CHAIN OF COMMAND: Wireless operators grapple with new value chain

The tables have turned for wireless data. Last week's Wireless I.T. show in Santa Clara, Calif., did not revolve around increasing wireless data speeds. Instead, the industry discussed new challenges.

"The issues facing our customers are all business model- and partner-related," said Alain Rossmann, chairman and CEO of Phone.com.

In the past, the model has been simple: A customer makes voice calls and pays the operator for use.

"With the Internet, the value chain changes click by click," said Steven Spencer, director of wireless Internet applications at Lucent Technologies. Each time a user visits a revenue-earning Web site, the site earns revenue from different sources - such as advertising or e-commerce. The wireless operator wants to secure a piece of that revenue, whatever the source.

"We hope to find a way to extract a percentage of the e-commerce flow," said Dean Sirovica, director of strategic technology, Internet systems and services for Vodafone AirTouch. "There is a big fear that we don't want to be pipes."

Wireless operators believe that by offering unique information to application providers, they can charge them for access to customers. That concept already is beginning to play out. @mobile.com has developed a service that sends users information about the closest Starbucks, for example. Starbucks pays @mobile.com for the service because it drives customers to its stores. @mobile.com then shares that revenue with its operator partners on a per-transaction basis.

Unlike players in the wired Internet world, @mobile.com can't reach the customer without establishing a relationship, so it makes sense to pay the operator for that access. "The content guys can't go straight to the end customer, so they have to share," said Mike Buhrmann, CEO of @mobile.com.

Lucent premiered a gateway at the show that helps operators attract application providers and market some unique information they own. The gateway allows application providers to access information such as customer location, device type and activated features. SignalSoft is an application provider that developed a product to use the gateway. Its local.info service allows customers to use mobile phones to find nearby restaurants and access other location-sensitive information.

InfoSpace.com showcased a new service that allows operators to build their own branded Web and phone portals. The company helps operators sell ads on their sites and then splits the revenue with carriers. The platform also allows operators to offer unique services to avoid being commoditized like wireline ISPs. "No one wants to be a wireless ISP," said Steven Shivers, director of business development for InfoSpace.com.

InfoSpace.com's platform integrates operators' information so that with one query, a customer could receive information on the closest movie theaters, schedules, reviews, directions and nearby restaurants.

Saraide has a similar service, which lets operators combine their features of location and time to offer services unlike those that an Internet-based portal could offer.

These platforms will allow wireless operators to offer more compelling services than the Web-based portals they now compete with, but some believe the operators will have to partner with the portals. "It's like they're all racing for the same window, but they all can't fit through," said Arno Schmidt, vice president of wireless Internet marketing for Nortel Networks' wireless solutions group. He warned that companies such as Yahoo! will approach wireless operators to buy airtime and offer their own branded services to customers. This puts operators in a difficult position because they won't want to turn away a potentially large piece of business, but they also won't want to add a potentially formidable competitor.