summer school jukka heikkilä professor, vice dean the faculty of information technology university...

Summer schoolSummer schoolSummer schoolSummer school

Jukka HeikkiläProfessor, vice dean

The faculty of Information TechnologyUniversity of Jyväskylä

P.O. Box 35FIN-40351 JYVÄSKYLÄ

FINLAND

tel:+358 50 581 8361email: jups@cc.jyu.fi

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Here it is!Here it is!

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Diffusion of Internet vs. Diffusion of Internet vs. wirelesswireless

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Projection of the diffusion Projection of the diffusion (c.f. Sonera, 2000)(c.f. Sonera, 2000)

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Diffusion?Diffusion? Installed base: is huge but the number of WAP,

GPRS, UMTS phones is minimal Any evidence on the replacements?

– Most Finns/Europeans have got a phone, the lifecycle of which is getting shorter (3a downto 1a)

– Operators have an incentive to move UMTS network broadens their operations to content

management

– Technology push

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Better displays?Better displays?

Fotorealistic, 3D-mobiili-terminal at a price suitable for consumer devices: – HDTV-precision within 2-4

years (Bruzzoni (Philips) 2001)

– At the limit of eyesight within 8-10 years (ibid.)

– 200dpi full color display introduced in Winter 2001 by IBM

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Faster transfer rates?Faster transfer rates?(Buckingham, 2001; c.f. Mobicom 2001)(Buckingham, 2001; c.f. Mobicom 2001)

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Better toolkits?Better toolkits?(c.f. Devine & Holmqvist, 2001)(c.f. Devine & Holmqvist, 2001)

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Tools?Tools? Development environments Terminals

– thin SIM Application Toolkit (SMS, WAP) WML scripting (WAP)

– thick, or sturdy Java (MeXE) with classmark compatibility (see Antero’s

presentation) Brew?

For server side– server software– gateways for SMS & WAP variants– filters & adapters for XML/WML– components SSL, payments etc

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Payments?Payments?(as an example of basic services)(as an example of basic services)

Merita-Nordbanken, Nokia and Visa are experimenting with the EMPS-phone (Electronic Mobile Payment System)

– You can fit on a special 7110 a semi-permanent, minisize smartcard, that can hold hundreds of payment mechanisms (VISA(!) credit and debit card as well as a Merita debit card.

– Wildest dreams equip it with Bluetooth, for cash payments

The Nordic consumers are anticipated to accept the system as Merita-Nordbanken on-line banking 1984.– Merita-Nordbanken has currently 1.1M Internet bankers in

Nordic countries It announced an expansion into Baltic countries by means of

electronic banking Available as WAP, too

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Another way - SmartTrustAnother way - SmartTrust Based on PKI X.509 std

– currently RSA keys Utilizes SMS infrastructure Requires a coprocessor SIM-card (replacement)

– for encryption/decryption – for authentication– for signing

Sonera co-operates with– GTE Cybertrust for PKI– SETEC manufactures SIM-card

Keep an eye on Radicchio

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Do we need this? Do we need this? Cybersource Internet Fraud ScreeningCybersource Internet Fraud Screening

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Projection from 2G is Projection from 2G is dangerousdangerous

(Kankare, 2001 in Talouselämä)(Kankare, 2001 in Talouselämä)

the introduction of 2G in Finland– 2G was hoped for by the customers (1.5M in Europe)– Profit calculations were based on underestimates

e.g. Radiolinja estimate of 1989 wast to have 50-150.000 GSM-subscribers instead of 1.3M in 2000 (Häikiö, 2001)

e.g. Radiolinja estimate on turnover was 0.5bFIM vs. 3.5bFIM in 2001

– Duopoly replaced monopoly Entrant’s risk was shared with banks, insurance companies, chain

masters and heavy industry

– Monopoly pricing was not limit pricing i.e., there was 40-50% supernormal profit on calls on NMT

networks

– The demand exploded (as expected) after the 20% penetration rate threshold

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Cellular ratesCellular rates(OECD, 2000)(OECD, 2000)

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Market structureMarket structure (OECD, 2000)(OECD, 2000)

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Operators are pricing new Operators are pricing new wireless services highwireless services high (Finnish Consumer (Finnish Consumer

Agency, 2000)Agency, 2000)

WAP on GSM Data

WAP on SMS

GSM SMS

WAP SMS

differenceRadiolinja 14,81 N/A 12,95 14 %Sonera 27,85 14,33 14,33 94 %Telia City 6,36 N/A 13,86 -54 %

– Tested set of services: domestic news, business news, sports news, weather

forecast, stock exchange, list of TV-programs, dictionary

– Browsing the services took ~ 13 mins

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A prerequisite - useA prerequisite - use Internet access

– U.S., flat rates Ahead in Internet connections Average connection time +1h/day

– EU., time based charges catching up in the number of connections Average connection time 1/4h/day!

In mobile environment – CSD & HSCSD are expensive– SMS & USSD reasonable– GPRS/EDGE/3G ?

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PricingPricingA seemingly resolved issue ;-)A seemingly resolved issue ;-)

Basic strategies– Consumer pays

Connection time - switched network (expensive) Traffic, I.e., packets - connectionless n. (overhead) Pay per service - any n. (service & no - in IP n.?)

– premium number– credit

Fixed price (pre, post) - any n. Nothing - any n.

– Banners, commercials, donate

The role of operator– intermediator?– or a retailer?

2020

Case iMode Case iMode (NTT DoCoMo, 2000; (NTT DoCoMo, 2000;

4/2000: 6+ M tilaajaa (20% äänipuhelujen tilaajista siirtyi vuodessa)

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Voice 34%, e-mail 42%, Internet 24% of time Voice 34%, e-mail 42%, Internet 24% of time

connectedconnected (InfoCom Research, Aug. 2000)(InfoCom Research, Aug. 2000)

Summer schoolSummer schoolSummer schoolSummer school

Jukka HeikkiläProfessor, vice dean

The faculty of Information TechnologyUniversity of Jyväskylä

P.O. Box 35FIN-40351 JYVÄSKYLÄ

FINLAND

tel:+358 50 581 8361email: jups@cc.jyu.fi

2323

iMode iMode (Tachikawa, CTIA April 2000)(Tachikawa, CTIA April 2000)

Content– 6000 providers, at NTT portal 500 providing customers

Entertainment, 50% of traffic Transaction and database services next

Revenue structure (and pricing)Flat fee equivalent to 3USD/month+ number of inbound/outbound packets (avg. 10USD)+ increase in voice (avg. 15USD)NTT earns avg. 25USD per subscriber per month+ if content providers charge, NTT collects 9% billing fee

Features– insensitive to transfer rates, good mix, portal-power

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Imode usersImode users(NTT-X & Mitsubishi Institute, 2000)(NTT-X & Mitsubishi Institute, 2000)

45% of the users are students

39% workforce 16% housewives

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The N-Gen is coming!The N-Gen is coming!Managing basic prerequisites (Statistics Finland, 1999)

0

10

20

30

40

50

60

70

80

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< 15 15–19 20–29 30–39 40–49 50–59 60+

Age

%

Can use keyboard

Using mouse is easy

Can cope with English software

Has access to network

Has email address(es)

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Case iMode Case iMode (NTT DoCoMo, 2000; Devine & Holmqvist, 2001) (NTT DoCoMo, 2000; Devine & Holmqvist, 2001)

Situation is different compared – especially - to Europe:– NTT DoCoMo has a very strong position on the market

(55%)– Few internet service providers and connections available

(or price is high)– Text messaging vs. hand-held e-mail – Huge variety of light, SIM-free, miniature terminals with

color displays, cameras, recorders, players etc.– Services tightly coupled with web-servers

Technology – no rocket science– Circuit switched digital network + on top 9.6kbps digital

packet switched– cHTML subset

Why not WAP?– Timing & simple implementation– Proprietary tech possible thanks to strong market position

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* huge Japanese market (potentiality of the market )

- 80 million voice users out of 125 million Japanese population- 50 million mobile subscriber will use internet email services- 40 million mobile subscriber is the target of mobile information service- 30 million mobile users needs rich contents on the mobile Internet

mobile Internet; the market potentiality

voice communication; 80million

I-net email; 50million

contents; 40million

rich contents (AV); 30million

mobile users’ pyramid (more than 80million)

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mobile information service business conceptin 2nd Generation

* mass marketing concept - focusing on consumer market - make best use of existing html contents (i-mode, J-Sky) - reasonable charging system; monthly flat price - reasonable pricing; lower price level as the other info. Media i.e. monthly magazines (400 .. 1,000 JPY; 20 .. 60 FIM)

* convenience store concept - mobile information service is “convenience store on the net” - provide only selected information at anywhere, anytime - continuous development of “info. site” and quick launching

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Greed or generosity?Greed or generosity?

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Potential market size of information service

* facts - at the moment, 30% of i-mode users subscribe 2 toll info.sites (at least) - the price of info. service is 100 .. 300 JPY/month

* trial calculation - total # of subscription to toll info. site; 24million out of 40million users 40M x 30% X 2

- sales of the toll info. site; 2.4 billion JPY/month (133 million FIM/M) 24M x 100

based on the mass marketing conceptbased on the mass marketing concept

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Competition?Competition?

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NTT Docomo; i-mode15.410 million subscribers1,267information sites- news; 39 sites- m-banking; 361 sites- money and credit; 25sites

J-Phone; J-Sky3.986 million subscribers489information sites- news; 30 sites- m-banking; 10 sites- money and credit; 20sites

EZ Web; au / tuka (KDDI)4.578 million subscribers583information sites- news; 35 sites- m-banking; 11 sites- money and credit; 21sites

WAP based

c-HTML based MML based

X

HTML basedin broad

mobile (phone) Internet infrastructuremanaged by mobile operator

telecom operator

e.g. Internet Service Provider, hosting/allocation service provider, etc)

solution provider

solution software solution hardware

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service provider / application provider

mobile portal, data center, mobile ASP, contents provider, etc

Greed or generosity?Greed or generosity?

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FOMA W-CDMAFOMA W-CDMA Voice = DoCoMo PDC Data = 1.8 x voice Packet comms

0.05JPY/128b packet = 1/6 of iMode

SMS 5/7JPY/msg

Color Multimedia Heavier More complex

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Launching iMode elsewhereLaunching iMode elsewhere PDC

– propriatory tech– iMode trials suspended in Europe

UMTS rollout delayed by European and Japanese teleoperators– In Europe delayed– In Japan – test terminals withdrawn