As everyone from Sony to Cisco Systems scrambles for position in the post-PC world, the Europeans are leading from strength. That’s why Microsoft trekked to Stockholm earlier this month and agreed to become Ericsson’s minority partner in a joint venture that will develop software for mobile Web browsing. It’s also why Vodafone AirTouch enjoys a market valuation so lofty that it’s able to offer some $130 billion in stock for Mannesmann–which just snapped up Orange of the U.K. in a $32 billion deal of its own. European mobile operators are coveted and costly properties. Deutsche Telekom’s thwarted lunge for Telecom Italia last spring was primarily an attempt to get its hands on mobile operations; DT then went on to buy Britain’s One2One in August. The competition is global–and fierce. Bell South edged out rival bidder France Telecom when it swooped in this month with Dutch partner KPN to buy E-Plus, Germany’s third largest mobile operator. “This is all about who is going to become the leader in the most important industry of the 21st century,” says Ron Sommer, CEO of Deutsche Telekom.
Driving all this is the idea of putting the Internet in the palm of your hand–a deceptively simple notion that has strategists up and down the wireless food chain drawing and redrawing business plans. Manufacturers are redesigning the phones and the base stations that move calls through the air. Telecom companies are ordering up both, and packaging phones and services for consumers. In September the first so-called smart phones hit European stores. They work on a new protocol, called Wireless Application Protocol, or WAP, that allows you to access the Web while on the move. Software designers are beavering away, refining operating systems and developing new browsers, applications and Web sites. And content providers such as Bertelsmann and Reuters are rethinking delivery of news and information. In fact, thousands of companies–airlines, booksellers, race tracks–are already at work on streamlined, mobile versions of their Web sites. No wonder: Danny Williams of Analysys, a market research company based in Cambridge, England, predicts that more than half of all European mobile users will be connected to the Internet by the end of 2001.
What will they all do online? If the industry’s hopes pan out, consumers will eagerly embrace something they’re calling m-commerce. From a seller’s point of view, mobile commerce is even niftier than old-fashioned e-commerce, because it goes beyond ordering flowers or books or jeans. When the customer’s mobile, information itself–whether a bus schedule, a rugby score or directions to the nearest pizza joint–gains value. And there’s a billing system (the phone bill) already in place. Falk Muller-Veerse, researcher at London technology-investment firm Durlacher, calculates that m-commerce will soar to 23 billion in 2003 from 323 million last year. “It creates a very powerful tool for one-to-one marketing,” he argues. That’s because consumers will personalize their portals to receive only the kind of information they want, creating a valuable little profile for an advertiser. Mobile operators can track calling patterns. And eventually, with positioning technology, they’ll know where you are, too. Attention, ice-cream lovers: Haagen-Dazs may beam you a half-off coupon if you’re in the neighborhood. Before long, voice could be free in exchange for a little targeted advertising.
If m-commerce sounds like an even bigger leap than e-commerce, it is. Hence the accepted wisdom that it will take some very big companies to make it happen. The biggest is Vodafone AirTouch, which is to the wireless world what MCI WorldCom is to fixed lines (though the U.S. giant is on the march in mobile communications, too). Like MCI WorldCom’s Bernie Ebbers, Vodafone CEO Chris Gent built a behemoth through aggressive acquisitions–with the most aggressive, his hostile bid for Mannesmann, still pending. Jump-starting m-commerce is going to cost Gent and his counterparts hundreds of millions of euros in license fees alone next year, as much of Europe follows Finland’s lead and auctions off chunks of the spectrum for so-called third-generation services. And to deliver those services (for example, real-time video), operators will have to spend billions on new equipment and marketing. “I have this business plan for Spain on my desk and I have to ask myself, is this a gamble?” says Kai-Uwe Ricke, head of Deutsche Telekom’s T-Mobile. All the while, the operators must protect their revenue streams from portal purveyors and other market participants. Average revenue per user is falling as competition forces prices down. Many operators, like Sonera in Finland and BT Cellnet in the United Kingdom, are already managing their own Internet portals so as to retain a bigger chunk of revenues.
Hans Snook, CEO of Orange, is determined to claim a nice slice of the value-added pie. He entered the U.K. market in 1994 as the fourth competitor, and quickly built nationwide, high-speed coverage. Today that network is the perfect platform for Wildfire, a voice-activated service now being tested by 25,000 of his customers. A woman’s voice dials the person you name and interrupts a conversation if an important call comes in. An American on the West Coast, hearing Wildfire ask Snook if she could cut in to transfer a call, was amazed that Snook could get his secretary to work at 3 a.m. More amazing still: Orange’s videophone plans. The company’s turbocharged second-generation network will be fast enough to launch initial services next year. And because the big manufacturers won’t produce videophones for another four to five years, Orange got things going by subcontracting the handset work to smaller suppliers.
A missed opportunity for Ericsson and Nokia? Don’t feel too sorry for them; they can’t keep up with the demand for current hot products. Customers want more WAP phones than Nokia can make, and Ericsson is still hustling to get its WAP phones on shelves by next spring. That kind of customer enthusiasm made Nokia the most highly valued company (142 billion at recent prices) on any European stock market earlier this month. And it has validated CEO Jorma Ollila’s early insight that consumers would treat their phones as fashion accessories as well as tools. Indeed, Nokia showed its sleek 8210 model at a Kenzo fashion show in Paris in October. Products are now arranged into six categories with separate brand images, and global launch manager Harri Leino-nen brandishes color slides identifying consumers such as “Self-Expressionists” and “Peace-of-Mind Seekers.”
At high-touch Nokia, even simple concepts like “data” are made user-friendly. Olli-Pekka Lintula, director of product marketing for third-generation phones, won’t let his engineers use the word. “When we talk about data now, we’re talking about things like music,” he says. His team is playing around with three concept models for five years down the road. They are smooth, thin and oval-shaped, like cosmetics cases. The “Mobile Book” is for Web browsing for professional use, and the “Fun Phone,” with the biggest screen, is for music and video.
But the true potential of the wireless Web doesn’t hinge on the color of a phone. It’s about getting what you want, when you want it, wherever you are. That’s why start-ups like Red Message of the U.K. and Sweden are jumping in now to offer new services on existing systems. Looking for a job? Register with Red Message client Reed employment agency, and it will pop you a message as soon as a good one becomes available. Trying to have a baby? Another service, WebBaby, will track a hopeful mom’s biological clock and send a red alert on fertile days. “We’re not taking bets on technology,” says Steven Yurisich, who launched Red Message last month with two former executives from Sweden’s Telia. “We’re going in now to help Internet businesses reach mobile customers, and get everyone used to it.”
As they get accustomed to it, most are recognizing that the hallmark of a good mobile Web application is practicality. “We have to think about normal life,” says Harald Behnke, a managing director of Berlin-based Web designer Pixelpark. The customer doesn’t want to surf the Net from the back seat of a taxi. He wants to check his e-mail, download the latest sales forecast and scan any breaking news on his industry so he can look smart at the meeting he’s going to. And information targeted to the caller’s position will also strike a chord. Yrjo Neuvo, senior vice president of product creation for Nokia, imagines in five years a global taxi service: you land in any city, push one button and a cab slides up to the curb.
The myriad possibilities explain why wireless ventures are attracting so much of the venture capital now flooding into Europe. “Wouldn’t it be cool if you were on a train and wanted to listen to music?” asks Vic Morris, London-based partner with Atlas Ventures Morris, who helps manage a new $400 million fund targeting Internet companies. At the moment that would be very expensive, even if the right phones existed. “Maybe a music download would be free if you’re willing to listen to an ad,” he speculates. “You have to keep your mind open to new possibilities.”
That’s putting it mildly. The possibilities in mobile communications are such that everyone–manufacturers, service providers, software and content companies–is talking to everyone, even as they worry about competing with the same companies. Cling too long to yesterday’s strategy and you could be in trouble, no matter how powerful you are. Microsoft’s deal with Ericsson is partly a tacit concession that Windows CE, an adaptation of Microsoft’s desktop operating system, has slipped behind Symbian. That’s the group formed in June 1998 by all the big mobile powers (including Ericsson, Nokia and Motorola) to design operating software based on that of Psion, the British maker of personal digital assistants. “We’ll see a number of other such linkups in the next 12 months,” says Nokia’s Ollila. With Nokia too? “Might well be,” he says coyly. “American companies have been making many pilgrimages to Europe.”
Of course, inventing the faith doesn’t mean you get to be high priest forever. Japan’s NTT Mobile Communications Network beat the Europeans when its mobile unit offered a comprehensive Web-access portal called i-mode. Analysts say U.S. wireless operators are up to two years behind Europe, handicapped by a hodgepodge of standards and a pricing plan where users pay to receive a call. Yet Internet-crazy Americans are comfortable with e-commerce, and Internet powers such as AOL and Yahoo! have big ambitions in the wireless world. None of which worries Ollila unduly. “We have built up a very deep understanding of the world of mobility over the past 15 years,” he says. “That lead is not going to fall away.” To the contrary: count on the Old World to defend the mobile phone as if it’s the crown jewel of the European economy. Which, of course, it is.
