Cashing in on content

Mobile commerce is the Holy Grail for wireless operators, but the road to get there is a long and costly. Carriers must negotiate separate revenue agreements with each content provider they do business with. A carrier may have a revenue-sharing agreement with one provider and a one-time slot fee with another. The result is wasted time and money.

Hence, a new business is emerging. Independent wireless Internet clearinghouse solutions are being created to help wireless carriers and content providers manage relationships and reap revenue.

The Yankee Group estimates that the value of goods and services purchased via a mobile device will exceed $50 billion by 2005, up from about $100 million in 2000 (see figure). In addition, the number of people using wireless financial services in North America is expected to reach more than 35 million in 2005, up from 500,000 in 2000.

Optimistic projections aside, there are changes in wireless technology, payments and consumer behavior that must occur in the wireless Internet world before those numbers can be reached.

On the payment side, Wmode wants to simplify the carrier/content provider relationship. In February, Wmode announced its clearinghouse for wireless commerce, designed to unite carriers, content providers and, in effect, consumers.

“Just as on the wired side, carriers will be successful if they offer customers the option for unlimited use and cater to a variety of interests,” said Dennis Woronuk, president, CEO and co-founder of Wmode.

When Wmode demonstrated its ClearMode wireless clearinghouse during the Wireless 2001 show in March, carriers had a chance to further learn how such a solution could help their wireless Internet initiatives, said Emanuel Bertolin, vice president of marketing and sales at Wmode.

Content providers have been even more receptive to the concept, he said. Since launching its content provider program about a month ago, Wmode has struck deals with 11 content providers.

In processing payment transactions, Wmode's solution uses a carrier's existing billing infrastructure and consumer relationships. When a user with a WAP-enabled device links to a content provider's Web site to subscribe to the site or download content, the Web site interacts with ClearMode to authenticate the user and validate the transaction.

ClearMode is expected to begin with a pilot program this quarter, with field trials beginning in the fourth quarter.

“As networks change and carriers and content providers begin looking for additional revenue, business models will have to change,” Bertolin said. “While content providers have made deals with carriers on a flat-fee or no-fee basis today — an old Internet model — that model is under pressure. Many content providers are looking for direct compensation, and this pressure now is on carriers.”

TSI Telecommunications Services also used the Wireless 2001 show to demonstrate its clearinghouse. TSI created an event management solution with EHPT USA to enable wireless operators and content providers to negotiate compensation agreements based on usage and the value of a service rather than on a flat-fee basis.

“We believe we are at the beginning of this,” said Lisa Hutteman, director of business development with TSI. “Once carriers get further with their 2.5G networks and then 3G networks, this could trigger the fact that they no longer have airtime as a meaningful way in which to bill.”