Diffusion of the Mobile Commerce: Analysis of the Italian Situation

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DIFFUSION OF THE MOBILE COMMERCE:

ANALYSIS OF THE ITALIAN SITUATION

A study submitted in partial fulfilmentof the requirements for the degree of

Master of Arts in MultilingualInformation Management

at

THE UNIVERSITY OF SHEFFIELD

by

ROBERTO LECCA

September 2007


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Abstract

This study aims at analysing the general status of the Mobile Commerce evolution inItaly and provides a background for further studies on this topic.

TLC companies have been almost obliged to direct their attention towards Mobile

Commerce services, because in many social contexts they have already exploited

effectively the voice telephony market. This shift has encountered both extreme and

rapid appreciation in some Asian markets, Japan and South Korea above all.

Their successful experience has therefore represented a peculiar driving force to all

the other mobile telephony companies, pushed by the need to generate new sources of

competitive advantage.

Nevertheless, so far this effort has not produced the same positive outcomes achieved

within the major Asian contexts.

Italy surely represents an ideal setting for the implementation of m-Commerce

policies, mostly due to the very high level of penetration of mobile telephones and the

attitude of its population towards innovations. However, although being introduced

by one of the most important ICT firms a couple of years ago, m-Commerce has not

breached into the Italian society yet.

In order to obtain relevant results and significant answers to these issues, this study

has been developed following both qualitative and quantitative patterns. A case study

covering the best example of Mobile Commerce success was selected and examined

in deep. Additionally, an online survey was formulated and sent out.

Finally, reviewing part of the literature available has constituted a fundamental step to

form a solid background to put this analysis through.

Overall, the research project has tried to cover the most influent aspects regarding the

development of the Mobile Commerce and contributed to explore such a phenomenon

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from a critical point of view, trying to provide significant recommendations for

further investigation.

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Acknowledgments

First of all, special thanks to my supervisor Dr. Angela Lin, for her patience and

guidance throughout the whole dissertation preparation period.

Secondly, thanks to all the people who contributed to the research project, particularly

those ones who spent part of their time completing the online survey, which has been

fundamental in order to reach the goals established. Among these people, I would

also like to thank Mr. Bryce Winkelman of Qualtrics for his scrupulous aid and

understanding.

Last but not least, a very special thanks goes to my family, which gave me the

possibility to do a master course and supported me in all possible ways during this

fantastic experience.

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Table of Contents

1. INTRODUCTION ...............................................................................................................................4

1.1. RESEARCH AIMS AND OBJECTIVES ................................................................................................61.2. ORGANISATION OF THE DISSERTATION..........................................................................................8

2. LITERATURE REVIEW.................................................................................................................10

2.1. LITERATURE OVERVIEW..............................................................................................................102.2. LITERATURE REVIEW: THEORETICAL BACKGROUND ...................................................................12

3. THE MOBILE PHONE IN THE MODERN SOCIETY................................................................15

3.1. THE EVOLUTION OF THE MOBILE PHONE AND ITS IMPACT ON THE SOCIETY .................................163.1.1. The mobile phone as a tool that enhances security and safety ..............................................173.1.2. Unadvised use of the mobile phone and reduction of safety..................................................193.1.3. The connection between mobile phone and public place utilisation .....................................193.1.4. The mobile phone and the maintenance of relationships ......................................................203.1.5. The role of the mobile phone within non-verbal communication ..........................................21

3.2. THE DIFFUSION OF SMS..............................................................................................................223.3. THE MOBILE PHONE DOMESTICATION WITHIN THE ITALIAN YOUTH SOCIETY ..............................243.4. THE BEEPING PHENOMENON: NOT ONLY AN ITALIAN PRACTICE ...............................................27

4. THE MOBILE COMMERCE..........................................................................................................29

4.1. THE CONCEPT OF MOBILE COMMERCE........................................................................................304.1.1. Differences and analogies between e-Commerce and m-Commerce ....................................32

4.2. OVERVIEW OF THE M-COMMERCE BUSINESS MODELS .................................................................334.2.1. User fee business models.......................................................................................................344.2.2. Shopping business models.....................................................................................................344.2.3. Marketing business models ...................................................................................................34

4.2.4. Improved efficiency business models.....................................................................................35 4.2.5. Advertising business models..................................................................................................35 4.2.6. Revenue-sharing business models .........................................................................................36

4.3. CASE STUDY:NTTDOCOMOS I-MODE SUCCESS ......................................................................364.3.1. The Japanese background at the end of the millennium and the contextual factors thatenabled NTT DoCoMos i-Mode service to stand out on the market...................................................374.3.2. The launch of NTT DoCoMos i-Mode: analysis of an innovative business model...............404.3.3. Conclusions ...........................................................................................................................45

4.4. OTHER SUCCESSFUL EXAMPLES OF M-COMMERCE IMPLEMENTATION AND THE SITUATIONIN THE MOST IMPORTANT AREAS OF THE WORLD .......................................................................................46

4.4.1. Mobile providers offering m-Commerce services in Italy .....................................................49 4.4.2. Mobile Commerce and the issues concerning security and privacy......................................52

4.5. OVERVIEW OF THE ITALIAN SITUATION.......................................................................................53

5. METHODOLOGY ............................................................................................................................57

5.1. OVERVIEW ..................................................................................................................................575.1.1. Rationale behind the choice of the research method .............................................................57

5.2. OVERVIEW OF THE CASE STUDY ..................................................................................................595.2.1. Resources employed for the case study .................................................................................59

5.3. OVERVIEW OF THE ONLINE SURVEY ............................................................................................605.3.1. Survey tool employed.............................................................................................................605.3.2. Ethical issues.........................................................................................................................60 5.3.3. Sample ...................................................................................................................................60


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5.3.4. Composition of the survey .....................................................................................................615.3.5. Delivery of the survey............................................................................................................62

6. SURVEY OUTCOME: EVALUATION OF THE RESULTS.......................................................63

6.1. SURVEY STATISTICS ....................................................................................................................636.2. DISCUSSION OF THE RESULTS ......................................................................................................63

6.2.1. Demographics .......................................................................................................................636.2.2. First part: broadband and e-Commerce ...............................................................................656.2.3. Second part: the role of the mobile phone.............................................................................676.2.4. Third part: the diffusion of the m-Commerce........................................................................73

7. DISCUSSION.....................................................................................................................................85

8. CONCLUSIONS................................................................................................................................89

BIBLIOGRAPHY .......................................................................................................................................92

APPENDIX A: ORIGINAL VERSION OF THE SURVEY .................................................................101

APPENDIX B: TRANSLATED VERSION OF THE SURVEY...........................................................113

APPENDIX C: INTRODUCTION TO THE SURVEY.........................................................................119

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List of Tables

TABLE 1DEMOGRAPHIC CHARACTERISTICS OF THE RESPONDENTS (N=125).........................................64TABLE 2 SQ22:IF YOU HAVE NEVER PURCHASED ANY GOODS OR SERVICES VIA YOUR MOBILE PHONE,

WHICH OF THE FOLLOWING SERVICES WOULD YOU INTEND USING?.............................................80

TABLE 3 SQ23:PLEASE STATE, IN ORDER OF PREFERENCE, THE MEDIUM BY WHICH YOU WOULDPREFER TO RECEIVE INFORMATION ABOUT MOBILE COMMERCE AND MOBILE SERVICES .............81

TABLE 4 SQ24:PLEASE INDICATE THE IMPORTANCE OF THE FOLLOWING FACTORS IN USING APARTICULAR M-COMMERCE SERVICE ..........................................................................................81

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1. Introduction

We may say that mobile phones have by now conquered almost any society in

the whole world, particularly those contexts that belong to the most developed

countries. However, also thanks to the poor level of fixed infrastructure in their

territories, many of the so called underdeveloped countries are already playing

a surprising role in the evolutionary process of such a phenomenon, concerning

the exploitation of both B2B and B2C mobile services (Muthigani, 2007; Rice,

2007; Vodafone, 2005; Wangui, 2005).

One of the foremost conditions for the establishment of the m-Commerce has

been, especially in the Western countries, the deep penetration of wireless

devices. Among that type of devices, the principal role is surely played by the

mobile phone.

In the EU-25, two countries have reached unexpected results, going beyond the

100% for what regards mobile phone penetration: in 2003, the best outcome

belonged to Luxembourg, which registered nearly 110% of mobile phone

subscriptions. Italy placed second with around 101.8%, and a constant pace of

growth that will possibly lead to the first position in the forthcoming future

(Bueti and Obiso, 2005).

Outside the EU, the trends for 2006 foresaw a penetration ratio of 74% for the

USA, while Japan (95%), South Korea (94%) and China (93%) symbolised the

huge potential of the Asian market (Ipsos Insight, 2006). Finally, Africa

constitutes a context where mobile phone users are growing rapidly: in 2004 it

accounted for 50 million mobile subscribers (7% of the population), while it isexpected to reach over 160 million users by the end of 2009, with a pace of 35%

per year (Batchelor et al., 2004).

Therefore, it can be argued that the mobile phone has literally conquered its

relevance in the new millennium society, constituting an essential tool that has

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been by now incorporated in our everyday life so to affect our personal

dimension.

Mobile phones extreme spreading has evidently generated a huge business,

mainly based on voice and SMS traffic. Nevertheless, the partial saturation of the

market in relation to those two particular features of mobile telephony has

pushed TLC companies to look for further areas of exploitation, creating new

products and services that would meet the needs of their costumers. Japan can be

considered the pacemaker in this field: in 1999 NTT DoCoMo, the most

important mobile provider launched i-Mode service, reaching in a short time an

impressive number of subscriptions and in fact projecting the Japanese society

towards the new mobile era. In 2007, it still represents the most successful model

of m-Commerce service.

Moreover, i-Mode introduction has given boost to the other telephony

enterprises, whose aim has been to emulate the Japanese performance in the

most profitable markets of the world.

Going back to the data that have been discussed at the beginning, many represent

examples of countries in which the Mobile Commerce would find an ideal

ground for its growth, thanks to the massive presence of mobile phones and the

high standards of innovation. Among them, Italy is certainly one of the most

profitable socio-economic contexts in terms of new mobile services exploitation.

However, although being introduced with great expectations in 2003 by the

provider H3G1, the popularity of m-Commerce in Italy can be still considered at

an embryonic stage.

In fact, the mobile phone still appears far from being deemed as a tool that goes

beyond the communicative scope, remaining still anchored to its original

conception.

1 H3G was later followed by the other 3 major mobile providers, Vodafone, TIM and Wind.However, H3G has been the only one to provide m-Commerce services based exclusively on UMTStechnology.

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1.1. Research aims and objectives

Following the conceptual background highlighted before, the main aim of this

research has been to understand the reasons why the mobile commerce is

struggling to make an opening in the Italian society. But that is not all. In fact, it

would be relevant to know how the use of the mobile phone is conceived among

the Italian youth population. The reasons behind the selection of such a peculiar

target will be explained later on.

Also, determining at what extent Mobile Commerce awareness is present within

that share of the Italian population will be interesting, together with its possible

relationship with the diffusion of the broadband and the internet, and the

presence of any electronic commerce (e-Commerce) culture.

This study would help to draw a scenario useful for the future development of

this kind of technology.

More precisely, for what regards the spreading of the mobile phone within the

Italian territory and its usage among the Italian youth generation, this study aims

at finding an answer to the following questions:

Concerning the popularity of the Internet and the well known practice of making

transactions online (e-Commerce), these are the interrogatives that this

investigation will try to answer to:

i. How is the mobile phone conceived within the Italian youthsociety?

ii. What are the most popular features connected to the usage ofmobile phones within the Italian youth society?

iii. What is the mobile phone potential in the Italian market?

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The last part of the research project will focus on Italian mobile phone users

current knowledge regarding the Mobile Commerce potential, together with the

most outstanding factors that drive (or would drive) their choice towards the

embracement of such a new frontier of mobile telephony:

iv. To what extent the Internet can be associated to the use of mobilephones?

v. How deep is the utilization of the internet among the Italiansociety?

vi. How frequently do they use the Internet to make purchases(Electronic Commerce)?

This final set of questions (and especially the last two ones) is particularly

interesting from a marketing point of view. In fact, the answers to those queries

would be very useful to understand how mobile commerce appeals the Italian

mobile phone users, highlighting both those elements that still constraint its

evolution and the major elements that they take into consideration for its

acceptance.

vii. Is there a Mobile Commerce awareness/culture in Italy?

viii. Do youth Italians perceive any benefits/improvements in their lifefrom the exploitation of Mobile Commerce?

ix. What are the major factors taken into account by Italian users inrelation to the m-Commerce utilization?

x. What are their needs and potential interests in terms ofexploitable services through the use of mobile phone?

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1.2. Organisation of the dissertation

The organisation of this report reflects the conceptual framework underlined in

the initial part of this chapter, with a descriptive process that moves from a more

general point of view, studying the role of the mobile phone within the modern

society, to the m-Commerce as a phenomenon, which is expected to contribute to

the announced shift towards a ubiquitous society based on the concept of

convergence of mobile and fixed telecommunication services (Alleman and

Rappoport, 2007; Bueti and Obiso, 2005; EC, 2006; Feldmann, 2003).

After a chapter dedicated to a brief literature review of the most relevant sources,

the analysis focuses on how the mobile phone has penetrated the modern society

and which part of the population represents its heavy users. As expressed before,

a special emphasis will be given to the Italian social context.

The fourth section goes straight to the foremost issue of this topic: the Mobile

Commerce.

After giving a definition of such a particular innovation, the report will discuss

the relationship lying between m-Commerce and e-Commerce.

Subsequently, after a review of the most common business models, the

discussion will shift to the close examination of the most successful case of m-

Commerce service implementation: NTT DoCoMos i-Mode.

The analysis will explore how that change has been domesticated by the

Japanese society, how it shaped it, how it fitted into the technological pattern

featuring the country and enabling it to become the most advanced nation in the

TLC circle with many years of anticipation in comparison to the many other

advanced countries. In relation to this, further cases of m-Commerce model

implementation will be presented.

The chapter ends with an overview of the Italian situation, trying to understand

what elements define the Italian TLC market and why it can be still considered at

an embryonic stage. Valid examples concerning this issue will be provided.

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The fifth part is entirely dedicated to the presentation of the research

methodology.

The choices regarding the various methods selected to carry out the research

project will be reviewed. Within this section, the survey definitely occupies a

core position because it reflects the direct opinion of the Italian mobile phone

users.

However, as it will be underlined many times during the discussion, the sample

chosen does not represent the whole segment of the Italian users; therefore its

outcome must be retained cautiously, as it does not have any statistical value.

A brief note regarding the choice of the online survey tool chosen for this task

will be included.

Consequently, the sixth section of the dissertation centres on the interpretation of

the results obtained through the online survey, which will be graphically

displayed.

The seventh chapter, instead, embodies a discussion concerning the data

analysis, which will be compared to the findings and considerations made in the

previous parts of the dissertation pattern.

Ultimately, the last chapter concentrates on a quick review of the core features

and findings obtained by the research procedure. It will also involve suggestions

for further research, along with final recommendations useful for the further

expansion of the Italian TLC context.

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2. Literature review

As it has been observed in the previous chapter, the literature available has

resulted necessary in order to build up a well-grounded background concerning

the many issues dealt with during the research task. Considering the high level of

complexity of the topic chosen, many types of sources have been taken into

account.

2.1. Literature overview

Books have been the principal source of information. Beyond a doubt, they

represent the most appropriate channel from where to get the necessary

knowledge to manage sufficiently the topic in question.

Unfortunately, due to the short evolutionary path of the mobile commerce, it has

not been simple to retrieve a large number of books dealing with such a

technological phenomenon.

Nevertheless, a few sources that deal in a very comprehensive way with the core

topics of the research are:

R. LingsMobile Connection The Cell Phones Impact on Society N. SadehsM-Commerce Technologies, Services and Business Models M. Ito, D. Okabe and M. Matsudas Personal, Portable, Pedestrian

Mobile Phones in Japanese Life

G. Elliott and N. Phillips Mobile Commerce and Wireless ComputingSystems

E. RogersDiffusion of Innovations

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Apart from books then, a concrete contribution has been given by:

Official reports from world and national telecommunication/ITorganisations (e.g. ITU, AITech-Assinform, WapForum, DVB, PCIC),

world economic/financial committees (e.g. CPSS), political and

economic institutions (e.g. EU and EU Commission, OECD), national

statistics committees and marketing consultancies (e.g. Abacus, Censis,

Ipsos Insight), political organisms (e.g. Japanese Ministry of Internal

Affairs and Communications (MIC) and finally important magazines

(e.g. The Economist). Such reports have provided updated statistical data

and information with respect to both general and specific trends affecting

different types of technological innovation. The details extracted from

those documents have been also efficacious in order to draw a

comparison between the situations of the most developed countries in the

world scene.

Previous research papers published by various reviews, in particular bythe journalNew Media and Society. This review, signalled by Dr. Angela

Lin during the first phase of the dissertation preparation, resultedprominently rich of research content focusing on mobile phones, mostly

considering the sociological implications of its adoption.

Also, relevant documents have been retrieved from The Journal of the

Communications Network, The Journal of the Electronic Commerce

Research, Computing and Electronic Markets.

Articles extracted both from paper-written and online magazines (e.g.The Economist), online newspapers (e.g. Financial Times, Il Corriere

della Sera, USA Today, The Guardian) and a large number of online

websites. This last set of resources has been fundamental in order to

obtain updated and global information about the mobile phenomenon.

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2.2. Literature review: theoretical background

The diffusion of mobile phone has had unpredicted implications since the early

stages of its evolution (Feldmann, 2003; Wei and Lo, 2006). However, in the

first years of its introduction, it faced a very slow diffusion rate, mostly due to its

high costs (Campbell, 2007). Therefore, it was strongly considered a technology

tool directed to the business area usage; on the top of that, usage of mobile

phones by businessmen had initially a vulgar acceptation (Feldmann, 2003;

Fortunati, 2005a; Ling, 2003, cited in Fortunati, 2005a; Rogers, 1995).

Subsequently, from the early 1990s, contemporaneously with the decrease of

handset prices and general service cost, mobile phones selling registered a

sudden increment. The advent of the GSM technology also accelerated the

process, with features that included the support for roaming and SMS texting

(Ling, 2004; Sadeh, 2002). The worldwide youngest population has proved to

constitute a base of mobile phone heavy users (Businessonline.it, 2006;

Entrepreneur.com, 2006(?); Ito et al., 2005). Ling (2004) studied the diffusion of

mobile phones in Norway, and found out that by 2001 approximately 90% of

the teens interviewed in a representative national sample owned a mobile

telephone (p.84). Interestingly, Ling (2004) noticed the popularity of text

messages within the sample analysed, fact that was accompanied by the adoption

of a peculiar but (in the majority of the occasions) simple written language. This

aspect is also strictly connected to the concepts of personalisation,

individualisation and construction of identity discussed by Fortunati (2005a)

and by Katz and Sugiyama (2006). To reinforce this last concept, Fortunati

(2002 and 2005a and 2005b) highlights the mobile phone as a symbol of fashion,

especially among the Italian users, a powerful feature for communicating ones

personal identity. Fashion is also identified by Leung and Wei (2000, cited in

Wei and Lo, 2006). In their study regarding students from the US and Japan,

Katz and Sugiyama (2006) found out a directly proportional relationship

between attention to fashion and mobile phone usage. Those findings confirm

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the conclusions obtained from the studies concerning students from Korea,

Norway and Namibia (Katz and Sugiyama, 2006).

When in Europe the 2G telephony standard was still in its process of expansion,

in Japan the major telephony provider launched the service that would

revolutionise the TLC sector: it was 1999, and NTT DoCoMo challenged the

mobile telephony market with the i-Mode service (Elliott and Phillips, 2004; Ito

et al., 2005; Ling, 2004; Sadeh, 2002). This new model aimed at satisfying

Japanese mobile phone users needs, shaped by the raising mobility.

Contemporaneously, with i-Mode NTT DoCoMo conceived a new service with

whom they intended to gain competitive advantage from a sphere other than

voice telephony market, now almost completely saturated.

Therefore, Japan opened the way to the Mobile Commerce, yet standing as the

best example within this telecommunications area (Sadeh, 2002).

Nowadays, although the situation in the rest of the world appears still pretty far

from the results gained in Asia and mobile commerces adoption pace is still

slow, the current premises adumbrate an effective spread of 3G services and

mobile commerce in the forthcoming years (Bradbury, 2006; OECD, 2007;

PassioneMobile, 2006). The level of mobile phones penetration in many

countries (both developed and least-developed ones), the level of mobile

infrastructure and the policies adopted by national governments and continental

institutions that point to convergence, ubiquity and the reduction of the so

called digital divide portend the intention to follow the footsteps traced by the

Japanese culture. However, the evolution of m-Commerce is still at its first

stage, due to various reasons (Feldmann, 2003; i-dome.com, 2001; OECD,

2007).

Although being the second nation in EU for mobile phones penetration with one

of the highest indexes in the world and being one of the leaders in 3G network

coverage, Italy is one of those many countries that still struggle in terms of 3G

telephony adoption, mostly because of the services high costs (OECD, 2007).

Nonetheless, cost is not the only factor that thwarts the proliferation of the new

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mobile standardisation within the Italian society: further limiting causes will be

analysed and spotted later on throughout this report.

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3. The mobile phone in the modern society

Among all the mobile devices available today in the global TLC market, the

mobile phone surely plays the role of the main character, having conquered a

great number of countries regardless of the age of the users. Ling (2004) defines

it as a taken-for-granted part of the social landscape in many countries (p.21).

Its success is due to many factors, depending on the situation of every single

socio-economic context in which it has been adopted (Feldmann, 2003). But, as

a general consideration, we might say that one of the major reasons for its

enormous popularity is its striking ease of use. This characteristic enables

anyone to employ it, regardless of any particular knowledge (Ling, 2004).

According to the report Mobile overtakes fixed: implications for policy and

regulation published by the International Telecommunication Union (ITU), in

2002 the world assisted to the phase of a process that represented an authentic

milestone in the sphere of telecommunications: the number of mobile subscribers

outpaced the number of fixed lines, reaching a quantity of subscriptions that

went beyond 1200 million units (Feldmann, 2003). Surprisingly, thisphenomenon comprised both developed and the so called least developed

countries, but was evidently forced by diverse drivers. However, this upshot

demonstrates how developing countries constitute markets with great potential

and thus ideal scenarios for future investments in TLC technology and services.

In Africa, for example, mobile companies registered a strong demand for mobile

voice services mostly due to the growing need of the populations living in the

rural areas of the continent to keep in touch more comfortably with the

respective families. Moreover, this was also a direct effect of the improving

general economic condition within many African societies and the widespread

aim of reducing personal risks. Such an increasing demand brought unexpectedly

the percentage of subscribers from 3% in 2001 up to 7% in 2004, reaching a

number of 50 million users (Batchelor et al., 2004; Feldmann, 2003). As shown

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in the right part of figure 1, the African continent is going at an impressive and

constant pace of growth in terms of mobile phone subscribers. That datum is

even more astonishing if compared to the world growth average, sign of the great

rapidity with which Africa is coping with the technological (and economical)

divide in comparison with the most advanced areas of the world. Particularly

interesting is the percentage relative to Asia, another geographical context that

has exploited only a small part of its immense potential so far. Its high number of

inhabitants makes Asia one of the most appealing catchment areas of the world.

This view is supported by an NTT DoCoMos recent declaration, in which they

announce their intention of investing part of the companys resources in that

market (Turner, 2006).

Figure 1 Mobile phones outpacing fixed lines and annual growth rate

Source: ITU World Telecommunication Development Report, 2003.

3.1.The evolution of the mobile phone and its impact on

the society

According to the figure 1, then, the mobile phone is quickly pushing off the fixed

line connection; this trend leads to the conclusion that, in the next future, mobile

phones will probably replace completely the fixed line as the principal

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communications medium (Feldmann, 2003). As it has been mentioned before,

that is what is already happening in the African continent at the moment.

Before its spread among the majority of the world populations, the mobile phone

connoted a tool designed just for very few ones. In fact, due to its huge cost

and the high prices of the services provided, the ones who could employ such an

expensive innovation were almost only wealthy people (Feldmann, 2003; Ling,

2004; Rogers, 1995; Srivastava, 2004).

As already stated in the paragraph 2.2, Fortunati (2005a) talks about this aspect

and reports the common reputation regarding the higher classes as bearers of

vulgarity (p.41). Later, with the prompt decrease of handset prices, services cost

and the introduction of prepaid services (Feldmann, 2003, Ling, 2004), the

mobile phone has become a technology tool popular within the masses, with the

consequent shift regarding its consideration. It passed from being reckoned as an

object symbolising status, to the idea of a trendy and fashionable object

(Fortunati, 2005a:41; Katz and Sugiyama, 2006). Ito et al. (2005) identify the

very same pattern in the penetration of the mobile phone within the Japanese

society.

3.1.1.The mobile phone as a tool that enhances security

and safety

Its common reputation is not the only one generated by the astounding popularity

of the mobile phone. As yet, a sufficient number of research studies have been

carried out with the aim of understanding better the role of the mobile phone

within the sphere of modern communication. And in that direction, the results

obtained by Ling appear extremely valuable. Talking about the mobile phone, he

asserts that one of the most common popular images is that it provides us

with a form of securityand safety (Ling, 2004:35). Following this statement

and focusing on the results obtained from investigations conducted in Norway,

Ling underlines how the mobile phone is seen as the most efficacious device for

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maintaining a high degree of security and safety. However, he points out that

granting a complete level of security and safety seems a pure utopia, since the

mobile phone is prone to technical limitations (such as battery power and

network coverage). Therefore, as those boundaries restrain from the total

attainment of such a goal, the mobile phone [it] is not something on which we

can rely absolutely (Ling, 2004:46).

Enhancing security is also the most important adoption factor within the young

people. In fact, parents are said to have found in the mobile phone a very

effective tool in order to increase their control over their children. Ito et al.

(2005), referring about Japanese young students use ofkeitai2, highlights their

parents common relief when their children carry a mobile phone with them, as it

enables contact at any time of the day. However, as Humphreys (2005) remarks,

children put in practice downright strategies to get around their parents

intrusion: screening the incoming calls or switching the device off are just two

of the most popular tricks to avoid bothers. The introduction of the caller-ID

function has definitely enabled the process of screening, giving more power to

the recipient (Humphreys, 2005).

Apart from the matters concerning security, parents see the owning of a mobile

phone also as an efficient method with whom their children can learn how to

manage money. This factor was largely favoured by the introduction of prepaid

services, extremely popular among teens. Moreover, taking up their

responsibilities is also a feature highly connected to the personal growth of the

individual (hence of his personality) (Ling, 2004).

2Keitai is the Japanese word for mobile telephone

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3.1.2. Unadvised use of the mobile phone and reduction of

safety

Yet, talking about mobile phones and security/safety, it is relevant to underlinehow its utilisation often coincides with situations of danger (hence reducing the

level of security/safety). The incorrect use of the mobile phone is often identified

with the causes of car accidents (Fortunati, 2002). This factor is evidently in

contradiction with the awareness stressed in the findings obtained by Ling. The

first example is given by a statistical datum reflecting one aspect of mobile

phones use in the US: nearly 27% of mobile phone calls in the USA are made

from vehicles on the move (Entrepreneur.com, 2006?). Such a percentage

illustrates the costume diffused among mobile phone users that contrasts with the

rules imposed by both social morality and legal environment. This proportion is

dramatically confirmed in a study conducted by Redelmeier and Tibshirani

(1997, cited in Ling, 2004), in which they analysed the situation preceding 742

cases of car accident. They obtained that 24% of the drivers were using a mobile

phone at least ten minutes prior to the accident, testifying how a more careful

utilisation of mobile communication tools might reduce the occurrence of

dangerous situations.

Again, that percentage of careless users is reflected in a survey made by The

University of Michigan. Such study showed that the 80% of American mobile

phone users consider using a mobile phone while driving a great risk for safety

(Usatoday, 2005), hence denoting awareness of the risks connected to an

improper usage of mobile devices while on vehicles.

3.1.3. The connection between mobile phone and publicplace utilisation

Within the field of social morality, a further aspect has been at the core of many

studies: the use of mobile telephones in public places. Concerning this issue,

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Humphreys (2005) correctly states that cellphone users tend to be less aware of

their surroundings (p.830), underlining an opinion that is highly shared

nowadays. In addition to this, Ling (2004) asserts that [The] use of the mobile

phone can be seen as an affront to the decorum of a situation (p. 128). This

means that although there might be room for the utilisation of a mobile phone in

a public context, such practice is always strictly subject to the rules proper to the

setting in which the interaction is taking place.

With relation to these conclusions, it is interesting to observe what happened in

Japan, where the irregardless use of mobile phones brought the public transit

facilities to ban it during the rush hours (Ito et al., 2005). The disrespectful use

ofkeitai was associated to young people, in many cases careless of the social

rules (and sometimes even of the legal regulations) proper to the Japanese

community.

3.1.4. The mobile phone and the maintenance ofrelationships

Looking at the verbal communication from another point of view, manyresearchers have found confirmations regarding the mobile phones widespread

use as a tool which increases communication with families and friends (Sofi,

2006). As stated at the beginning of this chapter, that is the case of the

populations living in the rural areas of Africa. The lack of a proper fixed

infrastructure enhanced the diffusion of mobile phones, with the people pushed

towards such a tool by a constant and swelling need of preserving the

relationship with their emotional ties. In this connection, Wei and Lo (2006)

study regarding a sample of Taiwanese students confirms how frequent is for

mobile phone users to make calls to their families and, in general, people they

care of. Their results showed women to be much keener on such practice than

men. Curiously, they also found out that lonely people normally use the mobile

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phone not to improve the level of their relationships, but for its symbolic value

fashion and status (Wei and Lo, 2006:66).

3.1.5. The role of the mobile phone within non-verbalcommunication

A further aspect of verbal communication via a mobile telephone is pointed out

by Ling. He states that such instrument improves the coordination of our

activities and, again, women appear to be the gender that benefits more of that

implication (Ling, 2004).

But there is another side of communication in which the mobile phone plays a

leading role. In fact, coming back again to Fortunati (2005a and 2005b) and her

fascinating parallel between two key conceptions linked to the mobile phones

idealization, individualisation and fashion, it is extremely interesting to note how

such a technological instrument embraces the sphere of communication tout

court: in fact, apart from conveying verbal communication (which is its main

purpose), the mobile phone, as it happens with fashion, is also a powerful

vehicle in the construction of identity (Davis, 1992, cited in Fortunati,2005a:39), thus entering the domain of non-verbal communication. To support

the concept of construction of identity underlined by the Italian researcher, it is

sufficient to exemplify how youth people (as anticipated in the previous

chapters, heavy users of mobile phones) usually personalise their own devices

with featured attributes like ringtones, covers, logos, screensavers etc. As a

matter of fact, that practice is nothing but a way to express ones self identity,

communicating it to the other people through the mobile phone.

This aspect, exactly like fashion, is among teens a feature that often determines

the inclusion/exclusion from a particular community (Ling, 2004).

These findings are also confirmed by the investigation conducted by Katz and

Sugiyama (2006) on a sample of US and Japanese students. They point out that

mobile phone [can be seen] not only as a tool to talk but also as a means to

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communicate symbolically about oneself (p. 324). However, apart from

highlighting the strict correlation between fashion attentiveness and construction

of identity, they also noticed that the former one is directly proportional to

mobile phone usage. This means that the more people care about fashion, the

more they use their mobile phone, but also that the more people care about

fashion, and the earlier they started using a mobile phone.

Presentation of the self is also addressed by Ling and Yttri (2002), when

explaining the two forms of social interaction via the cell phone: instrumental

and expressive (p. 55).

Ito et al. (2005) analysed the diffusion of pagers among the Japanese youth

population, and spotlighted the subsequent spread of mobile phones as the direct

consequence of the previous technological phenomenon. In addition to this, they

pointed out that personalisation is a common feature to the two wireless devices

in question.

Going back over the mobile phone attributes listed above (ringtones etc.), it must

be noticed that they are also some of the principal elements of the Mobile

Commerce business conception, which is the core topic of this analysis. Thus,

the idea of expressing the self within the mobile phone usage is (again, as

fashion does) also a valuable concept that can be exploited to gain competitive

advantage and increase revenues.

3.2. The diffusion of SMS

As it has just been seen, mobile phones have definitely changed our lives interms of communication, both verbal and non-verbal.

Apart from the aspects linked to that issue and within the various features

embedded in the mobile telephone, text messages (SMS) have surely represented

a striking surprise in those last years, by many chosen as the preferred way of

interacting (Wright, 2006).

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From a study included in the guide The mobile is open for business published

in 2005 by the company Netsize, it emerged that the number of text messages

sent each month in 20 countries of the EU reaches 200 billion units

(Consulteque, 2005). In another more updated investigation, Netsize affirms that

between 20 and 25% of all operator revenues are generated by data services,

and 90% of all data revenues are SMS (Netsize, 2007:17). The same company

argues that SMS might be the system upon which the m-Commerce will lever in

the upcoming future, although some other strategies can already be discerned in

the distance.

All this statistical information demonstrate how popular and at the same time

profitable is the market generated by SMS texts. Moreover, it is reasonable to

think that much of the success obtained by text messages is due to the high cost

of its direct successor, MMS (Consulteque, 2005; Ling, 2004). People use text

messages to communicate simple ideas, most of the times without having to wait

for a reply. This is surely one of the great advantages of such functionality. SMS

do not require immediate replies; therefore a user can comfortably rely on a

subsequent answer to his message as soon as his interlocutor notices it on his

device. For this reason, Ling (2004) correctly states that SMS are not as

intrusive as telephone calls.

From a communicative point of view, it is relevant to note how SMS are clearly

representative of the youth generation. We could affirm that teenagers use only

text messages to interact with other people. This aspect is strictly connected with

the economic factor, which has been mentioned in the paragraph 3.1.1.

But this element also relates to the concept of personalisation, discussed

previously; in fact, young peoples communication via SMS has proved to be

totally different from any type of interaction. The language they employ is

absolutely peculiar and distinguishable from the oral communication (Ling,

2004).

Therefore there is much truth in the opinion that teens appear to be the real

promoters of text messages. This last statement is also supported by parents

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view: a datum attributed to Cingular (now AT&T), in fact, reports that 63% of

US parents who use text messaging believe that it improves their communication

with their children (Entrepreneur.com, 2006?).

Figure 2. Worldwide SMS growth

Source: ITU Report Internet for a Mobile Generation, 2002; GSM Association.

3.3. The mobile phone domestication within the Italianyouth society

After the considerations made above in relation to the analogies among fashion,

construction of identity and mobile phone utilisation, the analysis narrows down

further and focuses on the Italian society.

This part of the discussion also leads us to the beginning of the research process,

and more specifically, to the first of the ten research questions presented in the

introductive chapter:

i. How is the mobile phone conceived within the Italian youthsociety?

As it has been mentioned at the beginning of this report, Italy represents one of

those countries where the mobile phone has reached unexpected results. With a

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degree of penetration that goes beyond 110% and that is constantly increasing, it

appears like an ideal market for the current and future telephony business.

Most of the factors that have been highlighted previously with respect to the

massive spread of the mobile telephone worldwide are applicable to the Italian

scenario.

Italian researcher Fortunati (2002) explains that the successful diffusion of the

mobile phone within the Italian society is mostly due to cultural reasons.

Fashion, for example, is a feature typical of the Italian culture, which is highly

observable in the mobile phone utilisation made by teenagers as well. But that is

not all. In fact, we might also include to this count the great importance given to

the concept of family and, in general, to all the friendly and emotional ties. The

maintenance of the relationships (together with the improvement of

coordination) is seen as one of the core factors for the owning of a mobile phone

(Hooper, 2003; Sofi, 2006).

Fortunati (2002) introduces another interesting theme related to the Italian

culture.

As a matter of fact, she asserts that what really prompted the spread of the

mobile phone in Italy has been Italians lack of familiarity with technology. She

points out that:

Italians are among the less enthusiastic about technological progress.

(Paradoxically, though, Italy is one of the European nations that have

most widely adopted the mobile phone) (Fortunati, 2002:53).

And also

The mobile [phone] has been a great success in Italy because it was

introduced not as a sophisticated technological instrument, but more

as a friendly, easy-to use gadget, a unique totem. So the early

promotion surrounding the technology showed it not as a serious

communication instrument, but rather as an easy-to-use toy as

simple to use as a wired telephone. (Fortunati, 2002:54).

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In sum, Italian people conceive the mobile phone as a simple tool that enhances

communication, especially towards our most significant relationships.

This opinion is highly supported by another Italian researcher, Barbara Scifo, of

the Universita Cattolica of Milan. She asserts that adolescents see the mobile

phone as a game, while the adults consider it as a pure communication

instrument (Sofi, 2006). This aspect reminds to what has been said previously

regarding teens, how they use the phone and the concept of personalisation.

Moreover, Scifo explains how the use of mobile phones by teens is extremely

conditioned by the economic factor (Sofi, 2006). In fact, in Italy it is very

popular the so called beeping phenomenon, a practice with which users reduce

to zero the cost of communication. Such practice consists on calling a person and

make his device beep, in order to inform him/her about, e.g. of the callers

presence or just to remind him/her of something. This strategy is extremely

popular and represents an effective way to interact without being charged.

According to what has been stressed in the previous sections, beeping finds its

roots in the fact that teens have a reduced economic power, which leads them to

manage their credit studiousness.

This aspect of the topic becomes extremely important, since it recalls the two

following research questions:

ii. What are the most popular features connected to the usage ofmobile phones within the Italian youth society?

iii. What is the mobile phone potential in the Italian market?

The problem connected to cost is something which is also directly reflected on

the way mobile phone users choose which device features they will use.

As the guide The mobile is open for business released by Netsize

demonstrates, among the factors that encumber the diffusion of MMS is their

high cost, nearly twice the cost of a text message (Consulteque, 2005). This

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factor is emphasized by Scifo, which also adds how young people tend to avoid

the cost of sending the files stored in their mobile phone (e.g. pictures or audio

content) to their friends. Instead of using the MMS service, it is much more

common to employ the Bluetooth or a personal computer (Sofi, 2006).

In summary, we might say that the mobile phone is perceived as a pure

communication tool in Italy, regardless of the concepts of convergence and

ubiquity that the EU and other important organisation are trying to promote.

Considering the last two questions, instead, it is clear that there is a great

difference between the utilisation of the mobile phone made by adolescents and

adults. Young people, who perceive it as an instrument for socialisation, tend to

exploit the cheapest functions (e.g. SMS, music, camera etc.). On the other

hand, adults, who have more economic power, consider the mobile phone more

seriously, so appear to be the target to which mobile telephony firms have to

focus on in the next future.

In general, however, being the mobile phone seen as a communication medium,

it will struggle to find another place in the Italian people conception, especially if

the cost of the services will remain too high. This hypothesis is also reinforced

by what Fortunati (2002) calls technophobia. Nevertheless, the research

questions related to these aspects will need to find some kind of further

confirmation throughout the rest of the research paradigm.

3.4. The beeping phenomenon: not only an Italianpractice

The strategy put in practice by so many Italian teens finds some common points

with the beeping praxis so popular in sub-Saharan Africa, although the two

backgrounds in which they take place are substantially different.

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Jonathan Donner (2005), a researcher in the Technology for Emerging Markets

Group at Microsoft Research India in Bangalore3, has developed an interesting

study related to this issue. Basically, he claims that there are three different types

of beeping called callback, pre-negotiated instrumental and relational.

The meaning of the first one (callback) is easily deducible: one person beeps

another one just to be called back, normally pushed by the lack of credit in his

mobile phone. This practice is also adopted by clients and employees, who beep

their providers/employers when they have to talk about work.

The second type of beep (pre-negotiated instrumental) refers to the

communication of pre-agreed messages. Donner cites the example of a taxi

driver that, by flashing his wifes mobile phone, tells her that he has come to

pick her up in the placed they agreed to meet.

The last typology of beep (relational) belongs to the emotional sphere. In fact, it

is mostly used to convey messages like I am thinking of you or goodnight,

without any expectations to be called back from the recipient of the beep.

In summary, these three main diversifications of the beep practice are regulated

by the concept that the richer guy pays (Donner, 2005:7), a consequence of the

serious economic situation that the African continent is facing. Therefore, the

common point with the beeping phenomenon typical of the Italian teenagers is

still the need to bypass the cost connected to the usual transmission of a message

via a mobile phone, forced by a precarious economic condition.

Mawaki (2005) also refers about the practice called bip falado (spoken beep),

extremely diffused in Mozambique. Users exploit the fact that one mobile

operator in Mozambique starts charging after the third second of conversation, so

they interact with short discussions of 2 seconds each in order to avoid paying

for their calls.

3 Information retrieved from Jonathan Donners personal website (jonathandonner.com)

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4. The Mobile Commerce

So far this analysis has focused on the instrument that has changed the way we

interact, reflecting its great power in both verbal and non-verbal communication.

However, that is just the impact that the mobile phone has had on the sphere that

constitutes the main goal for its creation.

In fact, it has also indirectly changed the way we manage our time and simplified

the manner we coordinate our activities.

But with the course of the time, together with its rapid growth and penetration in

almost every society of the world and the constant innovation in terms of

telecommunication technology, the mobile phone has evolved to a tool that

means much more than simple communication.

Following the concepts of ubiquity (as the consequence of the increased

amount of time spent out of home, typical of the modern individual) and

technological convergence (Alleman and Rappoport, 2007; Bueti and Obiso,

2005;; OECD, 2007; Srivastava, 2004), the mobile phone will represent soon the

indispensable instrument whose functions will encompass all the possible

activities of our everyday life, able to satisfy our desires at any time and at any

place.

Looking at the topic from a business point of view, we might be tempted to

argue that the so invoked convergence is just a direction imposed by TLC

companies, which aim at exploiting new prefabricated needs and generating

new sources of revenue following the saturation of the voice market in the most

advanced countries (Jeffries, 2007). Moreover, they have to regain what theyhave spent to obtain the so expensive 3G licenses (Sadeh, 2002).

Nevertheless, the current scenario sees now the telecommunications sphere

projected towards the Mobile Commerce (or m-Commerce), an abstract and

confusing concept to many of us, but at the same time reality for some social

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contexts. Japan is surely the example to imitate, a portrait of the future world

society based on the concepts described above (Bueti and Obiso, 2005).

4.1. The concept of Mobile Commerce

Defining Mobile Commerce is not a simple task. However, many sources try to

explain such a phenomenon in a very simplistic way: exploiting Electronic

Commerce (e-Commerce) from a mobile device.

This aspect must be surely taken into consideration when describing m-

Commerce, since both have many points in common. However, Mobile

Commerce has a broader scope: it is much more than simply browsing the net

and buying something. It is a more complete experience, able to enrich the deep

change begun by the mobile phone.

Here are some definitions of m-Commerce, which cover the topic differently.

According to Elliott and Phillips (2004), the Mobile Commerce is better

described as the mobile devices and wireless networking environments

necessary to provide location independent connectivity (p.3).

Sadeh (2002) instead, reports the description made by Durlacher Research which

defines the Mobile Commerce as any transaction with a monetary value that is

conducted via a mobile telecommunications network (p.5).

Schwiderski-Grosche and Knospe (undated) describe the term m-Commerce as

using a mobile device for business transactions performed over a mobiletelecommunication network, possibly involving the transfer of monetary values.

(p.2)

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Another set of interesting definitions is cited in Bertrand et al. (2001), a group of

students from the Kellogg University. Among the descriptions provided, two are

particularly interesting.

The first one comes from Forrester Research and asserts that the Mobile

Commerce corresponds to the use of mobile handheld devices to communicate,

interact via an always on, high speed connection to the Internet (Bertrand et al.,

2001:4).

The second one, instead, is attributed to Mobilocity, a management consultancy

based in the USA. They identify m-Commerce with the use of wireless

technology to provide convenient, personalised and location-based service to

your customers, employees and partners (Bertrand et al., 2001:4).

Among all these possibilities, the most appropriate seems to be the one proposed

by Mobilocity, which gives a clear and at the same time comprehensive

explanation of what Mobile Commerce really represents. In particular, it

correctly stresses the presence of personalisation, which features the m-

Commerce services.

However, there are a few important elements in the expression used by Forrester

Research, especially those ones referring to the type of connection.

Therefore, the best way to describe mobile commerce would be a combination of

both definitions, that is:

In this way, both the main characteristics that distinguish the m-Commerce

services and the quality of the connection employed are highlighted.

The use of a wireless technology to provide convenient,

personalised and location-based services to customers, employees

and partners via an always on, high speed connection to the

Internet

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4.1.1. Differences and analogies between e-Commerce andm-Commerce

It has been explained in the latest paragraph that the Mobile Commerce is by

many described as the implementation of the Electronic Commerce via a mobile

device.

As we saw, that does not give a correct idea of what m-Commerce really stands

for.

In fact, although there are similarities between the two practices, the m-

Commerce is conceived as a totally diverse experience. It is actually ideated to

be performed in a different manner (via a wireless device, normally out of home)

and to satisfy different needs (buy a ticket for a show, reserve a table at the

restaurant or even get traffic information). Moreover, while with the e-

Commerce it is the user that searches for a specific product on the Internet, the

m-Commerce rests on the concepts of personalisation and mobility.

In summary, although the two technologies share the idea of buying and selling

products/services over the Internet, the m-Commerce enables the user to get

specific services tailored to its preferences and current position.

This topic recalls one of the research questions, and more specifically:

As the relationship between Electronic and Mobile Commerce testifies, the

Internet has an important place in the performance of both technologies.

However, in the m-Commerce the Internet plays a more subordinate role with

respect to the e-Commerce, simply because the former is much more thansurfing the WWW and searching for a determined product/service. It definitely

goes beyond that.

The confirmation of this view is given by Elliott and Phillips (2004), who

observe that the Mobile Internet is but one application amongst many others

within the m-Commerce world (p.3).

iv. To what extent the Internet can be associated to the use of mobilephones?

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Further information to complete the answer to the question number iv will be

gathered in the next chapters. The study will also try to discover whether there is

a direct implication between the existence of an e-Commerce culture and the

potential success of m-Commerce, with a particular attention to the Italian

situation (research question vi).

4.2. Overview of the m-Commerce business models

From the close examination conducted in the previous section, the Mobile

Commerce emerged as a unique technology, if compared to the other ones

present in the telecommunications environment.

Its uniqueness, recognisable in its aims and trademarks, is also distinguishable in

the new business models ideated by the TLC companies.

The conception of m-Commerce has created new scenarios for the

telecommunications business, reshaping its usual value chain and also offering

the chance of gaining market shares to new participants (Sadeh, 2002).

According to Sadeh (2002) above all, m-Commerce is about content and giving

users access to a myriad of mobile services (p. 37). This statement gives

prominence to what has been defined as unique with respect to Mobile

Commerce: the services that users can make use of.

But services are obviously made of content. Therefore, content providers are

seen as one of the most crucial constituents within the m-Commerce value chain.

Their utmost importance is recognisable in the great number of business modelsthat the companies can produce in order to exploit efficaciously the market.

Here are reviewed the most popular patterns within the m-Commerce universe

(Sadeh, 2002).

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4.2.1. User fee business models

The core ideology that constitutes this type of business model is charging users

according to the amount of content they utilise.

Users might be charged in two different ways:

Subscription fees, which prefigure the charge of a fixed cost for theutilisation of one or more services during a pre-agreed period of time.

Usage fees, with which TLC enterprises assign a specific price to eachproduct/service they offer, charging users proportionally to their actual

access to the services. However, this model appears to be slightly

complicated in terms of billing process.

4.2.2. Shopping business models

It is without any doubt the simplest way of conceiving business via a mobile

device, in that it is pretty similar to the buying/selling experience occurring in

the Electronic Commerce.

It involves a mobile buyer and a mobile seller, which start and complete a

transaction. Sometimes there is the participation of a third part, who usually

manages the payment process.

4.2.3. Marketing business models

This particular type of business model is the one that better conveys the idea of

personalisation. In fact, companies use this strategy to send marketing messages

customised to the users profile, in order to increase the possibilities to appeal

the potential consumer.

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The costumers information is normally gathered through the wired Internet, due

to the limitations of mobile devices.

Being personalisation the core concept of such a business strategy, for a

company knowing its customers better than its competitors will result the best

method to reach its business goals.

4.2.4. Improved efficiency business models

The general aim of these business models, as the name suggests, is to reduce

managing costs and contemporaneously improve costumer satisfaction.

Cutting costs may be reflected in many ways: the simplest example is surely the

reduction of personnel employment.

Mobile banking and mobile ticketing are seen as two expanding sectors in this

direction. They enable customers to avoid bothering queues in the respective

offices and manage every single step of the procedure from the mobile device.

4.2.5. Advertising business models

This framework lies in a basic and simple scheme: the advertiser is charged by

the content provider whenever it wants to deliver an advertisement to the

potential costumer.

Advertisements can be sent in two different ways to mobile phone users:

push mode, that is sending specific messages to the users, i.e. via SMS

pull mode,that consists in showing promotional messages (e.g. in formof banners) while the users is accessing a specific typology of content.

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The promotional message is obviously chosen by the content provider

according to the information retrieved by the user

Finally, content providers may charge the advertisers in different modalities,

such as:

flat fees, that is charging a pre-agreed fee for a specific period of time

traffic-based fees, a charging method directly proportional to the numberof times that a message is shown

performance-based fees, or charging the advertiser each time itspromotional message is hit by the mobile phone user

4.2.6. Revenue-sharing business models

The basic pattern that underlies those business models, in their simplest

organisation, sees the content provider sharing the revenue that comes from the

business operation with all those parties that cooperate in creating the

product/service.

4.3. Case study: NTT DoCoMos i-Mode success

Following what has been anticipated in the first chapter, the best example of

successful implementation of an m-Commerce business model still belongs to

the major Japanese telephony provider, NTT DoCoMo, which launched the i-

Mode system in 1999, determining an important change both in the TLC market

and the habits of the Japanese society (Srivastava, 2001).

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Analysing the reasons connected to its prominent results in Japan will help to

obtain relevant information useful to understand better the current situation of

the Italian socio-economic context, as well as draw conclusions for the future

development of the m-Commerce in the Italian market.

However, before considering its successful evolution, one question must be

answered: how was the Japanese telecommunications scenario when the i-Mode

was implemented?

4.3.1. The Japanese background at the end of themillennium and the contextual factors that enabled NTTDoCoMos i-Mode service to stand out on the market

Statistical data show that the i-Mode has boosted notably the level of Internet

penetration, with excellent results right after one year from its launch (fig. 3).

Such a model, in fact, proposed the mobile Internet as a more than valid

alternative to the wired one, which was encountering enormous problems with its

diffusion. Difficulties were mainly due to low pc penetration rates and high

leased line rates (Srivastava, 2001).

Data relative to market research conducted by the Japanese Ministry of Internal

Affairs and Communications also confirm that trend, highlighting, on the

contrary, the extraordinary popularity of the wired Internet within the large

businesses in those years (fig. 4).

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Figure 3. Internet penetration in Japan from 1999 to 2000 (percent)

Source: ITU 3G Mobile Policy: the Case of Japan, 2001

Figure 4. Wired Internet diffusion rate in Japan from 1999 to 2005

Source: Japanese Ministry of Internal Affairs and Communications, 2006(?)

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However, the main factor behind the immediate success of the mobile Internet

format has been undoubtedly the great penetration of mobile phones (keitai),

which jumped from around 45% to 53% over the two year period 1999/2000.

Contemporaneously, this growth had been largely pushed by the introduction of

colour display devices, which granted a much better exploitation of the new

mobile services (Srivastava, 2004).

In turn, the rapid diffusion of mobile phones has been favoured by a strong

governmental policy (deregulation) started in the 1990s: customer ownership of

the devices was introduced in 1994, and in 1996, following the Ministry of Posts

and Telecommunications (MPT) modification of the mobile calls charge

regulations, tariffs could be reduced, determining a sudden increment of keitai

purchases (Ito et al., 2005; Srivastava, 2004).

Another fundamental element that facilitated the spreading of keitai, who

subsequently enabled the mobile Internet evolution, was the great popularity

achieved by the pager (in 1996, pagers subscribers accounted for over 10 million

people).

Extremely popular in the 1990s among Japanese students, the pager was the

communicative instrument which contrasted the diffusion of the mobile phone

within the wealthy class. Ito et al. (2005) refer of a well-established pager

culture among the Japanese young students, which created the background for

the future establishment of mobile phones. As a result of this, pager messages

(popular especially among the Japanese young girls) can be considered as the

precursors of the email, largely preferred to SMS in Japan.

Last but not least, a cultural element rooted in the Japanese society which must

have notably bore on the evolution of such phenomena has been the great

proneness towards innovation and technology. Japanese people are reported to

be constantly interested in new valid technologies and, given their high

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purchasing power, they configure as the best example of early adopter society

(JETRO, 2006).

In summary, the mobile Internet in Japan has emerged almost at the same time as

the wired Internet, as an alternative solution rather than a subsequent

phenomenon, as occurred in many other countries, favoured by a strong mobile

communication culture commenced with the diffusion of pagers and continued

by mobile phones.

These conclusions relative to the link between the evolution of the Internet and

mobile phones popularity result as an interesting contribute to formulate an

answer to the research question (iv).

4.3.2. The launch of NTT DoCoMos i-Mode: analysis of aninnovative business model

As anticipated above, NTT DoCoMo hit the Japanese market with the launch of

its new mobile service, i-Mode, in February 1999, becoming one of the very few

countries to obtain enormous success with the 2G mobile Internet (Srivastava,2004).

Straight after its implementation, its rapid establishment as the most popular

mobile service enabled NTT DoCoMo to obtain the leadership in the Japanese

TLC sector, which also saw other two providers, KDDI and Vodafone (Ito et al.,

2005; Srivastava, 2004).

The big hit got by the i-Mode was due to many factors, and the majority of them

have been reviewed in the last paragraph. Many of them were relative to the

communications environment and its situation in those years in which the

ideation of the system was still in progress.

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Others concerned the physiognomy of the TLC sector and its mutations during

the first period of implementation of the model, for want of the Japanese

government.

In fact, the launch of the i-Mode model was perfectly inserted in the

governmental program called e-Japan Strategy, a large plan ideated in January

2001 with the aim of transforming Japan into the best IT country in the world.

The development of the program would have taken five years and it was divided

in two phases.

The major aim of the government was to drive Japan straight to a ubiquitous

networked society within a very short time, based on high competitiveness and

reduced costs. One of the keys for the success was the creation of an adequate

infrastructure framework, a task clearly saddled to the Japanese TLC private

sector (Srivastava, 2004).

But the main reason for the success of NTT DoCoMos model was surely due to

the fact that it was (and still represents) a pure breakthrough.

The system lays its foundations on a strong and innovative business model,

which offers an easy-to-use service at a very cheap price to its customers.

Considering that Japan offers a catchment area of about 127 million people

(Srivastava, 2004), proposing a revolutionary model like i-Mode also meant the

chance for huge revenues.

The greatest advantage offered by NTT DoCoMo was the possibility to exploit a

packet-switched technology, which in turn granted an always on feature (Ito et

al., 2005). That meant enabling users to only pay for the actual content they

access while the device is on. In a few words, a fairer way of charging the user

based on the actual amount of data transferred (Sadeh, 2002). The monthly fee

for the i-Mode subscription is around $3 (JPY 300 per month, plus JPY 0.3 per

packet) (Srivastava, 2001). However, the packet-switched technology was

extended to the voice traffic as well: every phone call was charged 10-yen per

unit (Ito et al., 2005).

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The transfer speed was initially of 9.6 Kbit/s, which might appear too slow at a

first sight. Actually, due to the limited maximum application data size (10

kbytes) and the very small dimension of the content sent and received (e.g.

emails), the apparently slow transmission speed did not affect the quality of the

service (Elliott and Phillips, 2004; Srivastava, 2001).

Among its main services, which range from mobile Internet, email, mobile

banking, infotainment (information services regarding traffic, weather, download

of screensaver, ringtones etc.) and location-based services (information and

services depending on the current location of the user4), the i-Mode offers the

possibility to choose from around 3000 official websites, regularly checked by

NTT DoCoMo and made available from its portal. But that is not all. One of the

most striking features of this new system stays in giving the chance to anyone to

contribute in the enlargement of the i-Mode universe, creating and submitting his

own websites (thus not a walled garden approach). In fact, the i-Mode is based

on a particular version of HTML (together with a special version of JAVA)

called cHTML or compact HTML, which meant that the language used to create

the website was the same as the wired Internet. That is also the main difference

with the first WAP technology (based on WML language), popular in Europe

and in many other areas of the world.

Unofficial sites were supposed to be around 50000 in 2002 (Elliott and Phillips,

2004), and their amount kept growing, due to the great enthusiasm generated by

such model. These sites (together with the official ones) are part of the multiple

sources of revenue pattern elaborated by the Nipponese TLC giant. More

specifically, the mobile service provider keeps 9% of the subscription fees that it

collects on behalf of the content providers, which exploit NTT DoCoMos well-

established billing system to gather their revenues (Sadeh, 2002).

The first positive results were not late. Elliott and Phillips (2004) assert that

81% of the worlds wireless Internet users were resident in Japan in the year

4 Location-based service were further subdivided into three main categories: services for the movinguser, services for the moving objects and services when both the user and objects are moving (ITU,2004)

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2000, and of these over 61% accessed the mobile Internet using the i-Mode

service (p. 142). At the beginning of 2001, instead, NTT DoCoMo estimated

around 20 million i-Mode subscribers (Sadeh, 2002), which became 24 million

in July of the same year (Srivastava, 2001). In 2003, NTT DoCoMo calculated

USD 236 as average annual revenue per i-Mode user (Srivastava, 2004). Finally,

at the beginning of 2006 the NTT DoCoMos subscribers were over 50 millions,

while data subscribers accounted for the 91% of the total subscribers (OECD,

2007).

In June 2000 NTT DoCoMo was awarded with one of the three 3G licenses

available for the Japanese TLC sector. Winners were selected under those

participants that comply with the minimum requirements established by the

government (beauty contest)5.

The Japanese major provider launched then its own 3G services (called FOMA)

at the end of 2001. Such services were based on one of the five ITUs IMT-2000

standards called W-CDMA, which allowed voice and data services, circuit and

packet connection modes and high speed connections (from 384 kbit/s and up to

2Mbit/s) (Srivastava, 2004). At the end of January 2004, NTT DoCoMos 3G

service subscribers went over 2 million units.

Another important step made by NTT DoCoMo still at the end of 2001, with a

clear aim of getting ready for future investments abroad, has been the passage

from cHTML to xHTML basic, the same language adopted by WAP Forum for

its last WAP version (WAP2.0). The intent of both parts has been to cooperate to

the creation of a more uniform mobile Internet environment, based on the

languages used within the wired Internet (DellAquila, 2003; Sadeh, 2002; WAP

Forum, 2002).

As anticipated before, sending and receiving email is the most popular feature

among the Japanese i-Mode users (Ito et al, 2005; Srivastava, 2004), who

5 Information obtained from ITU website (www.itu.int/net/home/index.aspx)

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considered such practice the most important reason for the use of the mobile

Internet (fig. 5).

Figure 5. Most important reasons connected to the mobile Internet use in Japan

Source: ITU Shaping the Future Mobile Information Society: The Case of Japan, 2004

According to Ito et al. (2005), the mobile Internet is particularly widespread

among young people. Teens between 13-19 years register a 90% of keitai

Internet usage (the heaviest users in Japan). After that age, mobile Internet usage

tends to decrease gradually (to advantage the voice traffic), proportionally to

age. However, mobile Internet adoption is still high among 20-29 year old

mobile phone users (86.4%).

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4.3.3. Conclusions

This case study has given a portrait of the i-Mode introduction in Japan and has

highlighted its most important features, showing that such a success has been

achieved thanks to many factors.

Apart from a simple and at the same time incisive business model, the i-Mode

has been successful because it has been proposed to a market that was

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