But consumers are billed for those services through their phones, and at pennies per transaction. It's a huge leap from there to a Web-like system where the product or service is not delivered through the phone itself, and where the provider is separate from the merchant. Most mobile providers have no experience or infrastructure for the back end of m-commerce. "The mobile guys have diddly-squat," says Keith Woolcock, a wireless analyst with Nomura. "They're going to have to form alliances with AOL and Microsoft," and that will eat into badly needed revenue.
Then there's the security issue again. Probably the least-discussed barrier to m-commerce is the lack of security and privacy in wireless transactions. A recent survey conducted by Boston Consulting Group (dossier) uncovered deep mistrust in this area. In Sweden, a country where mobile phones are as ubiquitous as anywhere on the planet (more than seven out of 10 adults use them), an astounding 87 percent of consumers said they were concerned about sending their credit card number over a mobile network.
That surprisingly high figure could stem from the fact that, compared with many developed nations, Sweden has relatively low credit-card usage. Even so, the figure for concerned consumers in the United States is 74 percent; in Japan it's 83 percent. Consumer fears about security leaks in Internet and wireless networks may be overblown. But when a hacker working on a Brooklyn, N.Y., public library computer can steal banking and credit card details from the likes of George Soros and Ross Perot, as happened recently, public wariness seems justified.
Overblown or not, consumer fear is a huge marketing challenge, and one that mobile operators and m-commerce purveyors seem ill-equipped to tackle.
5. Dial "M" for Moneymaker
"The imminent arrival of 3G phones will create a massive market for wireless data services."
This is the mighty myth, the one that launched $130 billion in frenzied license auctions. According to widespread predictions made just two years ago, 3G phones were supposed to be on the market by now, offering customers mobile data speeds of up to 2Mbps. (That is approximately 40 times faster than a 56Kbps dialup connection, and would presumably allow for easy viewing of moving color images.) Instead, 2.5G phones are just now being introduced, and many companies have had to postpone their 3G launches.
Siemens (SI) recently estimated that by mid-decade, only 15 percent of European subscribers will be using 3G.
By itself, delay does not mean failure. But the pressure is acute because of the debt that major wireless operators acquired in order to obtain spectrum licenses. (At Deutsche Telekom (DT), for example, debt reached more than $50 billion, and the company's credit rating hinged on junk-bond status.)
Furthermore, the full rollout of third-generation services requires building a vast network of radio towers and base stations. That expense will almost certainly add another $100 billion to the 3G bill, possibly twice that amount. Earlier this month, the German government said it would allow 3G license winners to share network expenses. It's far from clear, though, that such post-auction niceties will withstand legal challenges from those who were outbid.
The longer these services are delayed, the more market share they may lose to cheaper services called 4G. As UBS Warburg's McCue puts it: "I haven't seen one business plan for 3G that makes sense. Not one."
