Americans Are Taking Over Euro Mobile Market

PARIS (04/26/2000) - Europe has a technological head-start in the mobile communications market -- but North America is closing the gap fast, venture capitalists and Internet entrepreneurs heard here today at the Upstart Europe conference.

Compared to North America, Europe has benefitted from the widespread deployment of a single wireless technology standard for voice and data, GSM (global system for mobile communications). This has driven mobile phone usage to high levels of penetration and prepared the region for the widespread introduction of wireless information services -- but has opened the way to a transatlantic invasion.

"The idea that Europe is 18 months ahead may be true in terms of wireless infrastructure, but in the U.S. every Internet company is focused on this opportunity," said Jon Mandel, an associate with Goldman Sachs in London, during a panel debate on the future of the European wireless market.

European innovators are fast falling prey to U.S. companies, he pointed out.

"Phone.com has been gobbling up wireless Internet companies in Europe," he said, and the fact that Europe has a single wireless infrastructure and a bunch of start ups around Helsinki and Stockholm "doesn't mean all the value is going to accrue to European companies."

Phone.com is also one of the originators of the WAP (Wireless Application Protocol), a hot topic during the debate. Conference speakers addressed the technological, commercial and social problems facing companies deploying WAP services.

WAP has had trouble living up to the hype because of a shortage of compatible mobile phones on the market, said Johan Montelius, an analyst with Jupiter Communications. "WAP services were out last summer, but devices are coming out only now," he said. Nevertheless, he is confident that the technology is here to stay. "WAP will be strong, and it will probably survive into the third generation" of mobile phone technology, due on the market between 2002 and 2005, he added.

While Montelius predicted that gambling and chatting will be two of the biggest applications for such devices, other conference speakers told of serious business applications for the technology.

For companies operating delivery services or teams of field workers, the mobile phone can be turned into a navigation tool and resource tracking system, said Jean-Michel Durocher, chief executive officer of French Internet mapping information provider Webraska. The company is building a digital map server incorporating real-time traffic information. "We aim to turn the phone into a personal copilot," Durocher said.

Webraska began experimenting with the transmission of digital maps to mobile phones in late 1998, and since March of last year has launched location information services with three mobile phone operators, including Belgacom of Belgium in a deal announced earlier this month, he said.

WAP has enabled Webraska to use centralized computing power to analyze location information and generate sophisticated maps and information services for transmission to a relatively low-powered device.

Two thousand employees at one consulting engineering firm are using a WAP project management application from Danish Maconomy, according to the company's Chief Executive Officer Per Tejs Knudsen. The application enables staff to log time expended and report progress on their projects, using their mobile phones.

In the new economy, he said, "You don't focus on functions, you focus onprojects," and such tools enabled companies to break free from monthly reporting cycles so that they always knew the status of their projects, and could move resources around when necessary.

Although these services are already on the market, a number of issues need to be resolved before the WAP market can really be expected to take off.

"Security is an issue," said Neil Gibbons, chief executive officer of Swiss online stock price information provider FirstQuote, Inc. The company has plans to launch an online brokerage system, but is waiting for this issue to be resolved. This could happen soon: "There are (security) products coming on the market now," Gibbons said, while a revised version of the WAP standard, due in the latter half of this year, would also help. "WAP 1.2 will be important to us because it will enable us to offer order execution online," he said.

Another sticking point is the data connection over which the services are delivered. While some GSM wireless network operators, such as Orange in the U.K. are already deploying high-speed circuit-switched data (HSCSD) services offering up to three times the speed of a typical data connection, these are inflexible, according to Montelius. All you can do is make the connection and drop it again, he said.

However, advanced services such as GPRS (general packet radio service), which network operators plan to introduce later this year, will have an even greater impact on the market. "Yes, we will have more speed, but that's not really very important. What's important is flexibility," he said -- the flexibility offered by the always-on GPRS connection.

Service providers should not ignore the possibilities offered by today's technology, said Montelius, advising the audience not to overlook SMS (short message service) which allows GSM subscribers to send and receive text messages up to 160 characters. "There are over 100 million phones out there in Europe and most of them are SMS-enabled. Don't forget, it's an important medium."

Who will provide the services delivered over these channels -- network operators or third parties -- proved a contentious point. One possibility is that the mobile phone network operators will dominate.

Operators are in a strong position, acknowledged Montelius, as they controlled the gateways between the mobile networks and the Internet.

This is enough to ensure success, however, according to Mandel. "They (operators) still see this world as one where one owns subscribers. But what we don't want is an exclusive portal with content provided by mobile operators," he said. "Wireless operators need to acquire content companies."

Paying for services raised interesting questions too. Mandel painted a picture of network operators acquiring banks in order to secure wireless payments.

"Maybe they need to, maybe they don't," he said, "but it is a possibility they are considering."

But even once these technical and commercial considerations are resolved, there will be some social consequences to deal with, said Vincent Everts, CEO of Midas Consultancy. Everts met his girlfriend on the Internet: "That was in 1996, and it made me pretty excited about the Internet." But there is a risk that technology can unmake what it has made. Mobile networks can locate their subscribers to within 50 meters through his mobile phone, claimed Everts -- and next year, they will be able to offer subscribers the choice of opening up this location information to family, friends andcolleagues. "Will my girlfriend be allowed to know where I am? And if not, why not? There'll be some great discussions about this: I can't wait," said Everts, perhaps a little ironically.

The Upstart Europe conference outside Paris, organized by Tornado Insider Group, finishes today. Further details can be found at http://www.tornado-insider.com/.

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