Critical Success Factors in the New Economy: How to Make WAP Worth IT. A Study of Mobile Internet

Critical Success Factors in

The New Economy

How to Make WAP Worth IT

A Study of Wireless Internet

Andrejs JerkinsIvaylo N. Todorov

Karlstad Master Thesis in Service ManagementSpring 2001 Department of Business and Economics,

Service Research Centre,Tutor: Prof. Per Norling

Discovering Success in the New Economy: How to Make WAP Worth IT

Acknowledgements

Working on this research has been tough and extremely interesting task. During the research we obtained a clear view of this new emerging market and tried to present our vision in the paper as clearly and thoroughly as possible. We hope that this research will serve as a basis for further research projects in this area and findings of this paper will contribute companies in the industry.

This master thesis would not have been possible without the help of many people that despite their tight schedules devoted time to answering our questions and provided us with valuable comments and unique opinions. We would like especially to thank the following people for their time, support and help:

Prof. Per Norling Our supervisor at Karlstad University, who gave us valuable comments during the research work.

Ken Young IT journalist and analyst, who showed interest in our research, gave us an interesting perspective on the problem and helped us believe that the paper will be a real contribution to the development of Wireless Internet

John Johansson Industry professional who made us believe that it is possible to find interviewees and proved that our research is going in the right direction.

Ass. Prof. Jeffrey L. Funk Graduate School of Business, Kobe University. He gave us information about the Japanese market and an interesting theoretical perspective of the field.

Lars Vestergaard; Robert Horvath For the valuable information and ideas shared with us during interviews.

Many thanks also to Tony Dennis, Doug Lucas, Andrea Vey, Martin Jönsson, and Göran Frödin.

We would also like to thank the God for the luck of being where we are now, our families for support, sweet friends for hugs and kisses, Napster for the great music and MovieGroup for providing us with the newest movies.

Karlstad, 2001

Ivaylo N. Todorov Andrejs Jerkins [email protected] [email protected]

Andrejs Jerkins & Ivaylo N. Todorov i

mailto:[email protected]

mailto:[email protected]

Discovering Success in The New Economy: How to Make WAP Worth IT

Abstract

The next stage of development of e-commerce is mobile commerce, which is discussed in this paper. In particular, the focus is on the present stage of development of Wireless Internet market, various standards, opportunities and challenges that currently exist.

The discussion is centred on the success of i-mode (service that customers of Japanese mobile telecom operator NTT DoCoMo can use to access specially designed, so called wireless Internet sites, from their mobile phones) and challenges of WAP (wireless application protocol, which was thought-to-be European solution for wireless devices).

Introduced in February 1999 i-mode has experienced an exponential growth and at the moment has more than 20 million subscribers in Japan. NTT DoCoMo has recently bought a fraction of the Dutch mobile operator KPN and in co-operation with KPN is planning to launch i-mode in the Netherlands later this year.

At the same time, WAP had approximately 8 million subscribers by the end of 2000, which accounts for a growth rate far less than that of i-mode. Although WAP Forum, the industry supervising body, claims that WAP is the worldwide standard for different kinds of wireless devices and networks, the adoption is unexpectedly slow. The future will show which standard will obtain dominance all over the world.

Before analysing the shortcomings of WAP and the advantages of i-mode’s approach, the paper provides: first, information about the wireless Internet market in general; second, a description of the past, present, and future mobile technologies; and thirdly, a combination of market statistics and controversial predictions for the future.

The theoretical part consists of four modules. The first one describes the general framework of new product development, trade-off between richness and reach and trade-off between high-tech/high-touch. An adjusted model of richness and reach trade-off, based on inputs from high-tech/high-touch model specifications, is suggested. The second module provides overview of modern theories of technology acceptance – technology acceptance and readiness model, theory of planned behaviour, theory of reasoned action as well as innovation diffusion theory and usability promoting/hindering factors. The third module presents antecedents to technology acceptance model and sets up a concept of cognitive absorption, emphasising that the role of fun is one of the most influential factors in the process of attracting the customers’ attention and making use and favour the new technology. The fourth module inquires into the basis of customer expectations in order to help solving the problem of setting the right expectations. It is argued that specific types of relationships have to be studied to gain insights what the customer wants from different means of communication.

The next chapter provides a thorough description of the Japanese mobile operator NTT DoCoMo and its wireless Internet service I-mode. The analysis suggests that the most influential factors maintaining the phenomenal success of I-mode are good upstart marketing, wide range of content services, feasible billing system, relative monopoly of NTT DoCoMo on the market, national characteristics and technological simplicity.

On the other hand, WAP faced serious challenges from the beginning of its promotion as an application that brings Internet on the screen of a mobile phone. Early adopters recognised that speed was slow and connection often unreliable, prices too high for the quality received, and size of the screens of mobile phones too small. Additionally, the offered services were far from satisfactory and were not facing the real customer needs. These negative factors involved other, some even less pleasant issues, such as whether WAP would be adopted at all and whether this slow start will harm the planned release of 3rd Generation mobile services.

After analysing the two “poles”, the authors present tools and models to be considered by the New Economy companies in order to maintain a competitive edge.

Andrejs Jerkins & Ivaylo N. Todorov ii


Table of Contents1 INTRODUCTION..................................................................................................................................................1

1.1 PROBLEM AREA.................................................................................................................................................11.2 RESEARCH QUESTIONS......................................................................................................................................21.3 STRUCTURE........................................................................................................................................................21.4 DELIMITATIONS..................................................................................................................................................2

2 METHODOLOGY.................................................................................................................................................4

2.1 OVERVIEW.........................................................................................................................................................42.2 RESEARCH..........................................................................................................................................................4

3 THE BACKGROUND OF WIRELESS INTERNET............................................................................................7

3.1 GENERAL DESCRIPTION OF THE MARKET...........................................................................................................73.1.1 What is Wireless Internet?.......................................................................................................................73.1.2 Why the Internet is suitable platform for wireless added services?........................................................83.1.3 Drivers.....................................................................................................................................................83.1.4 Wireless Applications for both consumers and businesses......................................................................9

3.2 MARKET STATISTICS AND PREDICTIONS............................................................................................................93.3 CHALLENGES, FACING THE DEVELOPMENT OF THE WIRELESS INTERNET........................................................123.4 NETWORK DEVELOPMENT AND NEW NETWORKS.............................................................................................13

3.4.1 Network summary..................................................................................................................................133.4.2 New high-speed technologies:...............................................................................................................153.4.3 3G solutions:..........................................................................................................................................16

3.5 WAP FORUM....................................................................................................................................................173.6 MARKET DEVELOPMENT SUMMARY.................................................................................................................17

4 THEORETICAL BACKGROUND.....................................................................................................................20

4.1 NEW PRODUCT/SERVICE DEVELOPMENT.........................................................................................................204.1.1 Avoiding the Wrong Route.....................................................................................................................204.1.2 To Reach or Not To Reach?...................................................................................................................224.1.3 To Touch or Not To Touch?...................................................................................................................24

The combined model.......................................................................................................................................264.2 ASSESSING POSSIBLE WAYS TO IMPROVE USER ATTITUDE TOWARDS THE NEW OFFER...............................27

4.2.1 Theory of Reasoned Action and Theory of Planned Behaviour.............................................................274.2.2 Technology Readiness and Acceptance Model......................................................................................284.2.3 Innovation Diffusion Theory..................................................................................................................294.2.4 Usability Promoting/Hindering factors.................................................................................................30

4.3 BETTING ON FUN.............................................................................................................................................314.3.1 Need for Change in the Course of Action..............................................................................................314.3.2 The Trait of Absorption..........................................................................................................................324.3.3 The State of Flow...................................................................................................................................324.3.4 The Concept of Cognitive Engagement.................................................................................................334.3.5 The State of Cognitive Absorption.........................................................................................................33

4.4 CUSTOMER EXPECTATIONS MANAGEMENT.....................................................................................................344.4.1 Roots of Expectations.............................................................................................................................344.4.2 The Art of Diplomacy.............................................................................................................................364.4.3 The electronic relationship....................................................................................................................384.4.4 The mass media relationship.................................................................................................................38

5 I-MODE AND NTT DOCOMO..........................................................................................................................39

5.1 DESCRIPTION OF I-MODE-................................................................................................................................395.2 WHAT KIND OF TECHNOLOGY?........................................................................................................................405.3 WHAT KIND OF SERVICES DOES I-MODE PROVIDE?.........................................................................................405.4 BUSINESS STRATEGIES.....................................................................................................................................42

Andrejs Jerkins & Ivaylo N. Todorov iii


5.5 GENERAL BILLING STRATEGIES.......................................................................................................................445.5.1 Revenue for NTT DoCoMo....................................................................................................................445.5.2 The content providers business models.................................................................................................45

5.6 SUBSCRIBER GROWTH AND USER CHARACTERISTICS.......................................................................................465.7 CHARACTERISTICS OF THE MARKET................................................................................................................485.8 WIRELESS INTERNET TRAFFIC..........................................................................................................................495.9 SUMMARY OF THE SUCCESS FACTORS OF NTT DOCOMO..............................................................................51

5.9.1 Good marketing.....................................................................................................................................515.9.2 Very good content offers and applications............................................................................................515.9.3 Good billing system...............................................................................................................................515.9.4 The dominance of NTT DoCoMo on the market-..................................................................................525.9.5 National characteristics of the market...................................................................................................535.9.6 Technological simplicity and quick launch...........................................................................................54

6 DEVELOPMENT OF WAP STANDARD AND ITS ADOPTION IN EUROPE..............................................55

6.1 REASONING......................................................................................................................................................556.2 IDEA.................................................................................................................................................................566.3 TECHNOLOGY...................................................................................................................................................566.4 CURRENT CHALLENGES...................................................................................................................................57

6.4.1 Market share and price curve challenge...............................................................................................576.4.2 Service concept......................................................................................................................................576.4.3 Range of services...................................................................................................................................576.4.4 Segmentation..........................................................................................................................................586.4.5 Overall marketing strategy....................................................................................................................586.4.6 Content providers..................................................................................................................................596.4.7 Stakeholder expectations.......................................................................................................................606.4.8 Pricing...................................................................................................................................................606.4.9 Approach................................................................................................................................................616.4.10 Critical mass..........................................................................................................................................62

6.5 VICIOUS CIRCLE...............................................................................................................................................626.6 WAP IS DIFFERENT..........................................................................................................................................63

7 ADVISORY TOOLS AND CONCEPTS............................................................................................................65

7.1 BUSINESS MODELS FOR THE OPERATORS........................................................................................................657.2 MANAGING CUSTOMER EXPECTATIONS...........................................................................................................66

7.2.1 Football Coach......................................................................................................................................677.2.2 PDSA cycle............................................................................................................................................687.2.3 Improvement programmes.....................................................................................................................687.2.4 QFD.......................................................................................................................................................68

7.3 SERVICE CONCEPT............................................................................................................................................697.3.1 Perceiving WAP, I-mode as service concepts, not as technologies.......................................................697.3.2 "Data Smog"..........................................................................................................................................69

7.4 THE IMPORTANCE OF CONTENT.......................................................................................................................727.4.1 Technical requirements..........................................................................................................................737.4.2 User Behaviour......................................................................................................................................747.4.3 Specific advantages of wireless Internet content...................................................................................74

8 CONCLUSIONS..................................................................................................................................................76

9 APPENDIXES.....................................................................................................................................................79

9.1 APPENDIX 1: STATISTICS OF INTERNET AND MOBILE PHONE USERS IN WESTERN EUROPE ..........................799.2 APPENDIX 2: WIRELESS DATA DEVELOPMENTS...............................................................................................809.3 APPENDIX 3: WHO IS WINNING THE 2G-STANDARDS WAR?.............................................................................819.4 APPENDIX 4: I-MODE CONTENT STATISTICS.....................................................................................................829.5 APPENDIX 5: CHARACTERISTICS OF WIRELESS CONTENT................................................................................839.6 APPENDIX 6 THIRTEEN KEY ACTIVITIES IN THE NEW PRODUCT DEVELOPMENT PROCESS............................84

Andrejs Jerkins & Ivaylo N. Todorov iv


9.7 APPENDIX 7: OVERVIEW OF THEORIES BEHIND THE CONCEPT OF COGNITIVE ABSORPTION.........................859.8 APPENDIX 8: THE FRAMEWORK OF COGNITIVE ABSORPTION.........................................................................869.9 APPENDIX 9: THE VALUE PARADIGM OF NTT DOCOMO................................................................................879.10 APPENDIX 10: LIST OF INTERVIEWS...........................................................................................................889.11 APPENDIX 11:INTERVIEW QUESTIONS........................................................................................................899.12 APPENDIX 12: GLOSSARY OF TERMS..........................................................................................................90

10 REFERENCES.....................................................................................................................................................92

Andrejs Jerkins & Ivaylo N. Todorov v


TABLE 1: INFORMATION SOCIETY IN 1999/2000 (SOURCE: A.C. NIELSEN)....................................................................7TABLE 2: NUMBER OF WIRELESS INTERNET USERS (AS OF DECEMBER, 2000)..............................................................10TABLE 3: WIRELESS INTERNET SERVICES IN JAPAN SOURCE: MOBILE MEDIA JAPAN, MODIFIED AS FROM DEVINE AND

HOLMQVIST (2001)...............................................................................................................................................41

FIGURE 1: TRADITIONAL TRADE-OFF BETWEEN RICHNESS AND REACH (SOURCE: WURSTER AND EVANS, 1999)........23FIGURE 2: COMING REVOLUTION IN TRADE-OFF BETWEEN RICHNESS AND REACH (SOURCE: WURSTER AND EVANS

1999)....................................................................................................................................................................24FIGURE 3: TWO APPROACHES AT CRM: THE TRADITIONAL AND THE NEW...................................................................25FIGURE 4: CORRECTED RICHNESS/REACH TRADE-OFF...................................................................................................26FIGURE 5: THEORY OF PLANNED BEHAVIOUR. SOURCE: CHANG (1998), COMPILED FROM AJZEN (1985)...................27FIGURE 6: NTT DOCOMO’S NETWORK STRUCTURE (SOURCE: NTT DOCOMO’S WEB SITE).......................................40FIGURE 7: STRUCTURAL MODEL OF I-MODE'S SERVICES................................................................................................42FIGURE 8: THE WIRELESS INTERNET VALUE CHAIN AS INFLUENCED BY THE OPERATOR (DEVINE AND HOLMQVIST,

2000)....................................................................................................................................................................43FIGURE 9: I-MODE'S PAYMENT SCHEME.........................................................................................................................45FIGURE 10: THE POSITION OF DIFFERENT INTERNET ACCESS DEVICES ON THE TRADE-OFF CHART (SOURCE: FUNK,

2000)....................................................................................................................................................................50FIGURE 11: VICIOUS CIRCLE OF WAP'S TROUBLES.......................................................................................................63FIGURE 12: LEVELS OF EXPECTATIONS, ACTUAL PERFORMANCE AND ZONE OF TOLERANCE........................................67

GRAPH 1: DISTRIBUTION OF WIRELESS INTERNET USERS WORLD-WIDE........................................................................10GRAPH 2: GLOBAL DATA BY TECHNOLOGY GENERATION (SOURCE: STRATEGIC ANALYTICS)....................................13GRAPH 3: JAPANESE MOBILE TELECOMS' MARKET SHARES (SOURCE: TELECOMMUNICATIONS CARRIERS

ASSOCIATION, 2000).............................................................................................................................................39GRAPH 4: GROWTH OF MOBILE INTERNET USERS. (SOURCE: TELECOMMUNICATIONS CARRIERS ASSOCIATION, 2000;

DEVINE AND HOLMQVIST 2001, NTT DOCOMO)................................................................................................47GRAPH 5: THE AGE DISTRIBUTION OF I-MODE USERS. (SOURCE: D2COMMUNICATION, 2000; MODIFIED AS OF DEVINE,

HOLMQVIST, 2000)...............................................................................................................................................48GRAPH 6: MOST POPULAR CONTENT CATEGORIES OF WAP (CURTIS, 2000)................................................................60GRAPH 7: DISTRIBUTION OF SPENDING LIMITS OF WAP USERS (CURTIS, 2000)...........................................................61

Andrejs Jerkins & Ivaylo N. Todorov vi


Mr. Mouche climbed on his horse and rode it beautifully."You must be proud of yourself," said the professor.

"No," replied Mr. Mouche."Still, your horse goes exactly where you want it to go," said the professor."That's because I always want to go exactly where the horse wants to go,"

replied Mr. Mouche

Jean-Luc Coudray

"There isn't such a thing as right or wrong, there is just fun or boring!"

Motion picture "Hackers" 1995, hacker nicknamed the Plague

Andrejs Jerkins & Ivaylo N. Todorov vii

Discovering Success in the New Economy: How to Make WAP Worth IT

1 Introduction

1.1 PROBLEM AREA

Will Europe maintain its global lead in the telephony market and especially in the mobile-commerce market?

A year ago, the perspectives of development of European mobile telecommunication market were going high. There were logical reasons to assume that the future is bright and flawless. At that time Nokia was the world’s largest mobile-phone manufacturer, Vodafone – world’s largest mobile phone network. Most important of all, Europe was introducing wireless application protocol (WAP) and developing the concept of mobile commerce (m-commerce). Considering the idea that mobile phone has so many advantages over personal computer, such as portability, convenience and size, many researchers predicted that m-commerce would be a sure winner. They also saw clear connection between interest in accessing the Internet from mobile phones and demand for hardware (“snazzy new models”). Many companies thought it was worth investing in license fees because of the revenues that would come from non-voice data traffic – $50 billion for the next round of the German mobile-spectrum licenses and $35 billion for the British ones.

However, things did not turn out as predicted. Falling share prices hit the whole industry. Nokia is no longer Europe’s largest company and its latest WAP phones have been strongly criticised. National phone monopolies like Deutsche Telekom, France Telecom, and British Telecom are suffering a vast pile of debt. Most significant of all, companies start to reconsider their optimistic predictions regarding the future success of WAP. Statistics show that even people with WAP-enabled phones do not use the service much. According to the recent survey in Sweden1, only 6% of WAP phone owners use WAP. Among the reasons are high expenses, problems with security, tiny screen, slow downloads, fiddly keyboard, unstable connection, etc. At the same time, a similar service provided in Japan – i-mode has already 20 million subscribers and is hugely popular.

The third-generation mobile technologies and services are coming in the following years. The question is if by then Europe would lose its presumed competitive edge in mobile telephony by failing in developing useful wireless Internet applications. This issue is analysed basing on current trends in main wireless Internet markets – Europe and Japan.

1 Lars Vestergaard, IDC; telephone interview

Andrejs Jerkins & Ivaylo N. Todorov 1


1.2 RESEARCH QUESTIONS

The thesis has three main objectives – to investigate the Japanese wireless Internet market, compare it with the European market and analyse whether the positive experience can be translated to Europe. In order to do that, the following research questions are posed:

1. What are the critical success factors (CSFs) for Japan’s wireless Internet market development?

2. What were the shortcomings of introduction of m-commerce protocol WAP in Europe?3. Is it possible to apply Japan’s positive experience on the European market? What kind of

tools/concepts should the telecommunication companies implement to be successful in this market?

1.3 STRUCTURE

For answering these questions, thorough study of the market, both in Europe and Japan, was conducted. First, the wireless Internet background is studied to introduce the reader to the past, present and future development of the related technologies and challenges facing it. The number of different technologies behind the convergence of the Internet and mobile networks are introduced as a separate section. The history behind networks is studied to understand the uncertainty of future. Second, theoretical framework is laid out with a focus on studying the acceptance of new technologies, transformation of economics of things into economics of information, and issues of new types of evolving relationships in the New Economy. The analysis part begins with the success of i-mode on the Japanese market and factors stimulating unpredictable growth are summarised. Then, the challenges of European wireless Internet market are studied. Analysis is concluded with the proposed tools to be used in order to improve and/or protect the competitiveness in the market of the New Economy. Some of these tools may be regarded as theoretical concepts, which are not mentioned in the theoretical part separately. This is because these tools are used as propositions and not as analysis background. Rather, they represent part of the conclusions of the analysis. Finally, conclusions of the thesis are presented and implications for further research - offered.

1.4 DELIMITATIONS

This part clarifies the research area this paper is focusing on. It has to be acknowledged that the wireless Internet market is still under serious development; therefore, the prioritisation of issues in the thesis is done according to the prospective development of the market.

In order to draw useful general conclusions for the rest of the world, two most developed markets are studied – Japanese and west Europe including Scandinavia. With the aim to keep the paper specifically to the topic and avoid irrelevant discussions, we followed the delimitations below:

Focus is put on the transfer-of-data telephony market and specifically on the wireless Internet segment.



In the comparison between Japan and Europe, special attention is devoted to WAP and i-mode and the relevant strategies, concepts, technologies and program languages (cHTML, WML).

Since i-mode is NTT DoCoMo’s service concept, thorough description only of that company is provided. All the other players in Japan are used as a comparison that would clarify NTT DoCoMo’s success strategies.

The European market is viewed as a whole considering the fact that cultural, technological and economical limitations for this technology do not restrict the communication between these countries. Another reason is that WAP as a global wireless standard is created by the WAP Forum, an organisation that represents almost all of the big manufacturers and operators in Europe.

Japan is used as a positive example of how wireless applications can be implemented and promoted. It is not argued that Japan will maintain its lead in the long run or that its example is the best. Considering the success of NTT DoCoMo, it is practically and theoretically feasible to analyse the business and technological models used on that market.

No customer surveys were made due to low general awareness rates and consequential difficulties in obtaining data.

A macroeconomic perspective is taken when analysing the markets.

We believe that these delimitations make the research more focused and, therefore, conclusions - more precise and valuable.



2 Methodology

2.1 OVERVIEW

Before explaining the methodology approach in the thesis, we would like to clarify that it is aimed at reaching academic objectives. The paper studies relevant problems in its area of research and is contributing to publicly available knowledge on the topic of wireless Internet and CSFs in the New Economy. The research on the topic was started in November 2000 and was finished in March 2001. It was carried out through a number of stages:

Gathering information about the market and the industry; Studying relevant literature; Defining the research problem and the research questions; Gathering more specific and research-specific data; Conducting interviews with experts in this area (see Appendix 10); Analysing the collected information and data throughout the research and present the

results in a written form.

The work for this thesis employed both qualitative and quantitative research methods. Quantitative methods are geared primarily to the collection of quantitative data, which arise as numbers and are a result of the process of measurement (Raymond, A. Ken, 1993). This type of data answers the question “how many?” Qualitative data was gathered by means of interviews, exhaustive data and information search on the Web, newspaper and magazine articles, research papers and books.

2.2 RESEARCH

The qualitative research was based on the following considerations:

Open-ended interviews with experts in Japan and Europe – it is believed that in particular research area this is the best way to acquire new information and opinions;

In many cases the research was based on largely qualitative, in the form of narrative, statements;

A small group of respondents was targeted – since there are a limited number of companies dealing with wireless Internet applications. The industry is still in its development stage and companies lack the clear vision of the future due to the market uncertainties.

It is being stressed that “data from interviews consist of direct quotations from people about their experiences, opinions, feelings, and knowledge” (Patton, 1991). In this thesis, interviews were



conducted in order to get use of all these 4 groups of responses. Interviewing was done in forms of personal discussions, telephone interviews, and email interviews. The fact that personal communication would allow the extraction of more precise data because of observing interviewees gestures and facial expressions is recognised. However, full use of this technique was not possible due to experts’ location around the world.

In order to construct a fair and objective perspective on the issue that is studied, open-ended interviews were used to “enter into the other person’s perspective” [Ibid.]. Due to the fact that publicly accessible objective opinions on the subject of study were not found because of the infancy of the field, combination of perspectives of interviews provided basis for objectivity of this work. Although total objectivity is considered to be achievable largely by “blind experiments and quantification” [Ibid.], this particular study could not perform a quantitative survey of experts for the reason that, firstly, there are not many experts in this area, secondly, response rate to email interviews has proven to be low.

Narrative statements were used to widen the area of interviewees’ response. In other words, interviewees were provided with opportunity to express their opinions not only on the specific issue but also on related issues. This method has proved to be successful because most interviewees responded with useful and thorough opinions on the issues of focus rather than just answering narrow question.

Before contacting any expert, a consideration of his/her ability to provide a useful insight for the work was made. At the end, a total of 11 interviews were made, gathering opinions from experts in Sweden, UK, Denmark, Germany, Ireland, and Japan. The choice of countries was semi-random, emphasising the willingness of one or another interviewee to share his/her opinion. Nevertheless, all represented countries are the ones to be on the wireless technology top-list.

In the process of writing a thesis work, it is important to use a theoretical background for a basic understanding of the discussed phenomena. However, it is also vital to provide some empirical information, which is to help a reader to have a deeper understanding of the subject. Wireless Internet applications and their market promotion – the topic of the research, as a direction is a relatively new and finding specific information, both empirical and theoretical, was complicated. Metaphorically, in a process of compilation, many small pieces had to be put together. Where no other basis for discussion was possible, the authors of this paper had to rely on the subjective opinion geared with extensive prior research.

The expert opinions were gathered through interviews, emails and telephone discussions. Before contacting any interviewee, an assessment of his/her professional experience on the topic was made. A number of interviewees were contacted through the contact list of WAP Forum. In essence, these people were chosen by their respective companies (members of WAP Forum) to handle the communication with WAP Forum. Another source of interviewees was the directory of functioning WAP sites of Europe, which was accessed through the Internet search engine Yahoo. It is assumed that content providers found in the “Yahoo! Directory” represent a fair basis due to the fact that the it is “a must to” list a functional site in the search engine for a company dealing with the Internet applications. In addition, mobile network operators in Scandinavia and the rest of Europe as well as Japan were approached with specific questions.



As it is stated on WAP Forum’s web site, its members roughly represent all the involved parties interested in the development of WAP – hardware manufacturers, software providers, telecoms, service operators, regulating bodies, and governmental institutions. In the research process, we attempted to reach most of the contact persons in the companies-members of the WAP Forum.



3 The Background of Wireless Internet

3.1 GENERAL DESCRIPTION OF THE MARKET

3.1.1 What is Wireless Internet?

The term mobile Internet or Wireless Internet has been a topic for many discussions recently. When it appeared in the vocabulary it was another modern buzzword. Many companies and specialists assumed that its implementation would make the whole industry thrive. The objective of this part is to describe briefly what actually stands behind it.

In this paper, the term Wireless Internet (Mobile Internet) is referred to as “a process of transmitting data over mobile telecommunication networks to different applications”. This transfer includes non-voice traffic, which has many implications, e.g. e-mails, downloading and uploading data from/to websites, uploading files and images, sending SMS, advertising, etc. The successive development of Internet has encouraged many people to conduct their businesses or even leisure activities online. New wireless technologies such as GPRS and UMTS will allow people to “unwire” themselves and use the mobile terminals they have not only for voice transfer, but also to access the Internet.

Every customer considers wireless Internet as the possibility to receive different value-added services. The service structure of wireless system is very simple. It includes all the services that the mobile operators provide when they enable access. In other words, Wireless Internet Services include all the software applications that allow the user to connect to the Internet using his/her mobile phone.

The concept of Wireless Internet has emanated from the convergence of conventional Internet and mobile networks due to the explosion of connectivity. The general market trends in these two areas are depicted below in Table 1.

Table 1: Information Society in 1999/2000 (Source: A.C. Nielsen)



3.1.2 Why the Internet is suitable platform for wireless added services?

More and more people are using services provided via Internet, more and more people are accepting Internet as an irreplaceable part of their everyday life, more and more are actually dependent on the Internet services. In this line of speaking, it is obvious that the necessity of some physical elements like a wire to connect to the Internet, big desktops or laptops is rather restrictive. For people that are often travelling or often do not have access to the conventional Internet, this is turning out to be a major problem. The portability of the phone can be easily transferred in a big advantage, in a platform for offering new kind of services to all consumers.

It is also very important to mention that service providers can benefit from the Internet paradigm, “since their services can be deployed independently of the location of the user. The applications that provide the services can be stored on a server, which means that they can be very easily changed according to the concrete needs of a user. This allows the service providers to reach the customers with a new service almost immediately. “The reduced service development time does of course also imply reduced costs compared to conventional service development in wireless networks” (WAP white paper, 2000).

3.1.3 Drivers

When it comes to new advanced technologies, there are many examples of ideas that failed however strong the industry support was. “So what makes this mobile Internet anything more than another techno dream waiting to crash?” (Baker, 2000).

Baker assumes that there are many reasons to believe that wireless Internet is not just another technological hype. The most important of them is that customer does not have to buy anything principally new to be a part of the wireless Net. Currently, more than 500 million people are using mobile phones and this figure is expected to double until the year end 2003. Due to the fact that many new phone models already come with built-in WAP browser and given that the average life-cycle for a mobile phone is approximately 2 years, it is natural to assume that most of 1 billion mobile phone users in 2003 will be capable to perform at least basic WAP transactions. The second major reason is that dominant mobile telecoms have already invested substantial amounts of effort and money in developing next generation networks.

From customers’ point of view, factors and drivers that stimulate a person to use new, advanced mobile service can be classified in three groups: How, When and Where will a customer use his mobile phone to connect to the Internet? The first question refers to the ease of personalisation on a new generations’ mobile handheld devices. The possibility of receiving customised content is especially crucial when it is the only device available at a given point of time. The second question refers to the criticality of importance of time. The mobile device allows user conducting various kinds of financial transactions, checking critical information, changing plans whenever s/he needs it. The last question refers to high usefulness of knowing the exact location with the aid of the mobile phone and finding the necessary directions. While the user is in the car, this navigation system can help to find the shortest and quickest way to the desired destination. The dependence on location can easily be transferred into a good value-added service.



3.1.4 Wireless Applications for both consumers and businesses

Below we provide examples of how the new technology can be used for different segment groups. If the development of all technologies goes at the pace that everybody predicts, soon many people will start using the wireless Net because it will be cheaper and easier (Herman, 2000) than the PC (the validity of this statement is discussed later). The exact amount of people that would be willing to use this service is a subject of further discussions. More important is what customers can use it for.

If the B2C market is considered, some obvious applications are access to maps and other kind of location/direction services; access to online banking and trading; downloading multimedia formats; VOID-based unified messaging, which combines e-mail, voice mail, paging; advertising; playing lottery or online-games. Delivering information such as headline news, stock quotes, flight delays, traffic jams seem to be particularly well suited to wireless technology. By using the location-based applications, which determine where the customer is by pinpointing signals form a wireless device, every user can receive an information about the nearest restaurant, cinema, information desk or even automatically send a message to an approaching friend. Herman also says that the final objective is to turn the mobile phone or any other hand-held device into a payment device, equivalent to an electronic device.

The potential of B2B is unquestionably much bigger. The critical issue at the moment is the inability of content developers to satisfy the needs of corporations. Inevitably, companies will realise that high-speed effective communication can either help them or will help their competitors. Nevertheless, the cornerstone is that corporations rarely know what they exactly want and service providers and application developers cannot deliver without knowing the exact needs. The core question is how to extract value from vast opportunities. Wireless Local Area Networks (LAN) and Wide Area Networks (WAN) will help in the nearest future employees to share and access the needed data anytime and anywhere. Location-based services are already implemented to monitor, for example, the exact location of companies’ sales cars to take advantage of the critical path technique to the fullest.

3.2 MARKET STATISTICS AND PREDICTIONS

The market of wireless Internet is in an infant stage of development, therefore, the compilation of statistics does not necessarily represent a true and fair view. However, data from different sources was compiled and presented in a form that allows reader to get a clear picture. The nature of this market (infancy and dynamics) makes it hard to make any predictions for the size, main players, and potential even in the near future.

Initially, a contact was established with the WAP Forum, an industry guiding association, to get the necessary data. Unfortunately, it came out that the WAP Forum either does not have or is unwilling to share the information on statistics of WAP usage in Europe. Either way, this does not seem to be a good indication of success. Especially, if this is compared to NTT DoCoMo in Japan, who provides a very detailed and up-to-date information on the number of its wireless



Internet users on their official web site. According to data gathered from the various sources2, the number of wireless Internet users in the world, as of the end of 2000, is described Table 2.

Number of wireless Internet users (million) % Users of WAP Users of i-mode

Japan 30 73% 4,5 17,1

Korea 2,5 6% 2,5 0

Europe 8 20% 8 0

USA 0,5 1% 0,5 0

Total 41 100% 15,5 17,1

Table 2: Number of wireless Internet users (as of December, 2000)

As the table indicates, currently i-mode has a slight dominance on the market. This is regardless of the fact that at the moment i-mode is only available in Japan while WAP has been launched in Europe, Korea, and on a very early stage in the United States, as well.

Graph 1: Distribution of wireless Internet users world-wide

It is logical to assume that in the nearest future the gap will increase. Many researchers, however say, that in the long run WAP has the potential to win the battle of standards. The current situation is based on the rapid growth of i-mode and moderate growth of WAP. In both cases, observed and predicted growth is taken into account. It is hard if not impossible to give the exact growth figures since both standards are on the market roughly one year. However, it is of useful insight to mention that in March 2000 Goldman Sachs predicted that the number of i-mode users would only reach the mark of 20m by the end of 2002. In addition to that, even NTT DoCoMo itself has predicted (Hoffman, 2000) that the mark of 20m subscribers will be reached only by end of 2001. It is a fact that this mark has already been passed in February 2001. In addition, at the end of year 2001 there are predicted to be 30 million of i-mode users in Japan only.

Any hypothesis about the future of wireless Internet has to take into consideration possible i-mode users in Europe since NTT DoCoMo’s announced that the service is to be launched in the

2 Data on the number of i-mode users was gathered from NTT DoCoMo’s official site; data about users in Korea and USA was gathered from the same source; data on the number of WAP users was combined from two sources – Lars Vestergaard from IDC and Martin Jönsson from Ericsson.



Netherlands in co-operation with KPN later this year (as well as in Italy). According to IDC3, the number of WAP users is predicted to reach 18 million, by the year-end 2001.

Predictions for the future are subject to serious biases due to several factors that cannot be measured – potential subscriber willingness to accept any of the new technologies, reaction of content providers and range and quality of their services, potential of telecom operators to develop their networks, etc. Nevertheless, IDC predicts that by the year-end 2002 there will be 30 million WAP users in Europe. Lars Vestergaard from IDC made a comment on this issue stating that the predictions their company is making about the number of WAP users are underrated due to the recent backfire of this standard.

At the same time, Martin Jönsson at Ericsson is stating that the sale of WAP-enabled mobile phones increases faster than the market itself. His conclusion is based on the information at his disposal, i.e. the fact that the number of WAP phones sold in January 2000 was 200 thousand units while a year later (January 2001) this number is 30 million across Europe. The predictions from the past (Wooldridge, 2000) indicate that WAP Forum’s initial predictions of WAP's usage have been always too optimistic – they expected 525m WAP-enabled phones on the market by 2003. Given the most recent data from Ericsson, the challenge attracting our attention is that in order to fulfil the prediction, the operators and manufacturers have to sell the huge difference of 495m WAP-enabled handsets in the next 24 month. Cahners In-Stat Group is predicting that the demand for mobile phones (disregarding the wireless Internet functionality) will jump up to more than one billion by 2003 from the expected 100 million in 2002. To make the picture "even more clear" Yankee group predicts4 that the number of mobile phones will reach a mark of a billion in 2005 (60% of these devices having wireless Internet capability), which delays the progress predicted by WAP Forum and others by two years.

According to interviewed experts, the main markets for WAP-enabled devices currently are Scandinavia, Great Britain, and Germany. The number of WAP users in Germany exceeded one million5 at the year-end 2000. The number of WAP sessions (i.e., user’s attempt, either successful or not, access to any of the available WAP services) averaged three million “with the increasing tendency”. This type of data about other countries in Europe is either confidential or missing at all.

In terms of the time lag, The Economist6 has predicted that Japan is 18 month ahead of Europe and Europe is 18 month ahead of the United States. Then again, the value of m-commerce by IDC is predicted to reach £25.4billion by 2004 whereas Forrester Research predicts that figure to reach only £3.2billion by 2005. While these were the predictions only for Europe, for the whole world Ovum7 predicts a $200 billion large m-commerce market in 2005.

3 Lars Vestergaard, IDC; telephone interview4 As stated in the executive summary for the new project Global m-Commerce 2001, which was launched in January 2001. 5 Andrea Vey, T-Mobil, email interview6 Anonymous, Business: I-modest success, The Economist, London, March 11, 2000.7 As stated in the executive summary for the new project Global m-Commerce 2001, which was launched in January 2001.



The statistics mentioned above for the past and the predictions for the future allow the reader to make his/her own conclusions about how and when the wireless Internet market will grow. Nobody argues whether it will grow (we cannot escape from that), the question is at what pace. Needless to say, that 2005 is a far-far future, from the standpoint of today. Research companies and market players themselves have proven to fail in their predictions, however thorough the initial analysis had been. An official from NTT DoCoMo has confessed (Dodgson, 2000) that they “are surprised at the pace of growth, which has far exceeded their initial expectations” and that they are rewriting their forecasts.

3.3 CHALLENGES, FACING THE DEVELOPMENT OF THE WIRELESS INTERNET

Wireless Internet will revolutionise the role of mobile devices by putting all the power and convenience of e-commerce in the device every modern individual will soon have. Nobody though expects that this is going to be an easy process. The development of wireless Internet depends on the way the industry copes with several hardware and software limitations of the wireless world. These challenges fall into several groups: scalability, interoperability, bandwidth, and interfaces.

A wide range of content scalability is required for these appliances. Firstly, the majority of existing Web content is unsuitable for mobile usage without conversion. Secondly, in the future, developers will have to design their Web sites so that the presentation is separate from the information. The answer to this issue is the eXtensible Markup Language (XML), a meta-language that enables developers to define mark-up languages according to set specifications and syntax. WAP uses an XML-compliant implementation called the Wireless Markup Language (WML). Finally, middleware will play a crucial role in providing scalability, not only to adapt a variety of data sources to a range of devices, but also to cope with high rates of transactions, which could potentially originate from vast numbers of mobile users.

The group of problems related to interoperability refers to the fact that the wireless Internet is based on standards like WAP, which are only a guideline or a set of base line definitions. All vendors have to follow these guidelines when they are developing products in order to offer to the users interoperability with a host of other devices and functionality (Ajluni, 2000). However, some of them still make proprietary changes that ultimately affect the quality of the services the customer receives. This may lead, for example, to a denied access to a particular service.

The crucial factor for developing faster service and data-intensive communication is providing higher bandwidth. In today’s low-bandwidth environment, at rates of 9kbps, it is time-consuming to send even small amounts of data up and down the link. All the new 2G, 2.5G or 3G technologies are aiming at enabling the networks with bandwidth with levels comparable with current wire-line bandwidth levels of about 54kbps. This will not only allow the transfer of data-intensive content, but also the transport of many forms of multimedia content.

As it is with any software, interface is very important for creating positive users' experiences in interaction with WAP sites. The content must be adapted to limitations of wireless devices and



networks. Improving the user experience means offering increased functionality and ensuring that the graphical user interface is not so sophisticated (ibid.).

3.4 NETWORK DEVELOPMENT AND NEW NETWORKS

Any of the existing or coming wireless Internet standards have to be developed on the basis of the type of network. Therefore, the background of network types development is very important and is discussed with the technical focus aiming mainly at readers with preliminary technical knowledge. At the end of this section we provide a brief summary of the critical issues that have to be considered.

3.4.1 Network summary

Until recently, the handset’s role was that of a modem to the laptop computer. For instance, typical usage would be for out-of-office employees to dial into enterprise-based modems to retrieve their e-mail. Wireless Internet access was initially viewed as providing Web surfing from a smart-phone or PDA. However, today’s mobile networks, such as Global System Mobile (GSM), are subject to a combination of limitations that make Web access practically infeasible. This includes slow speeds of transmission, commonly 9,6kpbs, unreliable links, variable system latency, and high usage charges compared to landline networks.

In addition, unless special arrangements have been made to install a digital connection to a Remote Access Server (RAS) in the telephone’s network, the GSM data transmission is modulated to analogue for its passage over the fixed line network. This is effectively two calls – from handset to base station, and from mobile to fixed line; resulting in a longer time-to-connect. Consequently, applications have been constrained to those requiring low bandwidth transmission and infrequent connection. Expectations of wireless Internet levels of service quality will remain totally unfulfilled until new types of wireless networks, such as General Packet Radio Service (GPRS) and Third Generation (3G), finally arrive.

Graph 2: Global Data by Technology Generation (source: Strategic Analytics)



All operators, manufactures, and providers are sure that the current networks are limiting the future development and have to be changed. The direction of development is obvious – 3G, but the means and software enhancements remain unclear. That is why many network or service providers are applying an incremental strategy/approach to 3G. This includes obtaining as big revenues as possible from the still developing data market by using 2.5G systems such as EDGE, HSCSD, HDR, and GPRS (see Graph 2). This means that they are waiting for the moment when there will be a critical mass on the market and the smooth evolution into 3G will be just a modest investment on the existing spectrum. None of these big players knows how big the mobile Internet will be, but all of them are trying to be prepared and gain a winning position on that market.

They realise that this should be done in a series of steps. First, they have to upgrade their current networks to packet-switched data-capable networks (Wickham, 2000). This means for GSM and TDMA providers a switch to GPRS and EDGE, and for CDMA providers to 1XRTT and 3XRTT. With this, they are trying to improve initial data transfer speeds of 144kbps for both of them to rates of respectively 384kbps and 2Mbps. Second, they have to provide solutions for connectivity to the Internet, such as WAP, Bluetooth, smart devices, compression, and security (ibid.).

To be able to understand the forthcoming changes, the three major digital cellular technologies nowadays have to be analysed. The first one is GSM, which was developed in Europe and was the most advanced digital technology worldwide. The second one is TIA/EIA-136, which is a time-division multiple access (TDMA) technology. The third one is IS-95 a code-division multiple access (CDMA) technology. The last two are dominant in USA, but lose the battle to GSM world-wide. TDMA, the oldest US digital technology, divides radio channels into three time slots. In other words, each user gets a separate slot and only three users can communicate on a single radio channel without interfering with each other. CDMA, a newer US digital technology, allows many users to share the same radio channel at the same time. Using a spread-spectrum technology, it distinguishes the users by applying unique pseudorandom codes (Rysavy, 2000).

The question is how and what kind of technology should the operators use to upgrade the existing networks in order to achieve the standards and necessities for 3G. It is obvious that there are two opposing camps, considering developing the new alternatives over CDMA or over TDMA networks. A couple of months ago CDMA was considered as the most attractive wireless platform but if we look at the market we can easily realise that the honour goes to the TDMA supporters (see Appendix 2). The data gathered by America’s Network show that the four DMA-based cellular standards – GSM, iDEN, Japan’s PDS and TDMA-EDGE account for 87% of the global market for handset services8. Among these, GSM is the obvious dominant standard with about 345 million connections. The influence of the other is also very important, because they account for 102 million connections. This compared to only 65 million connections for CDMA2000 world-wide, (half of which in one country South Korea) gives a clear clue where the development is heading for. This comparison maintains who of the two camps would be able to achieve a real effect on economies of scales. It also clarifies the perception of which 2.5G or 3G

8 Anonymous, America’s Network, “CDMA wins everywhere … but the marketplace”, Oct 1, 2000



technology would be chosen as an upgrade path. Some people in South Korea are already considering abandoning the CDMA One’s CDMA2000 in favour of the European W-CDMA.

3.4.2 New high-speed technologies:

The first new higher-speed alternative is a technology called High Speed Circuit Switch Data (HSCSD). It achieves download speeds of 56kbps, while upload speed remains 14kbps. This is because this service combines four slots on each radio channel’s eight time slots for downloading. This service will soon be available on the market and will be provided by Finish Sonera, Singapore's SingTel and UK's Orange. The device that most probably would use this technology is a PC modem card, because as Mike Walters (Nokia system marketing manager for North America) explains it “allows direct connection an IP rooter, and then the rooter connects to an IP network” (Rockhold, 2000).

General Packet Radio System (GPRS) starts to look increasingly attractive as the lowest-risk path to the next generation data services for a growing number or wireless service providers. It improves GSM by providing more efficiency for every subscriber. It is an IP-based packet data system, which means that the channels are used only for the time needed to transfer a packet of data. This is a great advantage, because it allows the network operators to support more users than circuit-switched technology. Users will also profit from it, since it allows sustained virtual connection to services and eliminates long dial-up delays. This packet upgrade increases data rates to more than 100kbps and eliminates the dial-up system by providing an “always-on” connection to Internet. It does not change the circuit-switch system, but provides some of the data capabilities required for the next 3G developments. Another advantage is that it does not modify the GSM physical layer system and just uses a new layer-2 and –3 protocol architecture, implemented on new network elements as the packet control unit and GPRS service nodes. Despite that, only 25% of the 366 GSM operators have signed contracts for GPRS equipment and only few of them are close to commercial launch. As a conclusion, we can say that GPRS is a necessary step in the development process, which brings the GSM into the packet world.

The popularity of GPRS among operators and providers makes some specialists think that development of a new radio interface, called EDGE will be even more important to the industry (Beutmueller and Faerber, 2000). Based on some technological concepts of GPRS, it offers evolutionary step of providing speed rates up to 384kbps in the existing GSM spectrum. It uses the same frame structure, logic channel structure and the 200kHz-carrier bandwidth of the GSM networks. This is achieved by increasing the current capabilities of a single slot from 9.6kbps to 48kbps per time slot. Implementation of EDGE is relatively inexpensive because it uses the GSM’s racks, antennas and base stations and only EDGE plug-in carrier unit has to be added. However, compared to GPRS, EDGE will be a costly upgrade and it is expected that some of the operators will wait until 3G standards arrive and go directly to these systems. One of the differences is that EDGE transmits 3bits per symbol, while GSM uses the 1-bit/symbol modulating system. Another important innovation is the quality-control link, which allows the operators to check the quality constantly in order to avoid sending data at a rate higher than the channel conditions can accommodate. To prevent connection loss in cases when there is an increased interference and weak signal, the data rate can be reduced gradually.



3.4.3 3G solutions:

All these technologies so far are considered as 2.5G or a step toward the 3G. The "race" for the 3G technology is between the American CDMA2000, the European Wideband CDMA (W-CDMA) and some new solutions like Time Division Synchronous Code Division Multiple Access (TD-SCDMA). The first two are the most popular and for long time the discussions were only between their supporters. Despite that, based on learning the wisdom of the evolutionary path of CDMA new offers are coming into consideration.

The 3G solution for GSM is W-CDMA, also known as Universal Mobile Telephone System (UMTS). It will require new radio spectra since it operates in ultra wide 5-Mhz radio channels. Auctions for new spectra have already started and everybody has heard about the enormous amount of money being considered. W-CDMA will meet the IMT requirements 2mbps indoors and 384kbps – outdoors, but its official launch will be at earliest in Japan in 2002 by NTT DoCoMo. Linda Windmark, strategic marketing manager in Ericsson views W-CDMA and EDGE as complimentary technologies and it is completely wrong to consider them as mutually exclusive. A possible co-operation between them is to deploy them simultaneously – W-CDMA in urban areas, where the traffic is very dense and EDGE on the rest of the network using the GSM (or TDMA) spectrum that already exists.

CDMA2000 is most popular in USA, because CDMA operators there have broader coverage than GSM operators. Its structure is fundamentally different from that of GPRS. “Rather than use specialised data infrastructure based on cellular-specific protocols, CDMA2000 leverages Internet developments and includes Point-to-Point protocol to link users to a packet data-serving node and Mobile IP to support customer roaming among CDMA2000 networks”(Beutmueller and Faerber, 2000). This will allow customers to have their own IP addresses and keep them while roaming in the network. This 3G technology comes in versions 1X and 3X. The first version can readily be deployed in existing spectra, but the second one has to wait for a new spectrum that combines three CDMA 1.25-Mhz radio channels for higher performance services. Qualcomm has offered recently a new option: High Data Rate (HDR), which some specialists refer to as 1XEV, acknowledging an evolution from 1X. With it, operators will not have to wait for a new spectrum, because it works on the 1.25-Mhz radio channels and still offers throughput rates of more than 2mbps.

These technologies get the biggest share of attention, but network managers have to examine carefully any other possibility. For example, in July 1998 Siemens and the China Academy of Telecommunication Technology (CATT) signed an agreement to develop jointly TD-SCDMA. This was followed by a serious process of R&D and it offers roughly the same data transfer rates as CDMA2000 and W-CDMA. Technically, the main difference is that it splits each W-CDMA 5-Mhz carrier into three 1.25-Mhz or 1.6-Mhz carriers, potentially offering both more flexibility in network deployment design as well as spectrum usage. The performance and spectrum usage are further improved by integrating it with a smart antenna technology. Because of the more efficient usage of network resources, it can offer in highly dense metropolitan areas savings of 30% over W-CDMA. The fact that the Chinese government supports this technology creates a positive image around it. After all, this market is very big and underdeveloped. Combined with the big potential to supply equipment to China’s quickly developing cellular market, TD-



SCDMA has already attracted the attention of big players like Siemens, Motorola, and Nortel Networks.

Obviously, the world has not agreed yet on a universal standard for 3G. The problem is that despite its size, the cellular industry cannot support three different 3G strategies worldwide. The future will show which ones will stay and provide a comfortable base for development of wireless Internet.

3.5 WAP FORUM

In order to provide some compensation to these problems, a number of companies have produced their own middleware solutions for the market. The diversity of the methods used to connect small devices, such as PDAs, to mobile data networks has led to the requirement for standardisation, driven by the need to allow mass-market appliances to be deployed. The arrival of the micro-browser, embedded within the handset, improved productivity by reducing the number of pieces of carried equipment, from two to one. In the short term, the technology most likely to provide universal access from mobile phones to the Internet is the Wireless Application Protocol (WAP), according to WAP White Paper, 2000.

3.6 MARKET DEVELOPMENT SUMMARY

“Is 3G a stepping stone or a lasting solution for wireless data? The answers lie in the application” (Herman, 2000). Despite unproven demand for key features, many service providers try to analyse the increasing popularity of e-commerce and the possible convergence of Internet and wireless applications and suggest that there is a massive latent demand for 3G. They say that in order to be profitable and efficient, economies of packets and reliability of the Internet connections have to be achieved. In other words, the “always on” capability will make the mobile Internet thrive. What is more important in this case is the strategy that operators and providers are using. So far, the development of 3G has followed a pattern similar to that of WAP. The excitement about theoretical possibilities new network technologies and handsets will bring results in present WAP’s troubles being underestimated.

From a network point of view, many specialists (Yoon, 2000; Davenport, 1997; Ehrlich, 2000) say that the whole technology industry is lacking a marketing perspective. Even before the manufacturers or operators are sure that there are potential subscribers, they start discussing and presenting the possibilities innovations. For example, as we can see on Graph 2, the 3G technologies will be installed at earliest in 2002 and 2003 and will be close to 2.5G and 3G in 2010. The promise of this generation is great: due its bandwidth and network capabilities, it will bring the richness of Internet to the mobile phone. Unfortunately, they do not say that this will not happen in the near future, at least not until 2005. So far, about a year since the launch of WAP and the strong discussion of GPRS, EDGE, W-CDMA, the consumers see the failure of these promises. The number of the wireless Internet users in Europe and Asia is so small that many companies refuse to tell the statistics they have (only one out of 12 contacted companies



gave us this type of data). For example, Chinese operator China Unicorn has postponed charging its WAP users, because expenses of billing do not even reach the break-even point.

The disappointment about new networks, WAP technology is all over the world and is big enough to result in a backlash. Maybe it is time, manufacturers to start reconsidering their practices and give the customers a chance to find something they can believe in.

Incremental approach- as we have seen the most popularly hyped word in the wireless industry these days – 3G - is promising “lightning-quick data throughput speeds, video, and multimedia applications (Holt 2000) ”. The problem is that, years yet measure the arrival of these technologies. If we listen to the way people are promoting the wireless Internet services, it is easy to realise that they will not be ready even for the coming “wireless data storm” (as they refer to it). That is why some operators are applying an incremental approach to 3G. This concept is based on the desire to get as much profit from the current networks or the next 2G and 2.5G as possible and then wait for the future to show which will be the most appropriate 3G technology. This will allow them to make a smooth evolution into 3G. Another advantage is that through this approach, the operators will not have to invest huge amount of money all of sudden, but rather make reactively small investments every year in the next couple of years. The threat of this approach is that 3G might be skipped because the telecoms will make a jump to the 4G. The technology hype might kill its own product- 3G!

The importance of applications- Some researchers (Malim, 2000; Wilhelm, 2000) maintain that the success of any new network technology depends on the quality and promotion of the applications. When a customer is buying a mobile phone, s/he does not buy it because of its speed capabilities, but because of the connectivity with the Internet. Therefore it is crucial to translate the technology into things that people will want and have a reason to use.

Speed trap - there are a great number of new network technologies coming or even running on the market. What is very interesting about them is that establishing or running their top speeds is not an easy task. The existing GPRS networks offer maximum theoretical rate at 172kbps, while some specialists say that this number is more realistically 144kbps. Others say that this is 115kbps and even that would be the maximum using all of the eight time slots available (Emmerson, 2000). “In practice GPRS is likely to top out at around 56kbps, which neatly matches or exceeds the speed of home PC users’ modems”(ibid.). Not to forget that whether operators will actually market at this rate is still an open issue.

The advertised speed for the next generation networks are around 2Mbps, which again is a theoretical figure. Technically speaking, it applies to the transport layer. “The air interface is a shared resource, which means that at the application layer, which is the only one that matters, the figure will be much lower (ibid.)”.

Many people are getting caught in this speed trap, focusing only on the improvement of speed rates. They forget to ask themselves: Is it really important? Are there any other possibilities?; etc. For example, there are developments in data compression that will make speeds appear much higher for certain applications. This may enable quick Internet access and other data services on existing mobile networks to run at the equivalent of PC modems, that is 56kbps (Nortel, E-mobility Accelerator).



On the road to packet networks, one of the biggest driving forces is that greater speeds, matching and in some cases even exceeding these of today’s wire line networks, will make wireless Internet thrive. It is obvious that the quality of the service will be better, but what is more important, as Keith Shank, Ericsson director of strategic market innovations, providers have to remain pragmatic about the speed and capabilities of the future 3G technologies. There will be many different applications and some of them will meet the customer needs at lower costs. He maintains the fact that “speed may thrill, but it may not pay the bill” (Wicklam, 2000). All companies should try to implement that kind of strategies that follow the customer needs and requirements.

Obviously, the “technological hype” has influenced this segment of development as well. Companies, vendors, operators, etc. are trying to promote something they will not be able to propose at the end. It is time engineers and managers to realise the fact that just because something is possible, this does not make it probable. This means that the fact that the networks have a limited capacity and many people use them should be accepted. It also means that through GPRS, EDGE, etc. operators can offer wireless rates that are in line with wire line rates. This is something that is sufficiently attractive to draw users' attention and should not be excessively exaggerated.



4 Theoretical Background

This part of the paper is presenting the theoretical basis for the analysis. The aim of theoretical background is to provide means for validating practical data in order to enforce the applicability of conclusions.

The theory part is divided into several subparts- modules, each of them presenting a separate conceptual frame. The first module encompasses concepts in the area of new product development. We provide a combination of the two most interesting concepts- reach/richness and high-tech/high-touch like the richness, which yields more feasible ground for applying the concrete cases discussed.

The next part provides a basis for the discussion on the customer side of the phenomena. The modern theories on technology adoption are summarised and shortly discussed. In addition to that, we discuss the innovation diffusion concept, which provides knowledge about the dissemination of innovations. At the end of that module, we list usability factors in order to give an overview of all general factors “fostering” usability.

Then, basing on the study of the literature in 4.2 it is argued that the present approach of assessing technology acceptance and customer perceptions is rather a reactive method. We maintain that in a world of extensive information and technology overloading a proactive approach aimed at understanding user’s intrinsic motivation is crucial. Along with the discussion of the previous studies leading to the new model, the concept of cognitive absorption is presented.

The last part evaluates the constituents of customers’ expectations with the aim of better understanding customer needs. We argue that effective customer expectations' management should involve proactive creation of favourable expectations.

4.1 NEW PRODUCT/SERVICE DEVELOPMENT

The aim of this theoretical block is to provide essential guidelines for the introduction of new products and services. Although there are unquestionable differences between these two categories of goods, such as inseparability, heterogeneity, intangibility, perishability (Lovelock et al, 1999), the discussion is not separated due to the general applicability of the approaches described. For the purposes of simplicity, we would refer to them in this section as products.

4.1.1 Avoiding the Wrong Route

Before even starting to consider the development of a new product, all critical reasons of failure have to be studied and considered carefully. Cooper (1993) provides a comprehensive discussion on new product failure reasons. The most common mistake is poor prior marketing survey, either inappropriately designed or, in most cases, rated too low in priority. This leads to a situation,



where customer needs are misunderstood, market needs – overlooked and/or overestimated, and market readiness seriously over hyped. The poor marketing survey may be caused also by (already mentioned before) the “machine engineering process” approach, i.e. the case when it “is assumed that because a product design is considered good by the R&D department, it is considered good by the customer as well.”

The second type of oversights is caused by technical glitches during the design and the production phase. Failure to deal with this type of mistakes results in huge cost inefficiencies, which are encountered later since the costs of corrections made at later stages increase exponentially (Bergman and Klefsjö, 1994). This category also embraces products that were designed to include too many features simultaneously. Although it may be a great product, users will often be too “lazy” to learn its functions thoroughly and, therefore, will not feel justification for price/value relationship. Caused by this type of mistake, the product often falls in to the failure category named “the better mousetrap that nobody wanted”. It is described as developed “internally with little attention paid to the real needs and wants of the marketplace.” Another failure category stemming from research of previous mistakes is the “technical dog”, which occurs when the product “simply doesn’t work or falls short of performance requirements”.

The third reason that Cooper points out is the inability to plan the right timing during the product development process. This includes both being too fast or too slow to offer to the market, which partly arises from different sources, namely, lack of co-ordination between departments and layers, lack or abundance of pressure on controlling. Willingness to deliver the product quickly to the market often results in compressing or even some skipping stages of development (for a detailed activity plan for new product development, refer to Appendix 6).

Some other mistakes are poor performance of marketing function, miscalculation of total development costs, pre-testing of the product with focus groups, lack of test marketing, poor financial and business analysis of product life-cycle costs and returns, poor internal testing.

The development of new products in today’s rapidly changing and turbulent environment requires not only expert knowledge and resource base but often also a great deal of luck. The reason underlying such statement is simple and lies within the fact that no market research can precisely estimate the true needs of a market even in 2 years time. Failure to act quickly may result in fierce competition and large opportunity losses. Scheuing (1989) states that forecasting “plays a vital role in the evolutionary process by predicting alternative future environmental conditions together with their associated probabilities of occurrence”. As stated previously, Scheuing also warns that no forecastings “have been or ever will be able to eliminate the entrepreneurial risk”. However, sound methods aimed at minimising risk should always be considered and used as thoroughly as possible given the concrete case.

The consequences of rapid technological development caused by the nature of the New Economy have posed great threats in terms of reduced time for marketing (which has resulted in fewer research activities prior to action) and of technological traps. By the latter, it is understood that companies often engage into actions, which outcome is not sure but they are afraid that procrastination would result in large opportunity losses. Scheuing warns that “it is dangerous for a company to be strictly technology driven and offer a product simply because it is technologically feasible”. Therefore, to safeguard the company from opportunity losses of



making the wrong decisions, the companies have to enforce internal collaboration between R&D and Marketing department. It is important to be customer driven and that can be achieved by, for example, QFD, which translates broad customer needs into product specifications.

4.1.2 To Reach or Not To Reach?

The following part presents the concept of richness and reach, which refers to the trade-off between the qualitative and quantitative aspect of data and its distribution.

Evans and Wurster (1999) suggest that, “Every business is consequently a compromise between the economics of information and the economics of things. Separating them breaks their mutual compromise and potentially releases enormous economic value”. In order to separate the two distinctively different economics of richness and reach are presented. This trade-off emanates from the “existence of information channels: physical infrastructures or behavioural patterns that support limited movements of information”. Richness is referred to as the quality of information, as defined by the user. In other words, it is the potential depth of analysis of the presented information. Evans and Wurster (1999) provide six dimensions of richness of information (each of them being more or less applicable): bandwidth (amount of information that can be moved through the distribution channel at a

time); customisation (degree of personalisation), interactivity (degree of two-way communication); reliability (degree of credibility); security (degree of sensitivity of information – implying that extremely sensitive information

is classified due to its unique rich content); currency (degree of speed of spread of information; relating to the stock exchange where few

receive instant quotes, financial institutions receive them with a small delay and individual investors – with 15 and up to the hour delay).

Reach is simply the theoretical number of people whom the given information reaches. The graphical presentation of the trade-off is shown in Figure 1.



Figure 1: Traditional trade-off between richness and reach (Source: Wurster and Evans, 1999)

The implications of this trade-off are that up until now, the traditional channels of information distribution could not support the simultaneous distribution of highly customised, analytical and deep material to a large audience. Take the case of newspapers and magazines – those that attempt to reach a wide audience, present information, which would be suitable for most of the readers (few headlines from the economic news, some sporting events coverage, national news, weather forecast for the days to come, etc.). Naturally, due to the limited amount of space, one cannot expect a 10-page-report on the political and economical consequences of the latest attack by Palestinians in the Gaza sector. On the other end of the spectrum, highly specialised newspapers and magazines, like Balkans Today, have this topic covered thoroughly, since this is their core subject and the readers expect this deepness. Quickly considering the group of readers of Balkans Today and of general daily newspaper like Expressen, one will most probably arrive at the conclusion that the latter has wider reach but is not even close to the richness of the coverage of the events in the Gaza sector, provided by the former.

Given the six dimensions of richness, it is easy to conclude that the main objective of the marketing mix is to achieve a desired place on the richness/reach scale through the deployment of scarce resources. Translating the trade-off into the familiar microeconomics terms, everybody can observe the abstract similarity to the indifference curve. Ceteris paribus, both individuals and companies can move up/down on the curve, but, unless they change the means of distribution, they cannot move the curve itself.

One of the most important implications of the discussed trade-off is the asymmetry of information. This implies that given the wide range of existing channels through which information is distributed, it is more than just highly probable that end-users of information- individuals, companies or alliances or else, will end up having different information about a given phenomena. This is also facilitated by the different standards we are using in our everyday life. Meanwhile, due to the force of the Internet and other wide area and local area networks (intranets), the traditional trade-off curve is being shifted, making it possible to achieve greater levels of richness and at the same time greater reach. This is shown in Figure 2


Richness

Reach


Figure 2: Coming revolution in trade-off between richness and reach (Source: Wurster and Evans 1999)

Inevitably, efforts of various standard bodies are resulting in more and more universal standards across the globe. Nevertheless, due to the varying degrees of lobbying in the process of approval of a standard, results are not always Pareto efficient. The discussion of standards consequently leads to the factor of critical mass. The critical mass is considered the most important driving force towards acceptance of the standard. This means that the standard faces the most of the challenges during the initial stage of its life cycle. Consequently, once the critical mass has been achieved, it is driven towards the mass acceptance creating a positive loop between number of existing users and benefits potential users see from using the standard. The positive loop does not only affect users, but also involves infrastructure companies, who are better off due to the advantages of scale economies. The positive loop is often also referred to as a snowball effect and is resulting in a network effect. Wurster and Evans (1999) warn, “There is no guarantee that the right alliance of players will achieve critical mass and drive their standard to become a global norm, although these have the resources, the intelligence, and a clear understanding of the value of the endgame”.

4.1.3 To Touch or Not To Touch?

Lately, there has been a considerable effort devoted to “outsourcing” the work previously done by humans to machines powered by recent technology developments. This section discusses the trade-off between use of technology and use of human interaction in the process of communication with the customers. We would apply and use some concepts introduced by Gummesson (2001). He divides the Customer Relationship Marketing (CRM) into two parts eCRM and hCRM, where “e” stands for electronic and “h” – for human.

Gummesson supports the different marketing approach that the New Economy companies should apply (what we present in the previous chapters and in the entire theoretical part). He states: “Major phenomena such as services, quality, relationships and IT are sparsely treated in marketing management; they have not changed the marketing management paradigm; and in microeconomics they are hardly noticed. Marketing theory development should lead to enhanced



understanding, insights and marketing wisdom, that is to a more balanced, more comprehensive, and more valid image of marketing reality”. Gummesson precisely points to the two explicit characteristics of the New Economy – importance of value and networks. Value creation is an ultimate goal for business enterprise in the new millennium because, as one could see, many e-companies have gone under water because of the instability of their value creation model. The short-term benefits have they provided have proven not to be enough for value creation in the long term. The notion of importance of networks becomes more apparent while observing the essence of modern communications – most are held online. Therefore, if less time is spent for setting up the meeting, more time should be devoted for polishing the prerequisites for contact and increasing the number of contacts.

Figure 3: Two approaches at CRM: the traditional and the new

Gummesson warns that the main reason of e-companies not living up to their promises has been inability to understand and combine the fair amount of technology with fair amount of human interaction. The web boom has been so drastic and overwhelming that suddenly everyone was speaking of Internet banking, Internet shopping (including choosing flowers for beloved on the Internet!), Net browsing, information downloading, etc. Naturally, “home shopping has been slow and will most likely only expand in limited areas” (Gummesson, 2001). The concept of high-tech and high-touch was developed 20 years ago by Naisbitt and, as quoted by Gummesson, was based on the need “… to balance material wonders of technology with the spiritual demands of human nature”. There are two conflicting views on the high-tech and high-touch. The traditional way says that these two factors are negatively correlated. The new way claims that effective CRM is essentially a positive correlation between eCRM and hCRM. Figure 3 provides a graphical presentation.

The figure on the left depicts how new technology is supposedly replacing the need for human interaction. Logically, it seems that costs are saved, and less time is required to perform an electronic relationship. At the same time, this figure also suggests that some of the basic human needs are neglected. The new approach suggests that a combination of electronic relationships with human presence helps to establish better CRM.



The combined model

This section will explore possible synergistic effects from combining the two previously discussed models – the trade-off between richness and reach and the trade-off between high-tech and high-touch.

As mentioned before, new technologies are assumed to shift the trade-off line between richness and reach so that both values increase at the same time. This is possible through advancements in communication technologies and increased effects from interconnected networks. The technology factor, which makes the curve shift, is presented in the second model in connection with human factor, which, according to the traditional way of thinking, is supposed to diminish with amount of technology increasing. If we would hold the old way as the correct one, this would inevitably (in pure theoretical terms) mean that there is a contradiction between the two models since the richness/reach concept claims that along with the curve shift customers are more satisfied due to the increased opportunity to communicate. This is not possible according to the psychological foundations in the high-tech and high-touch model. Therefore, the fist conclusion is that the new, balanced trade-off between eCRM and hCRM is the more correct way of abstraction of reality.

Next, provided that, firstly, the balance between technology and human interaction has to be fair and, secondly, neglecting this balance outweighs positive effects from technological advancements, follows more precise model of trade-off between richness and reach can be derived.

Figure 4: Corrected richness/reach trade-off

The implications for adjusting the model is that the technology should not be overemphasised. Therefore, the new trade-off of boosted reach and increased richness is constrained by the human ability to adopt to new things over time, but not immediately. Ironically, in a world of numerous technological advancements, we must think beyond machines.



4.2 ASSESSING POSSIBLE WAYS TO IMPROVE USER ATTITUDE TOWARDS THE NEW OFFER

Given the rapid pace at which new technologies, services, products hit the market, one has to adjust the common knowledge about customer readiness to use these new offers. The changing environment in which people have adapted to live today has, in fact transformed theoreticians’ proposals on technology acceptance9. Logically, the building blocks in these theories are still there. So, the main theories attempting to make use of psychology to explain human behaviour are very briefly discussed below. In addition, usability promoting/hindering factors are looked upon.

4.2.1 Theory of Reasoned Action and Theory of Planned Behaviour

In order to provide a reader with the background of the theories trying to describe the human attitude towards the new technologies one needs to start with the Theory of Reasoned Action (TRA) (Fishbein and Ajzen (1975, 1980)), which is a basis for both Theory of Planned Behaviour (TPB) (Ajzen 1985) and Technology Acceptance Model (TAM).

Figure 5: Theory of Planned Behaviour. Source: Chang (1998), compiled from Ajzen (1985)

The main assumption of TRA is that all individuals are rational and use the information at their possession when making decisions. TRA assumes that behaviour being studied is under the willful control of the individual and both theories assume that human beings are rational and make systematic use of information available to them when making decisions.

The TPB is in effect the extension of TRA. In order to explain Intention and Behaviour, TPB has added control beliefs and facilitation as an antecedent of perceived behavioural control. TPB incorporates measure of self-efficacy, which together with measures of subjective norms and attitudes can help to predict human behaviour. Self-efficacy relates to how easy or difficult it will be to learn the new system (in this context). Subjective norm is each individual projected 9 No wonder why thesaurus for Microsoft Word, along with other choices, offers to substitute theoretician with speculator, philosopher and dreamer.



response of other individuals in case s/he is to perform the action (in other words, what others will think of him/her if s/he is to perform the action). Finally, attitude towards technology indicates whether an individual thinks about it in a more positive or negative way.

4.2.2 Technology Readiness and Acceptance Model

Parasuraman (2000) starts developing this area with introducing a new and very useful concept: “technology readiness”. It refers to “people's propensity to embrace and use new technologies for accomplishing goals in home life and at work. The construct can be viewed as an overall state of mind resulting from a gestalt of mental enablers and inhibitors that collectively determine a person's predisposition to use new technologies” (Parasuraman 2000)”. Only if we able to measure and analyse this measure, we would know to what extent we could use a new technology on the market. Even though TRI is a comprehensive tool for measuring readiness and later basing business decisions on introduction of new technologies, there is a very critical point. In order to take full advantage of its positive results, the company has to devote large amount of time to gathering, analyse input data and provide viable conclusions. During that time, market may either shift in other direction or be already in the state, which has been analysed.

A lot of contemporary trends and challenges triggered the introduction of the technology readiness concept. In the last decade new technologies have proliferated through various facets of everyday life and have reached a point where we accept them as a normal part of our everyday life. However, many surveys (e.g. Parasuraman 2000, Alsop 1999, Mossberg 1999) suggest that there are more and more signs of growing consumer frustration and disillusionment and that there is also an inverse relationship between penetration and use rates. The logical explanation for this might be the fact that these new adopters are not as “technologically savvy” as the early users or that the companies offer more and more complex information solutions without a good service support and friendly instructions. What almost all researchers agree is that “consumers simultaneously harbour favourable and unfavourable views about technology-based products and services. In this vein, Mick and Fournier (1998) carried out an extensive qualitative research on people’s reactions to technology and identified eight technology paradoxes with which consumers have to cope: control/chaos, freedom/enslavement, new/obsolete, competence/incompetence, efficiency/inefficiency, fulfils/creates needs, assimilation/isolation, and engaging/disengaging. What is most interesting is that these paradoxes imply the appearance of both positive and negative feelings. The correlation of these feelings is likely to vary across individuals and if we have a good measurement system, we can determine the customers’ willingness to embrace the new technology, i.e. technology readiness. This implies that “ a combination of positive and negative feelings about technology underlies the domain of technology readiness”. An extensive research, conducted by Parasuraman shows that there are four main factors of technology-related behaviour:

Optimism: A. positive view of technology and a belief that it offers people increased control, flexibility, and efficiency in their lives.

Innovativeness: A tendency to be a technology pioneer and thought leader. Discomfort: A perceived lack of control over technology and a feeling of being

overwhelmed by it. Insecurity: Distrust of technology and scepticism about its ability to work properly.



Of these four aspects, the first two are drivers and the other two- inhibitors of TR. The conclusion of this survey is that whenever a company tries to implement a new technology-based service it has to consider carefully all these dimensions.

Dabholkar (2000) also supports the idea that the customer’s feelings and beliefs are positively correlated with the intensions to use a technology- positive feelings will propel people toward new technologies, the negative ones will hold them back. What is different is that he divides the factors in two big groups- situational and individual differences in using technology-based services. He considers the personal and demographic characteristics of the customers as one of the most important elements in the analysis of the plausible technology-based implications. Every company has to aim at creating technology comfortable customers, because this will be beneficial both to the customer (in the form of good experience and satisfaction) and the company (providing good and accepted service).

As explicitly stated by Davis (1989) in his Technology Acceptance Model, users’ intention to accept a technology is mainly driven by two factors – perceived usefulness and perceived ease of use. In this model he maintains that it is very important to understand how the customer perceives these two factors. Perceived usefulness is defined, as the degree to which a person believes that use of the system will enhance his or her performance and perceived ease respectively as the degree to which a person believes that the system will be free of effort. However, regardless of how these two factors interact with each other towards creation of favourable intention to accept a technology, TAM does not put focus on the external factor of need to use it. Put it a different way, individual differences of each human are not included on the explanatory side of the model. Given the business environment, both individual and organisational actors have to take advantage of new technologies and be aware of coming ones in order to stay on the competitive edge. This will inevitably initiate also acceptance of technologies on the individual level in the everyday life, assuming a normal working person is exposed to the obligation to work on average 5 days a week, 8 hours a day.

4.2.3 Innovation Diffusion Theory

The innovation diffusion theory explains how the new technology usage spreads from early acceptance by few users to either success or failure of concept (Rogers, 1962). The theory describes how the innovation is communicated over the time, through particular channels. Stages of innovation are (adopted from Clark):

knowledge (exposure to its existence, and understanding of its functions); persuasion (the forming of a favourable attitude to it); decision (commitment to its adoption); implementation (putting it to use); confirmation (reinforcement based on positive outcomes from it)

It is emphasised that mass-media channels are more important on the first stage, whereas inter-personal channels gain their importance on the second stage. As such, the decision to adopt may be personal (individual judgement of the affected person or organisation), collective (reached by consensus) or authoritative (imposed from hierarchically higher individual or organisation). Next, the important characteristics of innovation are:



relative advantage (the degree to which it is perceived to be better than what it supersedes);

compatibility (consistency with existing values, past experiences and needs); complexity (difficulty of understanding and use); trialability (the degree to which it can be experimented with on a limited basis); observability (the visibility of its results)

A widely used approach is to divide innovation users in 5 categories, which are related to time perspective:

innovators (venturesome); early adopters (respectable); early majority (deliberate); late majority (sceptical); laggards (traditional)

Clark describes these groups in the following way: “Earlier adopting individuals tend not to be different in age, but to have more years of education, higher social status and upward social mobility, be in larger organizations, have greater empathy, less dogmatism, a greater ability to deal with abstractions, greater rationality, greater intelligence, a greater ability to cope with uncertainty and risk, higher aspirations, more contact with other people, greater exposure to both mass media and interpersonal communications channels and engage in more active information seeking.”.

The innovation process is highly influenced by:

opinion leaders (who have relatively frequent informal influence over the behaviour of others);

change agents (who positively influence innovation decisions, by mediating between the change agency and the relevant social system);

change aides (who complement the change agent, by having more intensive contact with clients, and who have less competence credibility but more safety or trustworthiness credibility)

The innovation diffusion theory serves as a good descriptive instrument. Still it is hard to apply it in reality, because the explanatory and predictive sides are not strong.

4.2.4 Usability Promoting/Hindering factors

There are several dimensions, which can be of use when inspecting the possible usability of new technology (Stephen Bostock, 2000). The first group of factors concerns learnability:

familiarity (using existing knowledge); consistency (similar behaviour in similar situations); predictability of response generalisability (support to extend knowledge to other situations); synthesisability (past operations have clear effect on current state);



The second group deals with flexibility factors: controllability (the extent to which the customer can govern over the interaction process); multi-threading (allowing to engage in more tasks at the same time); task migration (the user can choose between performing a task him/herself or passing it to

a system); customisation (the extent to which the technology can be adjusted to specific user needs)

The third group concerns robustness: observability (the extent to which the user can observe the technological process); recoverability (ability to correct an error once observed); responsiveness (the perceived rate of communication, speed) task completeness (the extent to which the technology is able to perform the tasks of the

user in the user perceived way)

4.3 BETTING ON FUN

4.3.1 Need for Change in the Course of Action

Due to the above-mentioned arguments, we state that a new approach is needed to look at the whole process of introduction of new technologies and associated products and services. It is not enough to discuss only technology readiness or acceptance to understand how the customers would accept this technology. This approach has to deal with the fact that information on new offers is being quickly disseminated among market participants– existing and prospective internal and external customers, competitors and other stakeholders. Therefore, focus needs to be put on the creation and effective management of stakeholders’ expectations. While expectations is the input into the framework, the output is, logically, customer perceived quality. The way to customer perceived quality lies through managing expectations, creation of positive perceptions, and management of disconfirmation of expectations. Due to the fact that great amount of efforts is currently being put on personalisation of new services, the problem of disconfirmation is the ultimate issue. This is based on the idea that customers in the New Economy expect services to match exactly their needs. Again, this expectation has been created by numerous explicit and implicit promises involved companies have made. To conclude the arguments we would like to recall the state of mind people had had two decades ago. At that time there were no computers, no Internet, no mobile phones, no electronic payment cards (comparing the rate of penetration to that of today) etc. If an extensive marketing survey had been carried out towards assessing potential need for these technologies and their associated products and services, it would have shown negative results (this conclusion is based on studying the foundations of both TAM and TRI).

Therefore, we propose a new theoretical view on the development of new offers for the New Economy. This view is a combination of theories in relationship marketing, quality and psychology. Existing theories aimed at explaining and predicting customer attitudes towards new technologies greatly overlook the potential of placing a focus on fun associated with their usage. Once more, perceptions of technology as being able to provide fun are strongly dependent on



companies – they have to integrate fun in the new technology and promote it as a fun-having experience as well.

The aim of this section is to provide theoretical insights into the antecedents of technology acceptance models discussed above (particularly, TRA, TPB, TAM). Discussing the work of Agarwal and Karahanna (2000), we propose that the concept of cognitive absorption (CA) is of utmost importance when discovering the primary driving forces of user acceptance of the New Economy offers.

Agarwal and Karahanna (2000) give a logical background to our perspective by saying that "prior research has focused considerable attention on the centrality of beliefs in several key outcomes such as attitudes and usage", whereas "less emphasis has been placed on how such beliefs are formed". It is interesting to inquire not only into the notions of instrumentality but also into the notion of holistic experiences with technology. Agarwal and Karahanna (2000) warn, "Several central characteristics of contemporary IT underscore the need to pay close attention to noninstrumental variables". The concept of CA is based on three theoretical bases - the trait of absorption, the state of flow and the notion of cognitive engagement. Sections below are examining each of these bases separately.

4.3.2 The Trait of Absorption

This concept stems from the idea that human beings are often found in situations when their state of mind can be characterised as "readiness for experiences of deep involvement, a heightened sense of the reality of the attentional object, an imperviousness to normally distracting events, and an appraisal of information in inconventional and idiosyncratic ways" (Roche and McConkey, 1990). Naturally, the extent of the trait of absorption varies among different individuals. Moreover, this trait is directly influenced by situational factors and subjective previous experiences. The trait of absorption is a variable in the users' behaviour that in certain situations leads to the state of absorption.

In order to provide a useful insight on how this trait can be measured, Tellegen Absorption Scale (TAS) is briefly discussed. The scale developed by Tellegen (1982) has nine dimensions: responsiveness to engaging stimuli, responsiveness to inductive stimuli, thinking in images, an ability to summon vivid and suggestive images, a tendency to have cross-modal experiences, an ability to become absorbed in one's own thought's and imaginings, a tendency to have episodes of expanded awareness, an ability to experience altered states of consciousness, and an ability to re-experience the past.

4.3.3 The State of Flow

Originally developed by Csikszentmihalyi (1990), this concept has been recently considered in combination with the concept of trait of absorption (Wild et al 1995). Csikszentmihalyi defines state of flow as "the state in which people are so involved in an activity that nothing else seems to matter". Clusters of flow are intense concentration, a sense of being in control, a loss of self-consciousness, and a transformation of time. Trevino and Webster (1992) developed a more precise model particularly for the human-technology interaction. This model includes 1) a control dimension, analysing individuals perception of control over the process of interaction with technology; 2) an attention focus, whereby individuals attention to the process is analysed; 3) a



curiosity dimension, implying that during the state of flow there is a higher stimulation of sensory and cognitive curiosity; 4) intrinsic interest dimension, suggesting that individuals experience with technology is not of pure usefulness nature but much of it is represented by the pleasure from the process of interaction itself. Hoffman and Novak (1996) put forward that flow is a direct antecedent of positive subjective experience, increased learning and perceived behavioural control.

4.3.4 The Concept of Cognitive Engagement

The concept of engagement was presented by Webster and Ho (1997) and related as similar to the state of flow but without the perception of control and, therefore, identical to the state of playfulness.

4.3.5 The State of Cognitive Absorption

The final concept, which was drawn by Agarwal and Karahanna (2000) is partly based on all the previously mentioned theories. Appendix 9 provides a useful overview of the discussed theories and summarises their particular input into the new model. Next, the justification for using the state of CA is that the presented models along with much useful insights and analytical tools are overlapping but individually do not provide the completeness of state of cognitive absorption. Therefore, CA "captures the totality of an individual's experience with new software" and "is strongly grounded in prior research in cognitive and social psychology" (Agarwal and Karahanna).

The dimensions of CA are:1. temporal dissociation, or the inability to register the passage of time while engaged in

interaction;2. focused immersion, or the experience of total engagement where other attentional demands

are, in essence, ignored; 3. heightened enjoyment, capturing the pleasurable aspects of the interaction; 4. control, representing the user's perception of being in charge of the interaction; and 5. curiosity, tapping into the extent the experience arouses an individual's sensory and cognitive

curiosity (Malone 1981).

The theoretical model is depicted in Appendix 8 where arrows represent positive impact of one factor on another. For a detailed discussion and explanations, please refer to Agarwal and Karahanna (2000).

To conclude the section providing insights into the state of CA as well as preceding theories, one should note that the research done by Venkatesh (1999) on the role of the creation of favourable user perceptions via the path of intrinsic motivation has considerably proven that perceived ease of use is higher among the users in the game-based environments (alternatively, in the environments where more fun component is involved) than in the traditional environments. Next, Venkatesh has pointed to the fact that the behavioural intention to use will be higher among users in fun-mediated environments. Even more though, the simple notion of how to name the environment is going to produce different attitudes towards it. This means that labelling the environment as "fun" or "work" will eventually result in different user perceptions (Rosch, 1975,



1978). Labelling the environment as "fun" results in users concentration on the process whereas labelling it as "work" results in concentration on the outcome.

4.4 CUSTOMER EXPECTATIONS MANAGEMENT

This part provides basis for the discussion of customer expectations. First, determinants of customer expectations and their antecedents are studied. Then, management of expectations is discussed with the focus on the disconfirmation of service expectations. Finally, theoretical suggestions on how to correct the effects of disconfirmation of expectations are presented.

4.4.1 Roots of Expectations

To start with, according to Zeithaml, Berry and Parasuraman (1991), there are three distinctive types of customer service expectations: desired service, adequate service and predicted service. The conceptual model Zeithaml et al provide is divided in four parts: 1) expected service component, 2) antecedents of desired service, 3) antecedents of adequate service and 4) antecedents of both predicted and required service.

Expected service is affected by the level of service that the customer expects to receive (desired service) and the level of service that the customer will accept (adequate service). Although customer believes the company can deliver superior service, which would satisfy all customer needs and sometimes even exceed them, the customer is aware that this is usually not the case. The desired service expectations tend to be relatively stable over time, since they are based on accumulated past experiences. Adequate service expectations, however, has a tendency to substantially vary, due to the fact that it is based on current experiences and analysis of alternatives. Thus, there is a borderline between desired service and adequate service to indicate that there is a zone of tolerance. Zone of tolerance emanates from the heterogeneous nature of services and relates to the possible difference between the same service but at different time. Zone of tolerance is a conceptual foundation and therefore may drastically vary between different customers. Moreover, the variation is also possible given the same customer but different point of time.

Desired service refers to the ideal service expected by a customer. Major influencing factors on the desired service are enduring service intensifiers and personal needs. The first group of factors includes competitor services and their marketing, while the second group is a complicated combination of psychological state of the person at the time of service delivery, personal background (experience, professional education, family background and vast number of similar interpersonal characteristics). Enduring service intensifiers are therefore influenced by derived service expectations (influence of a third party) and personal service philosophy (personal intrinsic attitude towards the service and performance of service providers). Stemming from these manifests, one can conclude that enduring service intensifiers elevate the level of desired service. On the other hand, personal needs in detail represent the combination of one’s physical, social and psychological factors.

Adequate service is defined by five factors: transitory service intensifiers, perceived service alternatives, self-perceived service role, situational factors, and predicted service. The latter



further influences adequate service evaluations and customer perceived satisfaction. Transitory service intensifiers are short-terms individual factors and conditions that lead a person to more sensitive attitude towards the service. In other words, emergency situations increase customers expectations of adequate service in a way that individual expects that the company will react in the best possible way to solve the problem immediately. The perception of quality of service alternatives also tighten zone of tolerance indicating to the customer that switching is easy due to the low search costs (disregarding lock-in and switch costs). Next, inseparability of service production process and delivery requires customer as co-producer and, consequently, customer’s self-perceived role influences the level of adequate service. In practise, for example, this means that a customer who likes to be involved in the service production process, will more positively describe his experience about the moment of truth when s/he has been greatly involved in the process, and opposite also of course is true. Naturally, the customer understands that force major is beyond the control limits of the service provider, therefore, situational factors widen zone of tolerance.

Antecedents of desired and predicted service include four factors – explicit service promises, implicit service promises, word-of-mouth communications, past experience. Explicit service promises are constituted by statements made by company. These statements all together form the substance of market information, which is disseminated in natural ways and received by customers and other parties in differing amounts. This information includes direct and indirect advertising and personal communication from inside the company to outsiders. Implicit service promises, on the other hand, are communicated indirectly to customers and may even be received by customers not in the way company intended to. Here, major factors are price and tangibles. For example, a customer may logically assume that higher priced product is better and, therefore, levels of both desired and predicted service are altered. Tangibles, for example, suggest that a customer would expect higher level of service from a company whose office is in the city centre, nicely decorated, occupying the best floors of office building. Similarly, if the customer has heard from others, that particular service company is doing much better than their competitors, this person’s levels of desired service and predicted service from a better company are naturally heightened. Finally, the combination of past experiences has an impact of levels of desired and predicted service as well, for example, a customer who has experienced bad service from a company in 3 out of 4 interactions is likely to expect low performance the next time as well (disregarding the fact that service company might use promises).

In case of the new technologies that are introduced on the market, it is interesting to look at the sources of customer expectations. This makes it possible to base predictions about customers’ expectations about new products on a verified theory. As presented in Zeithaml et al (1991-113), Cadotte et al (1987) provide following base points to consider in this area. In their opinion, expectations norm is usually derived from experience, which should not necessarily be the experience about focal brand. Firstly, the norm might be derived from particular brand performance. Second possible way is that the norm is derived from the average performance of several similar brands. Naturally, the external communication and the role of public relations should not be underestimated.



4.4.2 The Art of Diplomacy

Previous sections of the theoretical model being developed have presented basis for following path of individual's formation of beliefs that lead to the formation of perceptions about usefulness and ease of use of the technology. PU and PEU (as we demonstrate later) have strong impact on the behavioural intention (BI) to use the technology. Then, critical factors in the process of expectation formation have been looked upon. The view that in the New Economy, in order to be successful, companies have to shape the expectations of their users has been expressed. Now, it is being argued that in order to competitively shape the expectations of users before they have started to use the technology, companies have to give great attention to the examination of their networks of relationships. Now more than ever, relationships are very important due to the increased abilities to communicate via numerous means (e.g., video conferencing, voice mail, email, and the conventional fax, telephone, post). This is to point the attention to the ease of establishing relationships nowadays. Therefore, there is an increasing need to comprehend the vast consequences of establishing relationships in the wrong way or committing mistakes during the relationship. The aim of this section is to enlighten the general properties of relationships nowadays and provide an insight on the most important ones in the context of company willing to create the right type of expectations (or, rather, willing to minimise the probability of creating the wrong expectations).

Gummesson (1998) puts forward three types of connections in the business relationships:

1) Activity links embrace activities of a technical, administrative and marketing kind;2) Resource ties include exchanging and sharing resources, which are both tangible such as machines, and intangible such as knowledge;3) Actor bonds are created by people who interact and exert influence on each other and form opinions about each other.

These relationships have eleven distinctive properties:

CollaborationCollaboration is one of the fundamental properties of the relationships. Different combinations of degrees of collaboration and competition can be observed in practice.

InterdependencyThis notion suggests that each party has to establish the basis of treating each other seriously and committing the resources in a mutually fair and beneficial way.

Trust, risk and uncertaintyEvery relationship involves a varying degree of risk that other party will not hold its promise. In order to strengthen the relationship, each party has to trust the other one. However, it is not possible to predict, which is the optimal degree of trust.

PowerThe relationship usually involves a party that naturally exhibits more power than the other one. Conflicts due to this factor have to be avoided for it may result in the end of the relationship. Awareness of the possible change in the symmetry of power has to be possessed.



LongevityThe implications of this notion are that the mutual benefit is a positively correlated to the time due to the initial costs of establishing activity links, resource ties and actor bonds. However, in some cases relationship does not have to be focused on outcome but rather on process - as in case with marketing agency when the new one could provide solutions that are more creative.

Frequency, regularity and intensityThese are the variables relating to the time and amount of relationship. For example, most people regularly visit their dentist, this visit might be intense, in case a treatment is needed, or it might not, provided that teeth are healthy, if a patient requires a treatment s/he might have to visit the dentist frequently during some given period, otherwise such visits are not frequent at all - few times a year.

Closeness and remoteness"Closeness can be physical, mental or emotional." In cultural settings, physical closeness might be opposed to mental remoteness in beliefs, values, and attitudes. A typical customer is usually far from the actual producer because of the layers of distribution channels.

Formality, informality, and opennessCommercial relationships usually are more informal than formal because every possible problem cannot be solved through obiding the contract and has to be dealt with quickly, by email, phone or other means of communication. Openness relates to the fact that the more parties know about each other, more informal their relationship will be. It is like two people who have just met each other will talk about neutral themes like whether instead of inquiring what is the other one's dog's disease.

RoutinisationThe function of mutual benefit and its correlation to time usually also implies that many process have become standard procedures that are performed quickly and minimising waste of resources, therefore, effectively and efficiently. However, the non-instrumental side of routinisation may experience downgrading in a way that involved actors may become bored of the repeating tasks, consequently, losing creativity.

ContentThe New Economics has different values than it was before and these values have to be appreciated in a right way. Knowledge and information is used for joint value creation.

Personal and social propertiesLogically, human beings possess different personal traits, talents, which are grounded in the unique nature of each individual. To name some of the distinctive categories, these are education, family background, nationality, religion, race, sex, political beliefs, and many others, being important more or less in shaping the concrete personality.

Now, when the general properties have been laid out, relationships that are of most importance in context of this research are briefly looked upon.



4.4.3 The electronic relationship

Gummesson proposes that "electronic relationships are formed through the new media of the 'IT triangle': computers, telecommunications, and television". The warning that he issues is that IT mainly serves as a medium of interaction and does not provide the content by itself. True, whatever the content is, it is being affected by the medium and recipient’s reaction is different depending on the type of the medium. However, nowadays companies do not appreciate to the full extent possibilities of IT infrastructure and often too heavily rely on the notion of IT itself.

4.4.4 The mass media relationship

Unquestionably, media is one of the most powerful tools of creation of certain public image. Substantial part of marketing efforts is directed to reach audience through the means of media. At the same time, the aim of this section is to illustrate the importance of using media as a tool for shaping customer expectations before these expectations have emerged by themselves.

Three types of media relationship are identified by Gummesson: 1) the relationship between an organisation and media, 2) the relationship between media and their audiences, 3) the relationship between an organisation and the media audience. In terms of this paper, we emphasise the importance of right upstart relationship between an organisation and media. Through this channel of interaction company has to release information on coming products well before they hit the market. It is known, if the new revolutionary-kind-of product is to hit the market, there is a lot of hype well before it has happened. The hype, which is created by journalists, usually does not reflect the reality of the product but what it does is that potential future users are exposed to the wrong type of information. This information will primarily govern the formation of their first expectations about the product. When this has happened, the company will face substantial difficulties in marketing their product, because what they will have to do, in essence, is to re-market it by breaking the previous wrongfully created expectations.

Gummesson points out that "editors and reporters have many incentives, such as passion for the truth, personal integrity, reaching a larger audience, fame, esteem among colleagues, vanity, and revenge." In this way, there might be often a goal conflict between companies and media. However, "the ability of business leaders to create relationships with media can sometimes be their most importance marketing activity, the activity that determines a corporate image".

What is of importance to understand is the distinction between investigative journalists and so-called news coverage journalists. The first group will dig deep into the essence of the issue and therefore provide worthwhile analysis in the course of communication with somebody from inside the company. The second group, unfortunately, may end up with a story reflecting on a subjective opinion of journalist or an expert who does not possess the true and fair amount of information. The effort of company’s media relations should be made in the direction of both of these groups.



5 I-mode and NTT DoCoMo

In Japan, the operators play a major role on the mobile market and therefore are the ones that will have a dominant role on the wireless Internet as well. Up to date, they are also the ones that profit the most from this new developing market. This is based on keeping strong relationships with customers, offering a wide range of services and exercising a significant control on handset manufacturers. Therefore, the analysis of the success of wireless Internet in Japan will be based on operator side, namely, the dominant player - NTT DoCoMo and its service i-mode.

As a main operator, NTT DoCoMo has a 55% market share (see Graph 3). Other big operators are KDDI/au, KDDI/Tu-Ka and J-Phone. NTT DoCoMo was established in 1991 by the Japanese telecommunications operator NTT (Nippon Telegraph and Telephone Corporation). DoCoMo stands for "Doing Communications over Mobile networks". Today, Japanese government owns the majority of NTT, which, in turn, owns 2/3 of NTT DoCoMo. NTT DoCoMo has a big advantage over its competitors in terms of national coverage, because it was the only company allowed to have a nation-wide coverage. Monopoly power of NTT DoCoMo became less dominant when it had to sign interconnection agreements with other two mobile operators.

Graph 3: Japanese mobile telecoms' market shares (Source: Telecommunications Carriers Association, 2000)

5.1 DESCRIPTION OF I-MODE-

“First introduced in Japan in February 1999 by NTT DoCoMo, i-mode is one of the world’s most successful services offering wireless web browsing and e-mail from mobile phones. Whereas until recently, mobile phones were used mostly for making and receiving voice calls, i-mode phones allow users also to use their handsets to access various information services and



communicate via e-mail.10”. It is very important to mention that i-mode is a complete wireless Internet service that at present is covering almost the whole Japan. Therefore, it is irrelevant to compare WAP with i-mode directly. In essence, WAP is a protocol while i-mode is a service based on cHTML programming language.

5.2 WHAT KIND OF TECHNOLOGY?

Technical solutions for wireless Internet vary between different Japan's mobile operators. Programming languages are used to translate the content of web sites into data that is compatible with limitations of mobile phones and networks. These mark-up languages are cHTML, MML and HDML. Due to the focus of this thesis, only cHTML is discussed.

The language used to create i-mode sites is a subset of HTML - programming language for conventional Internet. For this reason, it is very ease for any Internet developer to program i-mode's sites since little additional knowledge, apart from HTML, is needed to learn it. Consequently, steps that web-site developers have to take to translate existing sites into cHTML are relatively easy. This has geared a creation of a great number of private and commercial i-mode sites during last two years. This trend was also supported by the fact that cHTML has always been an open standard. The obvious consequence is that a positive spiral between users and good and plentiful content is maintained.

Due to the fact that the network used by NTT DoCoMo is based on a packet-switched technology and therefore is closer to computer network than to a phone system, i-mode offers continuous Internet connection – “somewhat like a slowed-down cable modem, but without the cable (Kunii, 2000)”.

5.3 WHAT KIND OF SERVICES DOES I-MODE PROVIDE?

Figure 6: NTT DoCoMo’s network structure (Source: NTT DoCoMo’s web site)

NTT DoCoMo, as well as other mobile operators, has adopted a “walled-garden” approach to the content offered to subscribers. This means that they are restrictive in terms of what kind of information and applications the users can directly access through their portals. In the case of NTT DoCoMo, this system is different (See figure 6), since anybody can operate an i-mode site,

10http://imodelinks.com/desktop/faq.html; “I-mode frequently asked questions”



but needs to sign a contract with DoCoMo to appear on the official menu. The content providers are divided into official and unofficial sites, and only the first ones are these that are listed on the screen of the phone. In order to access any site, the user can do three things: 1) access through the official menu; 2) enter a URL manually and 3) click on a link for a site in an e-mail or in the bookmarks list.

What is common for both official and unofficial sites is that they can reach any potential customer only through a relay station, called “i-mode server” or “i-mode centre” and owned by DoCoMo. DoCoMo also allows Internet connection, because it relays its packet network to the open Internet network. The greatest disadvantage for the unofficial sites is that their data is transported over Internet on its way to the user, while the official ones are connected directly to the server.

Many researchers in Japan and Europe (Funk, 2000) are maintaining that the key to i-mode's success is the range of applications available to subscribers through its network. From the start, NTT DoCoMo ensured it had services for its users by signing up with 67 partners who produced over too sites. For the last two years, this number has been growing and now the company is offering to its customers more than 600 official sites (see Table 3 and Figure 7).

Table 3: Wireless Internet services in Japan Source: Mobile Media Japan, modified as from Devine and Holmqvist (2001)

NTT DoCoMo J-Phone Au Tu-Ka

Wireless Internet Service

i-mode J-sky Ezweb

Number of users

17.4 million(Jan 2001)

4.5 million(Dec 200)

5.2 million (Dec 2000)

Number of official sites

618(Sep 2000)

414(Oct 2000)

339 (Nov 2000)

Fees for the service

300 Yen (monthly basic fee) and 0.3 Yen per a packet

No monthly fees; 2 Yen per request

200 Yen (monthly fee) and 0.37 per a packet

Markup language

CHTML MML HDML

NetworkDigital Packet-Switched PDC

Circuit-switched PDC

Digital Packet-SwitchedCDMA one

Circuit-switched PDC

Capacity 9.6 kbps 9.6 kbps 64 kbps 9.6 kbps

These 600 sites offer a great variety of opportunities and services. NTT tries to make the use of them easier and organises them into 11 categories. At the beginning when the company was targeting the business segment, they were organised into four groups: Transaction, Database, Entertainment, and Information and the first group was the biggest. It was covering many business areas - from bank account transfers to booking train tickets. Nowadays the categories are: News/Weather/Information; Mobile Banking; Credit cards/Securities/Insurance; Shopping/Living; Melodies/Images; Travel/Traffic/Maps; Gourmet/Recipes; Games/Fortune-



telling; Entertainment; Administration/Town Information; and Dictionary/Convenient tools (See Figure 7 and Appendix 4)

Takeshi Natsuno, media director of the gateway business department, says that the quality of the sites offered through the official menu is the key to success. These sites have to represent not a global wireless Internet service strategy, but the Internet business model for i-mode. In that case, all content providers have to consider carefully four criteria: “It should be fresh”(update once a day is too slow); “It should be deep”(i.e., more than a SMS); “It should encourage repeat visits” (e.g., games) and “The user should be able to see the benefit”.

Figure 7: Structural model of i-mode's services

5.4 BUSINESS STRATEGIES

"Walled Garden"Mobile operators aggregate the content and control the official sites. One of the most important aspects of the wireless Internet market in Japan is the fact that the operators control the whole market. Apart from being just voice and data telecommunication service providers, they also act as terminal providers, access providers and content providers (see Figure 8).


TransactionsMobile BankingTicket reservationCredit card bill inquiryMobile tradingPurchasing booksLife insurance/Mobile ATM

OthersNewsWeather forecastTransportation informationRental openingTown information

DatabaseRestaurant guideMobile phone directoryMobile recipesDictionary search

EntertainmentKaraokeFM on-air informationNetwork GamesFortune-telling

MailIncl. E-mail

Call(PDC)

NTT DoCoMo's i-mode

Cellular Phone Network


From the value chain, we will focus only on the right wing, because in the light of this paper it is the most important aspect (see also Appendix 9). It shows how all of them and in particularly NTT DoCoMo acts as a dominant content aggregator.

If we refer to the definition provided by Devine and Holmqvist (2000), content aggregators are “companies that aggregate content on a site, often called a portal. They are concerned only with collecting content for their specific portal, not adding content or services themselves”. The operators’ role as content aggregators is very important due to the existence of official and unofficial sites. Since the service menu on i-mode's phone is the most convenient way to access the sites, the official ones become most popular. That is why NTT DoCoMo is very restrictive of what is shown on the menu of every mobile phone they are selling. The company is trying to promote an attractive selection of official sites to the user. Being the biggest mobile operator (its main competitor has only 29% market share and 5.2 million users) and offering the greatest amount of services has a strong influence on the companies and sites that want to appear on the official menu. NTT has achieved a critical mass and is driving towards the mass acceptance, creating a positive loop between number of existing users and benefits potential users see from using the service. This positive loop is referred to as a snowball effect and can result in a network effect. Wurster and Evans (1999) maintain that there is no guarantee that this critical mass will be achieved. The Japanese market proves this statement, but what is even more important is that whoever achieves it first will force its standard (despite high technological advantaeges) to become a global standard, although it may not offer as much resources, intelligence and managerial power as another player on the market.

As NTT acts as a dominant content aggregator, it is very easy to transfer this controlling power over the content of the offered sites. Although NTT does not participate in the production and developing of these sites, it uses its strength and good market position to make sure that the


Figure 8: The wireless Internet value chain as influenced by the operator (Devine and Holmqvist, 2000)


content is of good quality to the customer. One of the values of company is establishing and maintaining a strong brand name. Therefore, NTT DoCoMo takes measures to prevent sites offering explicit and offensive content. In order to do that, NTT DoCoMo has imposed three rules that were subject to minor changes.

Advertising: The restriction to include any advertisements was based on the feature of billing system, which makes user pay for the amount of data transferred, in this case - involuntary advertisements. However, due to the importance of revenues from advertising in June 2000 NTT DoCoMo removed the ad ban and implemented changes in the billing system. Now the payment for the downloading of banners covered by the advertised company. Some sites even pay users small amounts of money for clicking on banners and links.

Links: At the beginning NTT was afraid of loosing control and profit from the market, so it did not allow any links on the official sites. NTT DoCoMo had no means of checking all links from the official sites and ensuring they do not lead to sites of unacceptable content. However, after liberating the advertising strategy, the company had to reconsider this rule as well. When offering an advertising also includes a link to a site with thorough information. Therefore, since November 2000, links from one official site to another are permitted but in each case NTT DoCoMo reviews the site.

“People-to-People sites": All sites that allow communication between previously unknown to each other users are explicitly forbidden. This group includes chat sites, bulletin boards, and dating services. In addition to that, it is very important to say that NTT acts as a dominant access provider and terminal provider.

Although Japanese mobile market can not be regarded as monopoly due to the existence of three other operators apart from NTT DoCoMo, this situation can definitely be described as oligopoly. Incumbent operators are not likely to loosen their control over the market and Japanese government has not announced bids for a fifth mobile operator license. The European market in general, therefore, can be considered as being more liberal.

5.5 GENERAL BILLING STRATEGIES

5.5.1 Revenue for NTT DoCoMo

Our research proved that DoCoMo is the company that profits the most out of the innovation of the mobile traffic. Its revenue from offering wireless Internet services amounts for 25 times as much as all the official content providers put together.

The reason for this is very simple. While content providers have only one revenue stream – 90% of the content subscription fees, DoCoMo has three profit drivers. They are based on the different



fees that the user pays for accommodating the phone and the network: subscription fees, traffic fees and percent of content subscription (see Figure 9).

Traffic Fees are the main source of revenue from wireless services. These fees are based on the traffic that every user generates on the network. Packet-based network allows NTT DoCoMo to charge for every packet (128bytes) of data acquired by user 0,3 yen. This network allows large economies of scale, because the capabilities of the network allow more people to use it at the same time.

Subscription Fees are collected on a monthly basis from customers willing to access the block of service offered via i-mode. Main monthly-billed services include sending e-mails and SMS, browsing the Net, and reaching the official sites. DoCoMo charges 300 Yen in comparison to Au, which charges 200 Yen and J-Phone, which does not charge at all. One has to bear in mind that 300 Yen is approximately equal to 2.5 USD.

Subscription fee

Traffic fees

Monthly fees

Commission

User NTTDoCoMo

Content provider

Figure 9: I-mode's payment scheme

DoCoMo receives approximately 10 Percent of Content Subscription fees that content providers generate. The logic behind this decision is that content providers use DoCoMo's network and, indirectly, mobile phones, which are subsidised by the company.

All these fees lead to the fact that “on average the i-mode users pay 2000 Yen per month in packet fees and between 400 and 500 Yen in content charges. About 50% of the users subscribe to official content and on an average each of these users subscribes to four contents" (Funk, 200).

5.5.2 The content providers business models

There are a number of billing methods/business models that are being used by content providers to generate profit. These are the “Clearinghouse” model, “Pay-to-have-Contents-Loaded” model, the “Marketing Core Business” model, the “Shopping” business model and the “Revenue sharing” model (Funk, 2000; Devine and Holmqvist 2000).



The “Clearinghouse” model is the most widely used billing method. It is based on fact that it is safer and quicker to use a third party when providing a wireless Internet service to a customer,. Third party acts as a payment collector and extracts certain percentage fee for this service. In the case of DoCoMo, it acts as a third party and collects fees from subscribers including it in monthly telephone bill. Usually the amounts charged are quite small and the customer is paying for more than one content, so it would be very impractical to make the content providers handle this process. It is important to mention that only the official sites are allowed to utilise the billing system offered by DoCoMo.

“Pay-to-have-Contents-Loaded” model (also referred to as Advertising model) is based on the traditional Japanese way of promoting businesses. This implies that companies are paying to have information about their services presented in a positive way on an i-mode’s site. Due to the fact that advertisements on i-mode have higher viewer and click rates, Funk (2000) maintains that this model is different than the usual fixed-line Internet advertising model. The reason for this lies in the pattern of usage of i-mode’s phone. In detail, Funk explains that Japanese often use their telephones to “kill the time”. Often users are rewarded with various discount coupons for clicking on banners and viewing company offers. The provider benefits form that because it is paid by the advertising company and some of these discount payments are handled through the providers billing system.

The “Marketing Core Business” model is largely used by government offices, ticket providers, airlines, and rental car agencies to attract customers to the organisations’ core activities. This includes providing free information or free services to customers in order to get them acquainted of organisations’ offers.

A variation of previous is the “Shopping” business model. It allows users to order a product or a service from their i-mode-enabled telephone. The content provider has to ensure that this possibility is legal and the delivery will be made. The payment takes place either online or at the time of delivery. Funk (2000) maintains that shopping on the mobile phone and the fixed-line Internet in Japan is still in the infant stage. He explains that with high cost of credit cards and the lack of confidence in using them. Still, the statistics show that sales over the wireless Internet amounted for about 100m Yen (0,87m USD) in July 2000.

Last, the “Revenue Sharing” model utilises the cases when content providers mainly use content from other parties (often referred to as content owners). In this model, content provider either pays the content owners for the access to their content or alternatively is paid for exposing it.

5.6 SUBSCRIBER GROWTH AND USER CHARACTERISTICS

Wireless Internet/ Mobile phone users. If one analyses the charts in Section 3.2,statistics for WAP appear to be sad in comparison to i-mode. The Japanese market development during past two years has been enormous. 27 million out of 58 million people that have mobile phones are wireless Internet subscribers. Not to forget that all over the world there are 40 million wireless Internet users and 70% of them are in Japan. Additionally, the predictions for user growth in



Europe are controversial (see Section 3.2) and make many specialists to assume that European companies do not have a clear vision what the future will bring to the industry.

Subscriber Growth. Most recent statistics11 show that so far i-mode has attracted more than 19 million subscribers (as of February 2000). The average growth of 9% a month is far beyond any previous expectations and predictions. At the beginning DoCoMo was aiming to reach 10 million subscribers within the first 3 years12, which actually was achieved in 18 months time- in August 2000 (see Graph 4).

Graph 4: Growth of Mobile Internet Users. (Source: Telecommunications Carriers Association, 2000; Devine and Holmqvist 2001, NTT DoCoMo)

User Characteristics Graph 5 of the age distribution of the i-mode users shows that the majority of the people (about 62%) are people less than 34 years. The biggest age group is the one between 25 and 34 and it accounts for more than 30%. Additionally, 30% of the customers are younger than 25, while the people between 35 and 44 account for only 17%.

11 http://www.nttdocomo.com, accessed on 18/02/200112 Mobile Media Japan’s website, Aug 2000


http://www.nttdocomo.com/


Graph 5: The age distribution of i-mode users. (Source: D2Communication, 2000; modified as of Devine, Holmqvist, 2000)

Recent surveys carried out by DoCoMo show that considerable number of people older than 45 are buying the i-mode enabled phones for their children. This means that the usage rate among young people is even bigger.

If broken down by occupation, the largest group of i-mode users is students and this accounts for 45%. Around 39% are business people and 16% are housewives (Devine and Holmqvist, 2001; derived from a Research by NTT-X and Mitsubishi Institute, Oct 2000). One of the most important characteristics of the Japanese market is that unlike Europe, where in many cases the company is their employees’ phone expenses, in Japan, more than 60% are paying themselves. Only 10% of users have their expenses covered by employers. The rest accounts for people that are depending on another member of the family (Devine & Holmqvist, 2001).

5.7 CHARACTERISTICS OF THE MARKET

The popularity of i-mode is also dependent on specific national factors (see section 4.2.2), as well as conditions of the Internet and telecommunications markets.

First of all, the fixed-line telephone service is expensive and, as a consequence, the number of mobile phones is larger than the number of fixed-line telephones. Second, the fees the users have to pay for browsing Internet are $3,36 per hour compared to $1,50 in USA and $1 in Sweden. Japan also has one of the highest costs for personal computers. Therefore, the percentage of users accessing Internet from desktop computers in Japan is the lowest among the developed countries. The PC penetration rate in Japan is 40%, as compared to Sweden’s 60%. The penetration of fixed-line Internet is even worse – 20%, while in Sweden and Finland this rate is respectively 50% and 60%. In the middle of August 2000, Japan’s wireless Internet subscribers outnumbered all those that use top 15 fixed-line Internet providers.



The fact that the level of fixed-line Internet penetration rate is higher than that of mobile penetration, explains why Japanese people are more willing to use wireless Internet than anybody else. “For the notoriously unwired Japanese, this whole world is a novelty (Kunii, 2000)”.

We also have to take into consideration that all consumers in Asia and especially in countries like Japan, Taiwan, South Korea and Hong Kong are extremely trend-conscious. This fact can easily be explained with the characteristics of the eastern culture. The construction of these societies is based on homogeneity, on the fact that differences between members in a social group are almost nonexistent. Therefore, almost everybody in a certain class has similar needs and requirements. Low-cost manufacturers use this characteristic to obtain a critical mass on home markets and secure their enter in the global arena.

All these, combined with the Japanese love for new technological advancements, turns Japan into the hottest field in this competitive market and it is likely that it will remain in forefront of innovation in the wireless Web (Kunii, 2000).

5.8 WIRELESS INTERNET TRAFFIC

Statistics described in the previous point explain how much the concept of richness and reach is reflected in the market for i-mode services. Wurster and Evans argue that Internet and other new developing technologies allow providing both more richness and more reach at the same time. Funk (2000) supports that by saying that the number of Internet users is increasing enormously and soon the number of people seeking for information via Internet applications will exceed the number of those using old means like newspapers. Therefore, the “reach” of Internet will surpass the “reach” of newspapers. Also, “the links between home pages will make it possible for users to simultaneously and easily obtain rich information on the Net”.

As can be seen from the practice of some European companies, they assume that this characteristic of the New Economy is transferable to mobile phone. But is that possible? Is it possible to access the same level of rich information you can access with your computer? It is obvious that because of their mobility and greater diffusion mobile telephones have a greater level of reach. However, the fact that the number of mobile phones will soon exceed the number of wired-Internet computers does not mean that the level of richness will also increase. The reasons why customers would like to use a wireless service are different (see Chapter 7.4) and therefore telephones have a different position on the trade-off chart (see Figure 10).

What does the experience of NTT DoCoMo show about this assumption? The most popular category on the i-mode menu is Entertainment. It accounts for 64% of all the accesses. In this category Games, Melodies, and Images are the most popular and more important – the most successful and profitable content services on i-mode in general. News and Information are second to Entertainment followed by Shopping/Living. Mobile Banking and Dictionary/Convenient tools share the fourth place. For all that, Mobile Banking/ Credit Card/ Securities/Insurance accounts for only 4% of the access to the official menu. The fact that the largest number of sites, 243 out 610, supports mobile banking does make it popular. Devine and Holmqvist (2001) explain the number as a remnant of the introduction strategy, which focused on the transaction section.



What is the conclusion? All of the i-mode customers tend to use all the services that have relatively low level of reach. There is far less information in the mobile phone (either via the main sites or links) than in a newspaper, but still people prefer to use this means. This obviously refers to the three main opportunities that all operators should turn into advantages- personalisation, timeliness and positioning. This also shows and proves the idea that the market is the big node that will decide what is and what is not popular. So far downloading images, playing games, downloading information about music are the most attractive services and European operators have to base their strategies on similar taking into account these trends.

Another implication of the trade off between richness and reach is that it is a function of age. In the case of wireless Internet and particularly i-mode, the statistics show that more than 35% of i-mode subscribers are less than 25% and almost 70% of them are less than 35. Even more important is the fact that the majority of people with biggest bills are under 25. It is acknowledged that most of the young people value more reach and less richness than older people do. Main reasons for that are being less experienced, spending greater amount of time away from home or office, travelling a lot, paying more attention to entertainment (Funk, 2000). We also know that young people under 35 are the ones that adopt any new technology first. Due to difference of education and technology perspectives obviously at the beginning they will be the ones that that run up the biggest bills and therefore support financially the development of the new technology or concept, in this case – wireless Internet (see sections 4.2 and 4.3).

In the long run, however, richer information will be required. It is not our objective to say whether it is going to be on the same levels as these in the Internet services. What is more important is that nowadays there are many constraints that prevent the spreading of high quality information (the definition of high quality is a personal activity; still we compare it with Internet)


Figure 10: The position of different Internet access devices on the trade-off chart (Source: Funk, 2000)


on mobile phones. Some of these limitations are network capacities, bandwidth, small displays, means for input, restrictive policies.

5.9 SUMMARY OF THE SUCCESS FACTORS OF NTT DOCOMO

5.9.1 Good marketing

As we have shown in Chapter 4 and discuss later in Chapter 7, the way every company markets any technological improvement is a critical issue and its success depends very much on the customer. The logical conclusion that can be drawn from the Japanese experience is that any new technological advances have to be done only if they meet customer needs (see Appendix 9). In Japan, the marketing strategy has been around what i-mode can deliver to customers. Throughout its short existence, i-mode has never been promoted as a means to bring Internet to the cell phones. Unlike the European companies, DoCoMo focuses on the possibilities rather than on the limitations. That is why there are no disappointed customers in Japan and plenty of them in Europe. Secondly, the strategy is focused on the specific national characteristics of the market. Additionally, the company was flexible enough to admit encountered mistakes, analyse them and take correction measures, implying the use of PDSA cycle (see Chapter 7). For example at the beginning, the wireless Internet service was promoted as a virtual private network application. Later, when it came out that business users did not show interest, the service was repacked for private use and directly marketed towards other groups.

5.9.2 Very good content offers and applications

When i-mode was introduced NTT DoCoMo offered customers not a technology, but a new advanced service concept. It showed them how they can actually use and benefit from it. From the start, the operator knew that the success depends extremely on the range of applications available to subscribers. DoCoMo ensured this by signing contracts with 67 content providers that produced over 200 i-mode sites. Nowadays the official i-mode menu offers connection to more than 600 sites (See Appendix 4).

In Section 7.4, we analyse the specific features of wireless Internet and come up with the conclusion that any wireless application – either cHTML or WAP based, has to reflect them. These are personalisation, timeliness, and positioning and to make sure that the service will be accepted by the users at least one of them has to be adopted. Otherwise, the service offer will be just theoretically good but have no value to the customer. NTT DoCoMo wisely used that concept and came up with fairly simple and straightforward services.

Yoon (2000) strongly supports the idea that the early adopters of any new technology are young people. Since almost 63% of the users of i-mode are under 34 years, the answer is that young people are actually the ones that “roll” i-mode. Additionally the most popular sites are connected to some form of entertainment – like downloading images, getting music information, fortune telling, network gaming, dating services. A large proportion of content in Europe might be the similar or might be very different. However, it will definitely reflect the western culture and the real needs of the users.



5.9.3 Good billing system

The efficient system of micro payments charged on the mobile phone bill is one of i-mode’s most important success factors. In Europe there is still an intense discussion how the billing system is supposed to work, who will provide the content, how content operators will receive the payment. In these terms, DoCoMo offers a variety of business models that actually work. Funk (2000) defines the practice that exists in Japan as a win-win situation. By combining the potentials of each side, a Pareto efficient situation is reached.

First of all the content providers are able to charge the customers and get the money in a secure and comfortable way. It would be expensive for them to establish a separate billing unit that would have to collect the money. Outsourcing this activity allows them to focus more precisely on their core competence – making and providing good information and content. Additionally, they are actually making money for the services they are offering. Furthermore, they do not have to worry about developing direct relationships with customers or building a database.

From a customer’s point of view, this system provides an easy way to handle the payments. Since they receive the bills as a part of the mobile phone bill, they do not have to spend more time than usually to pay separately. The element of trust and security is a very important element in this relation as well. The users have already experienced safe and reliable relations with the operator and by channelling these financial activities through the operator they do not have to worry about credit card numbers and confidential issues.

Obviously the operator, NTT DoCoMo benefits most from this system. The company is able to offer to its users a value-added service and be paid for that. Because the content providers use the network, they pay around 10% of the subscription fees. Also, the customers pay monthly (of about 300Yen) and traffic fees. On the other hand, they can focus on the process of distributing and improving the quality of the service and do not be distracted by costs and revenues. At the beginning when DoCoMo was considering the promotion of i-mode, it was considered as a good way of making the company thrive. Until that moment, the telephone was used only for voice transfer and to a very small degree for data transfer. These 10 percent gathered from the content providers are unlikely to cover the whole cost, but more importantly, by offering this new service opportunity, the operator made the users rediscover the mobile phone. From a pure financial view, the statistics (Goldman Sachs; Mar 2000) show that i-mode is an extreme advantage for NTT DoCoMo. Thanks to the good business strategy, including very effective billing system, DoCoMo’s i-mode propelled the operator’s share prices to around $38,000, for a market capitalisation of $340 billion, which is greater than any other telecom in the world.

5.9.4 The dominance of NTT DoCoMo on the market-

One of the strongest reasons why NTT DoCoMo has a strong position on the wireless market is its monopoly status. Through controlling almost every part of the value chain, the company can maintain its strategic goals and make sure that the customers get what they really need. Our research proved that NTT DoCoMo, the mobile branch of NTT, has little if any competition as a mobile service provider. Apart from being just a mobile operator, they have strong influence on the manufacturers, the content providers and retailers. Not to forget that DoCoMo is developing strong relationships with its customer either through building high entry barriers or providing the



users with the best services. That is why whatever technology the company develops for the market (i-mode or maybe something else later) it becomes a standard. Its dominance turns easily into a control and this leads to a moment when it is not a threatening issue anymore to obtain a critical mass.

It is a fact that NTT DoCoMo is a member of the WAP forum. For long time it was assumed that the success of i-mode worldwide depends on the support of the big players in USA and Europe. However, the situation is a little bit different nowadays, since NTT DoCoMo is turning to be a big player as well. It has the power and financial potential to set the rules.

In this sense, the Japanese market is incredibly different from any other mobile-phone market. The power balance there is no even close to this in Sweden or Europe. The success of DoCoMo does not mean that this dominance should be transferred to Europe. It just implies that all European manufacturers and operators have to work together to reach that point when all of them will profit from this new market opportunities. The development of the western markets is based on competition through which the customer obtains the most valuable offer. However, this is different in the eastern culture and as Deming (1993) says in that society every single person works more for the society than about himself. In that line of logic, a monopoly has the best chance to be of maximum service to the world, and has a heavy obligation to do so. Innovation and new business models may change the Japanese market a little bit, but this seems very unlikely, since the success of the existing companies is “pushing the ball” faster and faster. The snowball and network effects will make sure that these firms stay on the same position for the near future. What the future will be like is very hard to say, but the directions are clear- co-operation between all the players in the value chain will lead to a win-win situation for everybody.

5.9.5 National characteristics of the market

What we have noticed in the research process is that the Japanese market is very specific and is dominated by social and cultural issues. The homogeneity and trend-susceptibility have made the penetration of lots of the new technologies much easier. The first term refers to the fact that the majority members of a specific social class have similar personal requirements and therefore form one uniformed group. It that case form a marketing point of view it is really easy to come up with a product that meets most of the customers’ needs and is targeted at a large market segment. The second term refers to the fact that the Japanese are very social oriented and can live only as a part of the society, which takes different shapes- a company, a family, or any other small groups. The desire to be a part of something, to share the same goals etc. turns into a strong fear of being different. That is why all Japanese people are so trend oriented- whatever it is, they have to be a part of that. These are some of the psychological aspects that explain the exponential growth of the wireless Internet market in Japan.

Another national special feature is the fact that among all developed countries Japan has one of the lowest computer penetration rates. Additionally, Japan has one of the lowest percentages of users accessing the Internet via desktops as well. Because of that to a Japanese person buying a wireless Internet phone is like getting access to the real Internet13. Because of not having long

13 Discussion with Saori Ishikawa, Sweden, Jan 2001



experience with the Web, nowadays they refer to the “reach” quality of the mobile phone as “richness”.

All this makes us think that i-mode was exactly what the market at that particular moment was waiting for. This does not mean that it would not be successful now; this just reflects the fact that is strongly represents some national characteristics. Therefore, it would not be able to succeed on another market, unless it is slightly changed or adapted to the local cultural and economical issues.

5.9.6 Technological simplicity and quick launch

Trying to get out of the technological hype spreading in the high-tech industry, NTT DoCoMo applied a very simple technological strategy. The company was sure that there was a potential on the market and it had to be used. The way to do that should not be very complicated- simple technology and functional solutions, rather than technological revolution. With the existing network, imposing limitations in terms of bandwidth, speed, etc., it is impossible to bring Internet on the screen of a mobile phone. So, they did not try! The statistics show that technical superiority does not necessarily lead to a market leadership. Just the opposite, the simplicity makes a concept popular. WAP is more technically advanced, but still has a small market share, which keeps on shrinking.

The simplicity of the technology that was used was also triggered by the WAP Forum who at that time has been strongly debating some development issues. DoCoMo was willing to launch a new wireless service and while waiting for WAP Forum to come up with something, decided to go on its own and developed i-mode. I-mode is based on a mark-up language called cHTML (compact HTML). This open source standard is very similar to HTML- the mark-up language of Internet. That is why everybody who is familiar with web designing is capable of making an i-mode site. The number of the official sites, of the ones that are approved by DoCoMo is more than 600, which implies that the number of all cHTML-based sites is incredibly high.



6 Development of WAP standard and its adoption in Europe

6.1 REASONING

The logic behind the creation of WAP was driven by the rapid development of the Internet and mobile networks across the globe. Predicting the convergence of these two streams of communication, dominant players in the industry took an effort to form standards within this field. The initial justification of projects carried out during 1995 - 1997 was the creation of basis for new value added services on mobile networks. Consequently, various local standards were created none of which representing a sufficient platform for new stream of services. It was realised that a number of different standards would benefit no one.

In 1997, with the mission to create a unified standard, which would be acceptable and convenient for most of the parties that would-be involved into the chain of value-adding services of new standard, Phone.com (formerly known as Unwired Planet), Nokia, Ericsson, Motorola founded WAP Forum. This organisation was established with the aim of supervising and co-ordinating the development of WAP standard for the achievement of common goal and promoting the standard so to ensure its future position on the market.

It is recognised that WAP Forum today is the most influential formal body in connection to WAP standard and has attracted many members representing most of the stakeholders. The number of members in WAP Forum today is more than 400. The membership is open and the fact that WAP Forum is not a producer of products on its own but formal body is stressed. Due to the supervisory role of WAP Forum in the process of introduction of WAP, the concrete actions of this organisation are looked upon.

The latest publicly available report from WAP Forum states that four main goals of this organisation are:

to bring internet content and advanced data services to wireless phones and other wireless terminals

to create a global wireless protocol specification that works across all wireless network technologies

to enable the creation of content and applications that scale across a wide range of wireless bearer networks and device types

to embrace and extend existing standards and technology wherever possible and appropriate

WAP Forum has initiated contacts and works together with other official bodies that contribute to the telecommunications industry, the Internet and others. The WAP standard is being promoted as license-free so that companies willing to participate in the chain of value adding face no constraints in this direction. In addition, the specifications of the standard are provisioning the need for future additions and adjustments to the protocol in order to avoid the need for creation of another standard, which would be again difficult and resource consuming.



6.2 IDEA

The future services that WAP addresses are the ones, which customers will use while on the move with consequential inability of accessing a desktop computer and conventional Internet. The important distinction is being made between the suppressed functionality of hand-held devices and desktop computers. Limitations of devices are their computational power (CPU), information storage, random access memory, data input (keyboard) and output (display). Wireless networks suffer from high latency, unpredictable availability and stability as well as low bandwidth. Therefore, services aimed at WAP users are designed with a focus on practicality with no possibilities of making it graphically attractive and catchy. The idea of surfing the web on WAP enabled device is unquestionably still in future. In essence, the idea of wireless internet can be summarised in two short notions: immediate retrieval of information that is needed at the particular moment of time (as describing the business side of the process) and entertaining and user engaging applications for fun at any moment of time (as illustrating the need to provide the customer with means to “kill the time").

6.3 TECHNOLOGY

From a technological point of view, WAP uses a programming model similar to the one used by Internet in order to ease the associated workload for involved IT professionals who have the experience in developing applications for the internet environment. The programming language used in WAP is called WML (wireless mark-up language) and is specifically aimed at applications for small devices like mobile phones and PDAs today. WML can be compared to HTML (hyper text mark-up language), which is used for development of Internet pages. With the purpose of adding more functionality to WML applications, WML Script has been deployed, which, in turn, is similar to JavaScript technology used on the conventional Internet pages. The transmission on the Internet today is based on HTTP (hyper text transfer protocol) and TCP (transmission control protocol), which ensures that packets of data sent from one location do reach the intended location in form they were intended to. The transmission protocols WAP uses are similar to HTTP and TCP but adjusted to the limitations of wireless networks.

The design of WAP pages takes a form of cards, each of which is suitable to be displayed on a screen. This can be compared to the usual structure of HTML documents where the user can use the mouse to scroll down the page if it does not fit on the display. The problem lays within the different individual design of WAP enabled mobile phones, as well as other devices. In designing the page for conventional internet the developer is usually faced by the constraints imposed by the different user-agents (Internet Explorer, Netscape Navigator and others) as well different screen sizes (14”, 15”, 17”, 19”, 21”) and screen resolutions. In wireless Internet there are much more constraints of a kind. According to Martin Jonsson14 there are more than 30 different WAP enabled handsets on the market from different manufacturers, as of today. WAP was posed to be a common standard whereby many companies and organisations are taking an effort to develop it. At the same time, there is no apparent agreement among phone manufacturers as to the exact specifications of phones. The burden of development of WAP sites that would look similar and be equally functional on all these handsets is passed to content providers.

14 Email interview



6.4 CURRENT CHALLENGES

6.4.1 Market share and price curve challenge

There is a strong difference between the fixed-line Internet and the wireless Internet. The first was created by scientists who wanted to share their research and put special attention on the openness and free aspect of the shared data. The latter one- the wireless Web is the creation of operators and manufacturers that need new sources of revenue as competition drives down the prices of handsets and voice-transmission fees. This is a common feature for all different wireless Internet markets- Japan, Europe, etc. As Kurt Hellström, president of Ericsson, says in an interview for Wireless Asia, “in order to have a reasonable margin on the model you have to introduce new products all the time”. The reason for that is very simple- when the models are introduced for the first time they have very high prices, but then they start to slide down the price curve.

The competition on the market at the moment is very high and the only way to keep the same market share the company has is to sell more and more telephones and, for all that, offer cheaper prices. The market of mobile phones used only for voice transmission is getting saturated, so the companies have to offer some new ideas and/or models. The wireless Internet was one of them. The scheme is very simple- they develop new technology, create hype around it and then sell a great number of telephones enabled to perform that new service. Where is the problem? The problem is that in this quick process, the manufacturers forget about the customers. And the customer is the one, who is buying the phone and therefore providing the manufacturers with lifeblood capital. All customers, loyal or disloyal, are attracted by good services and WAP is offering them a simple technology they cannot use without the appropriate applications. The challenge is in trying to combine all contemporary market share strategies with strategies that focus on the customer and his/her needs (see Chapter 7, as well).

6.4.2 Service concept

The current problem in terms of marketing of WAP is that it is not being advertised as a service concept but more or less as a technology. This can be considered as both major difference and major mistake compared to highly successful i-mode, which is a service concept. If NTT DoCoMo would promote i-mode in the way WAP Forum did with WAP, they would have to use the name cHTML, which is a programming language for i-mode’s sites. Meanwhile, all mobile companies have to understand that wireless Internet services will be different and they have to implement such service concepts that utilise this differences (see section 7.2.).

6.4.3 Range of services

As it is known from the previous chapter, prior to launching its i-mode service NTT DoCoMo had signed a number of contracts with service providers in order to ensure the sufficient range of services to be used immediately by very first i-mode’s subscribers. In case of WAP, this simply was not done. The authors of this paper could not find out the reasoning of telecoms and WAP Forum on this point. One of the possible reasons could be that the founders of WAP Forum were three phone and equipment manufacturers and a technology company, which in this case have proved to be extremely production (not service) oriented.



In any case, services that are technologically possible and are currently on the market will not always attract customers. The need for human interaction as illustrated by high-tech/high-touch trade-off implies that the most successful CRM is the one that does not employ too much of technology. An example of combination of tech and touch would be a ticketing system, whereby a customer first approaches an online operator to receive the initial guidance on how to use the system most effectively, receives the data s/he needs on its WAP enabled phone, disconnects from the live conversation. Then, already having the data to choose from on its WAP phone, takes the time to think, which possibility is the most appropriate one and then makes a reservation/purchase or decides otherwise. Due to the sophisticated process to which few are used to by now, the opportunity to call to the operator and being explained the most difficult part in the technological interaction would save the time and customer would be satisfied in more cases.

6.4.4 Segmentation

The segment at which WAP was targeting initially was the segment of business users, people who need and can afford it. Unfortunately, stemming from the initial failures with speed of data transmission over WAP and customers’ negative evaluations of the service, business users never reached the critical mass needed for initial adoption of the technology. It is being indicated that often the ones first to adopt new offers are young people who have no problem taking advantage of the new technology. Due to their lifestyle, beliefs and ease of identifying underlying benefits and functionality, they are considered as the pioneers of any new service. Europe did not consider this point, counting on the fact that business users will provide initial impetus for the technology while later it will be slowly targeted at other segments. And even, when, the mistake was recognized, they did not change the strategy. Until recently, Nokia, Ericsson, Motorola and some operators were still focusing on the elusive businessperson in an airport, checking his e-mail or transferring money.

6.4.5 Overall marketing strategy

Due to the choice of targeted segment, the services which were stressed as being the critical decisive factors to lead customers to the behavioural intention to use WAP were booking of airplane tickets, accessing stock quotes and basic stock transactions, timely information on traffic jams. As suggested by previously introduced theory, the attention has to be given to the issues of fun and entertainment, which was clearly not a priority at all in case of WAP. The case of a new technology, which WAP is, suggests that users should be convinced that it is useful and especially easy to use. As illustrated before, particularly the ease of use has a main effect on behavioural intention and outweighs the impact of usefulness in the initial stages of technology acceptance. In the case of WAP, the operators did not only miss that aspect, but also misunderstood the immediate negative experience of accessing Internet using WAP.

Additionally, there was a lack of universal concept for the promotion of the technology. All operators and manufacturers launched advertising campaigns, which main message was- the wireless Internet is upon us. In the real life, the story is not so straightforward. Most commercials follow Vodafone’s promise of “the Net anywhere”. BT Cellnet (one of the highest spending advertiser of mobile services) offered a computer-generated commercial, that presented a tag line “surf the BT Cellnet” smoothly browsing the wireless network. It is no argue that these adverts promise too much, too much of something that the operators cannot deliver yet. The explanation



that Parsons (2000) offers is that “the race is to establish a link in the market’s mind between the operator and the new generation of mobile Internet services”. This means that the focus was on building strong brand names. Following that strategy, the companies considered the discrepancies between user experience and promises as a small price for linking the name of the operator as the future provider of wireless Internet services. However, isn’t that price too high? Doesn’t it threaten the promotion of the whole industry? If mobile companies do not drop their obsession with market share and focus on the customer needs WAP and 3G will fail to make any further developments.

Only now, one may observe actions to be taken towards the promotion of the idea of wireless Internet as a conceptually new service and avoiding the technological hype. For example, Telia started recently a new advertising campaign emphasising on the fact that telephones are not only for speaking, but also can be used by deaf people for any kind of data transfer. Additionally, Ericsson recently changed the focus of the commercials and instead of advertising the possibility of retrieving information about congestions on the roads now points audience’s attention to possibility of buying flowers. Indeed, how many cities in Sweden do have serious traffic jams on the road? In Stockholm, Göteborg or may be Lund. To continue this point, the idea of congestion does not invoke positive emotions in the potential consumer’s behavioural intention to use process, whereas shopping flowers is a far more pleasant experience to think about. As John Johansson, Cell Network15, maintained when a new product is advertised, the commercials should not focus on the negative cases but on the positive and pleasant moments of use.

6.4.6 Content providers

The cash flow is said to be the lifeblood of any company. Speaking of WAP, content providers were not offered the opportunity to sign contracts with telecoms prior to the introduction of WAP to the market and in the process of co-operation develop the initial range of services thought to be needed by customers. This has driven content providers to the point where they mainly had to guess the needs of customers and develop the content already after negative feedback has acknowledged the market. The resources invested in the creation of new WAP-based services have so far yielded mainly negative rates of return16. Given that prospects for the foreseeable future are not any much better, existing content providers either withdraw themselves from this line of business or simply go bankrupt. By no means this can serve as a good example to companies considering of entering the market of WAP content. Even big players like Excite (ibid.) will not make substantial investments in this area because even the business area of conventional internet has yet to prove its ability to generate rates of return that will satisfy shareholders.

15 personal interview 15/02/0116 Email interview, Doug Lucas



Graph 6: Most popular content categories of WAP (Curtis, 2000)

6.4.7 Stakeholder expectations

The white paper published by WAP Forum in 1999 warns: “Just as many other things in life, expectations matter very much. Anyone who have tried to access the Internet by using a laptop and a cellular phone, knows that the expectations we have created using the Internet at the office or at home are not fulfilled; as a matter of fact it is usually a quite tiresome experience”. Bearing this idea in mind and remembering that initially (before the launch of the service), WAP has been promoted as a technology that would “bring the power of internet to the mobile phone”, it is not hard to imagine what kind of expectations has been created by this hype. In effect, expectations have been boosted to the Moon.

Just as the protocol rolled out, disappointment of early adopters was huge. The hit-back experienced by WAP can be characterised by 4S: small screen, slow speed. Unfortunately, it is only now considered pretty stupid and adventurous to assume that the revolution in technology would immediately bring about revolutionary handsets and phenomenal network speeds. The latter was impossible because the existing networks did not have the capabilities and nobody acknowledged the fact that these new networks will be developed at earliest in 2003. WAP came out as a protocol, while apparently networks were not ready and nor were handset vendors. The lesson of 4S is that before any new technology hits the market, the market itself has to be prepared for it in terms of expectations and infrastructure.



6.4.8 Pricing

Kelly (2000) puts forward 12 new rules for the New Economy. One of them, the Law of Generosity suggests that the products that were proved to be the most successful in the New Economy were the ones initially given out for free. As an example Kelly mentions Microsoft’s Internet Explorer, Netscape’s Navigator, Adobe’s Acrobat Reader, Qualcomm’s Eudora, McAfee’s anti-virus software. The trial versions or even the full versions of these products have been distributed on cost-free basis with the purpose of promotion. WAP’s pricing, on contrary, has been reported by customers as been inappropriately high for the kind of quality (the 4S factor) it offered.

Graph 7: Distribution of spending limits of WAP users (Curtis, 2000)

What if the cut-down promotional WAP services would have been for free? Most probably, much more people would at lease try to use it because they would have nothing to lose. The demo versions of software suits and games have proven to be an effective tool to gain user acceptance and create favourable intention to use. Theoretically, it is also about a sense of control that the user has over the demo version - as time passes s/he does not have to worry about the payment. The so-called lemons problem for those WAP services that user is unfamiliar with can still be cured in this way.

It has been brought to our attention by Lars Vestergaard that a total factual pay for WAP services is so inappropriate, that sometimes accessing a couple of sports results via WAP can cost as much as buying a whole newspaper, without comparing the presentation and amount of information. Graph 7 shows the spending limits of WAP users.

6.4.9 Approach

The concept of richness and reach suggests that there will always be a trade-off between these two factors. In the European case of mobile Internet, the mistake was that WAP was aimed and initially promoted as the means to bring the richness of Internet to wireless devices. Nowadays, considering the existence of trade-off the very idea seems unnatural - taking the richness of the wired Internet (so richness remains the same) and transferring it to the wireless networks, just



because these networks provide higher reach aspect. Wurster and Evans provide the example of bandwidth as one of the dimensions of richness. Wireless networks today have considerably lower bandwidth, which, according to the trade-off, puts them down the curve (see Figure 10).

The use of the corrected richness/reach model suggests that WAP Forum has to be more careful in pushing the new technology forward. Human interaction still counts a lot; therefore, offsetting the technologically feasible solutions of overloading consumers with large amounts of data in their everyday life is very dangerous.

6.4.10 Critical mass

The impossibility of having very high richness and at the same time reach on the mobile phone, has resulted in customer unwillingness to use the standard. The current hurdles with reaching the critical mass for the consumer acceptance of WAP may result in its total failure as a standard. As illustrated in theoretical part, sometimes even the existence of a powerful coalition, in this case - WAP Forum, may not help.

As it has been announced recently, highly successful i-mode is soon to be launched in Europe: particularly, in Italy and the Netherlands. Having the extremely strong home market, NTT DoCoMo is now pushing its service to Europe challenging WAP Forum’s statement about worldwide potential of WAP. The existing critical mass of i-mode’s subscribers in Japan allows NTT DoCoMo to experiment in Europe with little risk of failure. The providers supplying wide range of content in Japan have the competence and competitive advantage over existing or would-be providers in Europe. This is an example of positive cycle.

6.5 VICIOUS CIRCLE

As it is evident from the analysis of the preceding paragraph, the current state of introduction of WAP in Europe faces a vicious circle. Each of the negative factors is linked to another one and leads to a situation where all sides (operators, manufacturers and customers) loose. Despite WAP Forum’s propaganda that WAP “is the de-facto world standard for the presentation and delivery of wireless information and telephony services and other wireless terminals”, the reality is not so straightforward. This perspective represents only the members’ point of view. The customer perspective in this case is mistakenly neglected. It is important to remember that it has been proven that currently there are no incentives for existing content providers as well as potential entrants. Figure 11 illustrates the negative loop of current challenges.



Poor Promotion

Lack of Segmentation

Inadequate Pricing

Neglection of Service Concept

Irroneous ApproachLimited Range of Services

Mistreatment of Content Providers

Creation of unsuitable Stakeholder Expectations

Absence of Critical Mass

Figure 11: Vicious circle of WAP's troubles

Naturally, the logical connections in this figure can be distributed in both directions. For example, limited range of services and absence of critical mass are positively correlated.

In order to break the vicious circle and switch to the positive circle, industry needs to improve significantly in various directions. Effective customer communication has to be established and promotion has to be based on actual performances of the technology. Relationships with media will help in creating favourable expectations. Comprehensive business models, which involve content providers as well, and positive atmosphere in general will attract more content providers. Thus, range of services will grow and quality increase. Increasing numbers of subscribers will generate cash flows for telecoms and content providers, as well handset vendors and, in longer run, equipment manufacturers. The need for breakthrough is apparent yet only easy in theoretical terms. In practice, WAP Forum’s members have to take a series of positive outcome centred actions, which have to be previously analysed and agreed upon.

6.6 WAP IS DIFFERENT

Perhaps, there is one more critical thing that has so far been neglected by both technology advocates and critics. The aim of WAP was initially much different (if similar at all) from that of i-mode. WAP has been created as an ultimate technical standard for any of upcoming wireless applications and devices. I-mode, on contrary, had a strong focus on a small number of issues – bringing some basic additional content. The fact that it somewhat overlaps with usual Internet content is just an indication of the necessity of that particular content on any device, either wired or wireless or anyhow else connected to content server. A person who wants to check the latest news headlines will find the most convenient way to do that - either on the TV, in the newspaper, magazine, radio, or Internet. If the most convenient way to access the particular content will be



mobile phone, a person being aware of this possibility will use it. That is why i-mode became so successful so fast. Literally speaking, i-mode’s attempt was to lift the stone, whereas WAP’s – to move the massive piece of granite.

I-mode created no expectations before the launch but relied on its carefully planned strategy and word-of-mouth, which generated an exponentially increasing positive feedback. This service came as a proposition and by its various useful functions and easy to use interface became eventually so popular. Now, look at WAP, which has first created the hype because the related companies were afraid that competitors would be first to associate their brand with WAP buzzword. I-mode offered a service, which would help its customers – they had exhaustive coverage of basic content from the start. WAP offered everything. As everything was pretty hard for anyone to comprehend, it turned out to be as much as – nothing. Doubtless, there were people in every sphere realising that the promise is too big but, on the other hand, the stakes seemed too high to even imagine that WAP will be so clumsy, in all the previously discussed aspects.

The big promise of WAP is that it will soon become the major base for wireless B2B solutions, which are to come as soon as corporations realise that it is as necessary as a PC mouse. That is going to be the point where the happy-hour of i-mode will be gone. According to Tony Dennis17, “in reality, i-mode is a massive B2C success story”, because “it’s a system which handles millions of micro payments from teenagers”. Moreover, Dennis notes that “it also had a very little impact on security because the Japanese trust each other (generally speaking)”. Well, one of the headline WAP promises already two years ago was that “you can buy and sell stocks, etc.” The reality is that before the new version of WAP is implemented (version 1.2), there is little sense to discuss shopping options via any WAP-enabled device since the current version of protocol does not yet support the secure transaction layer. However, according to Lars Vestergaard18, this fact has been hidden from customers who have already used WAP for such financial services as checking their bank accounts.

The conclusion to derive from above mentioned points is that WAP is a “giant baby” of the wireless Internet of tomorrow while i-mode – “a very smart fast growing kid” of today. As a “giant baby”, nobody can really control WAP’s evolvement while NTT DoCoMo operates i-mode in relatively small market and exercises notable degree of control on certain critical factors. Most probably, once the potential will be fully realised and real market needs anticipated, WAP will evolve into something, which, according to WAP Forum, it already is – a de-facto wireless platform for all kinds of networks and all kinds of devices.

17 Email interview, 15/02/200018 Telephone interview, 12/02/2000



7 Advisory tools and concepts

Make WAP worth it – all companies that are planning to develop wireless web sites or operators or vendors have to address a number of very important issues. It is obvious that they can obtain a competitive advantage, but they have to realise that not every application is suitable for a cellular phone. Obviously, data transfer services require a learning curve for both operators and the market. Therefore, before even beginning development they will have to come up with a clear wireless strategy. Should the applications be created for customers, employees, or both? Which is the most important segment? What kind of business strategy is most appropriate?

7.1 BUSINESS MODELS FOR THE OPERATORS

The analysis of the market practices and existing theories showed that there are two main business models that worth considering. The first one is the open business model, which is referred as an extension of the Internet. The second one is the closed business model or also called the “walled garden” model. The difference between the two concepts emanates from the fact the wireless Internet is compared to Internet. With all the new wireless technology applications like WAP and I-mode, any operator has the possibility to offer the possibilities of Internet to a closed domain of people, just like in intranet domains. The first model offers to this domain access the free Internet, while the second one limits its users to services it offers and considers as appropriate. Obviously NTT DoCoMo uses a closed model and most of the European operators- the open model.

Heijden and Taylor (2000) say, “As market development shows, the lesson has been learned that users want the open Internet model”. However it is arguable whether the success of Yahoo! and Altavista is translatable to the wireless world. As we have seen in the previous chapters this world is different and it will be wrong to consider WAP and I-mode as simple extensions of Internet. NTT DoCoMo is an example of a closed model and its quick adoption raises lots of questions. Chapter 5 showed that one of the critical success factors for the Japanese market was the operators control over the service domain, which ultimate aim was to create the highest possible value for the customer within the value chain.

When deciding what kind of model the operator should apply, it must consider the main elements and try to evaluate them from customers’ and operator’s perspective (ibid.). This means that on the customer level a thorough analysis is needed on the following factors: service portfolio, ease of use, pricing/service transparency, and value of offering. Operator’s perspective should be evaluated by other factors: potential for differentiation, control over offering, market potential, development/administrative costs, and potential for customer retention.



7.2 MANAGING CUSTOMER EXPECTATIONS

The key factors behind the success of all new and coming technologies and applications are infrastructure, terminal performance and education of users in order to foster their adoption of new offers. The problem is that many technological advances, like the television, the Internet and WAP, were created for their own sake because engineers have figured out how. Doubtlessly, most of the new technologies would seem too complicated for the usual consumer. Therefore, to consumers the technology means nothing unless they explicitly know what and how they can do with it. (Suh-kyung, 2000)

Unlike the Old Economy companies, which develop products to meet consumer needs, hi-tech firms work in reverse. They create a new offer and then have to stimulate or even create the demand. One can argue that Old Economy companies often fail in developing products that do actually meet consumer needs due to oversights encountered in the development process. In case of the New Economy, companies have to be extremely precise in estimations they make before launching the product. This is because the lead-time to market has decreased along with the embracement of fast communication channels.

As any service concepts implies, the success depends on managing customer expectations. In the light of that statement one has to understand that customer requirements reflect dramatically their expectations. Therefore, the operators have to realize that the way they introduce and promote these new services will crucially influence the expectations (see section 4.4). If the WAP and I-mode services are compared and positioned as wireless Internet applications, the users will compare them with Internet in terms of speed, usage patterns, functionality, security, operability, etc. And that is definitely a difficult objective, considering all the differences between the wireless and wire-line Internet (see section 3.1 and Appendix 5). However if these new services are promoted as value-added services (what exactly they are), the comparison in the user mind will be with the existing services – SMS and voice-transfer services. Through positioning in the right way, the operators can easily maintain its competitive edge and achieve customer retention.

The possibilities that WAP and I-mode offer are conceptually new and it is extremely hard for the customer to imagine what kind of services s/he will be offered. Therefore it is almost impossible to use only TAM and TRI to predict the rates and ways of adoption. Therefore concepts like Cognitive Absorption and State of flow (see section 4.3) have to be considered. They maintain that psychological user barriers can influence dramatically the attitude towards any new technology. A logical implication for the wireless world is that people with extensive experience with technologies are more psychologically ready to adapt WAP or I-mode than people without any relevant experience. In this case it is dangerous to assume that customer requirements can be derived from Internet applications. This can be done only to a limited extent because of the difference characteristics of the two applications.

Having in mind all the previously mentioned features of the wireless Internet world some of the possible ways (although they seem obvious) are:



7.2.1 Football Coach

One of the commonly known strategies for managing customer expectations is purposefully setting the level of expectations low so that these expectations can be easily met. This method has both its positive and negative aspects. The main positive aspects are presumably the high level of satisfaction of external customers and perceived high performance among the internal customers – employees. The negative aspects involve risk associated with initial customer engagement and disconfirmation of expectations if they are exceeded. Under-promise and over-deliver is the short notion for this strategy. However, continuously exceeding expectations will inevitably lead the level of expectations rise over time. Theoretically, the strategy can be illustrated by Figure 12.

Zone of tolerance indicates that if expectations are not fulfilled to the fullest extent or, on contrary, performance has exceeded the level of expectations, customer will to some extent tolerate both types of disconfirmation with his/her initial expectations. The company should always aim to widen its zone of tolerance to safeguard its satisfaction ratios. In case the opposite is true, the risk is that very often customers will end up being unsatisfied with the company.

Figure 12: Levels of expectations, actual performance and zone of tolerance

Before WAP was launched its idea was promoted as having Internet in your pocket. No one dared to clarify to potential users that data transfer speeds will never be the same on wireless devices as nowadays on office computers. All the limitations of size of wireless devices and consequences arising from the size constraint were also heavily neglected. The result, as depicted, was that expectations’ level was set well above the possible actual performance and, worse enough, above the upper limit of tolerance. This explains why users of WAP were disappointed of its performance.

The appreciation of mistakes encountered in the previous interactions with the external environment will definitely lead company’s way to better market interaction in the future. Therefore, the documentation of critical practices, with the emphasis on the best ones, should be done. Many well known companies use this technique to improve their operations. A particular example is a computer manufacturer (and distributor) Dell. This kind of documentation has to direct company’s actions while shaping customers’ perceptions of past outcomes with the



company. This again can be explained by the figure in the way that, retrospectively, the attitude towards past outcomes shapes customer’s future expectations.

7.2.2 PDSA cycle

This is a practical and easy to comprehend process tool (Shewart, 1939, 1968), which relates to the cycle of continuous improvement. The first stage – plan – studies the customers’ needs, evaluates the competencies of the company and in detail plans the intended action. Second stage – do – launches the action. Third stage – study – evaluates the results. Fourth stage – act – initiates the change process and continues in to the next PDSA cycle. In other words, when the final stage is reached, the cycle may be adjusted. The idea here is to make process improvement constantly and ensure that it is not a drastic leap forward if it is successful and worse yet, gigantic leap backwards and lot of customer complaint. By its nature PDSA cycle provides a viable basis for staying in touch with the external environment all the time rather than just conducting customer surveys when the over dissatisfaction becomes apparent for many involved groups of stakeholders.

7.2.3 Improvement programmes

The importance of constant education should not be neglected. The changes in outside environment do not only affect customers and their values, perceptions and expectations. The inside of the company – internal customers – may also start thinking in stereotypes while the conditions are changing all the time. It is recognised that customer values can and should be studied and translated to the employee level.

Considering general types of knowledge – business knowledge, customer knowledge, technology knowledge and methods’ knowledge – it makes sense to keep the employees updated in all of these directions.

7.2.4 QFD

The purpose of Quality Function Deployment is to translate all kinds of customer needs into the concrete product characteristics. This method is the most precise one to ensure that the product being developed is the one that users will accept most. Naturally, the use of QFD can be rather limited in IT industry due to evolving customer needs and technologies, which come to market faster than those needs. Nevertheless, QFD can be employed as a part of improvement programme due to its excellent “features”. Namely, implementation of QFD even at the basic level requires increased communication between the layers of the company and all of the departments. This results in enlarged information sharing and critical competencies of the company can be utilised in the better way since employees would be more aware, which person to contact in one or another case when a problem situation arises.

The models put forward in this section in practice aid the New Economy companies to preserve their competitive position. The uncertain and changing environment outside the company will only seem friendly if the company maintains the spirit of continuous change, adoption and improvement. The Old Economy view that suggested that the market needs must be firstly studied and analysed, has to be changed in order to prosper in the New Economy.



7.3 SERVICE CONCEPT

The successful introduction of I-mode and the shortcomings of WAP proved that the winning applications are those that focus on the services and customer benefits, rather than on the technology.

7.3.1 Perceiving WAP, I-mode as service concepts, not as technologies

While comparing the two most popular standards WAP and cHTML (cHTML is considered as the relevant technology representing i-mode), it is very easy to see one of the most prominent differences. i-mode has been handled as a “service concept” and not just as a technology. At the beginning WAP started promoting this new wireless concept and following the “machine engineering process” approach (see section 7.2) advertised it as a new advanced technology. That is why when NTT DoCoMo offered a proprietary initiative called i-mode almost everybody considered it as a technology. Everybody started comparing WAP and i-mode. However, WAP stands for Wireless Application Protocol and i-mode for “Internet-mode”. As Niraj K. Gupta (2000) says there is even more behind this name. The “i” in the name can represent many things- I am (personalisation); “anywhere” in Japanese (positioning) and intelligent mode.

This way of promoting represents one very important challenge for the New Economy. Any new technology adds value. However this link is not direct, it is not the technology itself that makes the user live better and obtain more knowledge. There is another node in that linkage- the service implication of this technology, i.e. the content applications. Without that node the customer will view the new offer, just as a technology and will be unable to use it. All companies- operators or manufacturers have to understand that wireless Internet adds value only through appropriate services. Norman and Ramirez (1995) introduced the concept of value-constellation, which tries to avoid looking at the production only as a sequential flow of value adding. If we apply this logic to the telecommunication companies we ca say that the winners will be these companies that can offer and form the best value-constellations. The aim of this concept is to bring value to end-customers, by understanding how value is created for every customer. When introducing highly technological consumer products, it becomes really difficult to implement and understand customer needs or requirements. However, there is one thing that our research proved to be true- lots of new technological advancements are possible, but they will become probable only if combined with value-adding services

7.3.2 "Data Smog"

This section of the paper deals with a particular shortcoming of the nowadays high-tech society in the age of new information systems. The aim of the paragraphs would not be to provide a solution to the problem, but to describe the problem and make sure that this information is useful to the managers of any New Economy company.

This problem refers to the term “information glut” or “data smog” (Shenk, 1997). To be able to understand its complexity we have to start looking at our society at an early stage of its development. For many years “information technology has been an unambiguous virtue as a means of sustaining and developing culture” [Ibid.]. Information and communications have made



us steadily healthier, wealthier and more tolerant. The knowledge obtained out of the acquired information helped the human kind to overcome the basic challenges of everyday life, to make food more abundant, to build more stable societies, etc. In the last couple of decades something marvellous happened to human kind. Information started to move faster and became more plentiful and consequently everybody was benefiting from this change. However, this process was characterized by the fact that we began to produce information much faster than we could process it. When it comes to information flow, “at a certain level of input, the law of diminishing returns takes effect; the glut of information no longer adds to our quality of life, but instead it starts to cultivate stress, confusion and even ignorance”. This information overload that threatens for example our ability to educate ourselves, and “leave us more vulnerable as consumers and less cohesive as society”, Shenk defines as data smog.

Shenk also maintains that the only way to counteract these unintended consequences and make the most of the information revolution is to understand the main properties of this New Economy conflict. This perspective, however, has to be considered as techno realistic, because it is appreciating the benefits of technology, while recognizing and responding to its drawbacks. Additionally, a critical distinction has to be made between information and understanding.

Shenk summarizes these features in 13 laws of data smog. It is not the purpose of this paper to analyse these laws or draw conclusions how to cope with the information glut. That is why the laws are just listed and in some cases, which reflect precisely our research, we would elaborate more.

1. Information, once rare and cherished like caviar, is now plentiful and taken for granted like potatoes.

In a very short span of natural history, human kind have jumped from a state of information scarcity to one of information surplus, where the amount of information is so huge, that people have stopped to appreciate it and are unable to absorb its multidimensional qualities. Meanwhile, the flavour of information has changed dramatically. “With hypermedia, “dense TV”, multiplicities of images at once, straining our attention has become one of our most popular forms of entertainment.” It is not the content or ubiquity of the messages that worries, but the fact that information does not have to be unwanted or unattractive to be harmful. If we take advertising, for example, we would realise that the messaging information is everywhere. Everybody is usually so used to it, that does not accept it as harmful. However, with the introduction of wireless Internet services, this process will reach new dimensions. Some stores are planning to beam advertisements from stores that the user is close to (e.g. “go inside the store and receive 20% discount”). It is time managers and people promoting this new service to ask themselves: Will the user like this intrusion in the private life? and Is the information valuable enough to compensate the negative feelings?

2. Silicon circuits evolve much more quickly than human genes.

The quick technological advancements are changing some basic society features. The technology is changing so fast that the natural capacity of humans to process information is increasingly inadequate to handle the surfeit of change, choice, and challenge that is a characteristic of modern life.



3. Computers are neither human nor humane.4. Putting a computer in every classroom is like putting an electric power plant in every home.5. What they sell is not information technology, but information anxiety.

This point is based on the contemporary marketing strategies of almost all companies operating in the information industry. Their goal is to convince the customers that whatever the users have, it is not enough. Or from another point of view, whatever the companies offer on the market, the consumers need it and must buy it. Yoon (2000) discusses almost the same issue and calls it technology hype. It refers to the fact that nowadays all high-tech companies are not customer or market driven, just the opposite, they first create a new information software or hardware and only after that stimulate demand for it. Scott Goldman, chief executive officer of WAP Forum, says, “Hype has become the new currency”. If there is no hype about a new product, there is no possibility you can attract the attention of the big investors.

The information anxiety is also maintained by another problem, called the Thunderbird problem. It summarizes the concept that upgrades are the lifeblood of the information industry. If we understand this, we can also understand the new social dynamics of the information society. Shenk (1999) gives a very good example of this problem. He recalls an episode of Gillian’s Island, where the castaways come upon a boat to take them back to the civilization. However, they overload the boat with too much unnecessary baggage and it sinks twenty seconds after they cast off.

6. Too many experts spoil the clarity.

The proliferation of expert opinion has created a virtual anarchy of expertise. With the reduction in the cost of information production and distribution, nowadays almost everybody can be considered as an expert. Consequently, the expertise has turned to be an endless argumentation.

7. All high-stim roads lead to Times Square8. Birds of a feather flock virtually together.9. The electronic town hall allows for speedy communication and bad decision- making.10. Equifax is watching.11. Beware stories that dissolve all complexity.12. On the information highway, most roads bypass journalists.13. Cyberspace breeds libertarianism.

All these facts should not lead any reader to the conclusion that any new technology trying to provide more information is bad. Just the opposite! The problem is that our anxiety with technology has made us forget the key purpose of information: to inform people (Davenport and Prusak, 1997). Many of the people that manage information technologies in companies- IT (Information Technology) professionals, developers, etc. continue to apply the “machine engineering process” approach. Those people do not take into consideration to the needs of the “end users”, and whatever the information problem, they believe that:

“Information is easily stored on computers- as data;



Modelling computer databases is the only way to master information complexity; Technology change will improve the information environment. (ibid.)”

However, the experience many companies have nowadays with new information technologies (esp. wireless Internet applications, as can be seen in the previous chapters) teaches that this is not exactly the truth. Rather than a narrow focus on the technology, information ecology puts how people create, distribute, understand, and use information at its centre. Managers who want their firms to be successful, should apply an ecological approach and maintain the following ideas:

Information is not just data and is not easily stored on computers; The more complex a technological information model, the less useful it will be; Information can take on many meanings; Technology is only one component of the information environment and often not the

right way to create change.

Lack of understanding of this problem will lead to wasting lots of money on unnecessary technologies. “Ironically, as information becomes ever more important to us, we must think beyond machines (ibid.)”

7.4 THE IMPORTANCE OF CONTENT

As we have already seen, the development and introduction of wireless services in Japan proved that that technology is not enough. People usually accept new advanced technologies slowly and gradually and the only way to convince them that it is good and they actually need it is to provide them with appropriate applications that they can use. In terms of wireless Internet, when a customer is buying a mobile phone, s/he does not buy it because of its speed capabilities, but because of the connectivity to the Internet. Therefore, it is crucial to translate the technology into things that people will want and have a reason to use. Moreover, the only reason why people would like to access Internet through their mobile phone is the content.

What is content? According to the Webster’s New College Dictionary, content is: a) all that is dealt in a course or area of study, work of art, discussion, etc. b) essential meaning; substance.

When content is discussed, especially the one carried out through highly technological means, one of the most important elements that are taken into consideration are used medium for transfer to the users, technical prerequisites and requirements, interface, user behaviour, and usefulness (Devine and Holmqvist, 2001). It is true that content on wired Internet and the content on wireless Internet have similarities, but if we compare the before mentioned points, everybody would realise that they have principle differences, differences that make the authors think that they should be considered separately. The experience and problems that wireless Internet providers have in Europe are based exactly on not differentiating these two concepts. It is impossible to transfer the richness of any Web site to the small screen of a mobile phone. The PC-accesses Internet may have boundaries, but wireless Internet has many!



Information has always been precious to our society and people, benefiting from this value have improved the whole society. Only recently, however, when information started to move faster and became more plentiful, people started to realise this basic concept. The value of the information is the information itself, because this information can be turned into knowledge, with which the life of every person can be improved. This obvious concept has to be applied to wireless Internet as well. Only after that we can understand that “good content is content that takes advantage of the specific characteristics of the mobile Internet and provides the user with the information that s/he needs” (ibid.). Therefore, it is very important to look at some very simple questions: What are the customer needs? Why would the user access Internet through the mobile phone, instead of through the PC? How can the user obtain (or be given) the greatest value? What kind of stimuli should the companies use?

We are presenting a model that encompasses all these questions and gives a clear vision of the content of a wireless Internet service. The ideas for the model are stemming from four main questions: How is the customer using this service? When is s/he using it? Where is this activity taking place? What is the customer using it for? (see Appendix 5).

7.4.1 Technical requirements

When the first question is discussed, we refer to the idea that there are a couple of limitations, based on the fact that we use a different medium to access the Internet. The mobile phone is a different terminal that has its own specific characteristics - user interface and technical prerequisites. This user interface includes two main constraints. First, there is a limit of how much can be shown on the small phone’s display. Even if this is technologically improved, the user cannot receive content that is as good as the content on a 21-inch computer screen. The established architecture of the PC universe, e.g., big colour monitors, ergonomic keyboards, multi-gigabyte disk drives, broadband has very a very strong influence on the human mind and perceptions. That is why many people still do not understand why somebody would like to go back to the sketchy images on a 2-inch liquid-crystal display from the picture-perfect 3D graphics (Baker and Kunii, 2000). The size of the screen imposes the use of short messages, overviews of articles or news, limited media applications, etc. Therefore, it is logical to expect a trade-off between richness and reach. The user has to sacrifice the quality of the information for reach and the providers try to leverage between simplicity and value of the content. The second limitation of the user interface is the key panel, which nowadays is the means for input from the user. It is not only small, but also very difficult to handle. Many manufacturers in Europe and Japan are trying to propose solutions that cope with this problem, but the interaction with the user trough typing will always be restricted. Matsushita Communications Consumer-Electronics Group was on of the pioneers in trying to reinvent the user interface(Kunii, 2000). Detachable keyboards were the beginning of improving the size-sensitive world of cell phones, but as the experience shows endlessly pecking at tiny buttons on a phone keypad also gets old quickly. In Japan, some investigations proved that, this process would be effective if we use terminals that are held and manipulated much like musical instruments or game controllers (ibid.). Whatever happens, the success of any wireless service will depend on the user interface and any manufacturer or operator, who does not realise these restrictions, will fail to obtain any share on this new developing market.



The disadvantages posed by the user interface are further aggravated by the technical limitations of the mobile phone and the telephone networks. Bandwidth is probably the most important one. In today’s low-bandwidth environment, at rates of 9kbps, it is time consuming to send even small amounts of data through the network. The development of 2.5 and 3G promises developing networks that will offer speeds comparable to these offered by wired lines. However, the first new high speed network technologies will roll out at earliest in 2001-2002 and obtain critical mass in 2006-2007.

7.4.2 User Behaviour

Everybody dealing nowadays with the issues of promoting WAP, i-mode, and wireless Internet, generally speaking is aware of the fact that mobile Internet is not used in the same pattern as the fixed-line Internet. This mainly refers to time and place.

7.3.2.1. This group of research questions summons all the possibilities that the mobile phone, as a device that is easily carried everywhere, gives to the every person. The wired-Internet connection requires a personal computer and a wire to connect to the Net. With the phone, you connect anywhere you want. Not to forget that by using the location-based applications, which determine where the customer is by pinpointing signals from a wireless device, every user can receive any kind of information. However with the development of new technologies and the high penetration rate of PCs, it is expected that the places where you can “get wired” to Internet will be everywhere around us.

7.3.2.2.The third group refers to the fact that any mobile phone can be used anytime (as long as the user has recharged it and has coverage) the user wants. With the fixed-line connection, there are time-limitations and when the time is a particularly critical element, you do not have a PC around you. Therefore, it is generally acknowledged that mobile Internet will be used at the beginning to utilise or kill short periods of time when the user is not occupied with anything else or for time-critical activities.

7.3.2.3.The final group encompasses the most important issue- what type of information will the user try to download on his/her mobile phone. As we have seen in chapters 4,5, and 6, this is the most critical element for the success of new wireless Internet promotion. The theoretical part proved that the companies have to focus on entertainment at the beginning to attract young people- the early adopters of any new technology.

7.4.3 Specific advantages of wireless Internet content

These four points mentioned above lead us to the conclusion that the differences between wired Internet and wireless Internet can be used and the operators and service providers could offer such customised services that target exactly at the specific customer needs. These opportunities can be summarised in three groups: personalisation, positioning and timeliness.

Personalisation refers to the fact that if we compare a mobile phone and a computer, the phone is really a personal tool. Unlike the computer that may be shared by a couple of people, either through the network or manually, the phone is a real personal tool. This aspect allows providers to offer customised services that respond exactly to the user’s needs.



Positioning refers to the idea that “value can easily be added to the offer by taking advantage of the knowing the users current location (ibid.)”. As the authors have mentioned before the location-based applications are the most popular ones on the market, especially in Europe now. By determining where the customer is by pinpointing signals from a wireless device, every user can receive an information about the nearest restaurant, cinema, and information desk or even automatically send a message to an approaching friend. Devine and Holmqvist (2001) divide this type of service into dependent and independent. The dependent aspect refers exactly to the fact that you know where you are, and the second one to the fact that you can access Internet at any location, since the mobile is always with you.

Timeliness (time opportunity) is based on the major characteristic of a mobile phone; you can use it at any time you want. There are many examples (already mentioned in the previous chapters) when time is a very critical issue and the providers can take advantage of it. Devine and Holmqvist (2001) also divide this opportunity in two layers- dependency and dependency. By doing this it is easier to encompass the cases that the services is used at any time and the cases when the user is able to utilise the right content at just the right time.



8 Conclusions

The aim of this research was to highlight the critical success factors in the New Economy as well as possible mistakes that can lead to failure with the focus on the developing area of wireless Internet. This was achieved by the evaluation of performance of two emerging standards for wireless Web - WAP and i-mode. The secondary objective was to highlight general tools and models that aim to improve the understanding the cornerstones in achieving competitive advantage to the New Economy companies. This was done by analysing the possibility of adoption of i-mode's positive example and transferring its success to Europe. Following sections briefly summarise the research questions posed at the beginning of the paper.

1. What are the critical success factors (CSFs) for Japan’s wireless Internet market development?

We have identified 6 main CSFs of i-mode. First, good marketing. When NTT DoCoMo introduced its wireless Internet service, it focused its strategy on the possibilities that the networks and the telephones offered at that moment, rather than on the limitations, provided by the same. Following that approach, it targeted the most popular customer needs by offering good service applications. Second, extensive content offers aimed at existing users needs. A large portion of i-mode's early adopters are young people. That is why, the operator focuses on entertainment, offering capabilities for downloading images, network gaming, fortune telling, dating services. As our research proved - betting on fun is definitely a win-win situation! Third, good billing system. By offering a concept that encompasses the interests of content providers, the operator and customers, NTT DoCoMo created a situation where everybody is satisfied. The payment system is very good optimised, the price for services is fair, and revenue stream goes to both operators and content providers. Fourth, the dominance of operator on the market. NTT DoCoMo has control on every node in the value chain. In other words, it has strong influence on content providers, handset manufacturers and retailers. In Japan the monopoly is considered to have the best chance to be of maximum service to the society, and has a heavy obligation to do so. This does not mean that this should be transferred to Europe, it just shows the direction for development- the co-operation between all participants in the value-creation process will lead to a situation where all sides win. Fifth, national characteristics of the market. The Japanese society is very homogenous and trend susceptible. This allows many companies to obtain quickly a critical mass and later play on the global market. Another national was low computer and Internet penetration rates, but one of the highest mobile phone penetration rates among the developed countries. Sixth, technological simplicity and quick launch. By applying this concept, one of the biggest problems in the realms of the New Economy - “technological hype” - was avoided.

2. What were the shortcomings of introduction of m-commerce protocol WAP in Europe?

In the case of Europe and WAP, failures are just the opposite of i-mode's success factors. Ten factors making the adoption of WAP very hard so far have been identified. The main are the following. First, market share and price curve challenges. The wireless Internet is a creation of



operators and manufacturers that need new sources of revenue and increase market shares (as always!). Second, (unfortunately) customer focus was neglected and service concept was not created. Therefore, third, lack of services was poor because operators did not work on the getting content providers to develop new services. Fourth, bad marketing. The promotion lead customer to believe that WAP will deliver speed and content of wireless Internet yet accessible from any place and time from mobile device, which has not proved to be true. Fifth, revenue to content providers. Inappropriate business model or, rather lack of it, did not ensure cash flow to content providers. This is why existing and new content providers are not motivated to develop good applications. Sixth, high price. Given the price/quality relationship WAP charges users way too much for what it offers. To summarise, vicious circle multiplies the negative effect of one factor on another and the way out is a complicated process that has to involve efforts from all the affected sides.

3. Is it possible to apply Japan’s positive experience on the European market? What kind of tools/concepts should the telecommunication companies implement to be successful in this market?

Managing Customer Expectations - The research has proved that New Economy requires new approaches to the promotion of new high-tech products and services. It is no more enough to try to calculate in numerical terms the readiness for new technologies because market changes very quickly. The marketing strategy of a company has to take a different focus - not trying to appraise customers' needs but rather create them. Creation of the needs inevitably includes creation of positive customers' expectations about usefulness and ease to use. The ultimate goal must be to prepare customers exactly for the product that company will soon deliver to the market. There are a couple of ways to do that: first of all, companies need to increase zone of tolerance, which refers to customers being satisfied even if they do not get the level of service they have expected. Second, using PDSA cycle will help companies implement changes in the course of action systematically and achieve desired result by reflecting on previous actions. Improvement programmes safeguard company's position in the industry by continuously adapting to changing environment factors outside as well as inside of the company. Finally, QFD is a set of tools allowing companies to translate customer needs into concrete product requirements. Although we argue that customer needs have to be created, the management of existing expectations is equally important and the use of QFD will help every company. I t will also increases the internal communication and knowledge sharing tremendously.

Service Concept - Any new technology adds value and offers new dimension of possibilities to the customer. However this link is not direct, it is not the technology itself that makes the user live better or get profound knowledge. There is another node in that linkage- the service implication of this technology, i.e. the content applications. Without that node the customer will view the new offer, just as a technology and will be unable to use it. The comparison between WAP (its service implication) with I-mode proved that any possible technology would become probable only if it is presented with relevant value-adding services. Encouraging the creation of more WAP sites will be the key to attracting and retaining customers.

When considering all new wireless applications, it is very important to consider the information glut (“data smog”) in our society. The development and distribution of data have reached a point where this information no longer adds to our quality of life, but instead it starts to cultivate stress,



confusion, and ignorance. In that case, people have to start considering information in a different perspective: information is not just data and is not easily stored on computers; the more complex a technological information model, the less useful it will be; information can take on many meanings; technology is only one component of the information environment and often not the right way to create change. If companies do not apply these ideas in their service strategies, they risk loosing customers and consequently money. Ironically, in a world where information technology become ever more important to us, we must think beyond machines.

The importance of content- our research proved that in the case of wireless Internet content is one of the most important critical factors. Operators (using WAP, cHTML, etc) will attract subscribers if only deliver good content. That content has to be considered in its specific dimensions that come from its principal difference from the fixed-line Internet. They refer to user interface, technical prerequisites, and user behaviour. In that case, providing good wireless Internet means utilising these differences through personalization, timeliness and positioning.

Answering the third research question, we embrace the positive experience learned from Japan and mistakes encountered in Europe. We questioned whether it is possible to apply i-mode's example on Europe's WAP and offered a number of general tool to be used. The conclusion drawn from i-mode and WAP is that these two concepts are in fact very different. WAP has been created as a global standard, taking into account interests of software developers, handset vendors, equipment manufacturers and may be also some of the content providers. Most importantly, WAP has been created on the base of future expansion on the market in the near future. In fact, NTT DoCoMo has not adopted WAP simply because it had lower objectives, focussing only on the Japanese market. The evolution of WAP can be compared to the emergence of universal standard for railways. When the railway system started to develop, there were many proprietary standards in different places around the planet, and it took long time before universal railway specifications were unified. The time scale is somewhat different for WAP and i-mode, but the general trend is the same. Presently, i-mode satisfies the needs of customers quite neatly but it is also largely dependent on limitations of networks. In the nearest future it will probably face a serious need for revision, which will be hard to implement compared to WAP. To conclude with, Kelly’s 12th law of the New Economy states: do not solve problems, because “in the coming era, doing the exactly right next thing is far more ‘productive’ as doing the same thing better”.



9 Appendixes

9.1 APPENDIX 1: STATISTICS OF INTERNET AND MOBILE PHONE USERS IN WESTERN EUROPE



9.2 APPENDIX 2: WIRELESS DATA DEVELOPMENTS

Wireless Data Developments

Service Data capability Expected deployment

GSM Circuit Switched Data 9.6 Kbps or 14 Kbps Available worldwide nowHSCSD 28.8 Kbps to 56 Kbps Limited this year, as many

operators will wait for GPRS

GPRS IP with typical data rates of 28 Kbps to 56 Kbps

Rollout in 2001

EDGE IP to 384 Kbps Rollout in 2002 or 2003; operators may go directly to W-CDMA

W-CDMA (also known as UMTS)

385 Kbps outdoors, 2 Mbps indoors

Initial deployment in 2002; widespread deployment may not happen until 2005 or later

TIA/EIA-136TDMA

EDGE/EGPRS-136 IP to 384 Kbps; roaming possible with GSM and W-CDMA networks

Initial deployment in 2002; widespread deployment in 2003

Wideband TDMA or W-CDMA

Adds 2 Mbps indoor capability per IMT-2000 requirements

No announcements

CDMA Circuit-switched data 9.6 Kbps or 14.4 Kbps Available from some carriers now

IS-95B IP to 64 Kbps Available in Japan and Korea

CDAM 2000 1X IP to 144 Kbps Trial deployment in 2001; rollout in 2002

CDMA2000 3X IP to 384 Kbps outdoors, 2 Mbps indoors

Initial deployment in 2002 or 2003

1XEV IP to 2 Mbps Trial planned for 2001; deployment uncertain



9.3 APPENDIX 3: WHO IS WINNING THE 2G-STANDARDS WAR?

Who’s winning the 2G standards warStandard North

AmericaLatin America

Asia Europe World %

GSM 7.5m 1.1m 93m 215m 345 68CDMA 23m 8m 33m N/a 65m 13TDMA 26m 17.5m 1m N/a 48m 9PDC 0 0 48m 0 48m 9IDEN 5m N/a N/a N/a 6m 1Total 61.5m 26.7 175m 215m 512m 100



9.4 APPENDIX 4: I-MODE CONTENT STATISTICS

Category Sub-category Number of sites

Number of fee-based sites

News/Weather/Information General Newspapers 12 8Investment Newspaper 1 0Regional newspapers 17 16Foreign newspapers 5 0Total: 35 24

Mobile banking National banks 10Regional banks 66Other savings/Loans 167AssociationsTotal: 243

Credit card/Securities/Insurance

Credit cards 4Securities 7InsuranceTotal: 11

Travel/Traffic/Maps Airlines 5 0Trains 2 2Hotels 5 0Rental cars 1 1Traffic information 2 2Maps 2 2Total: 17 7

Shopping/Living Tickets 3 2CDs, games, books 9 0Rentals 4 0Employment 4 4Cars 4 0Education 3 0Total: 17 6

Gourmet/recipes Restaurant information 7 3Recipes 2 0Total: 9 3

Melodies/images Melody downloading 19 18Character downloading 35 33Total: 54 51

Games/fortune-telling Games 16 16Horoscopes 17 17Total: 33 33

Source: Devine, Holmqvist (2001)



9.5 APPENDIX 5: CHARACTERISTICS OF WIRELESS CONTENT


Characteristics of wireless Internet content

How is the customer using the service?

Limitations of display

Input from the userNetworks

Speed

Bandwidth

Whenis the Internet used?

What is the Internet used for?

Where is the Internet used?

Dependency

Independency

How to utilise and take advantage of?

User Interface Technical Prerequisites

User Behavior


9.6 APPENDIX 6 THIRTEEN KEY ACTIVITIES IN THE NEW PRODUCT DEVELOPMENT PROCESS

Source: Cooper, 1993


Initial screeningPreliminary market assessmentPreliminary technical assessmentDetailed market studyPredevelopment business and financial analysisProduct developmentIn-house product testsCustomer product testsTrial sellTrial productionPre-commercialisation business analysisProduction start-upMarket launch


9.7 APPENDIX 7: OVERVIEW OF THEORIES BEHIND THE CONCEPT OF COGNITIVE ABSORPTION

The Dimensions of CA and of Related ConstructsCA (current study)

Related ConstructsFlow(Csikszentmihalyi 1990)

Flow(Ghani & Deshpande 1994; Ghani et al. 1991)

Flow(Trevino & Webster 1992; Webster et al. 1993)

Engagement(Webster & Ho 1997; Webster & Hackley 1997)

Flow Network(Novak et al. 1999)

Cognitive Absorption (Agarwal et al. 1997

Dim

ensi

ons

TemporalDissociation

“transformation of time”

Telepresence/time distortion (antecedent to flow)

FocusedImmersion

“attention is completely absorbed by the activity”“nothing else matters”

Concentration Attention focus

Attention focus

Focused attention (antecedent to flow)

Attention focus

HeightenedEnjoyment

“pleasure and enjoyment”

Enjoyment Intrinsic interest

Intrinsic interest

Intrinsic interest

Control “involving a sense of control”

Control Skill/control (antecedent to flow)

Control

Curiosity Curiosity Curiosity Curiosity

Source: Agarwal and Karahanna (2000)



9.8 APPENDIX 8: THE FRAMEWORK OF COGNITIVE ABSORPTION

Source: Agarwal and Karahanna (2000)



9.9 APPENDIX 9: THE VALUE PARADIGM OF NTT DOCOMO



9.10 APPENDIX 10: LIST OF INTERVIEWS

Andrea Vey, Public Relations manager at T-Mobil, Germany’s biggest mobile telecom operator, email interview on 09/02/2000;

Doug Lucas, senior Business Development manager at Excite Corporation UK, email interview on 08/02/2000;

Göran Frödin, Cetevo, Sweden, email interview on 14/02/2000;

Johan Holmgren, Director of Public Relations, Europolitan, Swedish mobile network operator, email interview 15/02/2000;

John Johnsson, Vice President at Cell Network, office in Karlstad, Sweden, personal communication on 18/01/2000;

Ken Young, senior Internet market analyst at VNUnet, UK, IT journalist, series of email communication;

Lars Vestergaard, senior analyst at IDC Denmark, market research and consulting company,, telephone interview on 12/02/2000;

Martin Jönsson, technology business manager in strategic business management division, UMTS-GSM business unit at Ericsson Mobile Communications, Sweden, email interview on 07/02/2000;

Robert Horvath, Nordic Springs AB, Sweden, telephone interview on 26/02/2001;

Tom Fitzpatrick, Wireless Internet Development Manager, Parallel Internet, Ireland, email interview on 01/03/2001;

Tony Dennis, Consultant Editor, WAP Insight (a free online newsletter for the WAP development community), UK, email interview on 19/02/2001.



9.11 APPENDIX 11:INTERVIEW QUESTIONS

General1. Is the Internet a suitable platform for wireless value added services?2. Which m-commerce services will be demanded most?3. Is the necessity to abolish some physical elements like a wire to connect to the Internet, big

desktops or laptops big enough to promote WAP?4. Is it possible to transfer the richness of the current networks into the wireless world?5. How big is the potential threat of I-mode to WAP?6. In Europe there is lots of disappointment about WAP. Is it possible to overcome the negative

attitude?7. Whose responsibility is to promote this new technology? Who failed in promoting it in the wrong

way?8. What were the shortcomings of WAP’s in Europe?9. In what ways can Europe learn from Japan’s experience?10. Which scheme do you think would be most applicable in transferring common Internet content to

mobile phones?Customers

11. What are the current customers’ expectations of the wireless web content?12. How to deal with current promises to build fair future expectations that can be met?13. What is the importance of Japanese culture for the success of I-mode?14. Which is the most important customer segment for m-commerce services in Europe – business

people or young people?15. Should telecoms promote the usage of m-commerce among young people by subsidizing handset

prices?16. What is your guess or estimate prediction of the number of WAP users in Scandinavia at this

moment?Telecoms

17. What kind of business models should telecom companies use in order to promote the spread of usage of wireless Internet?

18. Having in mind the network and snowball” effects (the greater the penetration rate, the greater the competitive advantage), do you think that WAP may loose the competition?

19. What are the odds that WAP Forum and other major WAP supporters will not achieve a “critical mass” and will fail in making WAP a global standard?

20. What are the critical success factors (CSFs) for Japan’s mobile Internet market current development?

Content providers21. Should telecoms provide value added services themselves or outsource them?22. Which services should be given the highest priority in terms of development and promotion?23. Why did telecoms fail in providing sufficient range of wireless services together with the launch

of WAP? Are content providers waiting for a critical mass?24. How many companies in Scandinavia are providing value added services for wireless web?



9.12 APPENDIX 12: GLOSSARY OF TERMS

Access Fee A monthly charge for the ability to connect to a wireless network. This fee is assessed monthly whether the phone is actually used or not.

Activation Configuration of a wireless phone so that it is ready to be used to transmit and receive calls on the wireless network.

Activation Fee A one-time up-front charge for activation of a wireless phone. Airtime Total time that a wireless phone is in connected and in use for talking. This includes use for calls

both received and placed.Analogue A method of modulating radio signals so that they can carry information such as voice or dataAuthentication A feature used to reduce fraud by confirming the identity of a phone to the wireless

network. Bandwidth Describes the transmission capacity of a medium in terms of a range of frequencies. A greater

bandwidth indicates the ability to transmit a greater amount of data over a given period of time. Bluetooth A short-range wireless protocol meant to allow mobile devices to share information and

applications without the worry of cables or interface incompatibilities. The name refers to a Viking King who unified Denmark.

Broadband Describes a communications medium capable of transmitting a relatively large amount of data over a given period of time; a communications channel of high bandwidth.

CDMA (Code Division Multiple Access) A digital communication technology used by some carriers to provide personal service. Other technologies used are TDMA and GSM. This technology allows numerous signals to occupy a single transmission channel, optimising the use of available bandwidth.

CDMA2000 this is a network standard popular mainly in USA. It leverages Internet developments and includes Point-to-Point protocol to link users to a packet data-serving node and Mobile IP to support customer roaming among CDMA2000 networks. This will allow the customers to have their own IP addresses and keep them while roaming in the network. This 3G technology comes in versions 1X and 3X.

CDMA One This is a 2G technology, first established in 1993/cHTML (compact HTML) This is the markup language that NTT DoCoMo uses for its wireless Internet

service – i-mode. It is a subset of HTML.CDPD (Cellular Digital Packet Data) A technology for transmitting data over analogue cellular

networks. Requires a special modem and the wireless carriers network must be upgraded to accommodate such data transmissions.

Digital A method of encoding information using a binary code of 0s and 1s. Most newer wireless phones and networks use digital technology.

Dual band A feature on some wireless phones that allows the handset to operate using either the 800 MHz cellular or the 1900 MHz PCS frequencies.

EDGE Enhanced Data for GSM EfficiencyGSM (Global Standard for Mobile) A digital communication technology used by some carriers to

provide Personal Customer Services (PCS) service. Other technologies used are CDMA and TDMA.

GPRS (General Packet Radio Service) An emerging technology standard for high-speed data transmission over GSM networks. It is packet based and allows rates from 56 to 114kbps.

Handset Any hand held device used to transmit and receive calls from a wireless system. Also known as a wireless phone, a cellular phone, a mobile phone, a PCS phone and many other terms.



HDML Handheld Device Markup Language. This a programming language that allows to translate and present content of web pages on mobile phones or PDAs via wireless Internet connection.

HTML Hyper Text Markup Language; a set of markup symbols and codes, used to display on a World Wide Web browser page.

ISP Internet Service Provider.LAN Local Area NetworkLCD (Liquid Crystal Display) A flat panel screen used to display numbers and/or characters. Often

found on a wireless handsetMMDS (Multipoint Multi-channel Distribution Service) Often referred to as 'wireless cable' as it is a

wireless system used to distribute cable television and other broadband signals to multiple users by way of a single transmitter

PDA Personal Digital Assistant; a device that provides computing, information storage and retrieval capabilities for personal and business use.

SMS (Short Messaging System) A feature of PCS phones (primarily GSM) that allows users to receive and sometimes transmit short text messages using their wireless phone.

Spectrum The entire range electromagnetic frequencies. Spread Spectrum A communications technology where a signal is transmitted over a broad range of

frequencies and then re-assembled when received. TDMA (Time Division Multiple Access) A digital communication technology used by some carriers to

provide PCS service. Other technologies used are CDMA and GSM.3G (Third Generation Wireless) The next generation of wireless communications beyond today's digital

technologies. When available, 3G wireless technologies will allow for much higher transmission rates to wireless devices leading to more useful services and a better user experience.

UMTS Universal Mobile Telephone System, also known as W-CDMAURL Uniform Resource Locator; the address of an Internet file.WAN Wide Area Network.WAP (Wireless Application Protocol) A global protocol used in many newer wireless devices that

allows the user to view and interact with data services. Generally used as a means to view Internet web pages using the limited transmission capacity and small display screens of portable wireless devices.

W-CDMA Wideband Code Division Multiple Access; The 3G solution for GSM is W-CDMA, also known as Universal Mobile Telephone System (UMTS). It will require new radio spectra since it operates in ultra wide 5-Mhz radio channels. W-CDMA will meet the IMT requirements 2 Mbps indoors and 384 Kbps – outdoors, but its official launch will be at earliest in Japan in 2002 by NTT DoCoMo.

Wireless Carrier A company that provides wireless telecommunications services.wISP Wireless Internet Service Provider.XML eXtensible Markup Language; a language used by WAP that provides an easy way to create common information formats and share both the data and the format on the Web.



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Critical Success Factors in the New Economy: How to Make WAP Worth IT. A Study of Mobile Internet

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