Location based services were once touted as the ‘killer ap’ for mobile network operators. Location awareness was a facility that only the mobile Internet could offer — opening up whole new revenue streams which were denied to the fixed Internet.  Yet this revolution hasn’t really materialised. Tony Dennis asks whether location still has a role to play in the services of the future.

The first thing to say is that expectations for location-based services (LBS) have changed noticeably. In 2001 Analysys forecast that location services revenues will grow from just over USD2billion at the end of 2002 to more than USD18.5bn by the end of 2006.  Yet by 2002, the ARC Group said that the location-based services market will grow from around USD1bn worldwide in 2002 to an estimated USD15bn worldwide by 2007.

Part of the problem derives from the multiplicity of LBS technology solutions and legislative uncertainties. In the USA, there are three different technologies certified for the E-911 initiative for emergency services, while in Europe the E-OTD (Enhanced Observed Time Difference), TDOA (Time Difference Of Arrival), A-GPS (Assisted GPS) and Enhanced Cell-ID location technologies, were all considered for the equivalent E112 legislation. The decision by the EU to simply specify the technology which is ‘feasible,’ means that the ball is once again firmly back in the operator’s court when it comes to deriving revenue from LBS.

Direction suggestions

To offer some guidance, analysts, Global Information, drew up four scenarios of how European operators might benefit from LBS. In Scenario 1, it cited a French operator deploying A-GPS in 2004. The prediction was that the expected capital expenditure over five years would be USD100.6million (assuming 15% subsidisation and 25% A-GPS handset migration rate). This, they claim would result in annual LBS revenues of USD213.1m. Scenario 2 sees a German operator relying on Enhanced Cell ID technology installed in 2001. Here, the expected capital expenditure over five years would be USD36.4m, while the resulting annual LBS revenues would be USD52.1m. Scenario 3 moves to Italy where an operator deploys E-OTD in 2004. The expected capital expenditure over the same five year period would be USD60m, resulting in annual revenues of USD251.5m. In the final scenario, a UK operator deploying TDOA in 2004, could expect capital expenditure over five years of USD81.6m and annual LBS revenues of USD291.5m.

Overall the returns aren’t exactly suggesting that location technology will set the mobile world on fire. However, this does not necessarily mean that there is no market for LBS. It is more that the technology and applications are yet to truly converge into compelling services.

Successful alternatives

A good illustration of the difficulties operators are encountering when providing location based services is provided by examining the rival systems aimed at a core market — transport. In central London. identifying the exact location of customers phoning for taxis is a major problem. However, rather than relying on just one technology to provide location information, taxi companies are using multiple technologies to create a service.

For example, taxi cab manufacturer, Manganese Bronze Holdings, is offering Zingo which enable the consumer to call a national rate number from a mobile phone. Using cellular-based location technology to identify where the customer is, the system then switches to GPS satellite technology to identify Zingo taxis in the vicinity. The customer is then connected to the nearest cab driver by voice to provide more precise location information. In effect Zingo uses two LBS services plus voice to do the job.

In partnership with The Location Network, Netsize is offering the alternative London Taxi Point service by installing physical signs at popular locations in the capital. Customers text the numbers written on the signs and this correlates to their exact location. The system then once again takes advantage of GPS terminals fitted to the taxi cabs to send the nearest taxi. It may not be that advanced technically but it does meet the market demand.

 “Many existing location based systems use Cell ID technology to locate an individual based on the position of the handset against base stations. However, many of these systems can be inherently flawed,” argues Craig Barrack, UK manager with Netsize. “In a highly dense urban environment such as Central London, a single cell can cover many buildings and may not be accurate enough for a [location based] service.”

Location Network’s CEO Davis Ward-Perkins, agrees adding, ” For those location-based services that rely on accuracy, many look to user-input as a means of fixing an individual’s position. This may come in the form of entering a postcode, or in the case of London Taxi Point, referencing a four-digit code that is unique to a designated location.” With regard to Cell ID technology, Ward-Perkins says, “It certainly has its applications and in time, when the accuracy improves, we will see a great deal more services that rely on its ability to fix an individual’s position. In the meantime, a positive user-experience is vital to the continued success of [LBS]. For London Taxi Point, there is no room for error. The taxi either arrives in the correct location or it doesn’t. If it doesn’t, then the chances of the customer using the service again are minimal. With physical signs and location codes the element of doubt has been removed.”

Matching the technology with a user benefit is vital to generate revenue and, according to Joe Barrett, director for industry marketing with Nokia Networks, this can be achieved by operators staying closer to their natural environment. He argues that network operators will employ LBS in the battle to capture voice minutes from the fixed line operators.
In Germany, for example, mmO2 has employed 1800MHz technology to offer its Genion service which provides GSM handset users with cheaper voice calls when they are within their ‘home zone.’ Barrett argues that by taking this principle and enhancing it with location technology, operators can offer a really valuable service. The handset would automatically recognise it is within a ‘home zone’, but it will not merely offer lower cost calls but will change a whole variety of parameters. Vitally, these would include its advertised presence so that the user is only visible to friends, family etc. Indeed, the use of presence will mean that as soon as a user looks at the handset’s address book, it will be possible to tell whether a particular contact is at home, work or travelling.

However, according to some, mobile operators have already missed the LBS boat. Ann-Louise Palm, CEO with Appear Networks suggests that the real opportunity can be found in the already location-specific environment of WLAN hotpots, “The numbers of [Wi-Fi] locations and connected users are growing daily.” she states and this provides a good base. However, she is well aware that it is services that count, “I’m not talking about PDA users being bombarded with advertising as they walk into shops…In reality, really useful contextual geo-localised services should be available for professionals. “Imagine a machine in front of you, capable of instructing you how to operate it, even able to transfer an educational video to your mobile terminal. Or imagine walking into a conference and having instant access to the floor plan of the conference venue, the conference programme and speaker presentation files. Well, this is not science fiction,  Appear Networks made this possible [via Wi-Fi] last year [2202] at the Stockholm Challenge held in Stockholm City Hall.”

User appeal

Appear also believes that LBS is relevant for other kinds of workers besides travelling executives and office clerks. “This is also useful for blue collars — a maintenance worker, for example, can plan where to lay cables on a building site. A security guard can locate video cameras in his/her field of surveillance. Appear Networks’ technology today makes it possible to tune positioning within a radius of a couple of metres,” Palm claimed. “As transport workers, security guards and hotel personnel don’t all require instant access to the same kind of information, it is vital to know a person’s specific profile. It’s about services. Users are not buying the technology (GPRS, UMTS, Wi-Fi), they are buying functionality.”

One of the greatest drawbacks to any LBS offering is consumer concern over privacy — a fear that ‘Big Brother is watching You’ through such facilities.  An excellent example of this kind of reaction was provided in the Iraq war where US military authorities demanded that journalists surrender their Thuraya handsets through a fear they were transmitting vital location information to the enemy. Of course this was only a remote danger even if the GPS capability was switched on (and it defaulted to off). This incident illustrates just how vital it is for users to be able to understand how they can disable positioning services or severely restrict how much information is revealed.

“The industry has done well to push location-based services and I don’t think we have been victims of too much hype. It certainly isn’t letting the user down in the same way that WAP did in its infancy,” commented Ward-Perkins. “The technology is maturing daily, but until location-signalling phones are used by the bulk of the population and the accuracy increases there will be a place for user-input based services particularly for applications that want to pinpoint a user down to an exact building.”

Early indications from the mobile data arena may not be giving any definitive messages about which applications will drive the market but one theme can be heard loud and clear — users want content related, value-based billing that is easy to understand and above all predictable. Catherine Haslam talked to  Dr Jens Trötscher, vice president of SchlumbergerSema Business Support Systems unit, about how this can best be achieved.

Mobile Europe:  A number of operators have been running high profile data services for over six months now, what are the early lessons being learned about billing for data services?

Dr Trötscher: Operators are beginning to get feedback from their users and this is clearly showing that billing rationales impact on the user’s willingness to use services. Firstly, the majority of services are billed on a byte basis and customers are simply not interested in this. They want a billing structure that is relevant to them and that means relevant to content.

Looking at it from the other side, the operators want to encourage data usage. However, the open-ended nature of charging for each event is putting people off exploring new services, while price advice delivered prior to every action merely acts as a reminder of the cost and as such creates a barrier to further use.

Mobile Europe:  There are clearly problems with the functionality that many billing systems currently offer but is there a better option?

Dr Trötscher: Billing must be for content with a clearly defined price and no separate charge for traffic — furthermore we believe that these content services will need to be bundled together and offered simultaneously as packages. These would comprise a number of music downloads, picture messages, location-based services, or whatever else operators believe will appeal to their customer bases. Customers would be able to pre-subscribe to the package, know what they are getting and understand what they are paying for without being constantly reminded that they are spending money. Some data bundling is done now but it is byte based and therefore difficult for users to understand.

Mobile Europe:  There may be benefits for the customers but what about the operators?

Dr Trötscher: All operators are looking to increase ARPU and they are looking to data services to do this. What bundling does is provide the customer with a clear and predictable view of what they receive for their money. It removes the cost barriers perceived by the user when they are charged for each and every transaction and therefore also encourages a certain level of usage.

Furthermore, in addition to driving data usage and ARPU up bundling also has advantages for an operators internal processes. Service and tariff definition processes were built for people with high levels of technical expertise. But with the introduction of many more and new data-based services, this has to change as it needs to be easier for marketing departments to access and create pricing definitions.

Mobile Europe:  Does this mean that marketing is taking over the billing function?

Dr Trötscher: Absolutely not. It is still necessary for the billing systems as a whole to capture the traffic levels and meter the transport layer but this needs to be de-coupled from the marketing functions.
It’s about building in a layer of abstraction which allows marketing departments to work from the functionality that exists in the network and use pre-defined tariffing and service building blocks to create compelling service bundles. This is something we are providing via the Product Center function of our  Business Support and Control System (BSCS) which provides the flexibility to deliver new, innovative bundles quickly and effectively. If the content already exists in the operator’s portfolio, it can take as little as a day to set up.
In effect the marketing department will have the freedom to create new bundles, run promotions etc but within strict boundaries; they will operate within their own sandbox. The technical divisions will still be responsible for the system configuration which must remain separate, as well as collecting information from all the network elements and the reconciliation of that data.

Mobile Europe:  This all sounds sensible and simple in concept but how easy is it to implement?

Dr Trötscher: The simplicity is created at the end for the customer because it needs to be that way but, as is often the case, the simpler it looks in the end, the more complicated it is early on. Information necessary for billing has to be gathered from the operator and partner network elements and this is far more complicated than it has been in the past.
To this end, we have now included an end-to-end content charging capability in version 8 of our BSCS product which interfaces with the billing system and partner settlement processes.

Mobile Europe: Is this not the job that rating and billing systems have always done? How does it differ?

Dr Trötscher: The strict definition between the responsibilities of the rating engine and the billing system is softening. A lot of things previously done by billing are now done by the real time rating engine that is part of our BSCS. This moves things like taxation into the rating engine and processes them in real time.
We also have to work with what already exists and this means pre and post-paid billing systems and often a number of different rating engines. We need to get these back together and our central balance manager does this in BSCS 8.
There is now another process that needs to take place which translates the traditional billing mechanism into a form users can understand and that is not billing for the byte. In effect, there are now two billing requirements. The first identifies the cost to the  operator and presents it to an internal cost centre, the second creates a bill that is both understandable and relevant for the customer. We believe that this can best be achieved through bundling.
However, this in turn requires not just real time billing but real time balance management. This real time balance management capability is what sets BSCS 8 apart as a real solution to the needs of mobile operators today.

Mobile Europe: Can you explain the difference between real-time rating and balance management?

Dr Trötscher: For most operators now the ability to rate in real time is not enough by itself. Those rated events must themselves be accumulated in the form of defineable bundles in real-time. With this it is possible to manage accounts appropriately — to authorise transactions, trigger discounts or to trigger alerts if the limits included in bundles are being reached.
However, this requires a powerful tool. In online charging mode, BSCS 8 is designed to support an average latency of 10ms. This means that it can process 20 million single event or 60 million bundled events per hour on a 32 CPU server, while in near real-time post event mode, it can rate 200 million transactions per hour. It’s a powerful solution which has been benchmarked on a number of different platforms aimed at all sizes of operators from Linux systems for smaller operations to more familiar HP and Sun platforms.

Mobile Europe: Isn’t this being unnecessarily complicated? If predictability of cost and value for money are the driving factors for consumers, why can’t operators just offer flat rate, all-you-can eat bundles as have been supplied in the US for fixed line customers?

Dr Trötscher: The bottom line is that mobile capacity is too expensive to offer such options. Operators need to control the usage but there also has to be a correlation between usage levels and the value customers associate with particular content. Identifying this could take years but operators already know that open-ended, unpredictable pricing options will not fly. That is why bundling meets the needs of both operators and consumers today.

Mobile Europe: Can bundled services be offered to all customers or is it just for post-paid account holders?

Dr Trötscher: To maximise the opportunity, operators needs to offer new services to all their customers but they can’t do this without first ensuring that they have full control over the authorisation of transactions. We address this with the concept of real-time rating and balance management which bring pre-and post-paid systems together. It can work in real-time for post-paid if necessary and manage new services for pre-paid and therefore the appropriate payment method can be deployed.
We employ a consulting methodology to the issue of pre and post-paid convergence based on what operators want to achieve. Some want to migrate pre-paid to post paid, others want to increase the value of pre-paid by offering higher value services. We have a generic model of six degrees of convergence moving from CRM only to full system integration, BSCS 8 is part of this with its real-time balance management provides the ability to offer the same products and services to both forms of account.

Mobile Europe: How does the bundling concept work with roaming?

Dr Trötscher: It remains to be seen if there is a valid case for roaming bundles of content. In the future when large operators span the world with a global presence then from a business viewpoint a unified offering may be more realistic.
Technically it is possible today. BSCS 8 supports TAP3.9 and therefore can be used to various business models for the reconciliation and settlement of content-based transactions both with content providers and other operators.

Contact: bssmarketing@slb.com

Although ticketing will lead the way, the mobile commerce report also establishes that the rapid adoption of mobile devices for commerce related applications is by no means limited to ticketing. All segments — money transfers, banking, payments and coupons — are forecast to see significant growth rates.

Report author Howard Wilcox said, “Our report demonstrates the spectacular growth that we forecast across all the segments of mobile commerce. Four of these segments (Ticketing, Money Transfers, Physical Goods and NFC) will more than double in transaction value over the next two years, whilst Digital Goods, Banking and Coupons will still post very healthy growth of 30% to 50% over the two years.”

The Juniper report, however, stressed that commerce providers need to keep users top of mind when developing their applications. If the initial user experience is poor for mobile payment methods — either based on cost, security, reliability or ease of use — then customers will reject them.

Further findings include:

• Mobile banking is becoming a must-have channel for banks;
• The mobile coupons market will approach $6bn by 2014;
• Mobile payments for physical goods will treble within three years as sites such as eBay Mobile and Amazon Mobile are used increasingly.

The new Juniper report features segment level assessments of mobile payments for digital and physical goods, NFC, mobile money transfer and remittances, mobile ticketing, mobile coupons, smart posters and mobile banking. The study pinpoints the key market drivers and constraints and sizes all seven mobile commerce market segments through global five year forecasts of gross transaction values.

After five and a half years of using this column to vent my personal opinions on the state of our industry, it is with some regret that I have to inform you that this is my last such rant.  As such it would seem appropriate to take stock and look at just what has been achieved by the mobile communications industry in that time.

There is little doubt that this has been the most turbulent of times: a period, particularly in the last 24 months, when failure and struggle have been as common as were the rampant stories of success in earlier years. However, as is often the case, the industry is all the stronger for the struggle. Indeed, I believe that despite share values suggesting the contrary, the mobile industry is now in a healthier position than it has been in at any other time in these five fascinating years.

As an interested, and I hope not completely uniformed observer, I have watched the highs and lows with equal excitement. The razzmatazz of the great satellite communications revolution fizzled out with all the impact of damp fireworks, while the hype of WAP was enough to make even the most optimistic supporter cringe at the credibility gap that it created. On the other hand, SMS has smashed every expectation, prediction or indeed anyone’s wildest dreams. It has set new levels of success to which we can aspire and left us with a number of key lessons particularly about the necessity for predictable and consistent pricing policies.

It is, however, easy to forget that in the relatively short time I have been with Mobile Europe, the mobile phone has gone from being a status symbol for the young and upwardly mobile (Yuppies, remember them?) to an essential part of daily life for everyone. It is a remarkable achievement which should not be underestimated, nor should it be allowed to be tarnished by the teething problems that have hit the introduction of packet data.

The mobile communications industry had an incredible childhood; it’s adolescence has been suitably turbulent but now as I hand over the reigns of the magazine, it is about to enter what I believe will be an incredibly rewarding adulthood.

I hope that in my new role with the GSM Association I will be able to help the Association as it strives to lead the industry to that future.  As for Mobile Europe, I know that it will only go from strength to strength under the guidance of the new editor, Keith Dyer. For the last three years Keith has been editing Communications News, a UK magazine which targets information about voice and data communications at enterprises and prior to this he spent a year as Deputy Editor on Mobile Europe. I could not wish to leave the magazine in safer hands and I’m sure that he can look forward to enjoying the same levels of help and support that I have received from everyone involved in the mobile industry.