e commerce to mobile commerce

From e-commerce to m-commerce:The power of the mobile Internet

Clarence N W TanT W Teo

Working PaperJanuary 2001

Invited chapter under reviewfor inclusion in the forthcoming book

“Internet Management Science: A Global Perspective”by Idea Group Publishing

Abstract

This paper provides an overview of prevailing trends and developments shaping m-commerce (mobile commerce) and the wireless economy. A detailed road map of the evolvingmobile technology landscape is first presented. An intuitive review of the many basic underlyingbuilding blocks attempts to demystify the alphabet soup that wireless telecommunications infra-structure is often deemed to be. Interesting mobile Internet deployment and adoption demo-graphics are highlighted. Commercial ramifications of actual and potential wireless applicationimplementations are emphasized, while pertinent issues that serve to promote or impede m-commerce take-off are examined. A case study is also included, profiling an industry leading m-commerce Web portal.

Keywords

Cellular telephone equipment industry, wireless communication systems, mobile communicationsystems, broadband communication systems, electronic commerce, mobile commerce.

School of Information Technology, Bond University, Gold Coast. University Drive, Robina, QLD4229, Australia. Phone: +61-7-5595-3366. Fax: +61-7-5595-3320. E-mail: [email protected].

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Contents

1 Introduction ................................................................................................................. 1

1.1 The WWW and e-commerce .............................................................................. 1

1.2 From e-commerce to m-commerce.................................................................... 1

2 Wireless telecommunications technology road map............................................. 2

2.1 First Generation—1G: Analogue network ....................................................... 22.1.1 Cellular networks..................................................................................... 22.1.2 Frequency Division Multiple Access (FDMA)..................................... 22.1.3 Advanced Mobile Phone Service (AMPS)............................................ 3

2.2 Second Generation—2G: Digital network........................................................ 32.2.1 Time Division Multiple Access (TDMA).............................................. 32.2.2 Code Division Multiple Access (CDMA) ............................................. 4

2.3 Second-and-a-half Generation—2.5G ............................................................... 52.3.1 General Packet Radio Service (GPRS)................................................... 52.3.2 CDMA IS-95B ........................................................................................... 7

2.4 ‘2.75G’ .................................................................................................................... 7

2.5 Third Generation—3G: Broadband network ................................................... 8

3 Wireless messaging developments........................................................................... 9

3.1 SMS—Short Message Service............................................................................. 9

3.2 EMS—Enhanced Messaging Service............................................................... 11

3.3 MMS—Multimedia Messaging Service .......................................................... 11

4 The mobile Internet................................................................................................... 12

4.1 WAP—Wireless Application Protocol............................................................ 12

5 Mobile commerce...................................................................................................... 15

5.1 Innovative m-commerce applications............................................................. 155.1.1 Location-based services ........................................................................ 155.1.2 Multimedia entertainment.................................................................... 16

Wireless games....................................................................................... 16Wireless streaming media .................................................................... 16

5.1.3 Wireless telemetry ................................................................................. 175.1.4 Wireless electronic payment systems ................................................. 175.1.5 Telematics ............................................................................................... 185.1.6 Wireless telemedicine............................................................................ 18

5.2 Current issues in mobile commerce................................................................ 195.2.1 Wireless privacy..................................................................................... 19

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5.2.2 Wireless payment systems ................................................................... 205.2.3 Wireless security .................................................................................... 205.2.4 Wireless emission and public health................................................... 215.2.5 3G license auctions ................................................................................ 22

6 A mobile portal case study—BlueSkyFrog Pty. Ltd. ........................................... 23

6.1 The Australian mobile phone market ............................................................. 23

6.2 Company background ...................................................................................... 23

6.3 Demographics, facts and figures ..................................................................... 23

6.4 Mobile services................................................................................................... 24

6.5 Mobile commerce and the BlueSkyFrog consumer portal........................... 24

6.6 The Future for BlueSkyFrog ............................................................................. 25

7 Conclusion ................................................................................................................. 25

8 References .................................................................................................................. 26

From e-commerce to m-commerce: The power of the mobile Internet

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1 Introduction

1.1 The WWW and e-commerce

The advent of the World Wide Web (WWW) in the early 1990s provided theinterface that made the Internet easily accessible to the mass market, sparkingthe information revolution—participants came to have unprecedented access to adeluge of data and information. Riding on the ubiquity and reach of the WWW iscommerce in its many forms: Inter-business trade, intra-organizational transac-tion, purveyors of goods and services touting wares to potential customers andconsumers soliciting purchases. The combination of the Internet as a businessdata clearinghouse, and the WWW as the virtual global marketplace, trans-formed traditional commerce to electronic commerce (e-commerce). E-commerceis the primary propellant of Internet development today and will continue todrive innovation well into the new millennium.

For the Business-to-Business (B2B) e-commerce sector alone, the Gartner Groupforecast for the Asia-Pacific region excluding Japan is an impressive 155% com-pounded average growth from 1999–2004, burgeoning in transaction value fromUS$9.2 billion to nearly US$1 trillion over the period to account for a 13.6% shareof the US$7.3 trillion expected worldwide by 2004 (Asia/Pacific Business-To-Business E-Commerce to Reach $1 Trillion in 2004). The exponential growth patternemulates that of the WWW upon inception for which the explosive user take uprate has been widely reported.

1.2 From e-commerce to m-commerce

Extraordinary market statistics are emerging from a related field: wireless tele-communication. Conceived in the 1980s primarily to carry voice transmissions,the medium today has developed into a fair bearer of data—including Internetcommunications. The Cahners In-Stat Group forecasts the international wirelessdata market growing from 170 million subscribers to more than 1.3 billion be-tween 2000–2004, equipping themselves with some 1.5 billion wireless-capablehandsets, personal digital assistants (PDA) and other Internet appliances by end2004 (Wireless Data Users to Reach 1.3 Billion by 2004). The same study found inthe United States with its high wired Internet penetration of 60 million connectedhouseholds, 100 million mobile phones representing an enormous potentialwireless data market. Elsewhere around the world where wired Internet pen-etration is relatively lower, mobile phones have actually become many subscrib-ers’ primary means of Internet access. The Strategis Group projects wireless In-ternet users in the Asia-Pacific region will rise ten-fold from 20 million in 2000 to216.3 million by 2007 (Number of Wireless Internet Users in Asia-Pacific to Grow Ten-Fold by 2007).

The Gartner Group contends worldwide shipment of Web-enabled wireless de-vices rose a whopping 796% in 2000 alone over 1999 and predicts consumertransactions committed from such terminals would ring up a worldwide value ofUS$1.8 trillion by 2005 (The Shape of the Wireless Economy). Untethered by the um-bilical cord of fixed line connection, the amazing possibilities of wireless Internetaccess fuels the unstoppable trend towards ultimate convergence of Internet andmobile communications. In the process, e-commerce evolves into mobile com-merce or m-commerce. M-commerce is more than just an extension of e-


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commerce in conducting conventional business—the allure of ‘anytime’ conveni-ence and ‘anywhere’ mobility in carrying out everyday Internet transactions hasthe potential to spur a myriad of novel and unique services.

2 Wireless telecommunications technology road map

The early form of wireless communication emerged in the late 1940s in theUnited States in the form of in-vehicle phones as the requisite communicationapparatuses then were too heavy and bulky to be considered portable. Televisionbroadcasting inspired the early architecture of this technology. Hence a givengeography was viewed monolithically, resulting in the erection of centralized talltransmitter towers at select locales that provided radio coverage to the region.Over time however, the system limitations of the technology like restricted mo-bility, low user capacity, poor voice quality and high cost, resulted in the gradualphasing out of the old technology and the introduction of the cellular frameworkin late 1970s, a superior architecture that has persisted to this day.

2.1 First Generation—1G: Analogue network

2.1.1 Cellular networks

Analogue technology characterized First Generation or ‘1G’ cellular systems andsaw the mobile market through its first decade of exponential growth. A cellularmobile communications system eschews transceiver centralization in favour of avast array of low-power antenna subsystems, dispersed in small, barely overlap-ping geographical units called cells. The so-called cellular base stations provideindividual local coverage and interconnect for a combined radio footprint thatconstitutes the wireless network. Techniques have been devised to maintainseamless transition for connected mobile users traversing adjacent cells, im-proving mobility immensely. The cellular schema affords fair network engi-neering flexibility: Cell size can be scaled to match subscriber demand by vary-ing transmission power within limits, while regional cell density increased toaccommodate growth. Indeed, modern network implementations are typified bylarger, sparse cells in rural districts and small, dense ones in the metropoli-tan areas.

2.1.2 Frequency Division Multiple Access (FDMA)

The transmission technology employed in inaugural cellular networks was ananalogue scheme called Frequency Division Multiple Access (FDMA). Continu-ous radio signals are frequency modulated to carry information for transmissionand reception. FDMA facilitates simultaneous network access by multiple userswith minimal radio interference by allotting each a dedicated channel fromwithin set frequency bands for the entirety of their connections. The simplisticalgorithm hogs precious airtime even during momentary transmission lulls.Consequently, the absolute capacity of a FDMA-based network is eroded. Still,cellular technology superseded its predecessors overall on technical and eco-nomic merits—advancements in electrical components and electronics fabrica-tion improved product quality significantly and made equipment more price ac-cessible to consumers. This marked a watershed in mass market acceptance andessentially launched the mobile telephony industry.


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2.1.3 Advanced Mobile Phone Service (AMPS)

Although beaten to the commercial cellular market by the Nordic Mobile Tele-phone (NMT) system in Europe, the Americans introduced the Advanced MobilePhone Service (AMPS) in 1983—the world’s first standardized analogue serviceinvented by AT&T Bell Laboratories. Particularly adept at carrying voice trans-mission, AMPS garnered extensive adoption throughout the Americas andacross the Asia-Pacific to become the de facto standard, bringing unprecedentedcross-border service compatibility for roaming subscribers—such unity wouldnot be seen again until well into future evolution of cellular telephony. NascentAMPS technology had its fair share of deficiencies: Limited growth capacity inface of escalating demand, very poor data transport and inadequate transmissionsecurity. Subsequent iterations boosted call capacity handling at the expense ofchannel interference. Total Access Communication System (TACS) was anotheranalogue standard that left its mark.

Despite the technical imperfections, 1G systems maintained their popularity intothe early 1990s. Even as radical technologies loomed, improved derivatives ofAMPS are still deployed in analogue networks around the world today.

2.2 Second Generation—2G: Digital network

The dawn of digital radio transmission heralded the 2G or Second Generationera in mobile telecommunications. Mushrooming demand exerted tremendouspressure on network capacity. Infrastructure providers were hard-pressed forscalable yet cost-effective solutions to addressing saturation and quality of ser-vice issues facing their existing networks. Innovations in the realms of semicon-ductors and microprocessors presented digital technology as the logical candi-date. The coding scheme incumbent in analogue systems is supplanted by digitalmodulation which encodes transmission information into a stream of computerbinary coded data packets destined for reassembly at the destination.

The benefits of a digital framework over analogue are manifold: Firstly, digitalsignalling is far less susceptible to radio frequency interference and incorporatesbuilt-in transmission error correction resulting in enhanced coverage and su-perior voice quality. An extensible architecture enables the addition of new sys-tem features such as a security model for call encryption, and supplementaryservices like short text messaging, fax and data transmission. Most importantly,by extracting finer channel granularity from set cellular bandwidth and facilita-ting more simultaneous calls per channel, digital systems better optimise band-width utilization for large boosts in network capacity. These impressive en-hancements are conferred primarily by the ingenuity of the signal digitisationmethodologies applied.

2.2.1 Time Division Multiple Access (TDMA)

Two competing schemes dominate the marketplace: Time Division Multiple Ac-cess (TDMA) promoted by the Universal Wireless Communications Consor-tium (http://www.uwcc.org), and Code Division Multiple Access (CDMA)championed by the CDMA Development Group (http://www.cdg.org). UnderTDMA, each radio channel within a set bandwidth is divided into packet trans-mission time slots for unique assignment to individual users accessing the cellu-lar network simultaneously. Many concurrent connections can be supportedwithout interference since users are effectively ‘time-sharing’ bandwidth. TDMA


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can expand network capacity three to fifteen times over that of analogue and wasdevised as an upgrade path from AMPS. CDMA tags each and every transmittedpacket in the digital stream with a unique key code that identifies it to the tar-geted receiver, enabling the destination device to retrieve the intended packetsfor decoding. CDMA assigns neither a fixed radio frequency nor time slot to eachuser, transmitting simultaneously instead on multiple channels spanning theavailable spectrum—individual user conversations code distinguished by de-sign. A CDMA-based network can expand call capacity eight to fifteen timesover that of AMPS.

Just as AMPS had secured its market position by being a world standard, an at-tempt was made to forge the equivalent for digital wireless communications. TheEuropeans spearheaded the long consultative process to establish the GSM orGlobal System for Mobile communications specifications based on TDMA. Thefirst commercial service made its debut in 1991 and acquired one million cus-tomers in two years. By late September 2000, GSM service spanned 158 countrieswith an incredible subscriber base of 380 million (Footprint of World’s LeadingWireless System Expands to 158 Countries), becoming the de facto internationalstandard. Today, the GSM Association (http://www.gsmworld.com) is the glo-bal overseer of the GSM platform. The Americans operated an assortment ofTDMA and CDMA-based digital wireless systems under the Personal Com-munications Services (PCS) umbrella domestically. A commercial adaptation ofGSM called PCS 1900 was added in late 1995. This platform is presently admin-istered by GSM North America (http://www.gsm-pcs.org/northamerica/gsmna.html), an offshoot of the global standards body.

2.2.2 Code Division Multiple Access (CDMA)

CDMA had a colourful history harking back to the 1940s when it was used forsecure military telecommunications during World War II. Adaptation for use inlarge scale, non-military radio applications was to take another arduous 50 years.In 1993, the CDMA Development Group (CDG) established IS-95, the industrystandard for CDMA wireless cellular service. The world’s first commercial roll-out by Hutchison Telecom took place two years later in Hong Kong. When theplatform acquired its trade name ‘cdmaOne’ in 1997, user base was an estimated4 million worldwide. By late October 2000, that subscriber base had swollen ex-ponentially to 71 million (More Than 71 Million Global Subscribers Choose CDMAfor Access to Mobile Communications) and cdmaOne had become the standard ofchoice in the Americas, Korea and Japan.

Digital technology exemplified Second Generation or ‘2G’ mobile communica-tion systems like GSM and CDMA, and represented the quantum leap that over-came the capacity, coverage and quality shortcomings of older cellular infra-structures. The mobile market continued its extraordinary growth unabatedthroughout its second decade—steadily improving manufacturing processespush increasingly sophisticated and progressively more portable devices into theconsumer space, encouraging widespread adoption. Voice telephony remains theprincipal application but demand for non-voice services such as fax, text mes-saging and data transmissions grew more prevalent.

The 1990s also saw the explosive phenomenon of the Internet: Applications likeelectronic mail (e-mail) and World Wide Web quickly became pervasive. Themost common mode of Internet connection is via a dial-up to an Internet ServiceProvider (ISP), which establishes an analogue data call using a conventional


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fixed telephone line. Data rates of up to 56 kbps (kilobits per second) are possibleusing current state-of-the-art industry standard V.92 protocol with V.44 datacompression (Voiceband Modem Standards Take Another Significant Step Forward). Adigital dial-up service like ISDN (Integrated Services Digital Network) offersdata rates of 64–128 kbps. Internet connection via optical fibre and Digital Sub-scriber Line (DSL) are also making strides of late, whetting the appetites of a userbase craving ultra-fast access. These technologies are termed broadband as theydeliver breathtaking speed of between 256 kbps to 1.5 Mbps (megabits per sec-ond) today, enabling a whole host of multimedia applications impracticable withthinner data pipes. Even higher data rates are promised for the future as broad-band technology evolves.

Analogue or digital broadband, Internet access has hitherto involved being teth-ered to some fixed line connection. It was a matter of time before mobile userslooked to recreating their Internet experience wirelessly. Wireless data transportover digital cellular networks was thus cast into the limelight. But initial en-counters proved underwhelming at best: 2G mobile systems were sub-optimisedfor data transmission. Networks in the early 1990s were based on the GSMPhase 1 standard, carrying data at a dismal 9.6 kbps before climbing to 14.4 kbpsunder Phase 2 in 1995. A year later, the introduction of the High-Speed Circuit-Switched Data (HSCSD) specifications revved throughput fourfold to57.6 kbps—nearly on par with ISDN but certainly not quite broadband perform-ance. But not many infrastructure providers took to HSCSD, stagnating trans-mission at the Phase 2 rate in many GSM networks to this day. CDMA networksdid not fare better with the first commercial 14.4 kbps data service launched aslate as February 1998 (LG TeleCom Launches CDMA Wireless Data Service).

Many countries around the world presently deploy both 1- and 2G systems con-currently to serve varying needs for capacity, mobility, coverage and servicefeatures. But with demand for mobile Internet access growing rapidly and usersaccustomed to far speedier connections than what 2G technology provides, themarket clearly needed a new solution—one better optimised for wirelessdata transmission.

2.3 Second-and-a-half Generation—2.5G

2.3.1 General Packet Radio Service (GPRS)

In 1996, the European Telecommunications Standards Institute orETSI (http://www.etsi.org) rectified the GSM Phase 2+ release that includedamong many other improvements, a radical technology enhancement calledGeneral Packet Radio Service (GPRS). It was conceived to solve 2G data woesand boasts a theoretical maximum data speed of 171.2 kbps—more than tentimes the average GSM rate and threefold that of analogue wired modems. Whilepractical throughput may be considerably lower, the forecast is still for GPRS tooffer at least 56 kbps connection in 2001, and double that the followingyear (Buckingham, Yes 2 GPRS). Wireless data transmission is en route to catch-ing up to its wired counterpart at last. Since GPRS represents a paradigm shift inGSM communications, new cellular handsets are required to exploit the ad-vanced data features. Widespread availability of such devices at accessible pricesis imperative to popularising the platform. British Telecom Cellnet inauguratedthe world’s first commercial GPRS service in June 2000 (BT Cellnet Rolls Out


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Nationwide GPRS Coverage) and networks in Hong Kong and Singapore havefollowed suit since then.

GPRS overlays packet switching technology on top of existing GSM and TDMAcellular architectures, effectively providing an upgrade path for infrastructureproviders. Existing networks employ a circuit switching strategy whereby eachconversation hogs the dedicated radio ‘circuit’ assigned until call termination.Packet switching conserves bandwidth in several ways. Data is transmitted inspecially encoded packets such that multiple conversations may be amalgamatedto share frequency channels without detriment as to subsequent correct separa-tion. No uninterrupted radio channels are set up among conversing par-ties—packets are simply transmitted into the network for system arbitration totheir final destinations. Furthermore, network connections are maintained vir-tually and dynamically: access is instantaneous, established on-the-fly only whenthere is actual data traffic.

Both GPRS providers and subscribers stand to benefit from the efficient band-width utilization. Proper infrastructure planning and implementation can staveoff the adding of excessive idle network capacity just to accommodate peak timetraffic spikes. High connection immediacy enables subscribers to maintain avirtual ‘always on-line’ status vis-à-vis the network without a full-time wirelessconnection, resulting in considerable airtime cost savings. It also endears thetechnology for use in relatively more time critical data applications like on-line e-commerce transactions and real-time credit authorization.

The Internet is perhaps the ultimate example of a packet switched network. It isno coincidence that the GPRS specifications embraced Internet protocols as itsfoundation. Incorporating the industry standard Internet Protocol (IP) broughtinstant compatibility: A GPRS network becomes subsumed into the Internet col-lective as yet another sub-network, interconnecting with others. GPRS mobiledata devices function just like other wired sub-nodes on the Internet, inheritingseamless access to IP-based networks like the WWW, and common IP servicessuch as e-mail, Telnet and FTP (File Transfer Protocol). A GPRS terminal can staywirelessly linked the whole day to a corporate intranet or to the Internet via anISP, receiving transmissions automatically and initiating communications at will.

GPRS forces a fundamental review of entrenched mobile service pricing policies:Data packet transmission may only be sporadic though a subscriber is always onair, calling into question the legitimacy of purely time-based tariff schemes.However, one based solely on transacted data volume would not effectively allo-cate scarce bandwidth and shape traffic over time. The optimal tariff modelcould well be one that combines per packet charges during peak times and anunlimited volume flat fee off-peak (Buckingham, Yes 2 GPRS).

The GPRS platform is not without its failings. The data channel competes forradio bandwidth with voice calls carried on the same network, limiting averagethroughput and absolute capacity to below the theoretical maximum. Packetswitching incurs processing overhead associated with collecting and re-assembling received packets, causing slight transmission latency—insignificantfor most mobile applications, but detrimental to a time-sensitive one like videodecoding and playback. Hence, GPRS is still not the optimal air interface for highquality wireless video conferencing. Another packet switching system artefactdissipates a data call if the intended recipient is offline during transmission—nostore-and-forward mechanism exists to guarantee ultimate call delivery. To


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overcome this limitation, GPRS needs to be paired with a complementary net-work service such as Short Message Service (SMS), discussed below.

2.3.2 CDMA IS-95B

Not to be outdone, the CDMA camp had been busy with plans shoring up itsnetwork data transport. The IS-95B standard mooted in mid-1997 extended thecdmaOne infrastructure to target ISDN-like data throughput. The new technol-ogy made a triumphant debut early January 2000 in Japan with a sparkling64 kbps data rate (IDO and DDI Establish Market Leadership with Motorola's 64kbpsHigh-Speed Wireless Internet Access on cdmaOne Networks in Japan), trouncing pre-vailing GSM offerings and beating GPRS to market by some six months.

Wireless data fervour began slowly gripping a mobile communications industryfresh from bringing voice carriage under control with 2G systems. The system-atic drive for improved data transmission were to lay the foundation for betterInternet access—the key to unleashing electronic commerce upon the mobilenetwork. While there remained room for further speed improvement, the notionof wireless Internet access was becoming within reach. GPRS and CDMA IS-95Barchitectures mark the ‘2.5G’ stage in the cellular telephony evolution—a mo-mentous yet destined to be brief milestone brought on not only by relentlesstechnology attrition, but also the irreversible trend towards ever more band-width-hungry Internet applications.

2.4 ‘2.75G’

While wireless data infrastructure is finally delivering usable transmission speedand quality, wired Internet access is undergoing a renaissance of itsown—broadband connectivity further raises the bar on throughput and overalluser experience. Before long, cellular network providers are forced into yet an-other research and development cycle to tackle rising consumer expectations.Standard bearers rallied to the challenge, piqued by the commercial potential ofa full-fledged wireless Internet platform.

In a show of solidarity, the Universal Wireless Communications Consor-tium (UWCC) and the GSM Association (GSMA) endorsed EDGE (EnhancedData rates for Global Evolution), a component of the 1996 ETSI GSM Phase 2+standard. EDGE was to be the penultimate extension to GSM technology, lever-aging installed TDMA and GPRS infrastructures to preserve past investments.Expected to be commercially available beyond 2001, EDGE mandates upgradedcellular handsets to attain data transmission speeds of up to 384 kbps initiallyand 553.6 kbps eventually. The CDG had evolved its next-generation cdmaOnestandard by July 1999. Called cdma2000 Phase 1 or 1XRTT, data speeds of be-tween 144–614 kbps are possible. The first 144 kbps 1XRTT service was commer-cially launched to much fanfare in Korea by SK Telecom in October 2000 (SKTelecom Launches Commercial cdma2000 1x Service).

When EDGE and cdma2000 Phase 1 are planted firmly in place, high-speed mo-bile data connectivity rivalling the wired variety would become ubiquitous andonly then can the era of wireless Internet access be deemed to have truly arrived.For this reason, some have loosely demarcated this stage on the cellular technol-ogy road map as ‘2.75G’, hinting perhaps at the interim nature of this signpostand a suggestion of greater things soon ahead.


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2.5 Third Generation—3G: Broadband network

The next logical progression would be broadband transmission speed parity formobile data communications—an amazing technical feat with intriguing com-mercial possibilities. But against this backdrop of data obsession, another in-dustry undercurrent was emerging strongly to assert itself: Service compatibilityamong different mobile networks. By the turn of the millennium, intense com-petition had consolidated the world cellular telecommunications market into re-gional blocs advocating divergent technologies and standards. While these infra-structures generally offered similar value-added voice and data services, manywere technically incompatible across international boundaries and often within acountry. Subscribers committing to say, GSM handsets may access GSM net-works at home and even abroad but not CDMA ones and vice versa—a frustrat-ing phenomenon for mobile citizens of the global village that is the world today,and one that demanded lasting relief.

The pre-eminent worldwide standards body International TelecommunicationsUnion (http://www.itu.int) or ITU had working groups convened since theearly 1990s in a grand attempt to propound a single global standard for teleph-ony (Newly Created ITU Group on IMT-2000 to Develop Work Plans for Future Wire-less Services and Systems). The massive undertaking proved to be an onerous yetultimately fruitful harmonization effort: When the first International MobileTelecommunications 2000 (IMT-2000) recommendations were promulgated inlate 1999, detailed technical input from practically all industry stakeholders hadbeen taken under advisement. International participation was absolutely criticalto producing a set of unified global guidelines and submissions were exhaus-tively received from organizations as diverse as the UWCC, GSMA, CDG andthe Third Generation Partnership Project or 3GPP (http://www.3gpp.org)—theumbrella association of national telecommunication standards authorities fromthe United States, Europe, China, Japan and South Korea.

IMT–2000 specifies a family of comprehensive solutions that enables mobile ser-vice providers to evolve their cellular networks towards eventual full inter-network compatibility independent of the underlying radio transmission tech-nology deployed. It is envisaged in the future for mobile devices to roam seam-lessly on enabled networks across continents, finally unlocking the true value ofinstalled infrastructures. Both circuit- and packet-switching topologies such asTDMA, CDMA and GSM must be accommodated, integrating disparate systemsto create borderless mobile services. To this end, IMT–2000 prescribes among itsmany proposals, migration paths for various network systems towards conver-gence: EDGE as enhancement to TDMA; cdma2000 as successor to CDMA; andUMTS (Universal Mobile Telecommunications System) as successor to GSM.Further provisions harmonize these three advanced technologies at convergenceto achieve network compatibility.

The CDG has lined up ITU-endorsed IMT-2000 compliant standards in its stable,namely cdma2000 1xEV (CDMA World Congress Successfully Concludes; Third Gen-eration Evolution Plans Revealed) and cdma2000 Phase 2 (3XRTT). UMTS is theGSM camp’s IMT-2000 initiative advocated by the 3GPP and the UMTSForum (http://www.umts-forum.org). Protecting existing infrastructure invest-ment in GSM and its derivatives like GPRS, UMTS will employ a new ITU-approved radio transmission technology called Wideband-CDMA (W-CDMA) to


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reach IMT-2000 compliance (UMTS Forum Welcomes ITU Approval of IMT-2000Radio Specifications).

Voice carriage sidelined during earlier stages of cellular communications devel-opment will receive substantial boosts in capacity and voice quality under IMT-2000 from the significant improvement in bandwidth utilization. New generationdevices will support concurrent use of voice and multiple mobile services. Un-precedented data rates will be on tap, scaling with relative mobility of transmit-ting device during communication: From 144 kbps data throughput for high ve-locity in-vehicle settings, and 384 kbps for mobility below 120 kilometres perhour, to a heady 2 Mbps under stationary indoor conditions (Buckingham, Dataon 3G). Mobile broadband connectivity would finally be a reality, enrichingoverall Internet user experience with high-speed wireless, on-demand access toe-commerce applications, online services and entertainment with all the associ-ated accoutrements of high quality audio and video. To fully exploit the new-found multimedia capabilities especially video, devices must be embellishedwith video cameras for image capture and bigger display screens for playback.

IMT-2000 represents one of the most monumental telecommunications stand-ardization exercises, with the lofty ambition to eradicate systems incompatibilityand provide a platform for international cellular network roaming mobility notjust for voice but also data. The tremendous data pipeline it brings redefines thestatus quo on Internet access—pushing the envelope beyond ‘wireless Internet’to ‘wireless multimedia’. Massive harmonization and broadband connectivitydifferentiate Third Generation or ‘3G’ mobile communication systems from pre-vious, the culmination of three decades of cellular research endeavour. 3Gpromises to revolutionize communications with its virtually limitless data appli-cations beyond voice. Indeed, the UMTS Forum projects more data than voicewould be transported over wireless networks by 2005 (The UMTS Third Genera-tion Market—Structuring the Service Revenues Opportunities).

Telephone network operators the world over are jostling for radio bandwidthspectrum licenses to operate 3G services in their respective markets, a testimonyperhaps to the prospective commercial ramifications of the technology. TheUnited States Federal Communications Commission (http://www.fcc.gov) 3Glicense auction that commenced in mid-December 2000 offered a total of 422licenses spanning 195 domestic markets (C and F Block Broadband PCS LicenseAuction Fact Sheet). The launch of the first commercial 3G services in Japan byNTT DoCoMo from May 2001 should prove an interesting watch (DoCoMo An-nounces Service Brand Name of 3G Wireless System).

3 Wireless messaging developments

3.1 SMS—Short Message Service

The evolution of digital cellular communications has focused largely on acceler-ating data communication amid steadily improving radio transmission technol-ogy. While bearer channels such as HSCSD, GPRS and 3G differ in capacity andthroughput, they share the common trait of transmitting over the central dataconduit provided by the underlying bandwidth. One bearer technology how-ever, is unique in this regard: Data is instead borne by the signalling radio re-sources reserved in cellular networks for locating mobile devices and connectingcalls. Short Message Service (SMS) is a wireless service conceived for the bi-


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directional exchange of short alphanumeric messages of up to 1601 characterseach among mobile devices. Originally developed in 1991 as part of the GSMPhase 1 standard, SMS has permeated the industry today and has grown in so-phistication to support messaging between devices and enabled systems externalto the cellular network such as Internet e-mail, the WWW, corporate intranetsand private telephone exchange systems. Since transmission occurs off the pri-mary data channel, short messages can be sent or received concurrently evenduring a voice or data call.

SMS offers a store-and-forward scheme that guarantees message delivery. Sentmessages pass through an electronic intermediary in the cellular network calleda Short Message Service Centre (SMSC) for arbitration to their destinations. If anintended recipient is contactable on the network, the message gets successfullydelivered. Otherwise, the SMSC stores it for subsequent delivery when the re-cipient next avails itself on-line. An undelivered message is purged from thesystem after the expiry of its validity period—a user-specifiable duration thatlasts anywhere from an hour to the maximum time stipulated by the service pro-vider. A sender may request the SMSC to provide explicit notice of ultimate de-livery success or failure through a SMS delivery report. This methodology isunique among bearer technologies and has led to the widespread deployment ofSMS as a complementary service alongside most digital infrastructure types fromPCS and GPRS to 3G. A SMSC can also build reply mechanisms into messages itcarries to create a feedback channel between itself and message recipients. Forexample, a user acknowledgement could be made to return a response codemeaningful to the sender for follow-up action. If the associated communicationswere properly encrypted and authenticated, secure and powerful interactivemobile e-commerce services like banking and finance can actually be deployedusing SMS. Service providers are also transmitting only machine intelligible bi-nary-encoded messages to remotely configure mobile devices for service featuresand administer subscriber records with minimal user intervention.

Although multiple short messages may be combined to form longer ones, the160-character ceiling on each message is actually adequate for encapsulating suc-cinct information with SMS starting out as a value-added service to voice calls,alerting subscribers to the presence of voice or fax messages recorded for them.Notification services now encompass paging alert, e-mail notification, calendarreminder and the like. SMS has spawned a wide gamut of one-way informationservices such as weather forecast, traffic watch, stock quotes, exchange ratepricing, flight schedules, sports statistics, gaming results and horoscope read-ings (Buckingham, Success 4 SMS). Originating SMS notes from mobile handsetshas traditionally been hampered by the cumbersome and laborious nature ofusing the diminutive keypads. This has been mitigated by the growing commer-cial availability of new devices sporting stylus input and miniature QWERTYkeyboards. Person-to-person SMS messaging has also benefited from increas-ingly prevalent technologies like the T9 Text Input standard from Tegic Com-munications that speed entry efficiency by drastically reducing requisite key-strokes for message composition (T9 Text Input Licensed by Wireless PhoneManufacturers Representing More Than 90 Percent of Handset Shipments Worldwide).There is also a trend towards integrating SMS to e-mail systems for seamless du-

1 The decision to limit the number of characters to 160 was based on doubling the 80-characterlimitation of alphanumeric pagers then.


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plex messaging between platforms, and SMS-enabling Web sites to further ex-tend their reach into the wireless domain. In fact, the case study later in this pa-per profiles a firm that builds its business model around value-added SMS ser-vices and technology.

The functionality and convenience of SMS has popularised adoption and pro-pelled message volume to astonishing highs: The Cahners In-Stat Group expectswireless messaging to explode from 3 billion messages sent monthly worldwidein December 1999 to 244 billion per month in 2004 (Fun Wireless Data Facts). Theslow pace of SMS evolution since its inception a decade ago is set to quicken asthe market continues to gain critical mass and service providers look to furtherdrive revenue. Some handset manufacturers had taken to differentiating their of-ferings via proprietary extensions to SMS technology, but industry momentum isbuilding towards a single improved standard—Enhanced Messaging Ser-vice (EMS).

3.2 EMS—Enhanced Messaging Service

A minor extension to SMS promulgated by the ETSI, EMS will imbue messageswith a rich mix of formatted text, simple animations, tiny pictures and smallmelodies (ETSI TS 123 040 V3.4.1—Technical Realization of the Short Message Ser-vice). The specifications support left, centre or right alignment of text and threefont sizes in five type styles intermixed within EMS messages, allowing for bettertext layout. Small black and white still images of varying sizes up to 32 by 32display pixels each may also be included and if desired, tiled together on-screento form a larger picture. Manufacturers may embed a number of their own pre-defined animations into handsets to be triggered into action by the receipt ofspecific code tokens inside messages. An identical mechanism is employed toplayback the 10 preset sound effects. To conserve bandwidth, only a maximumof four tiny user-defined animations and custom melodies no longer than 128bytes may be transmitted over the air per message. Such structural complexitywas bound to increase message length considerably so EMS specifications pro-vide for the concatenation of several classic SMS messages to convey the load.EMS-enabled handsets are expected to be commercially available by the first halfof 2001.

EMS enriches but does not revolutionize the messaging experience. Riding atopthe time-tested platform, EMS weighs SMS down with voluminous data, poten-tially defeating SMS as a quick and efficient delivery agent. Given SMS has tocompete for scarce radio resources within the cellular signalling band, a torrentof EMS messages can degrade messaging service quality quickly if left un-checked (Buckingham, Next Messaging: An Introduction to SMS, EMS and MMS).With SMS volume rising rapidly unabated, a long-term growth strategy is crucialto securing the future of wireless messaging. It is fortunate a ready source ofbandwidth has been awaiting in the sidelines: The fast expanding data express-way afforded by the likes of 2.5G to 3G technologies proves an irresistibledraw—transforming SMS from a bearer channel into a data application is only anatural progression.

3.3 MMS—Multimedia Messaging Service

Multimedia Messaging Service (MMS) has been proposed by the 3GPP as thenext generation wireless messaging system (3G TS 22.140 V4.0.1—Stage 1 Multi-media Messaging Service: Release 2000). A single message can contain a myriad of


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elements such as text, audio clips, still pictures, animated images, full-motionvideo and other multimedia embellishments destined for viewing on MMS-enabled terminals. As message size is bound to be heftier than that for SMS andEMS, MMS transmits over the data and not signalling channel of cellular net-works, tapping the broader bandwidth to deliver large messages expeditiously.MMS will also inherit the SMS store-and-forward guaranteed message deliveryschema, complete with delivery report confirmations.

MMS defines a comprehensive service environment that systematically inte-grates new and pre-existing messaging platforms, striving for maximum com-patibility and consistency. MMS will not only support and interwork with fax,paging, voice mail and SMS legacy services, but others external to the mobilenetwork like Internet e-mail, chat and the WWW. Seamless and transparent ser-vice roaming among domestic and international networks is also targeted fortruly universal messaging access.

The MMS specifications stipulate the necessary framework to attain these loftyideals. Industry standards and protocols, if they exist and are applicable, will beembraced for near-term compatibility and extended upon only as necessary. Forexample, MMS will support right at the onset, popular multimedia file formatssuch as JPEG for photographs, MP3 for audio and MPEG for video. StandardInternet protocols such as MIME (Multipurpose Internet Mail Extension) andSMTP (Simple Message Transfer Protocol) will be used to encode multimediamessages and handle Internet e-mail respectively. A standards-based approachwill assure backwards compatibility even as MMS evolves.

To achieve universal message access, bearer and device independence are man-datory. MMS services must be made accessible through all generations of cellularnetworks from 2G to 3G to cater to the eclectic mix of infrastructures often en-countered across geographies. Within practicable limits, MMS will automaticallyre-purpose content to fit the idiosyncrasies of target terminals, providing base-line messaging access from a broad range of devices. For example, less graphicsintensive version of a multimedia message could be delivered to a terminal withlimited screen real estate. Finally, MMS has a baseline security model in place tomanage message transmission encryption, authentication and privacy.

The 3GPP is collaborating with the WAP Forum (http://www.wapforum.org) toutilize the latter’s Wireless Access Protocol (WAP) as the standard of choice forencapsulating MMS messages (WAP MMS Message Encapsulation—Draft 0.8).WAP was selected for its extensibility and excellent technical fit. MMS is ex-pected to dovetail on the gradual commercial rollout of 3G systems worldwideand early use on enabled terminals will likely be for person-to-person messagingusing digitised images.

4 The mobile Internet

4.1 WAP—Wireless Application Protocol

Decades of impressive growth in the cellular telecommunications industrymasked the reality of the state of standards development within the sector. Ven-dors clamouring for market share often differentiated their products and servicesby taking proprietary and divergent routes, leaving a trail of fragmented stand-ards and incompatible systems well into the 1990s. The phenomenon eventually


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stifled innovation as few firms had the clout to gain sustainable economies ofscale to prevail over the long term in the marketplace. The industry was in direneed of a focal point as the launch pad to a new wave of research and develop-ment. Recognizing the need for a more coordinated strategy, wireless telecom-munications luminaries Ericsson (http://www.ericsson.com), Motorola (http://www.motorola.com), Nokia (http://www.nokia.com) and Phone.com (http://www.phone.com) founded the Wireless Application Protocol Forum (http://www.wapforum.org) in mid-1997 with a view to forging an open, extensible andunified industry standard for delivering sophisticated telephony services overwireless networks to mobile devices.

Wireless Application Protocol or WAP establishes the foundation necessary toprovide wireless terminals seamless and secure access to information and inter-active services residing within the mobile network and beyond, especially on theInternet. The architecture targets complete device and bearer independence forubiquity: Devices as diverse as mobile phones, alphanumeric pagers, PDAs andother wireless appliances are supported, as are practically all cellular networktechnologies from 2G to 3G—WAP scaling to device display and feature sophis-tication and the underlying data bandwidth as appropriate. WAP specificationsinclude frameworks defining the application development environment, datatransmission protocols and transaction security (WAP Architecture).

At the core of the application development environment is the micro-browser orWAP browser, essentially a highly trimmed and pared-down version of conven-tional Internet Web browser software. It is optimised for use in WAP-enableddevices to view information content delivered wirelessly on demand from net-work servers. The facility to run applications under script control is also presentand forms the basis for driving user-application interactivity. The browser evenhas scripting access to telephony functions such as phone call dialling.

WAP data transmission scheme is Internet standards-based, but adapted to thespecial constraints of the wireless domain—an environment exemplified by gen-erally low bandwidth, high latency, connection instability and unpredictableavailability. Internet content encoded in Hypertext Markup Language (HTML)for transmission via the Hypertext Transfer Protocol (HTTP) is far too text andbandwidth heavy for the purpose of conveying information efficiently to mobiledevices. Instead, WAP encodes content using the lightweight Wireless MarkupLanguage (WML) and transmits compressed binary code data in place of plaintext. WML optimises content for viewing on small screen displays typical ofwireless terminals and facilitates easy, one-hand operation of the built-in micro-browser. Unique to the WAP framework is data push support: A network servercan proactively initiate the sending of content wirelessly to a target WAP deviceand not merely respond passively to data requests (WAP Push Architectural Over-view). This powerful feature allows automated dispatch of time-critical informa-tion such as alerts and notifications to WAP subscribers.

The WAP security framework is based again on Internet security standards. Op-timised for response speed over low bandwidth, high latency wireless networks,authentication and encryption is implemented to provide privacy and data in-tegrity for secure communications and transactions. Support is being added forPublic Key Infrastructure (PKI) cryptography for digital signatures. These meas-ures enhance the viability of WAP as a platform for mobile e-commerce and se-


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cure wireless access to sensitive data stores such as corporate Intranetsand databases.

WAP represents an ambitious industry attempt to consolidate the wireless datamarket by leveraging existing technologies. Internet and cellular infrastructureproviders stand to profit from the revenue potential of interconnecting theirnetworks without significant new investment. Mobile hardware manufacturerscan design and ship differentiated yet globally compatible products in volume,reaping significant economies of scale. Content and applications providers al-ready experienced at deploying to the WWW will take to adapting their offeringsfor WAP access with ease utilizing familiar tool sets, extending market reach to ahuge mobile user base. End users gain from pervasive, real-time and securewireless access to pertinent information and new online services, choosing froman expanded range of compatible WAP devices.

WAP-enabled handsets have become commercially available from 2000, manycommanding a price premium due in part, to the slight enhancements to devicescreen size, processing power, memory, battery life and navigation interfaceneeded to create a satisfactory user experience. WAP faces another hurdle in at-tempting to recreate the Internet experience for subscribers wirelessly: A deviceis likely to be operated in a highly mobile and dynamic environment in whichthe user is engaged in concurrent multiple activities, resulting in shortened at-tention span and ability to manage complexity. The overriding emphasis is hencefor WAP applications to be available instantly on demand, as easy to use as pos-sible for short durations and accomplish small, specific tasks quickly withoutfussing over complicated content navigation structures. These requirements allbut rule out lengthy conventional Web browsing sessions as the primary driverof WAP traffic. Rather, the applications strategy is for providers to rework pre-existing Web-based services and create new ones tailored to the intricacies of theWAP platform. Potential applications include mobile commerce transactions,online banking and stock trading, and retail directory listings. The takeoff ofWAP has thus far been hampered by the low immediacy and performance of 2Gcellular systems, but the much exalted performance optimisations inherent inWAP will truly shine with the gradual worldwide rollout of high data rate net-works such as GPRS (Buckingham, Yes 2 WAP).

With the WAP Forum industry alliance standing at some 500 members com-prising the world’s foremost telecommunications, information technology andsoftware companies, and more than 90% of the major mobile handset manufac-turers worldwide committed to releasing WAP-compatible devices (The WirelessApplication Protocol: Wireless Internet Today), WAP has become the de facto stan-dard for wireless data services. Its continued development and relevance seemsassured with close collaboration already in place among global telecommunica-tions and Internet standards authorities like the ETSI, Telecommunications In-dustry Association (http://www.tiaonline.org), World Wide Web Consor-tium (http://www.w3.org) and Internet Engineering Task Force (http://www.ietf.org). Boding well for the future of WAP, a recent Gartner Dataquest surveyof the Asia/Pacific market found it to be the dominant mobile Internet platformsupported by the majority of network operators in the region (Asia/Pacific MobileInternet Service Dominated by WAP in First Quarter 2000).


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5 Mobile commerce

5.1 Innovative m-commerce applications

The market value and growth statistics for electronic commerce (e-commerce) onthe Internet speak volumes about just how entrenched the new business para-digm is in the world economy today. Wired Internet access via computer termi-nals enabled the public and firms alike to participate in domestic and interna-tional trade together on an unprecedented scale and at an incredible speed overthe WWW. Although cellular telecommunications technology was late to themarket delivering usable wireless Web access only recently, the sheer success ofthe mobile telephone as a consumer electronic device cannot be disputed. In-dustry trends are pointing to likelihood for wireless access via mobile terminalsto eventually outstrip its cabled counterpart. In fact, this is already the case in Ja-pan as a study had shown that while 25% of households had access to the Inter-net, only about 11% of them had a personal computer (Fun Wireless Data Facts).The change from voice to data centricity in mobile telephony was fuelled pri-marily by the demand for better wireless Internet access. As mobile networksconverge with the Internet, the spillover of e-commerce from the latter is inevi-table and hence, the take-off of mobile e-commerce or m-commerce is almost as-sured. The Aberdeen Group predicts by 2004, 74 million users or one-third of allwireless subscribers will access the mobile Internet (Mobile E-Commerce to Reach74 million Wireless Users by 2004).

The wireless industry is gathering momentum, delivering on high-bandwidth2.5G to 3G networks, augmented messaging platforms like EMS and MMS, andbetter transmission security and efficiency with WAP. Initiatives like these areaimed at ushering in the age of wireless multimedia and the commercial poten-tial it conjures. There are reasons to believe that the arrival of wireless broadbandtechnology will not only enable better versions of pre-existing Web applicationsto be deployed but fundamentally new ones, creating new value proposition forconsumers and revenue streams for vendors. The true power of the mobile In-ternet lies in the innovative m-commerce applications it will spawn.

5.1.1 Location-based services

The transmission interaction between a wireless terminal and the cellular infra-structure it resides in allows the service operator to place to within some accu-racy, the geographical location of the device as it roams about inside the cover-age footprint. Several positioning strategies yielding varying accuracy are used,most detecting a terminal’s activity in the particular cell site providing the wire-less service, while another technique modifies a mobile handset with Global Po-sitioning System (GPS) hardware to relay its satellite-placed location back to theservice provider (Hayes). Pinpoint precision may not even be necessary for net-work operators to offer subscribers value-added services based on their physicallocations on the network.

A wide array of new commercial applications can capitalize on this previouslyunavailable subscriber detail (Buckingham, Mobile Positioning). Medical emer-gency and roadside assistance may be wirelessly requested and service renderedin a more timely manner by homing in on the targeted recipient’s location withinthe cellular network. Mobile service providers may introduce location-based bil-


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ling, charging subscribers at a residential rate when they use their handsets athome2, and a different tariff when they roam to other locations on the network.Commercial courier services can wirelessly track and manage their deliveryfleets as each vehicle roams about the network coverage area equipped with anin-vehicle mobile terminal. Advertising can become highly targeted and person-alized to a subscriber’s location, e.g., notifying an individual of a special discounton his or her favourite items as that person passes within the vicinity of the asso-ciated retail outlet. Even an information service as benign as helping subscribersfind the public washroom closest to them can be implemented (Taggart).

5.1.2 Multimedia entertainment

The higher data bandwidth afforded by 2.5G and 3G networks will be a boon tom-commerce applications in the field of interactive multimedia entertainment. Inparticular, the distribution of multimedia content such as computer games,audio and video will be wireless and on demand.

Wireless games

Until recently, the closest any mobile handset came to being a game console wasthe handful of rudimentary games embedded in some models. Not only wasplay very basic without lush graphics, games were fixed for the lifetime of thedevice—users could not run programs of their choice. In September 2000,French-based company In-Fusio (http://www.in-fusio.com) launched itsExEn (ExecutionEngine) technology, a platform for sophisticated game devel-opment on mobile devices (Mobile Phones Finally Become Real Hand-Held GameConsoles Thanks to In-Fusio’s ExEn Technology). ExEn game play is rich with real-time 3D graphics, animation, music and sound effects. Users can downloadgames of their choice from a huge library over the cellular network for play ontheir enabled phones or play interactively against one another wirelessly, usingdata bearers such as SMS, GSM and GPRS. Users also receive embedded adver-tising along with game programs, creating a new real-time promotional channelfor advertisers. The company expects to have more than 100 ExEn games by late2001 and several major mobile handset manufacturers have committed to ExEn-enabling their phones.

Wireless streaming media

Streaming media enables the real-time playback of audio or video clips as theyare being retrieved without first waiting for the entirety to be downloaded andstored on the target device. Traditionally a bandwidth hungry endeavour evenover cabled Internet access, innovative technologies have evolved to providewireless users similar capabilities on their mobile handsets. For example, Pack-etVideo Corporation (http://www.packetvideo.com) offers a platform opti-mised for deploying multimedia content over wireless communications net-works. The technology employs high data compression and built-in errorcorrection to compensate for weaknesses inherent in wireless data transmission,delivering quality full-motion video and audio content to mobile de-vices (Motorola and PacketVideo Demonstrate Streaming Video and Audio for MobileDevices). Another company TuneTo.com, Inc. (http://www.tuneto.com) supplies

2 Hutchinson Telecommunications (http://www.orange.net.au) in Australia has already imple-mented this particular billing method on their CDMA network.


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a platform for broadcasting near-CD quality music interactively worldwide evenover present day limited-bandwidth wireless networks (TuneTo.com Breaks theWireless Barrier, Enabling Delivery of High Bandwidth Media Streams Over Current19.2 kbps CDPD Networks).

With real-time audio, mobile phones become essentially like portable radios.Conventional radio broadcasters have the opportunity to tap into the vast wire-less subscriber base while music vendors can offer for online purchase and in-stant delivery songs from their music library. Real-time video transforms mobilehandsets into miniature television monitors with subscribers able to watchmovies, commercials and other broadcast events. Location-based services caneven target subscribers with location-sensitive streaming content such as audiojingles promoting offers at retail outlets in the vicinity or trailer previews formovies showing at the nearest movie theatre. Nielsen/NetRatings was reportedto have found a 65% jump in the number of home Internet users in the UnitedStates accessing streaming content in the one year from 1999–2000, increasingfrom 21 to 35 million (Mariano). Technology and bandwidth permitting, the po-tential of streaming content on the mobile Internet cannot be underestimated.

5.1.3 Wireless telemetry

Wireless telemetry provides two-way communication between remote equip-ment and a central facility over the footprint of a mobile telephone system for thepurpose of gathering data or remotely controlling devices. As conventional cel-lular infrastructure is utilized without significant modification, implementationbenefit from low cost and fast turnaround (Cellemetry Data Service Via Cellular). Adevice can have its functionality remotely directed by the central facility throughan embedded cellular communication module. It can also wirelessly relay crucialstatus information back in real time or batch mode for recording and follow-up.A popular control function is the instant remote activation and suspension ofpublic utility supply to subscribers. Other commercial applications include themonitoring of security alarms, climate control systems, utility meter readingsand vending machines service status (“Telemetry: Red Hot in Ice Distribution”).

Wireless telemetry results in better supply chain management. It drives effi-ciency and productivity through large scale automation of data capture, im-proves billing timeliness and accuracy, reduces overheads associated with themanual alternative and increases customer satisfaction through service respon-siveness. For example, vending machines can be kept replenished and in reliableoperation by polling inventory and service status continually to avert costly ma-chine downtime. There were 5.4 million vending machines in the United Statesby the end of 1997, presenting a sizeable market for wireless telemetry deploy-ment (Felps).

5.1.4 Wireless electronic payment systems

With the rising worldwide market penetration of mobile handsets, wirelesspayment represents the next logical step in the evolution of electronic paymentsystems. The concept involves transforming mobile phones into secure and self-contained purchasing tools, capable of instantly authorizing payment over thecellular network for goods and services consumed. In Finland, SMS messagessent from GSM handsets are already being used to pay for food and drinks atsome outlets, initiate a car wash and trigger vending machines into dispensinggoods, all simply by dialling special numbers posted for the purpose (Buechner).


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An Israeli firm, TeleVend, Inc. (http://www.televend.com), has also pioneered asecure platform that allows subscribers to make payments using mobile phonesof any make on any cellular infrastructure (TeleVend, Inc. Introduces m-ABLETechnology at DEMO 2000). A typical payment session is akin to a credit cardpayment transaction: A customer making an impending purchase places a con-ventional mobile phone call to a number stipulated by the merchant. Connectingto a TeleVend server, the user selects the appropriate transaction option toauthorize payment. Upon approval, the server finally alerts the merchant tocomplete the sale. Final billing can be made to the customer’s bank or credit cardaccount, or even the mobile phone bill. This m-commerce technology has wide-ranging application, such as to collect payments for parking charges, restaurantorders, groceries shopping, gas station bills and public utility tariffs.

5.1.5 Telematics

Many people spend an inordinate amount of time daily inside their vehiclesowing to traffic congestion or long commute journeys. Those looking to spendthat time more productively by accessing the Internet would be fairly disap-pointed: Advances in cellular communications has made mobile Internet a re-ality on wireless handsets, but they remain impractical for Web access by auto-mobile drivers busily focused on the road. Voice-activated, hands-free dialling ishelpful under driving conditions, but navigating complex phone features byvoice has been impossible. New initiatives in telematics promise to addressthese shortcomings.

Telematics refers to the integration of wireless communications, vehicle moni-toring systems and vehicle location devices. MobileAria (http://www.mobilearia.com) is a proposed standards-based telematics platform designed to bringmultimedia services and m-commerce to automobiles. A cellular phone, a hand-held computer like a PDA, and other appropriate hardware are integrated toprovide personal information management, mobile Internet services and enter-tainment right on the vehicle dashboard. Advanced text-to-speech and voice re-cognition capabilities form the basis of the sophisticated voice-activated interfacethat minimizes driver distraction during use. For example, a user can composeand send e-mail by dictation, have news read aloud and easily voice navigateamong system features hands-free.

A host of online information services such as news, weather report, stock quotes,flight schedule, traffic information and route assistance are accessible initially.Higher bandwidth m-commerce applications, rich messaging, streaming mediaand location-based services will follow as transmission bandwidth improves. Anopen standard, MobileAria will support over time, all mainstream PDAs andhand-held computers, mobile handsets and wireless network infrastructures.MobileAria is expected to ship commercially in the United States during the sec-ond quarter of 2001 (Delphi Automotive, Palm and Mayfield Fund Launch MobileAriato Bring Hands-Free Internet to the Automobile).

5.1.6 Wireless telemedicine

Teleconsultations have long been conducted between doctors and their patientsin distant, rural areas but are traditionally conducted over fixed line ISDN net-works. Although 2G mobile networks cannot supply similar bandwidth, it hasnot stopped the gradual development of wireless adaptations.


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Wireless telemedicine refers to the use of mobile telecommunication infrastruc-tures and multimedia technologies to provide medical information and deliverhealth care services remotely. It facilitates the continuous monitoring of a pa-tient’s vital signs and condition by a hospital physician and allows the medicalsituation to be managed even as the patient is attended to by a paramedic enroute to the hospital in an ambulance fitted with a wireless transmission system3.Research experiments have demonstrated the feasibility of simple implementa-tions over 2G infrastructure (Gagliano). With the impending introduction ofbroadband 3G mobile systems, the concept of mobile medical clinics on wheelsmay become commercially realizable, potentially reducing costs and improvingproductivity of delivering quality health care in remote regions, leveraging themultimedia transmission capabilities of 3G technology (Versweyveld).

5.2 Current issues in mobile commerce

5.2.1 Wireless privacy

Mobile network location-based services offer content and service providers anunprecedented avenue to target consumers based on their physical locale. Withlocation technology steadily improving, it is plausible subscribers could soon beplaced with near pinpoint accuracy. Consumer advocates view this to be a threatto personal privacy, with the associated issues of undue surveillance, spam andprofiling (“Privacy on Mobile Internet Studied”).

It is conceivable location data could be collected to explicitly track the physicalmovement of a particular subscriber within the network coverage. This could es-calate to become a personal safety issue if the location information fell into thewrong hands through inadvertence or malicious theft. Companies keen to mar-ket their location-sensitive products and services might flood mobile handsetswith advertising material every time subscribers passed within range of retailoutlets. Firms could merge past data they had systematically gathered on users’Web usage habits and purchasing patterns with location information to buildeven more detailed consumer profiles from which they could discern previouslyobscured patterns to generate new promotional ideas.

It is fortunate the wireless marketing industry segment is in its infancy and theopportunity exists for stakeholders to stave off potential privacy disputes byconcerted early discussions . There are proposals for stringent industry self-regulation such as using low granularity location information when precision isnot critical nor desirable, obtaining explicit user consent before releasing locationdetails to advertisers and guaranteeing user anonymity even when data is usedby applying only aggregate information without identifying specific individuals.Subscribers ought to stay vigilant by getting acquainted with the privacy policiesof their service providers, whom in turn should have strict measures in place forsecuring user profile databases to prevent misuse or abuse. If the experiencegleaned from the wired Internet is indicative, esteemed advertisers ought toknow that consumers would be least receptive to mobile phone spam.

3 Micromedical Industries Limited (http://www.micromed.com.au) in Australia has successfullydeveloped electrocardiograph (ECG) machines that are able to transmit the information via WAPfrom mobile devices to hospital centres.


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5.2.2 Wireless payment systems

The use of transmission encryption technology has essentially contained the risksinherent in sending credit card information over the Internet to online merchantsfor payment settlement. Encrypted details like card number and expiration dateare largely secure en route, although this does not prevent subsequent misap-propriation at the destination. To further fortify security, credit card companieshave implemented authentication systems that verify the identities of transactingparties. Advocated by Visa (http://www.visa.com) and MasterCard (http://www.mastercard.com), the Secure Electronic Transaction (http://www.setco.org) system is supported by major banks but has been relatively costly for mer-chants to implement, delaying its widespread adoption. But the biggest short-coming of credit card settlement schemes by far relates to the expensive fixedtransaction overheads that favour higher value transactions, precluding cost ef-fective use for small value payments.

Internet payment systems are forced to evolve to accommodate new e-commercephenomena such as mobile commerce conducted on cellular phones and theproliferation of innovative online charging structures such as payment per ac-cess, by data volume or elapsed time. An ideal system must handle all paymentvalues large and small, cope well with high transaction volume, track billingcomprehensively, adapt to sophisticated pricing structures and interface seam-lessly with diverse payment platforms like mobile phones and wire-less terminals.

A new secure Internet payment platform called Jalda (http://www.jalda.com)has been formulated by EHPT (http://www.ehpt.com), a joint venture betweenEricsson and Hewlett-Packard (http://www.hp.com). Jalda is an open systemthat enables Internet purchasing from stationary computers, mobile phones orany other device with Internet connectivity (Jalda: A Quick Look at Payments on theInternet). It employs the notion of a payment intermediary called an InternetPayment Provider (IPP)—which could be a bank, a credit card issuer, an ISP or atelecommunications network provider—to arbitrate transactions between buyersand sellers, and to bill customers on behalf of merchants. This value-added ser-vice earns IPPs an added revenue stream. Jalda is unique in its ability to cost ef-fectively handle micro-transaction payments for goods and services—down tofractions of a cent, billed in accordance to individual vendor’s pricing structureand charges are accrued for single billing to the customer. Merchants and con-tent providers gain from the outsourcing of billing logistics and much improvedcharging granularity and flexibility, for instance, pricing service at several centsper block utilized. Consumers benefit from a secure payment system that letsthem make payments for small purchases from their wireless terminals withoutincurring excessive administrative charges, potentially boosting the volume ofmicro-transactions commerce online.

5.2.3 Wireless security

A reader survey of 101 information technology and business managers by Inter-netWeek (http://www.internetweek.com) in December 2000 found concernsabout security risks to be the overriding reason why firms have delayed de-ploying wireless Web technologies (Violino and Webster). Respondents foundthe WAP 1.2 specifications immature and insecure for enterprise class deploy-ment. The WAP Forum has committed to delivering version 1.3 which will en-able end-to-end security and add support for Public Key Infrastructure (PKI)


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cryptography (Buckingham, Yes 2 WAP), removing another obstacle to the via-bility of WAP as a secure wireless platform. M-commerce applications providerscan use WAP digital certificates to authenticate between transacting parties andto enable encrypted communications over the Internet and mobile net-works (Entrust Technologies First to Deliver Digital Certificates to Enable TrustedWireless Transactions). Web merchants can hence conduct secured transactionswith mobile customers.

Computer viruses have begun the migration to hand-held devices like PDAs andeven mobile phones as such terminals gain more processing power and intelli-gence. With the user base of cellular phones outstripping that of personal com-puters, it was only a matter of time before malicious individuals targeted theplatform with rogue code. The Gartner Group was reported to have estimatedthe proliferation of viruses afflicting hand-held computers to occur by late 2001and mobile phones soon after by mid-2002 (Kessler). This would present a sig-nificant security risk in the future to mobile users whom are growing increas-ingly reliant on their wireless devices not just for voice but data services such asmobile commerce.

The first computer virus know to have specifically targeted mobile phones aspart of its payload was isolated in Spain in mid-2000 (“Security Experts InterceptCell Phone Virus”). The virus was spread as an e-mail enclosure on conventionalcomputers but was also designed to send prank SMS text messages to randomlyselected mobile phone numbers on a particular cellular network in the country.Had the outbreak not been contained early, the flood of messages could poten-tially have crippled the network. Few mobile phones today possessed the capa-bility to handle e-mail attachments but subsequent generations of Internet-enabled devices will be better equipped and hence be more vulnerable. Anti-virus vendors have already begun shipping anti-virus programs for hand-heldcomputers but the onus remains on users to be vigilant to the possibility of suchinfections in time to come.

5.2.4 Wireless emission and public health

The mobile telecommunications industry has long grappled with the contentiousissue of cellular radio frequency (RF) emission and the impact on public healthand safety. In particular, there is fear that emission from wireless handsets andcellular base stations may actually be cancer inducing, sparking public outcry formanufacturers to be forthcoming about the true ramifications, given the rapidincrease in the use of mobile phones and related technologies. A recent compre-hensive study by the Independent Expert Group on Mobile Phones (http://www.iegmp.org.uk) in the United Kingdom reported no general risk to thehealth of people living near cellular base stations nor evidence that linked hand-set emission directly to health effects in users. The study did urge more detailedresearch to be conducted in the future and for the public to adopt a more pre-cautionary approach in their use of mobile phone technologies mean-while (Mobile Phones and Health).

Studies by the World Health Organization (http://www.who.int) had arrived atlargely similar conclusions, noting that while some scientists have reportedchanges in brain activity, reaction times and sleep patterns in some human sub-jects, these effects are small and have no apparent health significance. Researchhad however clearly demonstrated an increase in traffic accidents when mobilephones are operated while driving—even using so-called hands-free kits. There


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was also evidence to suggest the possibility of electromagnetic interference fromthe use of cellular phones near sensitive medical devices such pacemakers andhearing aids, and aircraft avionics. The Organization is presently conducting co-ordinated research in more than 10 countries to study if cellular phone usage ledto head and neck cancers. The project is expected to be completed in2003 (Electromagnetic Fields and Public Health).

The Cellular Telecommunications and Internet Association (http://www.wow-com.com) in the United States mandated in June 2000 that every new mobilephone carried information about its radiation emission rate to enable consumersto make an informed choice among different models (CTIA Certification Require-ment to Provide Consumer Information About SARs). Despite industry effort such asthis and research findings on good authority, public concern does not appear tohave been quickly allayed: As of late December 2000, at least 10 lawsuits seekingcompensation totalling billions of dollars were being prepared against cellularnetwork providers in the US, charging that mobile phone radiation is directly re-sponsible for causing brain cancer in users (Borland). The high-profile legal ac-tions would be keenly watched and could prove a public relations debacle forthe wireless telecommunications industry. Negative publicity could potentiallystunt subscriber growth, lower investor confidence, reduce investment in futureinfrastructure technologies and affect the long-term outlook on mo-bile commerce.

5.2.5 3G license auctions

The world’s first 3G license auction was concluded in the United Kingdom inApril 2000 and reaped the British government a staggering US$30 billion—fourtimes more than was expected (Woffenden). A similar sale soon followed inGermany fetching some US$45 billion. Telephone companies that won the bid-ding frenzies have since had their stock value traded down, punished by nega-tive market perception that many have overpaid for the rights to set up next-generation mobile infrastructures. There is consensus building that these incum-bent licensees may ultimately be unable to return enough profits for sustainablegrowth, having to pass significant costs on to subscribers whom might balk atthe high asking price for 3G services. Reliance on premium-paying corporateusers is not seen as a plausible business model as consumers traditionallyformed the critical mass of customers in the telecommunications industry.

Rationality appears to have prevailed in many subsequent auctions around theworld: One in Italy brought US$24 billion and another in Switzerland fetchedUS$113 million. Yet others have experienced postponement and even cancella-tion: One in Poland was cancelled in December 2000 when only three bids werereceived. Most recently, a 3G auction slated for February 2000 in Singapore waspostponed for two months . As at this writing in January 2001, an auction is on-going in the United States and could possibly fetch up to US$20 billion for thefederal government—the largest ever for a sale of domestic bandwidth. TheYankee Group was reported to have estimated the final outcome to be a moreconservative US$5 billion (Goodman).


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6 A mobile portal case study—BlueSkyFrog Pty. Ltd.

6.1 The Australian mobile phone market

Australia has a mobile penetration rate exceeding 50% (Towards a National MobilePhone Strategy). There are currently about 10.4 million mobile phones in total butonly about 15,000 WAP phones in Australia. Almost all the mobile phones inAustralia can send and receive SMS messages except for the very early models.The majority of the phones are GSM-compatible. The CDMA network is beingintroduced in Australia to replace the analogue networks that were terminated in2000 and had been primarily used in the rural areas of Australia.

6.2 Company background

BlueSkyFrog.com (http://www.blueskyfrog.com) was founded in Australia inDecember 1999 with about 100 users. The initial purpose of the portal was to en-able SMS interconnectibility among the three major mobile networks in Australiathen. The 100 users grew to 1,000 within a week by word of mouth, proving thegrowing popularity of SMS services even then. By April 2000, the networks an-nounced the introduction of interconnectibility services among themselves andpredicted the demise of companies providing SMS services such as BlueSkyFrog.However, BlueSkyFrog numbers by then had grown to almost 50,000 users andhad added additional SMS services and functionality resulting in the number ofunique users growing to over 1 million by January 2001. The phenomenalgrowth was also a result of the increasing popularity of SMS services fuelled byactive promotions and publicity from the local mobile networks trying to emu-late the success of SMS traffic growth in Europe.

BlueSkyFrog also has a corporate division4 that is responsible for marketing SMSand other wireless solutions to corporations. These include enabling SMS mes-sage broadcasting from corporate Internet Web sites or intranets, and providingtechnology to corporations developing mobile commerce applications and mo-bile Web portals.

6.3 Demographics, facts and figures

BlueSkyFrog is the most popular telecommunication Web portal in Australia andregularly features as one of the top ten most visited consumer Web sites in thecountry as ranked by Top100.com.au (http://www.top100.com.au). About 15%of all Australians between 18 and 25 years old are BlueSkyFrog members. Thephenomenon of youths being attracted to the site and higher overall SMS usecould stem from their lower technology aversion—the so-called ‘Nintendo-generation’ having grown up playing computer video games and the like. Thelower cost of SMS messaging compared to voice as a communication tool is yetanother draw.

About 75% of all BlueSkyFrog users are aged under 25, making the portal a veryattractive advertising channel for retailers targeting the ‘Generation-Y’ market.Since each user is authenticated to his or her mobile telephone number, potentialadvertisers are assured of an audience made up of unique phone owners andmobile service subscribers. However, 35% of users are aged under 18, posing an

4 The first author has been involved in the development of the BlueSkyFrog corporate division.


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issue with credit card payment administration. The acceptance of Internet cur-rency Beenz5 as payment has partly overcome this problem, making BlueSkyFrogone of the most popular online destinations for Beenz credits redemption.

6.4 Mobile services

As at this writing in January 2001, BlueSkyFrog.com provides the followingvalue-added SMS features and functionalities to users:

• mobile information services such as news, finance, sports and enter-tainment

• personalization services for mobile phones—composing and downloadingof ring tones, designing and downloading of logos and icons

• schedulers—allow users to schedule information services for automaticdelivery of SMS messages

• personal assistant and alerts—short memos, to-do list, reminders,time sheet

• games

• mail integration—Web-based e-mail with integrated SMS alerts

• sending of SMS messages to/from mobile phones from/to the Internet

• SMS-to-Web chats

6.5 Mobile commerce and the BlueSkyFrog consumer portal

New users are initially given a set number of message credits called ‘Bugz’. Morecredits may be obtained as follows:

• purchase credits on the Web

• earn credits by participating in online surveys and questionnaires

• earn credits by visiting sponsored Beenz sites and converting creditedBeenz to Bugz

• earn credits by direct BlueSkyFrog membership referrals to friendsand acquaintances

The consumer portal also generates revenue from the following sources:

• Web banner advertisements

• sponsored SMS message transmission for which a sponsor message is ap-pended to the end of BlueSkyFrog originated messages

• market research services that reward user response to online surveys withBugz. A good example of the success and responsiveness of this BlueSky-Frog service is a survey conducted for a local mobile network reseller that

5 Beenz (http://www.beenz.com) is an Internet currency that functions like cash. Beenz can beearned by interacting with Web sites that reward visitors for browsing their content, and spent atsites like BlueSkyFrog and others that accept Beenz as online payment for goods and services.


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saw 16,000 responses to a questionnaire within an hour of its on-line posting.

• target marketing channel. Corporations may target specific segments ofthe BlueSkyFrog user base for direct marketing by sponsoring e-mail orSMS messages to those interested in receiving them. For example, portalusers can subscribe to an assortment of SMS information services byBlueSkyFrog and its content partners, one of which is live surf reportingprovided in collaboration with Coastalwatch Technology6.

• sale of Bugz to users

6.6 The Future for BlueSkyFrog

BlueSkyFrog intends to maintain the popularity of its mobile portal throughtechnological superiority. Its WAP site WAPMeBaby.com (http://www.wapmebaby.com) caters to the growing WAP popularity of and hosts a large number ofWAP sites for its users. Its WAP gateway provides mobile phone WAP users thefacility to go beyond the ‘garden wall’ that some mobile network operators haveerected to restrict subscribers from accessing non-affiliated WAP sites. WAPMe-Baby has garnered about 50% market share of all WAP phone owners in Austra-lia. BlueSkyFrog is poised to migrate the majority of its SMS users to WAP oncethe latter technology becomes more popular with the introduction of fasterbandwidth technology such as GPRS.

In addition, BlueSkyFrog has patents pending on a filtering product tool calledFeedMeBaby that allows a user to select text or image content on any Web siteand customize it for delivery to their mobile phone via SMS or WAP for text, andWAP for images. Other products in development include SMS Secure7 that en-ables secure and semi-secure transactions to be conducted on mobile phonesusing SMS without any phone modification. The purely software applicationdriven solution will verify receipt by a message recipient and authenticated themessage sender to achieve non-repudiation in m-commerce transactions.

7 Conclusion

Mobile telecommunications has seen an evolution from a voice focus during itsfledging days to data-centricity presently. The future along this developmentpath will be down a decidedly multimedia route—plans are already afoot to de-velop mobile communications technology into its Fourth Generation (4G) be-yond 2007—a collaboration between NTT DoCoMo (http://www.nttdocomo.com) and Hewlett-Packard will research the next-generation broadband multi-media delivery framework. Code-named MOTO-Media, the architecture is ex-pected in the long-run to enable high-performance streaming of multimediacontent to mobile users based on intelligent agent technology, employing ad-vanced scalable media coding methodologies and optimally using network re-sources (NTT DoCoMo, HP Announce Joint Research Effort).

6 Coastalwatch Technology (http://www.coastalwatch.com) provides surf reports on Internetplatforms like the Web and e-mail, and mobile platforms like WAP and SMS.7 The first author contributed to the development of the SMS Secure product.


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In the near term, 3G networks will present a new channel to distribute con-tent—practically anything that can be digitised and packaged for wireless deliv-ery. Cellular handsets will improve tremendously in form and function overtime, a beneficiary of the many technological advancements in components tech-nology happening in parallel: Organic Light-Emitting Diode (OLED) will replaceconventional Liquid Crystal Display (LCD) screens, taking up less space andweight, and consuming far less power; new video camera technologies withsimilar advantages will provide video capture functionality on terminals; low-cost, non-volatile storage media will offer cost effective storage drawing minimalpower; and new battery technologies will radically enhance battery life while re-ducing weight. Since new handsets are required for each new generation ofwireless infrastructure, their timely availability in volume at mass market priceswill be critical to the success of those networks.

At the same time, more and more portable consumer electronics devices such asPDAs and other hand-held computers are becoming mobile-enabled, swellingthe wireless network user base. Pampered by their newfound mobility andwireless Internet connectivity, the proliferation of these devices is expected tocontribute significantly to the volume and value of mobile commerce in the fore-seeable time ahead, further unleashing the power of the mobile Internet.

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