Proprietary Software

Custom, proprietary software is the answer to creating service differentiation in your wireless market. If the customer leaves you, he loses his software. As innovative as it sounds to be able to browse the Internet with a smart phone, such a service doesn't solve the differentiation problem. So you need to find something that does.

This is what the "Internet in your pocket" vendors have put on the table to wireless carriers so far: Customers activate a wireless Internet phone (a smart phone) on your network for which you are supposed to provide unlimited airtime at a fixed fee. The applications are freely accessible over the Internet, both from wired and wireless devices. The applications are created by third parties that somehow sell directly to your customers.

That is not the vision of value-added services for the wireless industry. The market is too young for this value proposition. Third-party developers are not going to create applications for smart phones, smart-pagers, short- message-service-enabled phones, or PDAs with attached phones for two reasons. First, there are too few of any one device in the market to justify the speculation. Second, there is no clear marketing route to the few people who actually have purchased these devices.

Even if there were an abundance of browsable sites for HDML phones, Nokia 9000 client-server applications were plentiful and CDPD-equipped Palm Pilots had libraries of solutions to choose from, where would be the service differentiation? There is no incentive for a wireless carrier to offer a complex wireless terminal device that accesses the exact same application as its competitor. It reduces the value proposition to price, which many are trying to avoid.

All of those carrier executives who pound the table and say, "We're not in the application business; we're just the pipe," had better hold on. There is a new line of thinking, which, if properly executed, can create mainstream application products that will tip the scales of value.

Custom-Branded Applications Launch your own applications that tie customers to your network directly. These are branded applications that remind customers that they are using your service. If customers travel out of the home network, the applications still work. But if the customer churns, the applications are gone, even if the device can be reactivated on another carrier. Those applications will not run without a direct connection to your wireless network, even if the applications are client-server, and the customer purchases a software license and obtains code for his PDA or PC.

This is how Internet-access providers lock in their customers, and I suggest the wireless industry follow this model: Think of an analogy between carriers such as AT&T Wireless, Bell Atlantic and Sprint PCS, and Internet access providers such as AOL, CompuServe and MSN. The popularity of the World Wide Web (WWW) is both good and bad for a company such as AOL. The service draws users to the space, but the more comfortable users get, the less they feel they need AOL.

Before the web got really hot, AOL and CompuServe battled it out with their applications, which included moderated news groups, access to stock information and live chat rooms. Users could send e-mail between the competing systems, but only members could receive the applications. If a customer churned from CompuServe to AOL, he lost access to the discussion groups that were CompuServe-only.

I predict a wireless carrier will present a custom interface with access to custom content and custom applications and only minimal access outside that confined space. Each carrier will battle it out with its own suite of voice and data services. Ultimately, customers will decide among carriers' services based on their quality.

The branded application suite is launched from a custom viewer, proprietary to your network. That viewer receives content from any number of public sources but repackages that content in a proprietary way. Private content (voice mail, real-time billing, available services, rate plans and coverage maps) naturally is tied into the platform as well. A copy of that viewer can be placed on the web because a user name/password protects access. (A customer who has churned would lose access.)

The word "viewer" is used loosely in this context. I'm trying to draw the analogy between the CompuServe front-end and what a wireless carrier should offer. You must realize that a wireless carrier can present its services on wireless devices with dramatically different capabilities. The viewer, then, can be on a smart phone, a 2-way pager, the WWW or even an audio-only interface.

How It's Done This strategy can be used today, and a few carriers are taking advantage of it already. Let's say that you want to provide a financial investment application on your network, and you have decided on two target platforms: the Palm Pilot connected via cable to a digital phone and a CDPD-enabled HDML browser phone.

Conventional wisdom says that in this case, an HDML-based web site should be created, and both the Palm (with an HDML browser) and the smart phone simply should point to it. That application could be created on your information server or out on the Internet at large.

Here's the better way. You assemble a focus group of potential users for this application. Through a series of interviews, you identify a set of user requirements that will make the application compelling. You then go into the public software development community and secure exclusive contracts for the development of these applications, choosing one developer to build the Palm Pilot interface and another to build the HDML interface. The project manager ensures that data can move freely between these two interfaces as well as others down the line.

The Palm developers create an application that will reside on the Palm Pilot itself.

It has a moving stock ticker at the bottom of the display, and it shows the carrier name in the top left corner and selected index values on the right. An over-the-air update brings in top news headlines, graphics and display ads. The transmission system is highly optimized for this particular application and your particular digital transmission technology. (You don't care if it's standard; you want it cheap, fast and efficient.) The application is further refined to have maximum value even if the unit is not on-line.

The HDML version looks less flashy because of the reduced real estate of the target device, and it has different capabilities that exploit that device. In the focus groups, people considered the tradeoffs of the two devices in advance, so those users who chose the HDML browser phone option over the Palm Pilot had a specific set of requirements in mind, and those have been put into the design.

The developers in this example have signed NDAs, along with a support contract to provide continuing updates and technical assistance to users. These professional developers are hired to maintain their application across your user base at a monthly fee.

Now, the carrier sales channel has a branded, shrink-wrapped data product to sell. Training is an easy 3-hour exercise that focuses specifically on the financial application and its value proposition. This product can be sold at retail, and the sales representatives do not need to understand "wireless data" to sell this application because the product is self-contained, and the complexities of how it works are shielded from the user.

Implications When you commit to creating your own branded software that works only on your network, some powerful business implications result:

* You don't care which platform wins -- whether it's WAP, HDML, ICAP, CE, GEOS, EPOC or Palm. The cost for you to create an application on one of these target platforms is around $25,000 and can be sealed and delivered in six months.

* You can blur the line between application pricing and service pricing. You're in complete control over the pricing of your application because you own it. You can bundle applications into airtime packages.

* You can compete with other carriers on the quality and quantity of your applications. Shift the focus from price. Your phones are better than their phones because your phones can do more. If you build your applications correctly, you can make churning a painful process for your customers.

* You can sell advertising on your content service applications to reduce costs. For example, banner ads can be playing on those smart phones, either for your services or those of others.

There are other implications as well, but none more compelling than absolute service differentiation. The industry has been waiting for a chance to replicate the software-hardware escalation curves that have driven the computer industry year after year.

Assemble your marketing team, draft a set of specifications, contract a developer, and write some code. In six months, you'll have a service that all channels can sell. Use thelessons from that launch to refine the next initiative and keep that knowledge as your intellectual property. After two years, you'll have built more value and innovation into your networks than we could ever hope to see with the status quo.