Digital's new dilemma

After accomplishing a major part of their digital buildouts, wireless carriers are now at a turning point. Network migration has eaten up cost and time, but carriers have faith in the promise of better services. Now they must prove they can leverage what they have sewn.

With the introduction of digital, carriers began to dramatically decrease prices. Where once the wireless-to-wireline premium was 10 to 1, it's now 4 to 1 or even 2 to 1 in some markets, according to The Yankee Group.

"As price per minute has decreased, you have to find other services that customers want," says Eric Ensor, president of BellSouth Mobility DCS.

Carriers in search of those revenue-building services realize they may have made some mistakes in the past when bundling free enhanced features such as voice mail and conference calling. Now they are looking for ways to earn revenue from some of those features and add services to increase minutes of use and the average bill.

Perception changes Today's large carriers that have invested in digital networks are focusing now on two things-expanding their footprints and differentiating themselves in highly competitive markets, says Bill Nelson, vice president of the North America region for Lucent Technologies' wireless networks group. The recent introduction of AT&T's One Rate plan, which includes long-distance and national roaming, has increased the pressure on other carriers to expand their footprints so they can compete on a national basis.

In addition, the focus is shifting toward discovering which features will differentiate a carrier and which will be profitable. This is apparent by the way customers are approaching Lucent. In the past, customers entered discussions with the company by asking about technology. Today, customers prefer to talk first about Lucent's views of user demands and market drivers, and focus on the technology later, says Lucent's Nelson.

But adding revenue-earning services now will be more difficult than carriers once planned because they sacrificed services such as voice mail in the early launch days, he says. "What carriers originally hoped for and what happened are very different."

Some digital operators weren't able to launch service as quickly as they wanted to, but this was often due to zoning issues. When they did launch, their analog competitors could compete with them on better coverage. Digital players fought back by bundling features into low-price plans. "They had to fight with what they had," says Nelson.

Now it's too late to start charging users for services such as voice mail because consumers perceive them to be free.

"As voice revenues decrease, [carriers] are finding ways to turn revenue around due to price competition," says Mike Robinson, director of marketing for Nokia. One option may be for carriers to enhance those existing free services to earn more revenue. For example, users might be willing to pay for a voice mail service that combines multiple voice mail or e-mail accounts.

When carriers introduce new services, they must avoid past mistakes. "As they bring features forward, they need to be careful on packaging," Robinson says. For example, U.S. carriers missed the boat on short message service (SMS)-a profitable and widely used service in many European countries, he says. But carriers here found they couldn't charge for SMS on a per-use basis because of the strong paging market, which charges a flat monthly fee for unlimited use.

AT&T's One Rate plan has also affected the perception of money-making offerings. "The One Rate redefines long-distance and roaming," Robinson says. Because AT&T's plan includes roaming and long-distance together, users may begin to perceive those services as free-to the disadvantage of carriers without nationwide footprints. These smaller carriers offer roaming and long-distance through partnerships and can't afford to include those services in a rate plan like AT&T's.

While carriers are looking for services to increase revenues, they are trying to get out of the price game. "We continue to emphasize the value proposition, not just price," Ensor says.

Revenue potential What are some of the services that carriers think they can make money from? Many services that operators are talking about today leverage existing offerings to reach new customer segments.

A unified voice mail service is one that carriers can use to attract and retain customers, says Mike Hobby, marketing manager of PCS strategic planning for Lucent. "Voice services are no longer exotic," he says. Because mobile voice has become commonplace, carriers must add valuable services if they hope to increase revenue.

Lucent demonstrated a voice mail capability at PCS 98 in Orlando that integrates multiple voice mailboxes, e-mails and even faxes (Figure 1). Each of the message boxes is integrated into a common user interface that marks the source of the message with an icon. Users can receive headers for messages on their wireless handsets or scroll through a list of messages on a computer. They can choose to listen to a voice mail, read an e-mail or forward e-mail or faxes to a nearby machine.

"It uses the Internet as a depository of data," Hobby says. Because Lucent relies on open standards, it can integrate multiple services for an operator from different application providers to store messages on the Internet. Operators with any air interface can use a unified messaging service as long as users can receive data on their handsets.

Such a unified service blurs the distinction between voice and data, Hobby says. With unified messaging, users read text about voice mails they have received and could even eventually listen to e-mails through text-to-speech technology. Users won't recognize that they are using a data service to access voice messages.

Lucent can now design such a unified messaging service for carriers. It will even establish relationships with Internet service providers if customers needs that link.

Comverse also offers a unified messaging platform. "We take that mailbox foundation and build services into it," says Jeffrey Schlueter, director of marketing for the Americas division of Comverse. "That's especially critical in the wireless world."

The company's unified messaging solution allows messages from a single mailbox to be accessed from a range of devices, including wireline phones, PCs and wireless devices.

Schlueter believes wireless carriers haven't yet taken advantage of the marketing value of enhanced services platforms, having been consumed to date with getting subscribers on their networks.

"Right now, carriers are going after basic access and marketing it on price," he says. "They're not making a play for the value proposition. They won't start to pay attention to that until the subscriber growth rate slows."

Carriers might disagree. Ensor says BellSouth is marketing the value of its service and is examining ways to dig for new customer segments. Rather than research and design completely new services, carriers might do better with the capabilities they already have, Ensor says. In the near term, developing services such as prepaid to target different segments will help increase penetration. In fact, wireless can't reach 40% to 50% penetration rates without those segments that prepaid appeals to, he says.

For example, carriers could market prepaid services directly to parents with college student kids or to people who want to closely manage their spending. "One size won't fit all," he cautions. Carriers must focus on segments and market to them. BellSouth hasn't yet put forth the marketing efforts to target these prepaid segments though.

AT&T is now noticing an interest from post-pay customers who want to use prepay-in addition to their regular accounts-to control spending on calls used for a specific purpose.

Part of the challenge with introducing new services is suggesting uses, Ensor says. "We've got to be clever enough to suggest how they might use our product," he says. For example, SMS could be as widely used in the U.S. as it is in Europe and Asia if U.S. carriers offered their customers some direction.

Additional enhanced services might stem from regulatory requirements. A significant amount of carrier resources must go toward meeting regulatory orders, Ensor notes, and carriers hope to turn those efforts into revenue opportunities. "It's both a challenge and an opportunity," he says. For example, complying with E911 mandates could offer the opportunity for location-based information services.

The data demon Data services-and the elusive promise of revenue and new markets-still remain out of reach of mass market penetration. But carriers continue to search for the fabled "killer app" that might make mobile data use widespread.

Some companies may continue to develop data applications to pay off investments in cellular digital packet data (CDPD) networks. AT&T recently delivered two new services to encourage use of its CDPD network.

The first offers PocketNet users what AT&T calls "live" access to e-mail. Customers can manage e-mail directly from their PocketNet devices. In the past, users could receive e-mail on their phones, but if they wanted to delete a message, they would have to delete it again when returning to the office. The new capability removes the redundant step.

As part of the new service, users also can forward e-mail to a nearby fax machine, select a phone number in an e-mail message and have PocketNet dial it automatically. Such services may encourage customers to use PocketNet more often.

Leveraging its position as provider of multiple services, AT&T also offered subscribers of AT&T WorldNet and PocketNet a monthly discount of $10 on service.

AT&T Wireless also inked an agreement with Lotus to offer wireless access to Palm Pilot and IBM WorkPad users of Lotus Domino. Those customers must have a Novatel wireless modem and Unwired Planet's microbrowser to access their Lotus Notes Mail, Directory and Calendar. With the growing number of Palm Pilot and Lotus users, AT&T has the potential to increase usage of its CDPD network significantly with this agreement.

In addition to enhancing existing data offerings, more types of data services are becoming available. Developer Spyglass is applying its Internet experience to the wireless marketplace with some new products designed to help propel data over wireless networks.

The company recently joined the Wireless Application Protocol Forum and is now introducing products that fit the WAP specification for wireless content delivery. The products include the Wireless Device Mosaic, a microbrowser that allows wireless devices to display the WAP-specified wireless markup language (WML), and the WAP Gateway Server, which compresses WML content and provides HTML-to-WML conversion to prepare content for delivery to wireless devices.

The wireless applications from Spyglass are based on its Prism technology for Internet content conversion, which the company intends to adapt as the demands for data change.

"The issue with wireless data is how it is going to evolve," says Jack Armstrong, director of Internet solutions for Spyglass and the company's WAP Forum representative. "A hybrid browser begins to open up that flexibility."

Most carriers know that the key to significant use of data services lies in simplicity. Perhaps some day when advanced technology allows them to deliver simple, low-priced services, operators may finally discover that elusive killer app. Meanwhile, they must squeeze every bit of revenue possible from their digital networks in any way they can.