be beamed off to their destinations once the subscriber re-emerges aboveground. Americans, on the other hand, tend to drive everywhere. That’s conducive to voice conversations (particularly when using a headset), but makes it very difficult to punch in or read text messages.
Europeans may also be more willing to use wireless data services for Internet access, thanks to their pre-existing acceptance of cell phones for voice communications. “They believe that cell phones can work all kinds of magic,” Dulaney says.
On the other hand, Americans–while somewhat slower adopters initially–may prove to be enthusiastic users of the wireless Internet once sufficiently appealing content is available. “When people discover the services you can access via WAP, I think there’s going to be uptake in the United States that will rival other regions, because people here are very productivity-oriented,” says the WAP Forum’s Goldman.
Taking Advantage of the Opportunity
Ken Hyers, a senior analyst at Cahners In-Stat, agrees that it is productivity-oriented applications and content, rather than social text messaging or location-based advertising, that will stimulate American wireless usage. “Just getting random messages saying that baby carrots are on sale at Krogers is not going to fly too well,” says Hyers.
In fact, American wireless carriers might have a slight edge over European carriers, which have recently spent tens of billions of dollars on high-tech third-generation (3G) wireless spectrum licenses. In the United States, 3G spectrum auctions haven’t even started yet, so carriers are concentrating on upgrading their existing digital networks with so-called “2.5G” technologies that provide high data rates (up to 144 Kbps) at a lower cost. When 2.5G phones and services become widely available next year, that may prove to be the catalyst that the American wireless data market needs to get rolling.
The key, for businesses interested in capitalizing on the wireless opportunity, is to focus on productivity applications that are time- and location-sensitive. For example, wireless stock trading, traffic advisories, and restaurant reservations are all well-suited to WAP phones, says Goldman, who adds that teenagers may also be a strong market for SMS services, once they recognize the services’ “entertainment value.” Hyers points out that U.S. financial companies are already experimenting with SMS: “Brokerages have discovered [SMS] is a great way to reach customers with something that is truly time-sensitive…. The kind of services that are going to take off [in the United States] are going to be very action oriented–they are going to be time-sensitive, they’re going to be location-sensitive, and they’re going to be personalized for the individual user.”
Gartner’s Dulaney emphasizes the difference between the wireless world and the wired Internet. “The developers of wireless applications have not yet understood how to build for this new medium, which requires a new paradigm,” says Dulaney. Instead of trying to re-create the wired browsing experience on a cell phone, wireless developers should look for ways to exploit the unique characteristics of the new platform, such as cell phones’ small size, portability, and lack of full-sized keyboards. For example, says Dulaney, data-enabled mobile devices can be used to notify customers of time-sensitive events, such as online auctions they’re interested in, and can provide simple menus to execute transactions, request more information, or have information forwarded to a nearby fax machine. But such applications may be some time in coming. “People took the metaphor of the PC and just shrunk it down,” says Dulaney. “And that is going to take a while to fix.”
Until the United States catches up, however, Europe remains a larger and readier market for wireless data services. In this case, at least, Europeans are the avant-garde, leaving their American counterparts in the rear.
October 4, 2001
About the Author
D.F. Tweney is an award-winning writer and editor with a decade of experience covering business technology, computers, and the Internet.
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