Subject: [NEXTEL-1] A Roadmap to Interactive ARPU

From: [email-masked]
Date: Sun, 05 Oct 2003 18:24:01 -0400

A Roadmap to Interactive ARPU
– “P2P is the killer sector,” says Proteus CEO McQuown –
By  Jeremy Geelan

(September 26, 2003) - Day Two of Global Mobile 2003 in San Diego kicked off today
with a morning keynote given by Patrick McQuown, president and co-founder of
Proteus, an innovator in the interactive wireless (and iTV) space.
Founded in 1996, Washington DC-based network application company Proteus did some
its earliest work with Omnipoint –now T-Mobile – which in historical terms was
only the second ever GSM player in the USA and, unusually for a wireless player,
worked from the get-go with ABC Television and The Washington Post as well as with
the wireless carriers like AT&T Wireless.

“The last killer app the tech industry has seen was Napster,” says McQuown, so it
is hardly surprising that in the mobile space too, he argues, P2P (person to
person, or peer to peer) is the key killer sector.

A textbook “disruptive technology,” SMS recently led to the demise of some of the
summer’s blockbuster movies, according to McQuown. He alleges that the marketing
buzz surrounding some of the summer’s movie flops in the USA was, in very short
order, “neutralized and even quashed” by short-message communication.

“We need now to think outside the box,” he continues. New products and new apps do
not in and of themselves amount to a quantum leap. Besides, “America is not
Europe, different people in different areas of the world want different things,”
he continues. “On the carrier side for example, in the USA it isn’t just the
initiating party that gets charged for a call – as is the case in Europe.”

So we can’t just say that because SMS worked in Europe it will work in the USA.
Some carriers – AT&T for example – only charges customers for MO (mobile
originate) whereas Cingular charges both for MO and MT (mobile terminate).
“We’re going to see SMS become commoditized,” McQuown predicts, “just like data –
Leap Wireless, for example, already offers all-you-can-eat SMS, and T-Mobile’s
offers large buckets, $2.99 or thereabouts for 500 messages.”
So what can the carriers do? They need to leverage the medium and leverage content
and deliver ROI, and to do that they need to circumvent the bottlenecks afflicting
current network capacity.  To maximize resources, says McQuown, queue times need
adjusting so that no SMS messages get lost, and the whole protocol for short
service needs to be tightened. At the engineering level, there is at present a
very thin bottleneck – 200 messages per second per carrier – it’s not like the
Internet where there are a gazillion nodes.

SMS will clearly not be as compelling a form of communication unless and until you
can be 100% sure that an SMS message is actually going to be received. 200
messages a second is not enough, and in Europe 2,000 per second has been achieved
already. “The software and the hardware behind SMS is what’s wrong,” McQuown
observes.

Mobile data adoption is good in general, he continues. Handset sales are strong
and the carriers are “laser-focused” on the heavy users. But data-capable voice
users who are not actually using their handsets for messaging represent an ever
larger potential market: people who have the handsets, have the features, but
don’t (yet) send messages.

The solution, in McQuown’s view, is that carriers should leverage this situation
and sponsor events. Single-carrier sponsored events already work, he says. Major
League Baseball on Fox TV has been running well-integrated interactive voting for
the past 2 years, and Cingular has been the exclusive wireless sponsor of NASCAR
racing.

“Two years ago it was only Nextel and Sprint, and you could vote over your handset
or by going to FoxSports.com,” McQuown reports, from data gleaned from the 2 years
that his own company has been involved. “But every time, more votes come in over
the mobile handsets compared to the number of votes that come over the Net.”

But even 1 million votes in a poll and 1.5 million SMSes at this kind of event is
still only 1% of the TV audience, McQuown says. “Currently, 30% of folks voting
each time are doing so for the first time,” he adds. So the numbers are good but
in terms of the overall audience there is enormous potential for growth.  AT&T for
example is already a big spender in this area.
Third-party – i.e. multi-carrier – events work especially well too.  “This is what
everybody wants at this point,” according to McQuown. “Johnson & Johnson for
example recently paid for title sponsorship of The View, and there were viewer
polls by SMS and/or Web, and the more ‘touch points’ they can get the better,
since they want to burn their brand into viewers’ consciousness. [In this context
the mobile phone is a touch point.] Plus the carriers love it because it generates
traffic for which they can charge.”

ABC College Football has been sponsored by Volvo, but also by Cingular, Sprint,
AT&T, Nextel, and T-Mobile. “Volvo loves it because the company gets to touch
people on their handsets,” McQuown explains, “and not just during broadcast.”
(There are follow-up polls, etc.) “Carriers love it because they get the revenue
from the messages and can bill for them at their regular messaging rates.”

“Sprint and Nextel don’t yet have short codes,” he continues, “they’re using WAP
still on their home decks.
But the next step (Q4) will be when they both allow short codes
to be incorporated on their handsets.”

One very hot area of ARPU growth for carriers, McQuown
predicts, will be “Premium SMS.” For premium services, he
underlines, content is king. (“HBO is currently the only premium
content in the USA. Consumers happily spend more to have
access to Sopranos.”)

“We need to make the technology easy and intuitive,”
McQuown concludes, “And we need to improve the
effectiveness of the existing promotional spend and establish
clearer ROI, as well as create simple first-time use cases. This is
how to make short messaging succeed for the entire industry.”

About the Author: Jeremy Geelan is group publisher SYS-CON Media. He speaks,
writes, and broadcasts all over the world about the intersection of technology and
society, and in particular about the business strategies appropriate to the
convergence of life, telecommunications, and the future - with a particular
emphasis on wireless. Jeremy gave the opening keynote at the MUMJAVA International
Java conference in 2001 in Mumbai, India, and since then has chaired numerous
keynote panels, in Santa Clara, CA (Wireless DevCon, 2000), in New York (Wireless
Internet 2001), Orlando (Witness the Power of Wireless, 2002), Los Angeles
(iWirelessWorld 2003) and San Diego (Global Mobile 2003). A speaker at the
inaugural CeBIT America in New York in June 2003, he is conference chair of the
Web Services Edge series of Conferences & Expos, the next scheduled event being
Web Services Edge 2003 West – International Java, XML, .NET, and Web Services
Conference & Expo, being held next week at the Santa Clara Convention Center.

http://www.sys-con.com/wireless/article.cfm?id=637&count=5300&tot=1&page=2

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