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The U.S. Wireless Web - A Year in Review
By: Dave Mock
Over the last year in the US, a new era of mobile freedom has begun thanks to burgeoning
wireless data networks. The front-runner of the industry, SprintPCS, launched its Sprint PCS
Wireless Web service in late September 1999 and was soon followed by all other major
operators. These systems are continuing rapid expansion to offer business users and
consumers a wide array of services that compliment the standard voice communications
they've grown attached to over time.
But while the revolutionary combination of voice and data capabilities in a single device caught
the attention of the entire industry, it's still unclear just how valuable the data services are. No
one doubts that the wireless internet is the logical next-step in the evolution of services
provided through mobile wireless handsets. But the value created by these capabilities and the
consumer's willingness to pay for them is still an educated guess at best. Some early adoption
data is now being reported by the carriers themselves, but the usage statistics are noticeably
absent, so the whole picture is still murky.
The subscriber numbers to date are the most prominent statistic available from the carriers
who are actually providing the wireless internet access services. Of the six major, nationwide
service providers in the US, only the top two give a clear picture of their wireless data
subscribers. By the end of calendar 2000, SprintPCS claimed over 1 million Wireless Web
users while AT&T Wireless claimed 496,000 PocketNet users. Verizon states that they have
750,000 wireless data customers, but it is unclear whether this number is strictly for their
Mobile Web Internet access. Nextel is believed to have somewhere around 300,000
subscribers for it's Nextel Online service, but hard numbers have yet to come from the
company. Cingular and Voicestream are still a little behind in the wireless data game, just
getting their services launched late in 2000.
Unfortunately though, the adoption rates for wireless data services do not give anywhere near
a clear picture of the actual usage patterns. While SprintPCS is clearly the leader in signing up
wireless web users, less than half of their data subscribers actually paid for the service in the
3rd quarter, so it's probably safe to say that this trend continues today. Until most of these
carriers spin off their wireless business in IPOs this year and/or improve their reporting
metrics, the picture will remain clouded.
Taking a detailed look at the leader, SprintPCS, we see several interesting things. Sprint's
Wireless Web service is a flexible, circuit-switched WAP service (through IS-95 CDMA) that
enables access to HDML or WML content on web sites. They are partnering with portals and
content sites at a furious pace, filling the newswires with several announcements a day in
some cases. This big push into wireless internet access is also evident in the dozens of phones
they offer with the capability already built in. Most other carriers have only a few data-capable
handsets.
Their promotion history also gives interesting insight to their success in signing up users.
They've offered one of the sweeter deals to date: 6 months of Wireless Web service at no
charge. Consumers shopping at SprintPCS stores are pushed into the deal by eager salesmen
with an obvious incentive to sign up data users. Even in cases where it doesn't make sense or
when the customer has no desire to use the feature, salesmen throw it in for them anyway,
just to "try it out".
These sales tactics obviously skew the statistics towards the number of users who signed up
for the plan and away from the actual use of the feature. The thinking behind this tactic is a
belief that if you give people the capability, they will come to realize how useful it is in their
everyday life. It will take some time to see whether this strategy pays off and whether casual
users are actually willing to upgrade to paying customers.
AT&T Wireless may actually have a stronger core of wireless web users since their most
popular phones are not data-capable. With only two models currently supporting their
PocketNet service, it stands to reason that their user base would be more inclined to use the
services and features. AT&T Wireless also tends to appeal more to business and high-volume
users, a group that is more inclined to embrace the new data capabilities and make use of it.
This same line of thinking applies to Nextel, crowned the unofficial king of ARPU. Their Nextel
Online service may be more appealing to their users due to the efficiencies it can provide
when coupled with other unique communication features such as the Direct Connect. The
difference though is that Nextel's handset base is already largely made up of data-capable
handsets. More than half of their total domestic subscriber base already owns the wireless
data capable version of the Motorola iDEN units. This gives them a good penetration rate of
about 4-5% even though the service is less than a year old.
But while the hard usage statistics are hard to come by, many sources have been fairly
consistent in their evaluation of the wireless data market to date. According to a recent
Accenture study on global mobile internet usage, Japan has by far the highest penetration of
users, with roughly 3 out of every 4 wireless users connecting to the internet through their
mobile handset. The United States lags with an anemic 6%.
In addition, most research and reports agree that the most sought after features by users in
the US are e-mail and messaging. These two categories are also popular among users in
Europe, Asia, and Japan. Location-based services such as navigation and weather information
are also high on the list of the most sought-after data services.
The Accenture study notes though that mobile internet users in the US are far more likely to
purchase items through their handsets. Users in Europe and Asia/Japan are far less likely to
do so. Japan also seems to be the hotbed for entertainment type features on wireless phones,
with the oft-cited popularity of DoCoMo's i-mode service. With the user demographics in the
US skewed more towards business users and away from the teen market, gaming potential is
still an unknown here.
Overall, it's a mix of good and bad news in the US mobile internet market. While adoption
rates are high and consumers are willing to try it out, the litmus test of paying for the service
is still waiting for results. It appears the industry wants to clear the adoption hurdle before
they even consider entertaining the profitability aspect of wireless data services. Another year
of service and detailed reports from the leading providers should provide a much clearer
picture of just where the hype matches reality.
About the author:
Dave Mock writes regularly for Unstrung.com, an online wireless magazine
providing strategic insight into the mobile wireless market. He also
publishes digital content covering the mobile wireless market that is sold
through a variety of distributors such as MightyWords, a division of
BarnesandNoble.com. These best-selling reports are also licensed to
corporations for internal staff training and are the basis for educational
seminars where Dave speaks to investors and industry professionals. He can
be reached at mavedock@yahoo.com
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