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Betting it all on MMS
Friday, July 12 2002
by Andrew McLindon

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After gambling billions on 3G networks, mobile operators are hoping that multimedia messaging can ease their pain.

Text messaging has taken the world by storm and given mobile operators a much needed revenue boost at a time when most of them are mired in debt. However, what has been described as "SMS on steroids" might deliver even greater revenues and help operators entice consumers onto the third-generation mobile networks they spent billions of euro on.

After over-hyping the underperforming WAP and failing, so far, to entice users on to the faster mobile services of so-called 2.5G, mobile operators are pinning their hopes on multimedia messaging services (MMS) to give them new revenue streams in much the same way as simple text messaging has. They believe that MMS, which allows users to send content such as birthday cards, photographs and feature-rich presentations to other MMS-enabled phones, Web sites and e-mail accounts, will prove popular with a wide range of consumers from teenagers to businesspeople.

Operators across Europe, such as O2 and Vodafone in Ireland, are gearing up to launch MMS in the coming months and are certainly enthused about its ability. According to O2's chief executive officer, Peter Erskine, MMS is "the next killer app" in the mobile space.

O2 believes that MMS can build on the success of SMS and increase the company's data services revenues. Currently, around 10 percent of its revenues are from SMS, but a spokesperson for O2 said that by 2004, data services such as MMS should account for around 25 percent of its earnings. "MMS will be a major revenue generator for O2," commented the spokesperson.

The thinking behind such bullish statements from O2, and indeed other operators, is that if simple text messaging can be such a hit with users, imagine what their reaction is going to be when they can send holiday snaps or animated cartoon messages to each other's mobiles.

Certainly, SMS has proven incredibly popular with consumers. For instance, telecom regulator figures for the period from 01 January to 31 March show that Irish mobile users sent over half a billion text messages during the quarter. On average, mobile subscribers here are sending 62 text messages a month. If they send anywhere near the same number of multimedia messages, then mobile operators will be very happy indeed, particularly as they are likely to cost around EUR0.50 per message, which is more than double the cost of a text message.

An additional benefit for operators if MMS takes off is that it will migrate users to their 2.5G networks and services, which to date have been shunned by customers. "We have tried to sell GRPS (2.5G) as a technology and have failed," commented an executive from a leading mobile operator. "However, with MMS we can now show users the benefits of 2.5G and sell them additional GPRS services."

However, the mobile industry has had more than its share of "next big things" that have disappointed and disappeared as quickly as USD3 billion in a technology company's accounts. So, is MMS the white knight the mobile sector has been praying for?

Simon Buckingham, chief executive officer of UK-based wireless consultancy Mobile Streams, certainly thinks so. "The popularity of SMS will pale in significance when compared to MMS. Users will able to go from a rudimentary, text-based system to a graphical, intuitive offering, which will prove immensely popular," commented Buckingham.

He said that MMS, particularly when bandwidth improves allowing video and audio clips to be sent, will be very important in driving operators' revenues. The GSM Association agrees. It said recently that MMS will lead the way to profit in the 2.5G/3G arenas for mobile operators just as text messaging has done in today's networks.

John Delaney, principal analyst with consulting company Ovum, is not so sure. "No one should expect MMS to provide the complete solution to operators' revenues woes," wrote Delaney in a recent study of the potential of MMS.

He pointed out several problems that operators will have to overcome to make multimedia messages a success. "They will need to think very carefully about issues like service pricing, business agreements with other operators and Internet service providers, and their relationships with third-party content providers."

Of course, as Delaney wrote, MMS usage depends on there being a critical mass of people who can exchange messages. He predicted that it will take between 18 and 24 months before MMS becomes mass-market in Western Europe.

As a result, revenues from MMS will be modest in 2002 and 2003, and text messaging will continue to be the dominant technology for person-to-person messaging over mobiles, said the research company. Ovum projected that MMS will only start to show growth around 2004-2005, but by 2007 consumer revenues from MMS will reach around USD70 billion worldwide.

Over the coming months, MMS will get a major push from mobile operators, as well as handset manufacturers who are starting to introduce a range of MMS-enabled phones in an attempt to reverse their falling sales. Such phones won't be cheap though, with an average retail price of around EUR300, or more than EUR500 for phones with integrated cameras.

A lot is riding on MMS being a success. With third-generation mobile systems no longer expected to be the money-spinners they were originally hoped to be, mobile operators are damsels in distress. It remains to be seen, however, whether a sector that made a hash of WAP and was surprised by the success of text can ensure that multimedia messages will become its rescue.



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