Point of View May 2002

Why wireless instant messaging may be the key to migrating

mobile customers to 3G services
By Rochus Schreiber and Ragnar Eggen

As third-generation wireless technology comes closer to reality, Figure 1. Need for real-time, text-based communication
the mobile industry is faced with a dilemma: the need to invest
sooner rather than later in developing the required networks Integration with
other services Wireless
Internet
and compatible handsets while not yet knowing what will instant
instant
messaging
messaging
compel people to buy third-generation (3G) handsets and use Integration with
e-mail
the new mobile broadband technology.
Functionality

Two-way presence
But, customers are indeed sending messages about their 3G notification
Evolving
communication needs, although it is not clear that mobile through
Short
operators are hearing them. Chat support the 1990s messaging
services

The first message relates to the popularity of short messaging Address book
services (SMS), which now account for 10 percent of revenue Older messaging
versions
for European operators. Pure message
(e.g. Unix)
sending
PC – PC – On the Mobile,
The second message relates to the rapid acceptance of instant only home home and road across
messaging (IM) services. For many millions of people, IM has or office office borders
Mobility
quickly become as indispensable for business and social
communication as their mobile phones. Commercially in place Emerging opportunity

Source: Accenture

Enter a new communication concept
Accenture believes the real-time communication trends of SMS
and IM will, in fact merge, into a single wireless text-based
instant messaging service. This new communication concept
combines the multiple-party interactivity of instant messaging
with the portability of mobile short messaging services.
Wireless instant messaging addresses the limitations of SMS and
also enhances IM functionality by:
• Extending the communications ability of IM to include voice-calling.
• Establishing unified messaging standards, which will be a key
step to the integration of IM, SMS and e-mail and which will
result in a common message inbox.
• Offering positioning information, which will make it possible to
locate friends or colleagues (“I’m at home and available to
chat”; “I’m back in my office from my meeting”).
• Combining the existing automated customer service agents with
location positioning and permission-based marketing, which will
open new horizons in business-to-consumer interaction.
Customer behavior and technology advances show a need for a new
communication concept that is the “next step forward” for both instant
messaging and short messaging service users.
Enabling and accelerating this wireless instant messaging will be
the faster transmission speeds of 2.5G and 3G technologies.
Consequently the missing link that will move mobile users from
their current mobile phone SMS capabilities to appreciating the
benefits of 3G technologies is for mobile operators to offer real-
time, interactive wireless instant messaging (see Figure 1).
In this context wireless instant messaging will do for 2.5G and
3G what e-mail did for the Internet: open a new technology to
the masses. Eventually, wireless instant messaging will lead the
way to such 3G content services as picture and video transfer.
The favorable business environment for wireless
instant messaging
There are a number of factors creating a favorable environment
for consumer adoption of wireless instant messaging.
• Conditioned customer behavior. With IM and SMS, customer
behavior has already changed to include text-based quick
messages. With that change comes an openness to consider
improved messaging services.
For instance, one of the biggest drawbacks of SMS is that it is a
hit-or-miss proposition: The sender has no advance knowledge of
whether or not someone’s phone is on and if the person is
available to receive the message. With IM, user lists show real-
time availability status: who is “on” and therefore available to
receive a message and who is not. IM and wireless IM also
remove the character limitation of SMS, thus opening the way
for a more natural communication.
• Enhanced handset devices. The mobile handset is rapidly
overtaking the desktop PC as an Internet access device. This is
not to say that a personal digital assistant (PDA) or a phone is
easier to read or use than a PC; rather it recognizes that mobile
devices are much cheaper and more constantly available. This
trend, along with improved mobile device usability and capabilities,
is expected to drive many mobile Internet services before the
broadband third-generation mobile technologies are in place.
• Technology advances. The emergence of robust, open
development environments will mean wireless instant messaging
will be independent of mobile operators or handset manufacturers.
Two additional advances that will help popularize the use of
wireless instant messaging are the proliferation of web-based
applications that can be quickly adapted to wireless protocol,
and the “always on” connectivity and higher data transmission
speeds to be provided by 2.5G and planned 3G mobile networks.
With 2.5G networks already available in most of Western Europe,
we believe that the transmission technology is in place for a
potentially very fast take-up of wireless instant messaging.
Who will own the wireless instant messaging
market?
Mobile operators are in the best competitive position to take the
lead in the wireless instant messaging market. Foremost among
the reasons is that mobile phone users expect to pay for
services, including SMS, whereas IM users do not pay anything
for the service.
Accenture sees the potential for two wireless instant messaging
adoption scenarios.
1. Mobile operator launch. In the operator launch scenario, which
is especially applicable to Western Europe, the mobile operators
will own wireless instant messaging applications and market
them to their subscribers. While early adoption by heavy SMS
users is expected to be high, operators will migrate more users as
they offer reliable, integrated communication across instant
messaging, SMS and voicemail.
The uptake will be faster:
– If existing relationships between operators and handset
manufacturers drive standardization.
– If there is close integration with mobile network functionality,
to enable the user to see availability and the location of people.
– If operators relax their revenue squeeze on content providers,
and if greater revenue sharing drives content proliferation,
which would, in turn, attract more customers.
The business model for the operators is similar to the “open
marketplace” business model adopted by many operators for
SMS content. With this model, the operator seeds the market
with initial content applications based on wireless instant
messaging technology, such as community-based applications
leveraging positioning technology. At the same time, operators
start creating relationships with content providers and
applications developers who will offer additional services. In turn,
content providers, as part of a revenue-sharing deal, will have
access to such operator services as billing, location positioning,
security and authentication.*
2. Third-party launch. In this scenario, wireless instant messaging
will be adopted primarily by existing IM users utilizing PDAs with
wireless cards as access devices to their existing IM accounts.
Mobile operators will provide only the network over which the
messages are sent.
Wireless instant messaging adoption will be slower than the
operator launch scenario due to the following factors.
– PDAs have a lower market penetration than mobile phones.
– Price resistance from customers who are used to free
computer-based instant messaging.
– The higher price of PDAs, which are not subsidized like mobile
phone handsets.
The business model for the third-party launch scenario is most
likely to be based on advertising and, potentially, subscriptions
for more advanced services. In this scenario, the mobile operator
is relegated to the role of an infrastructure provider and will
receive only traffic revenue.
Rochus Schreiber, senior manager-Accenture Communications
& High Tech, is based in London. He can be reached at
rochus.schreiber@accenture.com.
Ragnar Eggen, manager-Accenture Communications & High
Tech, is based in Oslo. He can be reached at
ragnar.eggen@accenture.com.
*See the Outlook Point of View “From ‘killer app’ to ‘killer process’:
Achieving mCommerce success throug strong customer relationships”,
which is available at www.accenture.com.
The views and opinions expressed in this article are meant to stimulate thought
and discussion. As each business has unique requirements and objectives, these
ideas should not be viewed as professional advice with respect to your business.
Contact us at pointofview@accenture.com. For additional ideas from Accenture,
visit the Research & Insights section of www.accenture.com and register for
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