M-commerce: the new "anywhere, anytime" sales channel.

As the demand for mobile phones, PDAs and handheld computers increases at a phenomenal pace, a new worldwide business frontier has been created. M-commerce is not just a variant of e-commerce, but a unique distribution channel based on the shifting role of mobile devices from purely communicational to transactional. ARC Group estimates that by 2007 approximately 546 million users will spend close to $40 billion on mobile commerce.

Applications and Business Opportunities

The growth of m-commerce is being driven by several key applications as companies look for mobile e-business solutions to reach potential customers who have "unplugged."

In retail sectors, the introduction of mobile Internet purchases has provided a new sales channel customizable to a consumer's location and individual preferences. The ability to purchase goods from literally any location and have them delivered at an agreed time can be a differentiating factor for a retail business. Mobile access to inventory listings and transaction mechanisms can lower the merchant's costs and increase stock turnover. Retailers are also benefiting by the ability to offer instant purchasing using m-commerce applications. Transponders and speed passes transmit unique signals used to verify individual profiles and credit information. Upon authentication, a receipt is printed and the customer is on his way.

Financial institutions can take advantage of the infrastructure created for retail payments to offer mobile services to their existing customers. In addition to delivering static account information such as account balances and statement histories, a number of banks allow customers to perform transactions using wireless devices. These services include transfers, bill payments, stop payments, and security trading. M-commerce banking services can be used by corporate financial experts to derive real value and competitive advantage for their companies.

Online travel services continue to develop in the wireless market. Buying tickets, making hotel or rental car reservations and purchasing business travel services are becoming easier and more cost-effective than traditional channels. Additional services such as city guides featuring local restaurants, amusement, shopping and weather information are increasingly in demand. Mobile boarding services enable airline passengers to check-in to a flight and receive an electronic boarding pass using a mobile phone or PDA. This can eliminate long lines at check-in counters and kiosks.

Mobile entertainment is a burgeoning industry with huge revenue generating potential. With the recent introduction of mobile devices that include color terminals and downloading functions, mobile gaming is one of the fastest growing business opportunities for mobile service providers. Network operators control over their subscribers puts them in an ideal position to offer network gaming systems that include communication, location and subscriber presence information, enhancing the compelling community aspects of gaming. ARC Group projects mobile-networked gaming revenues to approach $4 billion in 2005.

Technology

Companies are rapidly integrating m-commerce into their business models as mobile technologies for communications, Internet access and commercial transactions evolve rapidly.

Short Messaging Service (SMS) was created as a standard to send and receive short text messages between mobile phones between 70-160 alphanumeric characters in length. SMS is a smart service that stores messages when the target mobile device is off and forwards the messages when the unit is switched on again. Approximately 90% of SMS traffic consists of peer-to-peer text messages. The remaining 10% are mobile transaction services such as news, stock prices and weather.

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Wireless Application Protocol (WAP) is a leading global standard for delivering information over wireless devices. WAP bridges the gap between mobile devices and the Internet, delivering a wide range of mobile services to subscribers independent of their network, bearer, and terminal. WAP is similar to the combination of HTML and HTTP but includes optimization for low-bandwidth, low-memory, and low-display capability environments necessary to deliver information to mobile devices.

I-mode is a proprietary packet-based information service for mobile phones that delivers information such as mobile banking and enables exchange of e-mail from handsets on the PDC-P network. I-Mode has dominated the Japanese market and is being considered a success story in the world of m-commerce. The service is based on the Compact HTML (cHTML) markup language, which is basically a scaled down version of HTML. I-mode's transmission speed is just 9.6kbps, but fast enough for its required services.

Bluetooth is a short-range radio technology aimed at simplifying communications among computing devices and associated peripherals, including laptop and mobile computers, PDAs, and mobile phones. It uses the 2.4 GHz spectrum to communicate a 1-megabit connection between two devices for both a voice channel and data channel. A simple example of a Bluetooth application is updating the phone directory, calendar, or to do list on a mobile phone without having to enter them manually.

Currently, 2G technologies such as GSM, CDMA and TDMA dominate m-commerce communications. The Global System for Mobile communications (GSM) is the most widely used 2G digital mobile phone system and the wireless telephone standard in Europe, present in more than 160 countries.

Next-generation 3G wireless technologies are increasingly moving into the spotlight worldwide as telecoms gradually shift from 2G to the 3G infrastructure. 3G is the collective term used for several engineering proposals to make wireless networks more data-capable than first generation analog, and second generation digital cellular networks. Some of the challenges of network speed and volume capability are addressed by these networks which must be able to transmit wireless data at 144 kilobits per second at mobile user speeds, 384 kbps at pedestrian user speeds and 2 megabits per second in fixed locations.

Using a new spectrum with a 5-MHz carrier, 3D technologies such as WCDMA provide data rates up to 50 times higher than GSM networks. 3G also promises extensive multimedia capabilities and location-enabled features. With 3G, users can browse the Internet during a voice conversation, or send a fax while taking part in a videoconference. 3G promises a truly global wireless system in which users could conceivably network with anyone from anywhere in the world.

There are a variety of mobile operating systems currently competing in the fast-growing mobile phone and PDA platform market.

Symbian was formed from Psion Software by Nokia, Motorola, Psion and Ericsson. Their EPOC system includes a suite of applications, customizable user interfaces, connectivity options and a range of development tools. Symbian's Series 60 features a large color screen, easy to use interface and applications that make it ideally suited to support new mobile services, such as rich content downloading and multimedia messaging services.

Microsoft has developed a lighter version of its Windows operating system called Windows CE, created especially for small palm-size, hand-held PCs and other consumer electronics devices. The 3.0 version, dubbed Pocket PC, features greater stability and an upgraded interface.

Wysdom MAP-OS aggregates the functionality that resides within a mobile operator's existing network and makes it possible to develop innovative services and applications in a scalable, streamlined process. MAP-OS enables the development of services and applications by third parties that go beyond simple device functionality.

Keys to Success in the Wireless World

Clearly established, pragmatic value must be established for the prospective mobile customer. Wireless users look for specific information or services rather than just "surfing." Choices should be limited with predictable availability and an appeal to impulse buying with no lengthy and in-depth decision-making.

M-commerce success requires payment methods characterized by ease of use, security, speed and convenience. The majority of transactions at present are for less than $10, or "micropayments". By 2007, it is forecast that "macropayments" of $10 or more will represent close to 20% of m-commerce payments. As networks support more sophisticated billing methods and users feel more and more comfortable making purchases from their mobile devices, content downloading and the remote purchasing of tangible items like books and CD's is expected to develop rapidly.

A significant challenge for companies engaged in m-commerce is to provide a secure environment. Key security features include:

Confidentiality: Electronic messages must be protected via encryption and only visible to the intended recipient.

Authentication: Communicating parties must be confident of each other's identity.

Integrity: Communicating parties must know that data is not being tampered with.

Digital signatures and encryption must be used so that an order is not changed after the moment of purchase. As important as security itself is the perception of an adequate level of security by the user.

Enormous advances in wireless communications have ushered in a new era of opportunity for business productivity, efficiency and enhancement of competitive advantages. M-commerce has emerged as a new "anywhere, anytime" sales channel and is set to explode in the coming years as mobile devices more efficiently support highly personalized and time-critical activities for consumers and enterprises alike. The convergence of mobile technology and the Internet will continue to revolutionize the way businesses interact with consumers and with each other.