Cingular takes the plunge

Mobile commerce might not explode for another two to four years, yet the intense competition in the wireless space may encourage carriers to jump on it today. Cingular Wireless is the first to join in with its DirectBill micropayment solution that allows customers to purchase low-cost digital goods such as ringtones via their wireless phones or the Internet and be charged on their monthly wireless phone bills.

While Cingular may have gained first mover advantage with this service — which is expected to evolve to include more complex transactions — the carrier may want to ensure it does not take it beyond its customers' current comfort levels.

A Forrester Research report suggests that it took nearly two years for people to gain the necessary confidence in Web-based e-commerce to begin making purchases online. Of course, as the Web matured, it did not take as long to win consumer trust in online transactions. The same type of learning curve could occur with m-commerce (see figure).

For now wireless carriers are exploring what can be done today to help drive m-commerce tomorrow.

“Our solution will revolutionize how people use wireless devices,” said Eric Burger, director of data content and partnerships for Cingular Wireless. “We see this as just the beginning.” The carrier expects eventually to enable customers to wirelessly purchase downloaded games and MP3s as well as soda and snacks from vending machines, Burger said.

However, the latter could take longer to come to market because implementation work on the technologies that will help make it happen, such as Bluetooth, has yet to be completed. In addition, business models for m-commerce remain unclear.

“There are issues when a carrier acts as a commerce enabler,” said Adam Zawel, program manager of mobile commerce strategies at The Yankee Group. “It is safe to charge for ringtones, and there is no significant change to financial risk. When getting into hard goods, it is less clear.”

While Cingular claims it currently is working through liability issues that might arise when it allows customers to make wireless payments on hard goods — which could be more complicated because third party merchants will be involved — Burger stresses that, for right now, the company is focused on keeping things simple.

“Today our solution [only] is for low dollar amounts,” Berger said. Customers will have a $20 purchase cap each month when using the DirectBill solution.

“This is an important step and is encouraging to see, although it is early on in the market,” said Andrew Cole, principal analyst at Adventis, who also follows m-commerce closely. “I do see concerns for latent demand in market for these services. Still, we are starting to see evidence that applications are coming.”

However, Cole said that some carriers might hold off on rolling out m-commerce services until the market matures.

“This [announcement] won't change carriers' plans,” Cole said. “Everyone recognizes that this is an early-stage market.”

m-commerce is taking off in Europe, with some carriers allowing customers to purchase event tickets from their wireless phones via short messaging service technology, Cole said. “Hopefully we can start using messaging technology to do similar things here,” he said.