Subject: [NEXTEL-1] Will picture mail deliver wireless ARPUs

From: Marcel <[email-masked]>
Date: Sat, 11 Jan 2003 22:04:45 -0500

Will picture mail deliver wireless ARPUs
Source: Business Communications Review
Publication date: 2002-12-01
Arrival time: 2003-01-11

Is Santa replacing your cell phone this Christmas? Well, if you ask for a
camera phone, and a subscription to AT&T's M-Mode, Sprint's PCS
Vision or T-Mobile's wireless packet data services, you can try the very
latest thing: taking photographs and emailing them instantly to friends and
family. If they get camera phones, too-- available from the carriers and made
by Samsung, Sanyo, Sony- Ericsson and others-you can exchange photos
directly and view them on your phones' tiny, high-resolution color displays.

Call it picture mail, photo sharing, instant imaging or multimedia messaging
(MMS), it's all the rage in Japan, where more than 6 million camera phones
have been sold this year; accessories include tiny printers with adhesive
paper, for creating instant photo "stickers." Now, equipment makers and
network operators are hoping the fad will spread to Europe and the
Americas, boosting "average revenues per user" (ARPUs) and renewing
interest in other wireless packet-data services (see BCR, October, 2002, pp.
12-13).

One company that's already profiting from picture mail is privately-held
LightSurf Technologies, a four-year-old brainchild of serial software
entrepreneur Philippe Kahn. Legend has it that when Kahn's daughter was
born in 1998, he was surprised how hard it was to send digital photos to the
grandparents using his cell phone as a modem. So he started LightSurf to
solve the problem. Within a year he had figured out how to send
VGA-quality color pictures over PacBell's wireless network in less than 30
seconds, but hardly any U.S. cell phone users had color-display phones to
take advantage of the capability.

"That's why we focused on Japan," said LightSurf marketing VP Robin Nijor.
"They had the color displays, because most of them get their Internet
access wirelessly." Today, LightSurf's eSwitch, a productized version of its
LightSurf IV Instant Imaging Platform software, transcodes and delivers
photos to Japan's nearly 200 different types of camera and display phones.
LightSurf's Japanese eSwitch customers include wireless network
operators, as well as auto sales and auction websites.

In the U.S., cheap wireline Internet access has thwarted a Japanese-style
wireless Internet craze, just as cheap voice calling has prevented a
Europeanstyle embrace of wireless short messaging services (SMS), but
picture sharing might be different. Commercial applications might surface for
equipment suppliers and network operators in vertical markets like real
estate, insurance and medical, according to Nijor, but consumer picture
sharing is expected to be the primary market driver.

Compared to Japan, Nijor says it won't be as hard to get photo- sharing
services going here, since there are only a handful of different handset
display formats to accommodate. Moreover, LightSurf already has a visible
foothold, handling all the back-end processing, storage and delivery of digital
images for Kodak's online photo-sharing service, Picture Center Online.
When customers get rolls of film developed, they also can have the pictures
posted in Web-accessible photo albums. LightSurf has also inked deals
recently with Microsoft, Motorola, Sprint and others.

"We make it easy for others to sell picture-sharing services-we design it,
develop it, integrate and manage the service," Nijor said. "We take a fee for
the setup, then participate in revenue sharing. By the end of the first quarter
[of 2003], we expect to have six more carriers using us as their multimedia
messaging service center [MMSC]."

Photo Opportunity?

If wireless photos break out in "viral exponential growth," as LightSurf puts
it, that could pull along additional, business- oriented uses. Perhaps the first
place photos will enter the enterprise will be through already-automated
field-service operations. Personnel who make site visits to repair equipment
or perform other services already use handheld Palm and other personal
digital assistant (PDA) devices to wirelessly access enterprise
trouble-shooting applications, schematic diagrams, databases and other
corporate resources. If they still can't solve the problem, the field people
usually talk to an in-house expert, but what if they could send this person a
picture of the problem, instead of just describing it?

"We are already seeing that:" said Donald Longueuil, wireless research
analyst with In-Stat/MR, and author of "Wireless Messaging Demystified:
SMS, EMS, MMS, IM, and Others" (McGrawHill Professional; ISBN:
0071386297). "Insurance companies like Progressive have given their guys
Pocket PCs, which can't take a picture of the claim, but that's coming. They
can already file the claim wirelessly and in some cases give the customer a
check right then."

Automating the insurance claims adjustor's process and wirelessly
connecting him/her to the company's internal applications lets the adjustor
clear more claims in a day, compared to going out in the field, gathering the
data and then coming back to the office to file the paperwork. Adding
pictures to the mix will make the process even more efficient, according to
Longueuil. "You can use less- experienced field people and still get many
more claims processed, because they are taking the pictures and sending
them to a decision maker," he said. "It's a matter of giving better customer
service- and that's what everybody is wanting these days."

A recent research report authored by Cliff Raskind of Strategy Analytics
also cites Kemper Insurance and OneBeacon Insurance Group as early
wireless imaging adopters. "Business adoption of mobile imaging is still
embryonic," writes Raskind. " It will be led by the developed North American
and west European markets with key catalysts for enterprise photo-imaging
growth being insurance, real estate and expert systems field service."

Raskind projects a 4 percent penetration rate for embedded cameras next
year, and 20 percent within five years, fueled primarily by consumer usage.
In-Stat/MDR's Longueuil forecasts 8 million MMS users in the U.S. within
five years, but 236 million worldwide (Figure 1).

FIGURE 1

Cheap And In Color

In Japan, more than 50 million subscribers use the three wireless data
services available in that country, compared to less than 10 million in the
U.S. who have access to six different services. Recently, competition from
J-Phone and KDDI, as well as a slowing overall growth rate, forced Japanese
pioneer NTT DoCoMo to cut its prices for heavy i-mode users by about 30
percent.

Analysts think that U.S. consumers have largely ignored wireless data
services for several reasons. A June 2002 survey of voice cell phone users
by the Yankee Group found 45 percent didn't "want or need" wireless data or
Internet services. Another 19 percent didn't even answer the question, while
16 percent objected to high prices, 6 percent said it was too complicated
and the remaining 14 percent complained that the needed information wasn't
available, network speeds were too slow or about other short-comings.

Others think U.S. customers are satisfied with their faster, prettier and
relatively inexpensive wireline Internet access, but they will want to give
better, faster, cheaper wireless handsets and services a try, once such
services show up. "It's a matter of education, availability and pricing," said
Longueuil. "Customers already do Internet photo emails, so this is an
extension of that. And keep in mind that, in Japan, you can get a
camera-embedded cell phone for $28. Sure it's not the best camera or the
best cell phone- but it works, and it gets the thing into more people's
hands."

Longueuil doesn't see camera-phone handset replacements driving the
market in the U.S., especially with AT&T and Sprint's units priced in the
$300-$400 range (T-Mobile touts its camera phones as "less than $100").
But he thinks they will plant the seeds of what it possible. Then, it will be up
to wireless carriers to encourage those seeds to grow by offering less
expensive, and less complicated, packet-data pricing. Both Sprint and T--
Mobile seem to have the right idea, offering unlimited wireless Internet usage
at least for the first few months when subscribers buy a qualifying device.
Nextel and Verizon already offer flat rate, unlimited Web- surfing, but it isn't
cheap-$55 and $100 per month, respectively. Cingular and AT&T still charge
based on monthly packet usage.

Conclusion

One of the perennial challenges in communications technology has been to
figure out profitable and sustainable uses for visual images- conferencing,
streaming and now instant picture sharing. In seeking commercial
applications, and higher-revenue enterprise customers, however, vendors of
desktop video conferencing and streaming content have repeatedly missed
the opportunity and the potential entre into the business world that the
consumer market affords.

"We had a lot of distractions along the way, mainly people wanting us to do
live video and streaming video" said LightSurf's Nijor. " But we kept saying,
No, the networks aren't ready, there's no demand'-and besides, pictures are
a great business."

It may take a while for pictures to cross the home-to-office chasm, as PCs
and Web browsers have done. Meanwhile, get ready for more photo email
from the early adopters in your circle of friends and family. "I'm that guy,"
says Longueuil, "at the tourist spot, taking a picture of myself and sending it
to my girlfriend, or my mom or my f\riends, just to give them a laugh, make
them smile." Go on, admit it, you want one

Companies Mentioned In This Article

AT&T Wireless (attws.com)

Cingular Wireless (www.cingular.com)

In-Stat/MDR (www.instat.com)

J-Phone Co. (www.j-phone.com)

KDDI Corp. (www.kddi.com)

LightSurf Technologies (www.lightsurf.com)

Microsoft (www.microsoft.com)

Motorola (www.motorola.com)

Nextel (www.nextel.com)

NTT DoCoMo (www.nttdocom.com)

Samsung (www.samsung.com)

Sanyo North America (www.sanyo.com)

Sony Ericsson Mobile Communications (www.sonyericsson.com)

Sprint (www.pcsvision.com)

Strategy Analytics (www.strategyanalytics.com)

T-Mobile USA, Inc. (www.t-mobile.com)

Verizon Wireless (www.verizonwireless.com)

Sandra L. Borthick

Sandra L. Borthick is BCR's technical editor.

Copyright Business Communications Review Dec 2002

Publication date: 2002-12-01

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