Anywhere but Here

Location-based services are making money for carriers in Europe and Asia while the U.S. market is stuck in E-911 implementation. But first to start is not always first to finish.

Five years ago, when the FCC (www.fcc.gov) mandated E-911, the U.S. market was the likely leader in the location space. Right now, though, “location is happening faster everywhere in the world than it is in the United States,” according to J.F. Sullivan, AirFlash vice president of marketing (www.airflash.com).

Indeed, location-based services are off the shelf in Europe and Asia with several carriers. (See sidebar on page 36.) Better yet, they are making money for carriers without any more data than is required for E-911 Phase I.

For all of their location-based problems, hope remains for U.S. carriers. With changes in their attitudes and adherence to the E-911 mandate, carriers can conquer the uphill battle. U.S. carriers will come armed with best-of-breed location technologies.

“The American market will have the most precise location technology deployed,” said Bill Dyer, Alcatel director for new ventures, intelligent network division (www.alcatel.com). “You'll see services really accelerate here before you do elsewhere in the world just because of the pervasive availability of that technology and the carriers' high interest in being able to market that capability.”

Over There

Julie Robson, Analysys analyst (www.analysys.com), said current location-based services in Europe are fairly primitive. The most rudimentary require the user to input his location, and the most advanced use cell ID data. European carriers have shown some reluctance to roll out more accurate location-based services, she said.

“Advanced services (are) available from the application developers, but those aren't in place commercially,” Robson said. “In the current climate, the operators are unwilling to make large investments in the services until they are convinced that there is money to be made from them.”

If European carriers are waiting for a better sign that location-based services will generate revenue, perhaps they don't know how lucky they already are.

“We must be upwards of 10,000 (users added) a week,” Sullivan said. “Then it's at least two uses a week, and the average use is four minutes. That's 80,000 minutes a week of new usage. Let's say it's 10¢ a minute, then it's only $5 million. It's still $5 million bigger than zero,” which is what the U.S. has right now.

In general, the most popular European location-based services revolve around weekend night life. Sullivan said that there is an almost hysterical correspondence between time and types of location-based services. He said it starts off with pub finders at the beginning of the evening. Then restaurant searches start hitting the system. About 10 p.m., it goes back to nightclubs or branded searches, where customers want to find someplace specific. Sullivan added that late in the evening, the most popular service is always taxis.

Three U.K. carriers offer location-based services: BT Cellnet (www.btcellnet.net), Orange (www.orange.co.uk) and Vodafone (www.vodafone.com). Both BT and Vodafone use cell ID, and Orange relies on user input. Chris King, Orange spokesperson, said the carrier is considering an upgrade to cell ID technology but added that issues need to be clarified, privacy paramount among them, before doing so.

With its reach, Vodafone can bring location-based services to nearly every corner of the globe. In May, the world's largest carrier launched location-based services in its Australia and New Zealand markets. That's just the beginning. Within two years, a platform including location-based services should be available to Vodafone affiliates in 30 countries, said Ray DeRenzo, Vodafone Global Platform Group director, Internet content and applications. Vodafone Global Platform is the division of Vodafone chartered to develop mobile data services.

Vodafone Global Platform isn't looking simply to offer location-based services, the plan is to make all data commerce, communications and location-enabled, DeRenzo said.

“So rather than just looking up a restaurant, you'll be able to get a review of the restaurant, make a reservation and then take that information and send it as an e-mail or SMS to a group of friends,” he said.

French carrier SFR (www.sfr.fr) rolled out location-based services two years ago with its initial wireless Internet product. Adding location services was easy, as the carrier only had to download the application to the SIM cards in its handsets.

“We use the SIM toolkit to process signal-strength information from the tower, pass that information to the location server via SMS, and the location server then runs the algorithms on that to determine the user's location,” Dyer said. “That is generally accurate, particularly in the denser metropolitan areas in Europe, within about 300 meters.”

Without mandates for location technology, foreign carriers have not faced the rigid accuracy requirements thrust upon U.S. carriers. It's no surprise that freedom makes developing location-based services easier for carriers; what may be a surprise, though, is that lack of accuracy hasn't been an inhibitor of applications. Accuracy is more important when locating widely dispersed things such as ATMs, but pinpoint accuracy is not critical for finding the nearest movie theater or Italian restaurant.

“Probably 85% of the applications that you can think of today are doable on an accuracy level of cell sector,” Dyer said.

Japan's first location-based service didn't come from the carrier you might expect. J-Phone (www.j-phone.com) was first to market with a location-based yellow pages and maps application. Developed by Xmarc (www.xmarc.com), the J-navi service uses cell ID and, if necessary, prompts the user for landmarks to determine greater accuracy. The application had a return on investment in six weeks of operation, according to Rich Neville, Xmarc product marketing manager.

“Usage did peak on the third day; we did 1.6 million map transactions,” Neville said. “After that it's been fairly even, from half a million to 1.2 million a day.”

Repeat usage has been a consistent trait of location-based services.

“People are coming on, starting to use the stuff and continuing to use it, which is probably the biggest statistic that flies in the face of people who don't believe in this market,” Sullivan said.

Coming to North America

Without E-911, U.S. carriers would have waited even longer to launch location-based services, said Robert Hegblom, The Strategis Group senior analyst, mobile wireless data (www.strategisgroup.com).

“They see it as something they wouldn't want to ordinarily deal with at this point,” he said. “The E-911 mandate is becoming a bit of a burden on them, and it's coinciding with their data services.”

He said data services are not as mature as carriers would like them to be before raising the price of handsets to cover GPS integration or before raising the price of the service to pay for costly network upgrades to handle the location element.

Carriers may find it advantageous to offer simple location-based services before delivering those with more accurate technologies.

“For us to sit here and only develop a set of services that are predicated on precise coordinates of the end user, we could be missing huge market opportunities, or we could be designing services that are so far afield that nobody is interested in them,” DeRenzo said. “You get something out, and you can learn more about the service than you ever could through focus groups or any other research.”

Jennifer Wirth, Alltel product manager for location-based services (www.alltel.com), disagrees.

“It would look like you are trying to use it for profit rather than safety,” she said.

Canadian carriers don't have an E-911 mandate, but the Canadian Wireless Telecommunication Association (www.cwta.ca) has initiated a cooperative effort to develop location technology for public safety, said Kelly Dixon, Bell Mobility general manager (www.bellmobility.com), wireless Internet and data. There's no time frame, but there soon will be cell ID-based location services, followed by more accurate public-safety services.

“We are committed to rolling out location-based services by the end of the year,” Dixon said.

It's All in the Attitude

Key differences between the United States and foreign markets create drastically different attitudes about location-based services. As foreign carriers actually witness wireless-data adoption, location-based services don't seem so far away. U.S. carriers focus too much on trying to catch up to overseas markets in a single bound, Sullivan said.

“Think of it like a basketball game,” he said. “Even if Duke is down by 18 points with seven minutes to go, they don't suddenly start throwing up 3-pointers. They systematically attack what's wrong with the game, and they do all the myriad little things to help themselves. It's very difficult to be that disciplined in business.”

Regardless of when American carriers launch commercial location-based services, their attitudes about the space have come a long way. Sullivan said that six months ago, carriers across the board demanded 95% to 99% of profits from potential content partners. In one meeting, Sullivan heard a paradox of an offer.

“I (said) ‘Listen, I've got this really cool technology, and with this technology you can build the neatest wireless data applications in the world, especially around location-based services.’ And the carrier turned to me and (said), ‘That's great, it'll be $50,000.’ (And I asked) ‘For what?’ (And he said) ‘For us to use your technology.’”

That attitude has come about-face, and once carriers survive the E-911 ordeal, it will be easier to see how important location-based services are going to be.

“There may be make-or-break services they will offer, and this (location) will be among them,” Hegblom said.

According to the ARC Group (www.arcgroup.com), global location-based services users will number 748 million by 2004. To capture their share of that market, U.S. carriers need to simplify their mindsets about location-based services.

“Carriers in this country need to focus on the user,” Sullivan said “What does my dad, your brother, her sister, want to pay for? Go build it. If you go build it, I guarantee they will come.”

Who, What & Where

Select overseas carriers that offer location-based services:

• BT Cellnet (www.btcellnet.net) — offers information on accommodations, entertainment, restaurants and traffic
• diAx (www.diax.com) — localized news and community information
• E Plus (www.eplus.de) — entertainment information
• J-Phone (www.j-phone.com) — maps from location-based yellow pages
• Mobilkom Austria (www.mobilkom.at) — users pay to be located and then access location-based services
• NTT DoCoMo (www.nttdocomo.com) — Assisted-GPS-based consumer and business applications
• Orange (www.orange.co.uk) — users can find, among other things, the nearest cash machine, gas station or hotel
• Sunrise (www.sunrise.net) — entertainment and ski resort information
• Telia Mobile (www.teliamobile.se) — location-sensitive yellow pages
• VIAG Interkom (www.viaginterkom.de) — entertainment information, including restaurant finder and reservations
• Vodafone (www.vodafone.com) — traffic information.