Critical Success Factors in The New Economy: How To Make WAP Worth IT. A Study of Mobile Internet

Critical Success Factors
in
The New Economy
How to Make WAP Worth IT
A Study of Wireless Internet
Andrejs Jerkins
Ivaylo N. Todorov
Karlstad Master Thesis in Service Management

Spring 2001 Department of Business and Economics,
Service Research Centre,
Tutor: Prof. Per Norling
Discovering Success in the New Economy: How to Make WAP Worth IT
Acknowledgements
Working on this research has been tough and extremely interesting task. During the research we
obtained a clear view of this new emerging market and tried to present our vision in the paper as
clearly and thoroughly as possible. We hope that this research will serve as a basis for further
research projects in this area and findings of this paper will contribute companies in the industry.
This master thesis would not have been possible without the help of many people that despite
their tight schedules devoted time to answering our questions and provided us with valuable
comments and unique opinions. We would like especially to thank the following people for their
time, support and help:
Prof. Per Norling Our supervisor at Karlstad University, who gave us

valuable comments during the research work.
Ken Young IT journalist and analyst, who showed interest in our
research, gave us an interesting perspective on the
problem and helped us believe that the paper will be a
real contribution to the development of Wireless
Internet
John Johansson Industry professional who made us believe that it is
possible to find interviewees and proved that our
research is going in the right direction.
Ass. Prof. Jeffrey L. Funk Graduate School of Business, Kobe University. He
gave us information about the Japanese market and an
interesting theoretical perspective of the field.
Lars Vestergaard; Robert Horvath For the valuable information and ideas shared with us
during interviews.
Many thanks also to Tony Dennis, Doug Lucas, Andrea Vey, Martin Jönsson, and Göran Frödin.
We would also like to thank the God for the luck of being where we are now, our families for
support, sweet friends for hugs and kisses, Napster for the great music and MovieGroup for
providing us with the newest movies.
Karlstad, 2001
Ivaylo N. Todorov Andrejs Jerkins

intos@hotmail.com andrejs@jr.lv
Andrejs Jerkins & Ivaylo N. Todorov i

Discovering Success in The New Economy: How to Make WAP Worth IT
Abstract
The next stage of development of e-commerce is mobile commerce, which is discussed in this paper. In particular,
the focus is on the present stage of development of Wireless Internet market, various standards, opportunities and
challenges that currently exist.
The discussion is centred on the success of i-mode (service that customers of Japanese mobile telecom operator NTT
DoCoMo can use to access specially designed, so called wireless Internet sites, from their mobile phones) and
challenges of WAP (wireless application protocol, which was thought-to-be European solution for wireless devices).
Introduced in February 1999 i-mode has experienced an exponential growth and at the moment has more than 20
million subscribers in Japan. NTT DoCoMo has recently bought a fraction of the Dutch mobile operator KPN and in
co-operation with KPN is planning to launch i-mode in the Netherlands later this year.
At the same time, WAP had approximately 8 million subscribers by the end of 2000, which accounts for a growth
rate far less than that of i-mode. Although WAP Forum, the industry supervising body, claims that WAP is the
worldwide standard for different kinds of wireless devices and networks, the adoption is unexpectedly slow. The
future will show which standard will obtain dominance all over the world.
Before analysing the shortcomings of WAP and the advantages of i-mode’s approach, the paper provides: first,
information about the wireless Internet market in general; second, a description of the past, present, and future
mobile technologies; and thirdly, a combination of market statistics and controversial predictions for the future.
The theoretical part consists of four modules. The first one describes the general framework of new product
development, trade-off between richness and reach and trade-off between high-tech/high-touch. An adjusted model
of richness and reach trade-off, based on inputs from high-tech/high-touch model specifications, is suggested. The
second module provides overview of modern theories of technology acceptance – technology acceptance and
readiness model, theory of planned behaviour, theory of reasoned action as well as innovation diffusion theory and
usability promoting/hindering factors. The third module presents antecedents to technology acceptance model and
sets up a concept of cognitive absorption, emphasising that the role of fun is one of the most influential factors in the
process of attracting the customers’ attention and making use and favour the new technology. The fourth module
inquires into the basis of customer expectations in order to help solving the problem of setting the right expectations.
It is argued that specific types of relationships have to be studied to gain insights what the customer wants from
different means of communication.
The next chapter provides a thorough description of the Japanese mobile operator NTT DoCoMo and its wireless
Internet service I-mode. The analysis suggests that the most influential factors maintaining the phenomenal success
of I-mode are good upstart marketing, wide range of content services, feasible billing system, relative monopoly of
NTT DoCoMo on the market, national characteristics and technological simplicity.
On the other hand, WAP faced serious challenges from the beginning of its promotion as an application that brings
Internet on the screen of a mobile phone. Early adopters recognised that speed was slow and connection often
unreliable, prices too high for the quality received, and size of the screens of mobile phones too small. Additionally,
the offered services were far from satisfactory and were not facing the real customer needs. These negative factors
involved other, some even less pleasant issues, such as whether WAP would be adopted at all and whether this slow
start will harm the planned release of 3rd Generation mobile services.
After analysing the two “poles”, the authors present tools and models to be considered by the New Economy
companies in order to maintain a competitive edge.
Andrejs Jerkins & Ivaylo N. Todorov ii

Table of Contents
1 INTRODUCTION.........................................................................................................................1
1.1 PROBLEM AREA..........................................................................................................................1
1.2 RESEARCH QUESTIONS.................................................................................................................2
1.3 STRUCTURE................................................................................................................................2
1.4 DELIMITATIONS...........................................................................................................................2
2 METHODOLOGY........................................................................................................................4
2.1 OVERVIEW.................................................................................................................................4
2.2 RESEARCH..................................................................................................................................4
3 THE BACKGROUND OF WIRELESS INTERNET...................................................................7
3.1 GENERAL DESCRIPTION OF THE MARKET .........................................................................................7
3.1.1 What is Wireless Internet?..............................................................................................7
3.1.2 Why the Internet is suitable platform for wireless added services? ...............................8
3.1.3 Drivers ............................................................................................................................8
3.1.4 Wireless Applications for both consumers and businesses ............................................9
3.2 MARKET STATISTICS AND PREDICTIONS...........................................................................................9
3.3 CHALLENGES, FACING THE DEVELOPMENT OF THE WIRELESS INTERNET...............................................12
3.4 NETWORK DEVELOPMENT AND NEW NETWORKS..............................................................................13
3.4.1 Network summary..........................................................................................................13
3.4.2 New high-speed technologies: ......................................................................................15
3.4.3 3G solutions: ................................................................................................................16
3.5 WAP FORUM ..........................................................................................................................17
3.6 MARKET DEVELOPMENT SUMMARY...............................................................................................17
4 THEORETICAL BACKGROUND............................................................................................20
4.1 NEW PRODUCT/SERVICE DEVELOPMENT.......................................................................................20
4.1.1 Avoiding the Wrong Route............................................................................................20
4.1.2 To Reach or Not To Reach?..........................................................................................22
4.1.3 To Touch or Not To Touch?..........................................................................................24
The combined model.........................................................................................................26
4.2 ASSESSING POSSIBLE WAYS TO IMPROVE USER ATTITUDE TOWARDS THE NEW OFFER.......................27
4.2.1 Theory of Reasoned Action and Theory of Planned Behaviour....................................27
4.2.2 Technology Readiness and Acceptance Model ............................................................28
4.2.3 Innovation Diffusion Theory.........................................................................................29
4.2.4 Usability Promoting/Hindering factors........................................................................30
4.3 BETTING ON FUN ....................................................................................................................31
4.3.1 Need for Change in the Course of Action.....................................................................31
4.3.2 The Trait of Absorption.................................................................................................32
4.3.3 The State of Flow...........................................................................................................32
4.3.4 The Concept of Cognitive Engagement.........................................................................33
4.3.5 The State of Cognitive Absorption................................................................................33
4.4 CUSTOMER EXPECTATIONS MANAGEMENT....................................................................................34
4.4.1 Roots of Expectations....................................................................................................34
4.4.2 The Art of Diplomacy....................................................................................................36
Andrejs Jerkins & Ivaylo N. Todorov iii

4.4.3 The electronic relationship............................................................................................38

4.4.4 The mass media relationship.........................................................................................38
5 I-MODE AND NTT DOCOMO.................................................................................................39
5.1 DESCRIPTION OF I-MODE- ..........................................................................................................39
5.2 WHAT KIND OF TECHNOLOGY? ...................................................................................................40
5.3 WHAT KIND OF SERVICES DOES I-MODE PROVIDE?..........................................................................40
5.4 BUSINESS STRATEGIES...............................................................................................................42
5.5 GENERAL BILLING STRATEGIES ....................................................................................................44
5.5.1 Revenue for NTT DoCoMo ...........................................................................................44
5.5.2 The content providers business models ........................................................................45
5.6 SUBSCRIBER GROWTH AND USER CHARACTERISTICS ........................................................................46
5.7 CHARACTERISTICS OF THE MARKET ..............................................................................................48
5.8 WIRELESS INTERNET TRAFFIC .....................................................................................................49
5.9 SUMMARY OF THE SUCCESS FACTORS OF NTT DOCOMO..............................................................51
5.9.1 Good marketing.............................................................................................................51
5.9.2 Very good content offers and applications....................................................................51
5.9.3 Good billing system.......................................................................................................51
5.9.4 The dominance of NTT DoCoMo on the market- .........................................................52
5.9.5 National characteristics of the market..........................................................................53
5.9.6 Technological simplicity and quick launch...................................................................54
6 DEVELOPMENT OF WAP STANDARD AND ITS ADOPTION IN EUROPE.....................55
6.1 REASONING..............................................................................................................................55
6.2 IDEA.......................................................................................................................................56
6.3 TECHNOLOGY...........................................................................................................................56
6.4 CURRENT CHALLENGES..............................................................................................................57
6.4.1 Market share and price curve challenge.......................................................................57
6.4.2 Service concept..............................................................................................................57
6.4.3 Range of services...........................................................................................................57
6.4.4 Segmentation.................................................................................................................58
6.4.5 Overall marketing strategy............................................................................................58
6.4.6 Content providers..........................................................................................................59
6.4.7 Stakeholder expectations...............................................................................................60
6.4.8 Pricing...........................................................................................................................61
6.4.9 Approach.......................................................................................................................61
6.4.10 Critical mass..............................................................................................................62
6.5 VICIOUS CIRCLE........................................................................................................................62
6.6 WAP IS DIFFERENT...................................................................................................................63
7 ADVISORY TOOLS AND CONCEPTS...................................................................................65
7.1 BUSINESS MODELS FOR THE OPERATORS......................................................................................65
7.2 MANAGING CUSTOMER EXPECTATIONS..........................................................................................66
7.2.1 Football Coach..............................................................................................................67
7.2.2 PDSA cycle....................................................................................................................68
7.2.3 Improvement programmes.............................................................................................68
7.2.4 QFD...............................................................................................................................68
Andrejs Jerkins & Ivaylo N. Todorov iv

7.3 SERVICE CONCEPT ....................................................................................................................69

7.3.1 Perceiving WAP, I-mode as service concepts, not as technologies..............................69
7.3.2 "Data Smog"..................................................................................................................69
7.4 THE IMPORTANCE OF CONTENT ....................................................................................................72
7.4.1 Technical requirements.................................................................................................73
7.4.2 User Behaviour ............................................................................................................74
7.4.3 Specific advantages of wireless Internet content ........................................................74
8 CONCLUSIONS.........................................................................................................................76
9 APPENDIXES.............................................................................................................................79
9.1 APPENDIX 1: STATISTICS OF INTERNET AND MOBILE PHONE USERS IN WESTERN EUROPE ...................79
9.2 APPENDIX 2: WIRELESS DATA DEVELOPMENTS...............................................................................80
9.3 APPENDIX 3: WHO IS WINNING THE 2G-STANDARDS WAR?..............................................................81
9.4 APPENDIX 4: I-MODE CONTENT STATISTICS....................................................................................82
9.5 APPENDIX 5: CHARACTERISTICS OF WIRELESS CONTENT...................................................................83
9.6 APPENDIX 6 THIRTEEN KEY ACTIVITIES IN THE NEW PRODUCT DEVELOPMENT PROCESS....................84
9.7 APPENDIX 7: OVERVIEW OF THEORIES BEHIND THE CONCEPT OF COGNITIVE ABSORPTION..................85
9.8 APPENDIX 8: THE FRAMEWORK OF COGNITIVE ABSORPTION...........................................................86
9.9 APPENDIX 9: THE VALUE PARADIGM OF NTT DOCOMO...............................................................87
9.10 APPENDIX 10: LIST OF INTERVIEWS...........................................................................................88
9.11 APPENDIX 11:INTERVIEW QUESTIONS........................................................................................89
9.12 APPENDIX 12: GLOSSARY OF TERMS.........................................................................................90
10 REFERENCES..........................................................................................................................92
Andrejs Jerkins & Ivaylo N. Todorov v

TABLE 1: INFORMATION SOCIETY IN 1999/2000 (SOURCE: A.C. NIELSEN)....................7
TABLE 2: NUMBER OF WIRELESS INTERNET USERS (AS OF DECEMBER, 2000).........10
TABLE 3: WIRELESS INTERNET SERVICES IN JAPAN SOURCE: MOBILE MEDIA

JAPAN, MODIFIED AS FROM DEVINE AND HOLMQVIST (2001).....................................41
FIGURE 1: TRADITIONAL TRADE-OFF BETWEEN RICHNESS AND REACH (SOURCE:

WURSTER AND EVANS, 1999)..................................................................................................23
FIGURE 2: COMING REVOLUTION IN TRADE-OFF BETWEEN RICHNESS AND REACH

(SOURCE: WURSTER AND EVANS 1999)...............................................................................24
FIGURE 3: TWO APPROACHES AT CRM: THE TRADITIONAL AND THE NEW..............25
FIGURE 4: CORRECTED RICHNESS/REACH TRADE-OFF...................................................26
FIGURE 5: THEORY OF PLANNED BEHAVIOUR. SOURCE: CHANG (1998), COMPILED

FROM AJZEN (1985)....................................................................................................................27
FIGURE 6: NTT DOCOMO’S NETWORK STRUCTURE (SOURCE: NTT DOCOMO’S WEB

SITE)..............................................................................................................................................40
FIGURE 7: STRUCTURAL MODEL OF I-MODE'S SERVICES...............................................42
FIGURE 8: THE WIRELESS INTERNET VALUE CHAIN AS INFLUENCED BY THE

OPERATOR (DEVINE AND HOLMQVIST, 2000)....................................................................43
FIGURE 9: I-MODE'S PAYMENT SCHEME..............................................................................45
FIGURE 10: THE POSITION OF DIFFERENT INTERNET ACCESS DEVICES ON THE

TRADE-OFF CHART (SOURCE: FUNK, 2000).........................................................................50
FIGURE 11: VICIOUS CIRCLE OF WAP'S TROUBLES..........................................................63
FIGURE 12: LEVELS OF EXPECTATIONS, ACTUAL PERFORMANCE AND ZONE OF

TOLERANCE................................................................................................................................67
GRAPH 1: DISTRIBUTION OF WIRELESS INTERNET USERS WORLD-WIDE.................10
GRAPH 2: GLOBAL DATA BY TECHNOLOGY GENERATION (SOURCE: STRATEGIC

ANALYTICS)................................................................................................................................13
GRAPH 3: JAPANESE MOBILE TELECOMS' MARKET SHARES (SOURCE:

TELECOMMUNICATIONS CARRIERS ASSOCIATION, 2000)..............................................39
Andrejs Jerkins & Ivaylo N. Todorov vi

GRAPH 4: GROWTH OF MOBILE INTERNET USERS. (SOURCE:

TELECOMMUNICATIONS CARRIERS ASSOCIATION, 2000; DEVINE AND HOLMQVIST
2001, NTT DOCOMO)..................................................................................................................47
GRAPH 5: THE AGE DISTRIBUTION OF I-MODE USERS. (SOURCE:

D2COMMUNICATION, 2000; MODIFIED AS OF DEVINE, HOLMQVIST, 2000)................48
GRAPH 6: MOST POPULAR CONTENT CATEGORIES OF WAP (CURTIS, 2000) .............60
GRAPH 7: DISTRIBUTION OF SPENDING LIMITS OF WAP USERS (CURTIS, 2000).......61
Andrejs Jerkins & Ivaylo N. Todorov vii

Mr. Mouche climbed on his horse and rode it beautifully.

"You must be proud of yourself," said the professor.
"No," replied Mr. Mouche.
"Still, your horse goes exactly where you want it to go," said the professor.
"That's because I always want to go exactly where the horse wants to go,"
replied Mr. Mouche
Jean-Luc Coudray
"There isn't such a thing as right or wrong, there is just fun or boring!"
Motion picture "Hackers" 1995, hacker nicknamed the Plague
Andrejs Jerkins & Ivaylo N. Todorov viii

Discovering Success in the New Economy: How to Make WAP Worth IT
1 Introduction
1.1 PROBLEM AREA
Will Europe maintain its global lead in the telephony market and especially in the
mobile-commerce market?
A year ago, the perspectives of development of European mobile telecommunication market were
going high. There were logical reasons to assume that the future is bright and flawless. At that
time Nokia was the world’s largest mobile-phone manufacturer, Vodafone – world’s largest
mobile phone network. Most important of all, Europe was introducing wireless application
protocol (WAP) and developing the concept of mobile commerce (m-commerce). Considering
the idea that mobile phone has so many advantages over personal computer, such as portability,
convenience and size, many researchers predicted that m-commerce would be a sure winner.
They also saw clear connection between interest in accessing the Internet from mobile phones
and demand for hardware (“snazzy new models”). Many companies thought it was worth
investing in license fees because of the revenues that would come from non-voice data traffic –
$50 billion for the next round of the German mobile-spectrum licenses and $35 billion for the
British ones.
However, things did not turn out as predicted. Falling share prices hit the whole industry. Nokia
is no longer Europe’s largest company and its latest WAP phones have been strongly criticised.
National phone monopolies like Deutsche Telekom, France Telecom, and British Telecom are
suffering a vast pile of debt. Most significant of all, companies start to reconsider their optimistic
predictions regarding the future success of WAP. Statistics show that even people with WAP-
enabled phones do not use the service much. According to the recent survey in Sweden1, only 6%
of WAP phone owners use WAP. Among the reasons are high expenses, problems with security,
tiny screen, slow downloads, fiddly keyboard, unstable connection, etc. At the same time, a
similar service provided in Japan – i-mode has already 20 million subscribers and is hugely
popular.
The third-generation mobile technologies and services are coming in the following years. The
question is if by then Europe would lose its presumed competitive edge in mobile telephony by
failing in developing useful wireless Internet applications. This issue is analysed basing on
current trends in main wireless Internet markets – Europe and Japan.
1
Lars Vestergaard, IDC; telephone interview
Andrejs Jerkins & Ivaylo N. Todorov 1

1.2 RESEARCH QUESTIONS
The thesis has three main objectives – to investigate the Japanese wireless Internet market,
compare it with the European market and analyse whether the positive experience can be
translated to Europe. In order to do that, the following research questions are posed:
1. What are the critical success factors (CSFs) for Japan’s wireless Internet market
development?
2. What were the shortcomings of introduction of m-commerce protocol WAP in
Europe?
3. Is it possible to apply Japan’s positive experience on the European market? What
kind of tools/concepts should the telecommunication companies implement to be
successful in this market?
1.3 STRUCTURE
For answering these questions, thorough study of the market, both in Europe and Japan, was
conducted. First, the wireless Internet background is studied to introduce the reader to the past,
present and future development of the related technologies and challenges facing it. The number
of different technologies behind the convergence of the Internet and mobile networks are
introduced as a separate section. The history behind networks is studied to understand the
uncertainty of future. Second, theoretical framework is laid out with a focus on studying the
acceptance of new technologies, transformation of economics of things into economics of
information, and issues of new types of evolving relationships in the New Economy. The analysis
part begins with the success of i-mode on the Japanese market and factors stimulating
unpredictable growth are summarised. Then, the challenges of European wireless Internet market
are studied. Analysis is concluded with the proposed tools to be used in order to improve and/or
protect the competitiveness in the market of the New Economy. Some of these tools may be
regarded as theoretical concepts, which are not mentioned in the theoretical part separately. This
is because these tools are used as propositions and not as analysis background. Rather, they
represent part of the conclusions of the analysis. Finally, conclusions of the thesis are presented
and implications for further research - offered.
1.4 DELIMITATIONS
This part clarifies the research area this paper is focusing on. It has to be acknowledged that the
wireless Internet market is still under serious development; therefore, the prioritisation of issues
in the thesis is done according to the prospective development of the market.
In order to draw useful general conclusions for the rest of the world, two most developed markets
are studied – Japanese and west Europe including Scandinavia. With the aim to keep the paper
specifically to the topic and avoid irrelevant discussions, we followed the delimitations below:

• Focus is put on the transfer-of-data telephony market and specifically on the

wireless Internet segment.
• In the comparison between Japan and Europe, special attention is devoted to WAP
and i-mode and the relevant strategies, concepts, technologies and program
languages (cHTML, WML).
• Since i-mode is NTT DoCoMo’s service concept, thorough description only of
that company is provided. All the other players in Japan are used as a comparison
that would clarify NTT DoCoMo’s success strategies.
• The European market is viewed as a whole considering the fact that cultural,
technological and economical limitations for this technology do not restrict the
communication between these countries. Another reason is that WAP as a global
wireless standard is created by the WAP Forum, an organisation that represents
almost all of the big manufacturers and operators in Europe.
• Japan is used as a positive example of how wireless applications can be
implemented and promoted. It is not argued that Japan will maintain its lead in the
long run or that its example is the best. Considering the success of NTT DoCoMo, it
is practically and theoretically feasible to analyse the business and technological
models used on that market.
• No customer surveys were made due to low general awareness rates and
consequential difficulties in obtaining data.
• A macroeconomic perspective is taken when analysing the markets.
We believe that these delimitations make the research more focused and, therefore, conclusions -
more precise and valuable.

2 Methodology
2.1 OVERVIEW
Before explaining the methodology approach in the thesis, we would like to clarify that it is
aimed at reaching academic objectives. The paper studies relevant problems in its area of
research and is contributing to publicly available knowledge on the topic of wireless Internet and
CSFs in the New Economy. The research on the topic was started in November 2000 and was
finished in March 2001. It was carried out through a number of stages:
− Gathering information about the market and the industry;

− Studying relevant literature;
− Defining the research problem and the research questions;
− Gathering more specific and research-specific data;
− Conducting interviews with experts in this area (see Appendix 10);
− Analysing the collected information and data throughout the research and present the
results in a written form.
The work for this thesis employed both qualitative and quantitative research methods.
Quantitative methods are geared primarily to the collection of quantitative data, which arise as
numbers and are a result of the process of measurement (Raymond, A. Ken, 1993). This type of
data answers the question “how many?” Qualitative data was gathered by means of interviews,
exhaustive data and information search on the Web, newspaper and magazine articles, research
papers and books.
2.2 RESEARCH
The qualitative research was based on the following considerations:
− Open-ended interviews with experts in Japan and Europe – it is believed that in

particular research area this is the best way to acquire new information and opinions;
− In many cases the research was based on largely qualitative, in the form of narrative,
statements;
− A small group of respondents was targeted – since there are a limited number of
companies dealing with wireless Internet applications. The industry is still in its
development stage and companies lack the clear vision of the future due to the market
uncertainties.

It is being stressed that “data from interviews consist of direct quotations from people about their
experiences, opinions, feelings, and knowledge” (Patton, 1991). In this thesis, interviews were
conducted in order to get use of all these 4 groups of responses. Interviewing was done in forms
of personal discussions, telephone interviews, and email interviews. The fact that personal
communication would allow the extraction of more precise data because of observing
interviewees gestures and facial expressions is recognised. However, full use of this technique
was not possible due to experts’ location around the world.
In order to construct a fair and objective perspective on the issue that is studied, open-ended
interviews were used to “enter into the other person’s perspective” [Ibid.]. Due to the fact that
publicly accessible objective opinions on the subject of study were not found because of the
infancy of the field, combination of perspectives of interviews provided basis for objectivity of
this work. Although total objectivity is considered to be achievable largely by “blind experiments
and quantification” [Ibid.], this particular study could not perform a quantitative survey of experts
for the reason that, firstly, there are not many experts in this area, secondly, response rate to email
interviews has proven to be low.
Narrative statements were used to widen the area of interviewees’ response. In other words,
interviewees were provided with opportunity to express their opinions not only on the specific
issue but also on related issues. This method has proved to be successful because most
interviewees responded with useful and thorough opinions on the issues of focus rather than just
answering narrow question.
Before contacting any expert, a consideration of his/her ability to provide a useful insight for the
work was made. At the end, a total of 11 interviews were made, gathering opinions from experts
in Sweden, UK, Denmark, Germany, Ireland, and Japan. The choice of countries was semi-
random, emphasising the willingness of one or another interviewee to share his/her opinion.
Nevertheless, all represented countries are the ones to be on the wireless technology top-list.
In the process of writing a thesis work, it is important to use a theoretical background for a basic
understanding of the discussed phenomena. However, it is also vital to provide some empirical
information, which is to help a reader to have a deeper understanding of the subject. Wireless
Internet applications and their market promotion – the topic of the research, as a direction is a
relatively new and finding specific information, both empirical and theoretical, was complicated.
Metaphorically, in a process of compilation, many small pieces had to be put together. Where no
other basis for discussion was possible, the authors of this paper had to rely on the subjective
opinion geared with extensive prior research.
The expert opinions were gathered through interviews, emails and telephone discussions. Before
contacting any interviewee, an assessment of his/her professional experience on the topic was
made. A number of interviewees were contacted through the contact list of WAP Forum. In
essence, these people were chosen by their respective companies (members of WAP Forum) to
handle the communication with WAP Forum. Another source of interviewees was the directory
of functioning WAP sites of Europe, which was accessed through the Internet search engine
Yahoo. It is assumed that content providers found in the “Yahoo! Directory” represent a fair basis
due to the fact that the it is “a must to” list a functional site in the search engine for a company

dealing with the Internet applications. In addition, mobile network operators in Scandinavia and
the rest of Europe as well as Japan were approached with specific questions.
As it is stated on WAP Forum’s web site, its members roughly represent all the involved parties
interested in the development of WAP – hardware manufacturers, software providers, telecoms,
service operators, regulating bodies, and governmental institutions. In the research process, we
attempted to reach most of the contact persons in the companies-members of the WAP Forum.

3 The Background of Wireless Internet
3.1 GENERAL DESCRIPTION OF THE MARKET
3.1.1 What is Wireless Internet?

The term mobile Internet or Wireless Internet has been a topic for many discussions recently.
When it appeared in the vocabulary it was another modern buzzword. Many companies and
specialists assumed that its implementation would make the whole industry thrive. The objective
of this part is to describe briefly what actually stands behind it.
In this paper, the term Wireless Internet (Mobile Internet) is referred to as “a process of
transmitting data over mobile telecommunication networks to different applications”. This
transfer includes non-voice traffic, which has many implications, e.g. e-mails, downloading and
uploading data from/to websites, uploading files and images, sending SMS, advertising, etc. The
successive development of Internet has encouraged many people to conduct their businesses or
even leisure activities online. New wireless technologies such as GPRS and UMTS will allow
people to “unwire” themselves and use the mobile terminals they have not only for voice transfer,
but also to access the Internet.
Every customer considers wireless Internet as the possibility to receive different value-added
services. The service structure of wireless system is very simple. It includes all the services that
the mobile operators provide when they enable access. In other words, Wireless Internet Services
include all the software applications that allow the user to connect to the Internet using his/her
mobile phone.
The concept of Wireless Internet has emanated from the convergence of conventional Internet
and mobile networks due to the explosion of connectivity. The general market trends in these two
areas are depicted below in Table 1.
EU-15 USA Japan As % of Total World Source
Number of PCs (Dec. 1999) 93 141 36 70% 387
-per 100 inhabitants 25 52 29 6 ITU
Internet hosts (Oct. 2000) 13,9 65,9 4,5 89% 94,3 Netsizer
-per 100 inhabitants 3,7 23,9 3,9 1,6
Internet users (Nov. 2000) 98 154 39 71% 407 NUA

-per 100 inhabitants 26 56 31 7
Mobile phones (Dec. 1999) 147 86 57 60% 481 ITU

-per 100 inhabitants 39,1 31,7 45 8
Table 1: Information Society in 1999/2000 (Source: A.C. Nielsen)

3.1.2 Why the Internet is suitable platform for wireless added services?
More and more people are using services provided via Internet, more and more people are
accepting Internet as an irreplaceable part of their everyday life, more and more are actually
dependent on the Internet services. In this line of speaking, it is obvious that the necessity of
some physical elements like a wire to connect to the Internet, big desktops or laptops is rather
restrictive. For people that are often travelling or often do not have access to the conventional
Internet, this is turning out to be a major problem. The portability of the phone can be easily
transferred in a big advantage, in a platform for offering new kind of services to all consumers.
It is also very important to mention that service providers can benefit from the Internet paradigm,
“since their services can be deployed independently of the location of the user. The applications
that provide the services can be stored on a server, which means that they can be very easily
changed according to the concrete needs of a user. This allows the service providers to reach the
customers with a new service almost immediately. “The reduced service development time does
of course also imply reduced costs compared to conventional service development in wireless
networks” (WAP white paper, 2000).
3.1.3 Drivers
When it comes to new advanced technologies, there are many examples of ideas that failed
however strong the industry support was. “So what makes this mobile Internet anything more
than another techno dream waiting to crash?” (Baker, 2000).
Baker assumes that there are many reasons to believe that wireless Internet is not just another
technological hype. The most important of them is that customer does not have to buy anything
principally new to be a part of the wireless Net. Currently, more than 500 million people are
using mobile phones and this figure is expected to double until the year end 2003. Due to the fact
that many new phone models already come with built-in WAP browser and given that the
average life-cycle for a mobile phone is approximately 2 years, it is natural to assume that most
of 1 billion mobile phone users in 2003 will be capable to perform at least basic WAP
transactions. The second major reason is that dominant mobile telecoms have already invested
substantial amounts of effort and money in developing next generation networks.
From customers’ point of view, factors and drivers that stimulate a person to use new, advanced
mobile service can be classified in three groups: How, When and Where will a customer use his
mobile phone to connect to the Internet? The first question refers to the ease of personalisation on
a new generations’ mobile handheld devices. The possibility of receiving customised content is
especially crucial when it is the only device available at a given point of time. The second
question refers to the criticality of importance of time. The mobile device allows user conducting
various kinds of financial transactions, checking critical information, changing plans whenever
s/he needs it. The last question refers to high usefulness of knowing the exact location with the
aid of the mobile phone and finding the necessary directions. While the user is in the car, this
navigation system can help to find the shortest and quickest way to the desired destination. The
dependence on location can easily be transferred into a good value-added service.

3.1.4 Wireless Applications for both consumers and businesses

Below we provide examples of how the new technology can be used for different segment
groups. If the development of all technologies goes at the pace that everybody predicts, soon
many people will start using the wireless Net because it will be cheaper and easier (Herman,
2000) than the PC (the validity of this statement is discussed later). The exact amount of people
that would be willing to use this service is a subject of further discussions. More important is
what customers can use it for.
If the B2C market is considered, some obvious applications are access to maps and other kind of
location/direction services; access to online banking and trading; downloading multimedia
formats; VOID-based unified messaging, which combines e-mail, voice mail, paging;
advertising; playing lottery or online-games. Delivering information such as headline news, stock
quotes, flight delays, traffic jams seem to be particularly well suited to wireless technology. By
using the location-based applications, which determine where the customer is by pinpointing
signals form a wireless device, every user can receive an information about the nearest restaurant,
cinema, information desk or even automatically send a message to an approaching friend.
Herman also says that the final objective is to turn the mobile phone or any other hand-held
device into a payment device, equivalent to an electronic device.
The potential of B2B is unquestionably much bigger. The critical issue at the moment is the
inability of content developers to satisfy the needs of corporations. Inevitably, companies will
realise that high-speed effective communication can either help them or will help their
competitors. Nevertheless, the cornerstone is that corporations rarely know what they exactly
want and service providers and application developers cannot deliver without knowing the exact
needs. The core question is how to extract value from vast opportunities. Wireless Local Area
Networks (LAN) and Wide Area Networks (WAN) will help in the nearest future employees to
share and access the needed data anytime and anywhere. Location-based services are already
implemented to monitor, for example, the exact location of companies’ sales cars to take
advantage of the critical path technique to the fullest.
3.2 MARKET STATISTICS AND PREDICTIONS
The market of wireless Internet is in an infant stage of development, therefore, the compilation of
statistics does not necessarily represent a true and fair view. However, data from different sources
was compiled and presented in a form that allows reader to get a clear picture. The nature of this
market (infancy and dynamics) makes it hard to make any predictions for the size, main players,
and potential even in the near future.
Initially, a contact was established with the WAP Forum, an industry guiding association, to get
the necessary data. Unfortunately, it came out that the WAP Forum either does not have or is
unwilling to share the information on statistics of WAP usage in Europe. Either way, this does
not seem to be a good indication of success. Especially, if this is compared to NTT DoCoMo in
Japan, who provides a very detailed and up-to-date information on the number of its wireless

Internet users on their official web site. According to data gathered from the various sources2, the
number of wireless Internet users in the world, as of the end of 2000, is described Table 2.
Number of wireless Internet users (million) % Users of WAP Users of i-mode
Japan 30 73% 4,5 17,1

Korea 2,5 6% 2,5 0
Europe 8 20% 8 0
USA 0,5 1% 0,5 0
Total 41 100% 15,5 17,1
Table 2: Number of wireless Internet users (as of December, 2000)
As the table indicates, currently i-mode has a slight dominance on the market. This is regardless
of the fact that at the moment i-mode is only available in Japan while WAP has been launched in
Europe, Korea, and on a very early stage in the United States, as well.
47% Users of WAP

53%
Users of i-mode
Graph 1: Distribution of wireless Internet users world-wide
It is logical to assume that in the nearest future the gap will increase. Many researchers, however
say, that in the long run WAP has the potential to win the battle of standards. The current
situation is based on the rapid growth of i-mode and moderate growth of WAP. In both cases,
observed and predicted growth is taken into account. It is hard if not impossible to give the exact
growth figures since both standards are on the market roughly one year. However, it is of useful
insight to mention that in March 2000 Goldman Sachs predicted that the number of i-mode users
would only reach the mark of 20m by the end of 2002. In addition to that, even NTT DoCoMo
itself has predicted (Hoffman, 2000) that the mark of 20m subscribers will be reached only by
end of 2001. It is a fact that this mark has already been passed in February 2001. In addition, at
the end of year 2001 there are predicted to be 30 million of i-mode users in Japan only.
Any hypothesis about the future of wireless Internet has to take into consideration possible i-
mode users in Europe since NTT DoCoMo’s announced that the service is to be launched in the
2
Data on the number of i-mode users was gathered from NTT DoCoMo’s official site; data about users in Korea and
USA was gathered from the same source; data on the number of WAP users was combined from two sources – Lars
Vestergaard from IDC and Martin Jönsson from Ericsson.

Netherlands in co-operation with KPN later this year (as well as in Italy). According to IDC3, the
number of WAP users is predicted to reach 18 million, by the year-end 2001.
Predictions for the future are subject to serious biases due to several factors that cannot be
measured – potential subscriber willingness to accept any of the new technologies, reaction of
content providers and range and quality of their services, potential of telecom operators to
develop their networks, etc. Nevertheless, IDC predicts that by the year-end 2002 there will be 30
million WAP users in Europe. Lars Vestergaard from IDC made a comment on this issue stating
that the predictions their company is making about the number of WAP users are underrated due
to the recent backfire of this standard.
At the same time, Martin Jönsson at Ericsson is stating that the sale of WAP-enabled mobile
phones increases faster than the market itself. His conclusion is based on the information at his
disposal, i.e. the fact that the number of WAP phones sold in January 2000 was 200 thousand
units while a year later (January 2001) this number is 30 million across Europe. The predictions
from the past (Wooldridge, 2000) indicate that WAP Forum’s initial predictions of WAP's usage
have been always too optimistic – they expected 525m WAP-enabled phones on the market by
2003. Given the most recent data from Ericsson, the challenge attracting our attention is that in
order to fulfil the prediction, the operators and manufacturers have to sell the huge difference of
495m WAP-enabled handsets in the next 24 month. Cahners In-Stat Group is predicting that the
demand for mobile phones (disregarding the wireless Internet functionality) will jump up to more
than one billion by 2003 from the expected 100 million in 2002. To make the picture "even more
clear" Yankee group predicts4 that the number of mobile phones will reach a mark of a billion in
2005 (60% of these devices having wireless Internet capability), which delays the progress
predicted by WAP Forum and others by two years.
According to interviewed experts, the main markets for WAP-enabled devices currently are
Scandinavia, Great Britain, and Germany. The number of WAP users in Germany exceeded one
million5 at the year-end 2000. The number of WAP sessions (i.e., user’s attempt, either successful
or not, access to any of the available WAP services) averaged three million “with the increasing
tendency”. This type of data about other countries in Europe is either confidential or missing at
all.
In terms of the time lag, The Economist6 has predicted that Japan is 18 month ahead of Europe
and Europe is 18 month ahead of the United States. Then again, the value of m-commerce by
IDC is predicted to reach £25.4billion by 2004 whereas Forrester Research predicts that figure to
reach only £3.2billion by 2005. While these were the predictions only for Europe, for the whole
world Ovum7 predicts a $200 billion large m-commerce market in 2005.
3
Lars Vestergaard, IDC; telephone interview
4
As stated in the executive summary for the new project Global m-Commerce 2001, which was launched in January
2001.
5
Andrea Vey, T-Mobil, email interview
6
Anonymous, Business: I-modest success, The Economist, London, March 11, 2000.
7
As stated in the executive summary for the new project Global m-Commerce 2001, which was launched in January
2001.

The statistics mentioned above for the past and the predictions for the future allow the reader to
make his/her own conclusions about how and when the wireless Internet market will grow.
Nobody argues whether it will grow (we cannot escape from that), the question is at what pace.
Needless to say, that 2005 is a far-far future, from the standpoint of today. Research companies
and market players themselves have proven to fail in their predictions, however thorough the
initial analysis had been. An official from NTT DoCoMo has confessed (Dodgson, 2000) that
they “are surprised at the pace of growth, which has far exceeded their initial expectations” and
that they are rewriting their forecasts.
3.3 CHALLENGES, FACING THE DEVELOPMENT OF THE WIRELESS INTERNET
Wireless Internet will revolutionise the role of mobile devices by putting all the power and
convenience of e-commerce in the device every modern individual will soon have. Nobody
though expects that this is going to be an easy process. The development of wireless Internet
depends on the way the industry copes with several hardware and software limitations of the
wireless world. These challenges fall into several groups: scalability, interoperability, bandwidth,
and interfaces.
A wide range of content scalability is required for these appliances. Firstly, the majority of
existing Web content is unsuitable for mobile usage without conversion. Secondly, in the future,
developers will have to design their Web sites so that the presentation is separate from the
information. The answer to this issue is the eXtensible Markup Language (XML), a meta-
language that enables developers to define mark-up languages according to set specifications and
syntax. WAP uses an XML-compliant implementation called the Wireless Markup Language
(WML). Finally, middleware will play a crucial role in providing scalability, not only to adapt a
variety of data sources to a range of devices, but also to cope with high rates of transactions,
which could potentially originate from vast numbers of mobile users.
The group of problems related to interoperability refers to the fact that the wireless Internet is
based on standards like WAP, which are only a guideline or a set of base line definitions. All
vendors have to follow these guidelines when they are developing products in order to offer to
the users interoperability with a host of other devices and functionality (Ajluni, 2000). However,
some of them still make proprietary changes that ultimately affect the quality of the services the
customer receives. This may lead, for example, to a denied access to a particular service.
The crucial factor for developing faster service and data-intensive communication is providing
higher bandwidth. In today’s low-bandwidth environment, at rates of 9kbps, it is time-consuming
to send even small amounts of data up and down the link. All the new 2G, 2.5G or 3G
technologies are aiming at enabling the networks with bandwidth with levels comparable with
current wire-line bandwidth levels of about 54kbps. This will not only allow the transfer of data-
intensive content, but also the transport of many forms of multimedia content.
As it is with any software, interface is very important for creating positive users' experiences in
interaction with WAP sites. The content must be adapted to limitations of wireless devices and

networks. Improving the user experience means offering increased functionality and ensuring that
the graphical user interface is not so sophisticated (ibid.).
3.4 NETWORK DEVELOPMENT AND NEW NETWORKS
Any of the existing or coming wireless Internet standards have to be developed on the basis of the
type of network. Therefore, the background of network types development is very important and
is discussed with the technical focus aiming mainly at readers with preliminary technical
knowledge. At the end of this section we provide a brief summary of the critical issues that have
to be considered.
3.4.1 Network summary

Until recently, the handset’s role was that of a modem to the laptop computer. For instance,
typical usage would be for out-of-office employees to dial into enterprise-based modems to
retrieve their e-mail. Wireless Internet access was initially viewed as providing Web surfing from
a smart-phone or PDA. However, today’s mobile networks, such as Global System Mobile
(GSM), are subject to a combination of limitations that make Web access practically infeasible.
This includes slow speeds of transmission, commonly 9,6kpbs, unreliable links, variable system
latency, and high usage charges compared to landline networks.
In addition, unless special arrangements have been made to install a digital connection to a
Remote Access Server (RAS) in the telephone’s network, the GSM data transmission is
modulated to analogue for its passage over the fixed line network. This is effectively two calls –
from handset to base station, and from mobile to fixed line; resulting in a longer time-to-connect.
Consequently, applications have been constrained to those requiring low bandwidth transmission
and infrequent connection. Expectations of wireless Internet levels of service quality will remain
totally unfulfilled until new types of wireless networks, such as General Packet Radio Service
(GPRS) and Third Generation (3G), finally arrive.
Global Data by Technology Generation
250
(Millions of users)
200
2G
150
2.5G
100
3G
50
0
97
99
00
01
02
03
04
06
08
10
98
05
07
09
20
20
20
19
19
19
20
20
20
20
20
20
20
20
Year
Graph 2: Global Data by Technology Generation (source: Strategic Analytics)

All operators, manufactures, and providers are sure that the current networks are limiting the
future development and have to be changed. The direction of development is obvious – 3G, but
the means and software enhancements remain unclear. That is why many network or service
providers are applying an incremental strategy/approach to 3G. This includes obtaining as big
revenues as possible from the still developing data market by using 2.5G systems such as EDGE,
HSCSD, HDR, and GPRS (see Graph 2). This means that they are waiting for the moment when
there will be a critical mass on the market and the smooth evolution into 3G will be just a modest
investment on the existing spectrum. None of these big players knows how big the mobile
Internet will be, but all of them are trying to be prepared and gain a winning position on that
market.
They realise that this should be done in a series of steps. First, they have to upgrade their current
networks to packet-switched data-capable networks (Wickham, 2000). This means for GSM and
TDMA providers a switch to GPRS and EDGE, and for CDMA providers to 1XRTT and
3XRTT. With this, they are trying to improve initial data transfer speeds of 144kbps for both of
them to rates of respectively 384kbps and 2Mbps. Second, they have to provide solutions for
connectivity to the Internet, such as WAP, Bluetooth, smart devices, compression, and security
(ibid.).
To be able to understand the forthcoming changes, the three major digital cellular technologies
nowadays have to be analysed. The first one is GSM, which was developed in Europe and was
the most advanced digital technology worldwide. The second one is TIA/EIA-136, which is a
time-division multiple access (TDMA) technology. The third one is IS-95 a code-division
multiple access (CDMA) technology. The last two are dominant in USA, but lose the battle to
GSM world-wide. TDMA, the oldest US digital technology, divides radio channels into three
time slots. In other words, each user gets a separate slot and only three users can communicate on
a single radio channel without interfering with each other. CDMA, a newer US digital
technology, allows many users to share the same radio channel at the same time. Using a spread-
spectrum technology, it distinguishes the users by applying unique pseudorandom codes (Rysavy,
2000).
The question is how and what kind of technology should the operators use to upgrade the existing
networks in order to achieve the standards and necessities for 3G. It is obvious that there are two
opposing camps, considering developing the new alternatives over CDMA or over TDMA
networks. A couple of months ago CDMA was considered as the most attractive wireless
platform but if we look at the market we can easily realise that the honour goes to the TDMA
supporters (see Appendix 2). The data gathered by America’s Network show that the four DMA-
based cellular standards – GSM, iDEN, Japan’s PDS and TDMA-EDGE account for 87% of the
global market for handset services8. Among these, GSM is the obvious dominant standard with
about 345 million connections. The influence of the other is also very important, because they
account for 102 million connections. This compared to only 65 million connections for
CDMA2000 world-wide, (half of which in one country South Korea) gives a clear clue where the
development is heading for. This comparison maintains who of the two camps would be able to
achieve a real effect on economies of scales. It also clarifies the perception of which 2.5G or 3G
8
Anonymous, America’s Network, “CDMA wins everywhere … but the marketplace”, Oct 1, 2000

technology would be chosen as an upgrade path. Some people in South Korea are already
considering abandoning the CDMA One’s CDMA2000 in favour of the European W-CDMA.
3.4.2 New high-speed technologies:

The first new higher-speed alternative is a technology called High Speed Circuit Switch Data
(HSCSD). It achieves download speeds of 56kbps, while upload speed remains 14kbps. This is
because this service combines four slots on each radio channel’s eight time slots for
downloading. This service will soon be available on the market and will be provided by Finish
Sonera, Singapore's SingTel and UK's Orange. The device that most probably would use this
technology is a PC modem card, because as Mike Walters (Nokia system marketing manager for
North America) explains it “allows direct connection an IP rooter, and then the rooter connects to
an IP network” (Rockhold, 2000).
General Packet Radio System (GPRS) starts to look increasingly attractive as the lowest-risk path
to the next generation data services for a growing number or wireless service providers. It
improves GSM by providing more efficiency for every subscriber. It is an IP-based packet data
system, which means that the channels are used only for the time needed to transfer a packet of
data. This is a great advantage, because it allows the network operators to support more users
than circuit-switched technology. Users will also profit from it, since it allows sustained virtual
connection to services and eliminates long dial-up delays. This packet upgrade increases data
rates to more than 100kbps and eliminates the dial-up system by providing an “always-on”
connection to Internet. It does not change the circuit-switch system, but provides some of the data
capabilities required for the next 3G developments. Another advantage is that it does not modify
the GSM physical layer system and just uses a new layer-2 and –3 protocol architecture,
implemented on new network elements as the packet control unit and GPRS service nodes.
Despite that, only 25% of the 366 GSM operators have signed contracts for GPRS equipment and
only few of them are close to commercial launch. As a conclusion, we can say that GPRS is a
necessary step in the development process, which brings the GSM into the packet world.
The popularity of GPRS among operators and providers makes some specialists think that
development of a new radio interface, called EDGE will be even more important to the industry
(Beutmueller and Faerber, 2000). Based on some technological concepts of GPRS, it offers
evolutionary step of providing speed rates up to 384kbps in the existing GSM spectrum. It uses
the same frame structure, logic channel structure and the 200kHz-carrier bandwidth of the GSM
networks. This is achieved by increasing the current capabilities of a single slot from 9.6kbps to
48kbps per time slot. Implementation of EDGE is relatively inexpensive because it uses the
GSM’s racks, antennas and base stations and only EDGE plug-in carrier unit has to be added.
However, compared to GPRS, EDGE will be a costly upgrade and it is expected that some of the
operators will wait until 3G standards arrive and go directly to these systems. One of the
differences is that EDGE transmits 3bits per symbol, while GSM uses the 1-bit/symbol
modulating system. Another important innovation is the quality-control link, which allows the
operators to check the quality constantly in order to avoid sending data at a rate higher than the
channel conditions can accommodate. To prevent connection loss in cases when there is an
increased interference and weak signal, the data rate can be reduced gradually.

3.4.3 3G solutions:
All these technologies so far are considered as 2.5G or a step toward the 3G. The "race" for the
3G technology is between the American CDMA2000, the European Wideband CDMA (W-
CDMA) and some new solutions like Time Division Synchronous Code Division Multiple
Access (TD-SCDMA). The first two are the most popular and for long time the discussions were
only between their supporters. Despite that, based on learning the wisdom of the evolutionary
path of CDMA new offers are coming into consideration.
The 3G solution for GSM is W-CDMA, also known as Universal Mobile Telephone System
(UMTS). It will require new radio spectra since it operates in ultra wide 5-Mhz radio channels.
Auctions for new spectra have already started and everybody has heard about the enormous
amount of money being considered. W-CDMA will meet the IMT requirements 2mbps indoors
and 384kbps – outdoors, but its official launch will be at earliest in Japan in 2002 by NTT
DoCoMo. Linda Windmark, strategic marketing manager in Ericsson views W-CDMA and
EDGE as complimentary technologies and it is completely wrong to consider them as mutually
exclusive. A possible co-operation between them is to deploy them simultaneously – W-CDMA
in urban areas, where the traffic is very dense and EDGE on the rest of the network using the
GSM (or TDMA) spectrum that already exists.
CDMA2000 is most popular in USA, because CDMA operators there have broader coverage than
GSM operators. Its structure is fundamentally different from that of GPRS. “Rather than use
specialised data infrastructure based on cellular-specific protocols, CDMA2000 leverages
Internet developments and includes Point-to-Point protocol to link users to a packet data-serving
node and Mobile IP to support customer roaming among CDMA2000 networks”(Beutmueller
and Faerber, 2000). This will allow customers to have their own IP addresses and keep them
while roaming in the network. This 3G technology comes in versions 1X and 3X. The first
version can readily be deployed in existing spectra, but the second one has to wait for a new
spectrum that combines three CDMA 1.25-Mhz radio channels for higher performance services.
Qualcomm has offered recently a new option: High Data Rate (HDR), which some specialists
refer to as 1XEV, acknowledging an evolution from 1X. With it, operators will not have to wait
for a new spectrum, because it works on the 1.25-Mhz radio channels and still offers throughput
rates of more than 2mbps.
These technologies get the biggest share of attention, but network managers have to examine
carefully any other possibility. For example, in July 1998 Siemens and the China Academy of
Telecommunication Technology (CATT) signed an agreement to develop jointly TD-SCDMA.
This was followed by a serious process of R&D and it offers roughly the same data transfer rates
as CDMA2000 and W-CDMA. Technically, the main difference is that it splits each W-CDMA
5-Mhz carrier into three 1.25-Mhz or 1.6-Mhz carriers, potentially offering both more flexibility
in network deployment design as well as spectrum usage. The performance and spectrum usage
are further improved by integrating it with a smart antenna technology. Because of the more
efficient usage of network resources, it can offer in highly dense metropolitan areas savings of
30% over W-CDMA. The fact that the Chinese government supports this technology creates a
positive image around it. After all, this market is very big and underdeveloped. Combined with
the big potential to supply equipment to China’s quickly developing cellular market, TD-

SCDMA has already attracted the attention of big players like Siemens, Motorola, and Nortel
Networks.
Obviously, the world has not agreed yet on a universal standard for 3G. The problem is that
despite its size, the cellular industry cannot support three different 3G strategies worldwide. The
future will show which ones will stay and provide a comfortable base for development of
wireless Internet.
3.5 WAP FORUM
In order to provide some compensation to these problems, a number of companies have produced
their own middleware solutions for the market. The diversity of the methods used to connect
small devices, such as PDAs, to mobile data networks has led to the requirement for
standardisation, driven by the need to allow mass-market appliances to be deployed. The arrival
of the micro-browser, embedded within the handset, improved productivity by reducing the
number of pieces of carried equipment, from two to one. In the short term, the technology most
likely to provide universal access from mobile phones to the Internet is the Wireless Application
Protocol (WAP), according to WAP White Paper, 2000.
3.6 MARKET DEVELOPMENT SUMMARY
• “Is 3G a stepping stone or a lasting solution for wireless data? The answers lie in the
application” (Herman, 2000). Despite unproven demand for key features, many
service providers try to analyse the increasing popularity of e-commerce and the
possible convergence of Internet and wireless applications and suggest that there is a
massive latent demand for 3G. They say that in order to be profitable and efficient,
economies of packets and reliability of the Internet connections have to be achieved.
In other words, the “always on” capability will make the mobile Internet thrive. What
is more important in this case is the strategy that operators and providers are using. So
far, the development of 3G has followed a pattern similar to that of WAP. The
excitement about theoretical possibilities new network technologies and handsets will
bring results in present WAP’s troubles being underestimated.
From a network point of view, many specialists (Yoon, 2000; Davenport, 1997; Ehrlich, 2000)
say that the whole technology industry is lacking a marketing perspective. Even before the
manufacturers or operators are sure that there are potential subscribers, they start discussing and
presenting the possibilities innovations. For example, as we can see on Graph 2, the 3G
technologies will be installed at earliest in 2002 and 2003 and will be close to 2.5G and 3G in
2010. The promise of this generation is great: due its bandwidth and network capabilities, it will
bring the richness of Internet to the mobile phone. Unfortunately, they do not say that this will
not happen in the near future, at least not until 2005. So far, about a year since the launch of
WAP and the strong discussion of GPRS, EDGE, W-CDMA, the consumers see the failure of
these promises. The number of the wireless Internet users in Europe and Asia is so small that
many companies refuse to tell the statistics they have (only one out of 12 contacted companies

gave us this type of data). For example, Chinese operator China Unicorn has postponed charging
its WAP users, because expenses of billing do not even reach the break-even point.
The disappointment about new networks, WAP technology is all over the world and is big
enough to result in a backlash. Maybe it is time, manufacturers to start reconsidering their
practices and give the customers a chance to find something they can believe in.
• Incremental approach- as we have seen the most popularly hyped word in the wireless
industry these days – 3G - is promising “lightning-quick data throughput speeds,
video, and multimedia applications (Holt 2000) ”. The problem is that, years yet
measure the arrival of these technologies. If we listen to the way people are promoting
the wireless Internet services, it is easy to realise that they will not be ready even for
the coming “wireless data storm” (as they refer to it). That is why some operators are
applying an incremental approach to 3G. This concept is based on the desire to get as
much profit from the current networks or the next 2G and 2.5G as possible and then
wait for the future to show which will be the most appropriate 3G technology. This
will allow them to make a smooth evolution into 3G. Another advantage is that
through this approach, the operators will not have to invest huge amount of money all
of sudden, but rather make reactively small investments every year in the next couple
of years. The threat of this approach is that 3G might be skipped because the telecoms
will make a jump to the 4G. The technology hype might kill its own product- 3G!
• The importance of applications- Some researchers (Malim, 2000; Wilhelm, 2000)

maintain that the success of any new network technology depends on the quality and
promotion of the applications. When a customer is buying a mobile phone, s/he does
not buy it because of its speed capabilities, but because of the connectivity with the
Internet. Therefore it is crucial to translate the technology into things that people will
want and have a reason to use.
• Speed trap - there are a great number of new network technologies coming or even running
on the market. What is very interesting about them is that establishing or running their top
speeds is not an easy task. The existing GPRS networks offer maximum theoretical rate at
172kbps, while some specialists say that this number is more realistically 144kbps. Others
say that this is 115kbps and even that would be the maximum using all of the eight time slots
available (Emmerson, 2000). “In practice GPRS is likely to top out at around 56kbps, which
neatly matches or exceeds the speed of home PC users’ modems”(ibid.). Not to forget that
whether operators will actually market at this rate is still an open issue.
The advertised speed for the next generation networks are around 2Mbps, which again is a
theoretical figure. Technically speaking, it applies to the transport layer. “The air interface is a
shared resource, which means that at the application layer, which is the only one that matters, the
figure will be much lower (ibid.)”.
Many people are getting caught in this speed trap, focusing only on the improvement of speed
rates. They forget to ask themselves: Is it really important? Are there any other possibilities?; etc.
For example, there are developments in data compression that will make speeds appear much

higher for certain applications. This may enable quick Internet access and other data services on
existing mobile networks to run at the equivalent of PC modems, that is 56kbps (Nortel, E-
mobility Accelerator).
On the road to packet networks, one of the biggest driving forces is that greater speeds, matching
and in some cases even exceeding these of today’s wire line networks, will make wireless
Internet thrive. It is obvious that the quality of the service will be better, but what is more
important, as Keith Shank, Ericsson director of strategic market innovations, providers have to
remain pragmatic about the speed and capabilities of the future 3G technologies. There will be
many different applications and some of them will meet the customer needs at lower costs. He
maintains the fact that “speed may thrill, but it may not pay the bill” (Wicklam, 2000). All
companies should try to implement that kind of strategies that follow the customer needs and
requirements.
Obviously, the “technological hype” has influenced this segment of development as well.
Companies, vendors, operators, etc. are trying to promote something they will not be able to
propose at the end. It is time engineers and managers to realise the fact that just because
something is possible, this does not make it probable. This means that the fact that the networks
have a limited capacity and many people use them should be accepted. It also means that through
GPRS, EDGE, etc. operators can offer wireless rates that are in line with wire line rates. This is
something that is sufficiently attractive to draw users' attention and should not be excessively
exaggerated.

4 Theoretical Background
This part of the paper is presenting the theoretical basis for the analysis. The aim of theoretical
background is to provide means for validating practical data in order to enforce the applicability
of conclusions.
The theory part is divided into several subparts- modules, each of them presenting a separate
conceptual frame. The first module encompasses concepts in the area of new product
development. We provide a combination of the two most interesting concepts- reach/richness and
high-tech/high-touch like the richness, which yields more feasible ground for applying the
concrete cases discussed.
The next part provides a basis for the discussion on the customer side of the phenomena. The
modern theories on technology adoption are summarised and shortly discussed. In addition to
that, we discuss the innovation diffusion concept, which provides knowledge about the
dissemination of innovations. At the end of that module, we list usability factors in order to give
an overview of all general factors “fostering” usability.
Then, basing on the study of the literature in 4.2 it is argued that the present approach of
assessing technology acceptance and customer perceptions is rather a reactive method. We
maintain that in a world of extensive information and technology overloading a proactive
approach aimed at understanding user’s intrinsic motivation is crucial. Along with the discussion
of the previous studies leading to the new model, the concept of cognitive absorption is
presented.
The last part evaluates the constituents of customers’ expectations with the aim of better
understanding customer needs. We argue that effective customer expectations' management
should involve proactive creation of favourable expectations.
4.1 NEW PRODUCT/SERVICE DEVELOPMENT
The aim of this theoretical block is to provide essential guidelines for the introduction of new
products and services. Although there are unquestionable differences between these two
categories of goods, such as inseparability, heterogeneity, intangibility, perishability (Lovelock et
al, 1999), the discussion is not separated due to the general applicability of the approaches
described. For the purposes of simplicity, we would refer to them in this section as products.
4.1.1 Avoiding the Wrong Route

Before even starting to consider the development of a new product, all critical reasons of failure
have to be studied and considered carefully. Cooper (1993) provides a comprehensive discussion
on new product failure reasons. The most common mistake is poor prior marketing survey, either
inappropriately designed or, in most cases, rated too low in priority. This leads to a situation,

where customer needs are misunderstood, market needs – overlooked and/or overestimated, and
market readiness seriously over hyped. The poor marketing survey may be caused also by
(already mentioned before) the “machine engineering process” approach, i.e. the case when it “is
assumed that because a product design is considered good by the R&D department, it is
considered good by the customer as well.”
The second type of oversights is caused by technical glitches during the design and the
production phase. Failure to deal with this type of mistakes results in huge cost inefficiencies,
which are encountered later since the costs of corrections made at later stages increase
exponentially (Bergman and Klefsjö, 1994). This category also embraces products that were
designed to include too many features simultaneously. Although it may be a great product, users
will often be too “lazy” to learn its functions thoroughly and, therefore, will not feel justification
for price/value relationship. Caused by this type of mistake, the product often falls in to the
failure category named “the better mousetrap that nobody wanted”. It is described as developed
“internally with little attention paid to the real needs and wants of the marketplace.” Another
failure category stemming from research of previous mistakes is the “technical dog”, which
occurs when the product “simply doesn’t work or falls short of performance requirements”.
The third reason that Cooper points out is the inability to plan the right timing during the product
development process. This includes both being too fast or too slow to offer to the market, which
partly arises from different sources, namely, lack of co-ordination between departments and
layers, lack or abundance of pressure on controlling. Willingness to deliver the product quickly to
the market often results in compressing or even some skipping stages of development (for a
detailed activity plan for new product development, refer to Appendix 6).
Some other mistakes are poor performance of marketing function, miscalculation of total
development costs, pre-testing of the product with focus groups, lack of test marketing, poor
financial and business analysis of product life-cycle costs and returns, poor internal testing.
The development of new products in today’s rapidly changing and turbulent environment
requires not only expert knowledge and resource base but often also a great deal of luck. The
reason underlying such statement is simple and lies within the fact that no market research can
precisely estimate the true needs of a market even in 2 years time. Failure to act quickly may
result in fierce competition and large opportunity losses. Scheuing (1989) states that forecasting
“plays a vital role in the evolutionary process by predicting alternative future environmental
conditions together with their associated probabilities of occurrence”. As stated previously,
Scheuing also warns that no forecastings “have been or ever will be able to eliminate the
entrepreneurial risk”. However, sound methods aimed at minimising risk should always be
considered and used as thoroughly as possible given the concrete case.
The consequences of rapid technological development caused by the nature of the New Economy
have posed great threats in terms of reduced time for marketing (which has resulted in fewer
research activities prior to action) and of technological traps. By the latter, it is understood that
companies often engage into actions, which outcome is not sure but they are afraid that
procrastination would result in large opportunity losses. Scheuing warns that “it is dangerous for
a company to be strictly technology driven and offer a product simply because it is
technologically feasible”. Therefore, to safeguard the company from opportunity losses of

making the wrong decisions, the companies have to enforce internal collaboration between R&D
and Marketing department. It is important to be customer driven and that can be achieved by, for
example, QFD, which translates broad customer needs into product specifications.
4.1.2 To Reach or Not To Reach?

The following part presents the concept of richness and reach, which refers to the trade-off
between the qualitative and quantitative aspect of data and its distribution.
Evans and Wurster (1999) suggest that, “Every business is consequently a compromise between
the economics of information and the economics of things. Separating them breaks their mutual
compromise and potentially releases enormous economic value”. In order to separate the two
distinctively different economics of richness and reach are presented. This trade-off emanates
from the “existence of information channels: physical infrastructures or behavioural patterns that
support limited movements of information”. Richness is referred to as the quality of information,
as defined by the user. In other words, it is the potential depth of analysis of the presented
information. Evans and Wurster (1999) provide six dimensions of richness of information (each
of them being more or less applicable):
• bandwidth (amount of information that can be moved through the distribution channel at a
time);
• customisation (degree of personalisation),
• interactivity (degree of two-way communication);
• reliability (degree of credibility);
• security (degree of sensitivity of information – implying that extremely sensitive information
is classified due to its unique rich content);
• currency (degree of speed of spread of information; relating to the stock exchange where few
receive instant quotes, financial institutions receive them with a small delay and individual
investors – with 15 and up to the hour delay).
Reach is simply the theoretical number of people whom the given information reaches. The
graphical presentation of the trade-off is shown in Figure 1.

Richness
Reach
Figure 1: Traditional trade-off between richness and reach (Source: Wurster and Evans, 1999)
The implications of this trade-off are that up until now, the traditional channels of information
distribution could not support the simultaneous distribution of highly customised, analytical and
deep material to a large audience. Take the case of newspapers and magazines – those that
attempt to reach a wide audience, present information, which would be suitable for most of the
readers (few headlines from the economic news, some sporting events coverage, national news,
weather forecast for the days to come, etc.). Naturally, due to the limited amount of space, one
cannot expect a 10-page-report on the political and economical consequences of the latest attack
by Palestinians in the Gaza sector. On the other end of the spectrum, highly specialised
newspapers and magazines, like Balkans Today, have this topic covered thoroughly, since this is
their core subject and the readers expect this deepness. Quickly considering the group of readers
of Balkans Today and of general daily newspaper like Expressen, one will most probably arrive
at the conclusion that the latter has wider reach but is not even close to the richness of the
coverage of the events in the Gaza sector, provided by the former.
Given the six dimensions of richness, it is easy to conclude that the main objective of the
marketing mix is to achieve a desired place on the richness/reach scale through the deployment of
scarce resources. Translating the trade-off into the familiar microeconomics terms, everybody can
observe the abstract similarity to the indifference curve. Ceteris paribus, both individuals and
companies can move up/down on the curve, but, unless they change the means of distribution,
they cannot move the curve itself.
One of the most important implications of the discussed trade-off is the asymmetry of
information. This implies that given the wide range of existing channels through which
information is distributed, it is more than just highly probable that end-users of information-
individuals, companies or alliances or else, will end up having different information about a
given phenomena. This is also facilitated by the different standards we are using in our everyday
life. Meanwhile, due to the force of the Internet and other wide area and local area networks
(intranets), the traditional trade-off curve is being shifted, making it possible to achieve greater
levels of richness and at the same time greater reach. This is shown in Figure 2

Figure 2: Coming revolution in trade-off between richness and reach (Source: Wurster and Evans 1999)
Inevitably, efforts of various standard bodies are resulting in more and more universal standards
across the globe. Nevertheless, due to the varying degrees of lobbying in the process of approval
of a standard, results are not always Pareto efficient. The discussion of standards consequently
leads to the factor of critical mass. The critical mass is considered the most important driving
force towards acceptance of the standard. This means that the standard faces the most of the
challenges during the initial stage of its life cycle. Consequently, once the critical mass has been
achieved, it is driven towards the mass acceptance creating a positive loop between number of
existing users and benefits potential users see from using the standard. The positive loop does not
only affect users, but also involves infrastructure companies, who are better off due to the
advantages of scale economies. The positive loop is often also referred to as a snowball effect and
is resulting in a network effect. Wurster and Evans (1999) warn, “There is no guarantee that the
right alliance of players will achieve critical mass and drive their standard to become a global
norm, although these have the resources, the intelligence, and a clear understanding of the value
of the endgame”.
4.1.3 To Touch or Not To Touch?

Lately, there has been a considerable effort devoted to “outsourcing” the work previously done
by humans to machines powered by recent technology developments. This section discusses the
trade-off between use of technology and use of human interaction in the process of
communication with the customers. We would apply and use some concepts introduced by
Gummesson (2001). He divides the Customer Relationship Marketing (CRM) into two parts
eCRM and hCRM, where “e” stands for electronic and “h” – for human.
Gummesson supports the different marketing approach that the New Economy companies should
apply (what we present in the previous chapters and in the entire theoretical part). He states:
“Major phenomena such as services, quality, relationships and IT are sparsely treated in
marketing management; they have not changed the marketing management paradigm; and in
microeconomics they are hardly noticed. Marketing theory development should lead to enhanced

understanding, insights and marketing wisdom, that is to a more balanced, more comprehensive,
and more valid image of marketing reality”. Gummesson precisely points to the two explicit
characteristics of the New Economy – importance of value and networks. Value creation is an
ultimate goal for business enterprise in the new millennium because, as one could see, many e-
companies have gone under water because of the instability of their value creation model. The
short-term benefits have they provided have proven not to be enough for value creation in the
long term. The notion of importance of networks becomes more apparent while observing the
essence of modern communications – most are held online. Therefore, if less time is spent for
setting up the meeting, more time should be devoted for polishing the prerequisites for contact
and increasing the number of contacts.
tech eCRM CRM
touch hCRM
Figure 3: Two approaches at CRM: the traditional and the new
Gummesson warns that the main reason of e-companies not living up to their promises has been
inability to understand and combine the fair amount of technology with fair amount of human
interaction. The web boom has been so drastic and overwhelming that suddenly everyone was
speaking of Internet banking, Internet shopping (including choosing flowers for beloved on the
Internet!), Net browsing, information downloading, etc. Naturally, “home shopping has been
slow and will most likely only expand in limited areas” (Gummesson, 2001). The concept of
high-tech and high-touch was developed 20 years ago by Naisbitt and, as quoted by Gummesson,
was based on the need “… to balance material wonders of technology with the spiritual demands
of human nature”. There are two conflicting views on the high-tech and high-touch. The
traditional way says that these two factors are negatively correlated. The new way claims that
effective CRM is essentially a positive correlation between eCRM and hCRM. Figure 3 provides
a graphical presentation.
The figure on the left depicts how new technology is supposedly replacing the need for human
interaction. Logically, it seems that costs are saved, and less time is required to perform an
electronic relationship. At the same time, this figure also suggests that some of the basic human
needs are neglected. The new approach suggests that a combination of electronic relationships
with human presence helps to establish better CRM.

The combined model
This section will explore possible synergistic effects from combining the two previously
discussed models – the trade-off between richness and reach and the trade-off between high-tech
and high-touch.
As mentioned before, new technologies are assumed to shift the trade-off line between richness
and reach so that both values increase at the same time. This is possible through advancements in
communication technologies and increased effects from interconnected networks. The technology
factor, which makes the curve shift, is presented in the second model in connection with human
factor, which, according to the traditional way of thinking, is supposed to diminish with amount
of technology increasing. If we would hold the old way as the correct one, this would inevitably
(in pure theoretical terms) mean that there is a contradiction between the two models since the
richness/reach concept claims that along with the curve shift customers are more satisfied due to
the increased opportunity to communicate. This is not possible according to the psychological
foundations in the high-tech and high-touch model. Therefore, the fist conclusion is that the new,
balanced trade-off between eCRM and hCRM is the more correct way of abstraction of reality.
Next, provided that, firstly, the balance between technology and human interaction has to be fair
and, secondly, neglecting this balance outweighs positive effects from technological
advancements, follows more precise model of trade-off between richness and reach can be
derived.
New Trade-Off that would be

Richness possible due to the emergence
of the New Economy
Actual Trade-Off due to

the importance of offline
human interaction
Reach
Figure 4: Corrected richness/reach trade-off
The implications for adjusting the model is that the technology should not be overemphasised.
Therefore, the new trade-off of boosted reach and increased richness is constrained by the human
ability to adopt to new things over time, but not immediately. Ironically, in a world of numerous
technological advancements, we must think beyond machines.

4.2 ASSESSING POSSIBLE WAYS TO IMPROVE USER ATTITUDE TOWARDS THE NEW OFFER
Given the rapid pace at which new technologies, services, products hit the market, one has to
adjust the common knowledge about customer readiness to use these new offers. The changing
environment in which people have adapted to live today has, in fact transformed theoreticians’
proposals on technology acceptance9. Logically, the building blocks in these theories are still
there. So, the main theories attempting to make use of psychology to explain human behaviour
are very briefly discussed below. In addition, usability promoting/hindering factors are looked
upon.
4.2.1 Theory of Reasoned Action and Theory of Planned Behaviour

In order to provide a reader with the background of the theories trying to describe the human
attitude towards the new technologies one needs to start with the Theory of Reasoned Action
(TRA) (Fishbein and Ajzen (1975, 1980)), which is a basis for both Theory of Planned Behaviour
(TPB) (Ajzen 1985) and Technology Acceptance Model (TAM).
Behavioural beliefs Attitude

and towards the
Outcome evaluation behaviour
Normative beliefs
and Subjective Intention Behaviour
Motivation to comply Norm
Control beliefs Perceived

and Behavioural
perceived facilitation Control
Figure 5: Theory of Planned Behaviour. Source: Chang (1998), compiled from Ajzen (1985)
The main assumption of TRA is that all individuals are rational and use the information at their
possession when making decisions. TRA assumes that behaviour being studied is under the
willful control of the individual and both theories assume that human beings are rational and
make systematic use of information available to them when making decisions.
The TPB is in effect the extension of TRA. In order to explain Intention and Behaviour, TPB has
added control beliefs and facilitation as an antecedent of perceived behavioural control. TPB
incorporates measure of self-efficacy, which together with measures of subjective norms and
attitudes can help to predict human behaviour. Self-efficacy relates to how easy or difficult it will
be to learn the new system (in this context). Subjective norm is each individual projected
response of other individuals in case s/he is to perform the action (in other words, what others
9
No wonder why thesaurus for Microsoft Word, along with other choices, offers to substitute theoretician with
speculator, philosopher and dreamer.

will think of him/her if s/he is to perform the action). Finally, attitude towards technology
indicates whether an individual thinks about it in a more positive or negative way.
4.2.2 Technology Readiness and Acceptance Model
Parasuraman (2000) starts developing this area with introducing a new and very useful concept:
“technology readiness”. It refers to “people's propensity to embrace and use new technologies for
accomplishing goals in home life and at work. The construct can be viewed as an overall state of
mind resulting from a gestalt of mental enablers and inhibitors that collectively determine a
person's predisposition to use new technologies” (Parasuraman 2000)”. Only if we able to
measure and analyse this measure, we would know to what extent we could use a new technology
on the market. Even though TRI is a comprehensive tool for measuring readiness and later basing
business decisions on introduction of new technologies, there is a very critical point. In order to
take full advantage of its positive results, the company has to devote large amount of time to
gathering, analyse input data and provide viable conclusions. During that time, market may either
shift in other direction or be already in the state, which has been analysed.
A lot of contemporary trends and challenges triggered the introduction of the technology
readiness concept. In the last decade new technologies have proliferated through various facets of
everyday life and have reached a point where we accept them as a normal part of our everyday
life. However, many surveys (e.g. Parasuraman 2000, Alsop 1999, Mossberg 1999) suggest that
there are more and more signs of growing consumer frustration and disillusionment and that there
is also an inverse relationship between penetration and use rates. The logical explanation for this
might be the fact that these new adopters are not as “technologically savvy” as the early users or
that the companies offer more and more complex information solutions without a good service
support and friendly instructions. What almost all researchers agree is that “consumers
simultaneously harbour favourable and unfavourable views about technology-based products and
services. In this vein, Mick and Fournier (1998) carried out an extensive qualitative research on
people’s reactions to technology and identified eight technology paradoxes with which
consumers have to cope: control/chaos, freedom/enslavement, new/obsolete,
competence/incompetence, efficiency/inefficiency, fulfils/creates needs, assimilation/isolation,
and engaging/disengaging. What is most interesting is that these paradoxes imply the appearance
of both positive and negative feelings. The correlation of these feelings is likely to vary across
individuals and if we have a good measurement system, we can determine the customers’
willingness to embrace the new technology, i.e. technology readiness. This implies that “ a
combination of positive and negative feelings about technology underlies the domain of
technology readiness”. An extensive research, conducted by Parasuraman shows that there are
four main factors of technology-related behaviour:
• Optimism: A. positive view of technology and a belief that it offers people increased
control, flexibility, and efficiency in their lives.
• Innovativeness: A tendency to be a technology pioneer and thought leader.
• Discomfort: A perceived lack of control over technology and a feeling of being
overwhelmed by it.
• Insecurity: Distrust of technology and scepticism about its ability to work properly.

Of these four aspects, the first two are drivers and the other two- inhibitors of TR. The conclusion
of this survey is that whenever a company tries to implement a new technology-based service it
has to consider carefully all these dimensions.
Dabholkar (2000) also supports the idea that the customer’s feelings and beliefs are positively
correlated with the intensions to use a technology- positive feelings will propel people toward
new technologies, the negative ones will hold them back. What is different is that he divides the
factors in two big groups- situational and individual differences in using technology-based
services. He considers the personal and demographic characteristics of the customers as one of
the most important elements in the analysis of the plausible technology-based implications. Every
company has to aim at creating technology comfortable customers, because this will be beneficial
both to the customer (in the form of good experience and satisfaction) and the company
(providing good and accepted service).
As explicitly stated by Davis (1989) in his Technology Acceptance Model, users’ intention to
accept a technology is mainly driven by two factors – perceived usefulness and perceived ease of
use. In this model he maintains that it is very important to understand how the customer perceives
these two factors. Perceived usefulness is defined, as the degree to which a person believes that
use of the system will enhance his or her performance and perceived ease respectively as the
degree to which a person believes that the system will be free of effort. However, regardless of
how these two factors interact with each other towards creation of favourable intention to accept
a technology, TAM does not put focus on the external factor of need to use it. Put it a different
way, individual differences of each human are not included on the explanatory side of the model.
Given the business environment, both individual and organisational actors have to take advantage
of new technologies and be aware of coming ones in order to stay on the competitive edge. This
will inevitably initiate also acceptance of technologies on the individual level in the everyday life,
assuming a normal working person is exposed to the obligation to work on average 5 days a
week, 8 hours a day.
4.2.3 Innovation Diffusion Theory

The innovation diffusion theory explains how the new technology usage spreads from early
acceptance by few users to either success or failure of concept (Rogers, 1962). The theory
describes how the innovation is communicated over the time, through particular channels. Stages
of innovation are (adopted from Clark):
− knowledge (exposure to its existence, and understanding of its functions);

− persuasion (the forming of a favourable attitude to it);
− decision (commitment to its adoption);
− implementation (putting it to use);
− confirmation (reinforcement based on positive outcomes from it)
It is emphasised that mass-media channels are more important on the first stage, whereas inter-
personal channels gain their importance on the second stage. As such, the decision to adopt may
be personal (individual judgement of the affected person or organisation), collective (reached by

consensus) or authoritative (imposed from hierarchically higher individual or organisation). Next,

the important characteristics of innovation are:
− relative advantage (the degree to which it is perceived to be better than what it

supersedes);
− compatibility (consistency with existing values, past experiences and needs);
− complexity (difficulty of understanding and use);
− trialability (the degree to which it can be experimented with on a limited basis);
− observability (the visibility of its results)
A widely used approach is to divide innovation users in 5 categories, which are related to time
perspective:
− innovators (venturesome);
− early adopters (respectable);
− early majority (deliberate);
− late majority (sceptical);
− laggards (traditional)
Clark describes these groups in the following way: “Earlier adopting individuals tend not to be
different in age, but to have more years of education, higher social status and upward social
mobility, be in larger organizations, have greater empathy, less dogmatism, a greater ability to
deal with abstractions, greater rationality, greater intelligence, a greater ability to cope with
uncertainty and risk, higher aspirations, more contact with other people, greater exposure to both
mass media and interpersonal communications channels and engage in more active information
seeking.”.
The innovation process is highly influenced by:
− opinion leaders (who have relatively frequent informal influence over the behaviour
of others);
− change agents (who positively influence innovation decisions, by mediating between
the change agency and the relevant social system);
− change aides (who complement the change agent, by having more intensive contact
with clients, and who have less competence credibility but more safety or trustworthiness
credibility)
The innovation diffusion theory serves as a good descriptive instrument. Still it is hard to apply it
in reality, because the explanatory and predictive sides are not strong.
4.2.4 Usability Promoting/Hindering factors

There are several dimensions, which can be of use when inspecting the possible usability of new
technology (Stephen Bostock, 2000). The first group of factors concerns learnability:
− familiarity (using existing knowledge);
− consistency (similar behaviour in similar situations);

− predictability of response
− generalisability (support to extend knowledge to other situations);
− synthesisability (past operations have clear effect on current state);
The second group deals with flexibility factors:

− controllability (the extent to which the customer can govern over the interaction
process);
− multi-threading (allowing to engage in more tasks at the same time);
− task migration (the user can choose between performing a task him/herself or passing
it to a system);
− customisation (the extent to which the technology can be adjusted to specific user
needs)
The third group concerns robustness:

− observability (the extent to which the user can observe the technological process);
− recoverability (ability to correct an error once observed);
− responsiveness (the perceived rate of communication, speed)
− task completeness (the extent to which the technology is able to perform the tasks of
the user in the user perceived way)
4.3 BETTING ON FUN
4.3.1 Need for Change in the Course of Action

Due to the above-mentioned arguments, we state that a new approach is needed to look at the
whole process of introduction of new technologies and associated products and services. It is not
enough to discuss only technology readiness or acceptance to understand how the customers
would accept this technology. This approach has to deal with the fact that information on new
offers is being quickly disseminated among market participants– existing and prospective internal
and external customers, competitors and other stakeholders. Therefore, focus needs to be put on
the creation and effective management of stakeholders’ expectations. While expectations is the
input into the framework, the output is, logically, customer perceived quality. The way to
customer perceived quality lies through managing expectations, creation of positive perceptions,
and management of disconfirmation of expectations. Due to the fact that great amount of efforts
is currently being put on personalisation of new services, the problem of disconfirmation is the
ultimate issue. This is based on the idea that customers in the New Economy expect services to
match exactly their needs. Again, this expectation has been created by numerous explicit and
implicit promises involved companies have made. To conclude the arguments we would like to
recall the state of mind people had had two decades ago. At that time there were no computers,
no Internet, no mobile phones, no electronic payment cards (comparing the rate of penetration to
that of today) etc. If an extensive marketing survey had been carried out towards assessing
potential need for these technologies and their associated products and services, it would have
shown negative results (this conclusion is based on studying the foundations of both TAM and
TRI).

Therefore, we propose a new theoretical view on the development of new offers for the New
Economy. This view is a combination of theories in relationship marketing, quality and
psychology. Existing theories aimed at explaining and predicting customer attitudes towards new
technologies greatly overlook the potential of placing a focus on fun associated with their usage.
Once more, perceptions of technology as being able to provide fun are strongly dependent on
companies – they have to integrate fun in the new technology and promote it as a fun-having
experience as well.
The aim of this section is to provide theoretical insights into the antecedents of technology
acceptance models discussed above (particularly, TRA, TPB, TAM). Discussing the work of
Agarwal and Karahanna (2000), we propose that the concept of cognitive absorption (CA) is of
utmost importance when discovering the primary driving forces of user acceptance of the New
Economy offers.
Agarwal and Karahanna (2000) give a logical background to our perspective by saying that "prior
research has focused considerable attention on the centrality of beliefs in several key outcomes
such as attitudes and usage", whereas "less emphasis has been placed on how such beliefs are
formed". It is interesting to inquire not only into the notions of instrumentality but also into the
notion of holistic experiences with technology. Agarwal and Karahanna (2000) warn, "Several
central characteristics of contemporary IT underscore the need to pay close attention to
noninstrumental variables". The concept of CA is based on three theoretical bases - the trait of
absorption, the state of flow and the notion of cognitive engagement. Sections below are
examining each of these bases separately.
4.3.2 The Trait of Absorption

This concept stems from the idea that human beings are often found in situations when their state
of mind can be characterised as "readiness for experiences of deep involvement, a heightened
sense of the reality of the attentional object, an imperviousness to normally distracting events,
and an appraisal of information in inconventional and idiosyncratic ways" (Roche and
McConkey, 1990). Naturally, the extent of the trait of absorption varies among different
individuals. Moreover, this trait is directly influenced by situational factors and subjective
previous experiences. The trait of absorption is a variable in the users' behaviour that in certain
situations leads to the state of absorption.
In order to provide a useful insight on how this trait can be measured, Tellegen Absorption Scale
(TAS) is briefly discussed. The scale developed by Tellegen (1982) has nine dimensions:
responsiveness to engaging stimuli, responsiveness to inductive stimuli, thinking in images, an
ability to summon vivid and suggestive images, a tendency to have cross-modal experiences, an
ability to become absorbed in one's own thought's and imaginings, a tendency to have episodes of
expanded awareness, an ability to experience altered states of consciousness, and an ability to re-
experience the past.
4.3.3 The State of Flow

Originally developed by Csikszentmihalyi (1990), this concept has been recently considered in
combination with the concept of trait of absorption (Wild et al 1995). Csikszentmihalyi defines

state of flow as "the state in which people are so involved in an activity that nothing else seems
to matter". Clusters of flow are intense concentration, a sense of being in control, a loss of self-
consciousness, and a transformation of time. Trevino and Webster (1992) developed a more
precise model particularly for the human-technology interaction. This model includes 1) a control
dimension, analysing individuals perception of control over the process of interaction with
technology; 2) an attention focus, whereby individuals attention to the process is analysed; 3) a
curiosity dimension, implying that during the state of flow there is a higher stimulation of sensory
and cognitive curiosity; 4) intrinsic interest dimension, suggesting that individuals experience
with technology is not of pure usefulness nature but much of it is represented by the pleasure
from the process of interaction itself. Hoffman and Novak (1996) put forward that flow is a direct
antecedent of positive subjective experience, increased learning and perceived behavioural
control.
4.3.4 The Concept of Cognitive Engagement

The concept of engagement was presented by Webster and Ho (1997) and related as similar to the
state of flow but without the perception of control and, therefore, identical to the state of
playfulness.
4.3.5 The State of Cognitive Absorption

The final concept, which was drawn by Agarwal and Karahanna (2000) is partly based on all the
previously mentioned theories. Appendix 9 provides a useful overview of the discussed theories
and summarises their particular input into the new model. Next, the justification for using the
state of CA is that the presented models along with much useful insights and analytical tools are
overlapping but individually do not provide the completeness of state of cognitive absorption.
Therefore, CA "captures the totality of an individual's experience with new software" and "is
strongly grounded in prior research in cognitive and social psychology" (Agarwal and
Karahanna).
The dimensions of CA are:

1. temporal dissociation, or the inability to register the passage of time while engaged in
interaction;
2. focused immersion, or the experience of total engagement where other attentional demands
are, in essence, ignored;
3. heightened enjoyment, capturing the pleasurable aspects of the interaction;
4. control, representing the user's perception of being in charge of the interaction; and
5. curiosity, tapping into the extent the experience arouses an individual's sensory and cognitive
curiosity (Malone 1981).
The theoretical model is depicted in Appendix 8 where arrows represent positive impact of one
factor on another. For a detailed discussion and explanations, please refer to Agarwal and
Karahanna (2000).
To conclude the section providing insights into the state of CA as well as preceding theories, one
should note that the research done by Venkatesh (1999) on the role of the creation of favourable
user perceptions via the path of intrinsic motivation has considerably proven that perceived ease
of use is higher among the users in the game-based environments (alternatively, in the

environments where more fun component is involved) than in the traditional environments. Next,
Venkatesh has pointed to the fact that the behavioural intention to use will be higher among users
in fun-mediated environments. Even more though, the simple notion of how to name the
environment is going to produce different attitudes towards it. This means that labelling the
environment as "fun" or "work" will eventually result in different user perceptions (Rosch, 1975,
1978). Labelling the environment as "fun" results in users concentration on the process whereas
labelling it as "work" results in concentration on the outcome.
4.4 CUSTOMER EXPECTATIONS MANAGEMENT
This part provides basis for the discussion of customer expectations. First, determinants of
customer expectations and their antecedents are studied. Then, management of expectations is
discussed with the focus on the disconfirmation of service expectations. Finally, theoretical
suggestions on how to correct the effects of disconfirmation of expectations are presented.
4.4.1 Roots of Expectations

To start with, according to Zeithaml, Berry and Parasuraman (1991), there are three distinctive
types of customer service expectations: desired service, adequate service and predicted service.
The conceptual model Zeithaml et al provide is divided in four parts: 1) expected service
component, 2) antecedents of desired service, 3) antecedents of adequate service and 4)
antecedents of both predicted and required service.
Expected service is affected by the level of service that the customer expects to receive (desired
service) and the level of service that the customer will accept (adequate service). Although
customer believes the company can deliver superior service, which would satisfy all customer
needs and sometimes even exceed them, the customer is aware that this is usually not the case.
The desired service expectations tend to be relatively stable over time, since they are based on
accumulated past experiences. Adequate service expectations, however, has a tendency to
substantially vary, due to the fact that it is based on current experiences and analysis of
alternatives. Thus, there is a borderline between desired service and adequate service to indicate
that there is a zone of tolerance. Zone of tolerance emanates from the heterogeneous nature of
services and relates to the possible difference between the same service but at different time.
Zone of tolerance is a conceptual foundation and therefore may drastically vary between different
customers. Moreover, the variation is also possible given the same customer but different point of
time.
Desired service refers to the ideal service expected by a customer. Major influencing factors on
the desired service are enduring service intensifiers and personal needs. The first group of factors
includes competitor services and their marketing, while the second group is a complicated
combination of psychological state of the person at the time of service delivery, personal
background (experience, professional education, family background and vast number of similar
interpersonal characteristics). Enduring service intensifiers are therefore influenced by derived
service expectations (influence of a third party) and personal service philosophy (personal
intrinsic attitude towards the service and performance of service providers). Stemming from these
manifests, one can conclude that enduring service intensifiers elevate the level of desired service.

On the other hand, personal needs in detail represent the combination of one’s physical, social
and psychological factors.
Adequate service is defined by five factors: transitory service intensifiers, perceived service
alternatives, self-perceived service role, situational factors, and predicted service. The latter
further influences adequate service evaluations and customer perceived satisfaction. Transitory
service intensifiers are short-terms individual factors and conditions that lead a person to more
sensitive attitude towards the service. In other words, emergency situations increase customers
expectations of adequate service in a way that individual expects that the company will react in
the best possible way to solve the problem immediately. The perception of quality of service
alternatives also tighten zone of tolerance indicating to the customer that switching is easy due to
the low search costs (disregarding lock-in and switch costs). Next, inseparability of service
production process and delivery requires customer as co-producer and, consequently, customer’s
self-perceived role influences the level of adequate service. In practise, for example, this means
that a customer who likes to be involved in the service production process, will more positively
describe his experience about the moment of truth when s/he has been greatly involved in the
process, and opposite also of course is true. Naturally, the customer understands that force major
is beyond the control limits of the service provider, therefore, situational factors widen zone of
tolerance.
Antecedents of desired and predicted service include four factors – explicit service promises,
implicit service promises, word-of-mouth communications, past experience. Explicit service
promises are constituted by statements made by company. These statements all together form the
substance of market information, which is disseminated in natural ways and received by
customers and other parties in differing amounts. This information includes direct and indirect
advertising and personal communication from inside the company to outsiders. Implicit service
promises, on the other hand, are communicated indirectly to customers and may even be received
by customers not in the way company intended to. Here, major factors are price and tangibles.
For example, a customer may logically assume that higher priced product is better and, therefore,
levels of both desired and predicted service are altered. Tangibles, for example, suggest that a
customer would expect higher level of service from a company whose office is in the city centre,
nicely decorated, occupying the best floors of office building. Similarly, if the customer has heard
from others, that particular service company is doing much better than their competitors, this
person’s levels of desired service and predicted service from a better company are naturally
heightened. Finally, the combination of past experiences has an impact of levels of desired and
predicted service as well, for example, a customer who has experienced bad service from a
company in 3 out of 4 interactions is likely to expect low performance the next time as well
(disregarding the fact that service company might use promises).
In case of the new technologies that are introduced on the market, it is interesting to look at the
sources of customer expectations. This makes it possible to base predictions about customers’
expectations about new products on a verified theory. As presented in Zeithaml et al (1991-113),
Cadotte et al (1987) provide following base points to consider in this area. In their opinion,
expectations norm is usually derived from experience, which should not necessarily be the
experience about focal brand. Firstly, the norm might be derived from particular brand
performance. Second possible way is that the norm is derived from the average performance of

several similar brands. Naturally, the external communication and the role of public relations
should not be underestimated.
4.4.2 The Art of Diplomacy

Previous sections of the theoretical model being developed have presented basis for following
path of individual's formation of beliefs that lead to the formation of perceptions about usefulness
and ease of use of the technology. PU and PEU (as we demonstrate later) have strong impact on
the behavioural intention (BI) to use the technology. Then, critical factors in the process of
expectation formation have been looked upon. The view that in the New Economy, in order to be
successful, companies have to shape the expectations of their users has been expressed. Now, it is
being argued that in order to competitively shape the expectations of users before they have
started to use the technology, companies have to give great attention to the examination of their
networks of relationships. Now more than ever, relationships are very important due to the
increased abilities to communicate via numerous means (e.g., video conferencing, voice mail,
email, and the conventional fax, telephone, post). This is to point the attention to the ease of
establishing relationships nowadays. Therefore, there is an increasing need to comprehend the
vast consequences of establishing relationships in the wrong way or committing mistakes during
the relationship. The aim of this section is to enlighten the general properties of relationships
nowadays and provide an insight on the most important ones in the context of company willing to
create the right type of expectations (or, rather, willing to minimise the probability of creating the
wrong expectations).
Gummesson (1998) puts forward three types of connections in the business relationships:
1) Activity links embrace activities of a technical, administrative and marketing kind;

2) Resource ties include exchanging and sharing resources, which are both tangible such as
machines, and intangible such as knowledge;
3) Actor bonds are created by people who interact and exert influence on each other and form
opinions about each other.
These relationships have eleven distinctive properties:
Collaboration
Collaboration is one of the fundamental properties of the relationships. Different combinations of
degrees of collaboration and competition can be observed in practice.
Interdependency
This notion suggests that each party has to establish the basis of treating each other seriously and
committing the resources in a mutually fair and beneficial way.
Trust, risk and uncertainty

Every relationship involves a varying degree of risk that other party will not hold its promise. In
order to strengthen the relationship, each party has to trust the other one. However, it is not
possible to predict, which is the optimal degree of trust.
Power

The relationship usually involves a party that naturally exhibits more power than the other one.
Conflicts due to this factor have to be avoided for it may result in the end of the relationship.
Awareness of the possible change in the symmetry of power has to be possessed.
Longevity
The implications of this notion are that the mutual benefit is a positively correlated to the time
due to the initial costs of establishing activity links, resource ties and actor bonds. However, in
some cases relationship does not have to be focused on outcome but rather on process - as in
case with marketing agency when the new one could provide solutions that are more creative.
Frequency, regularity and intensity

These are the variables relating to the time and amount of relationship. For example, most people
regularly visit their dentist, this visit might be intense, in case a treatment is needed, or it might
not, provided that teeth are healthy, if a patient requires a treatment s/he might have to visit the
dentist frequently during some given period, otherwise such visits are not frequent at all - few
times a year.
Closeness and remoteness

"Closeness can be physical, mental or emotional." In cultural settings, physical closeness might
be opposed to mental remoteness in beliefs, values, and attitudes. A typical customer is usually
far from the actual producer because of the layers of distribution channels.
Formality, informality, and openness

Commercial relationships usually are more informal than formal because every possible problem
cannot be solved through obiding the contract and has to be dealt with quickly, by email, phone
or other means of communication. Openness relates to the fact that the more parties know about
each other, more informal their relationship will be. It is like two people who have just met each
other will talk about neutral themes like whether instead of inquiring what is the other one's dog's
disease.
Routinisation
The function of mutual benefit and its correlation to time usually also implies that many process
have become standard procedures that are performed quickly and minimising waste of resources,
therefore, effectively and efficiently. However, the non-instrumental side of routinisation may
experience downgrading in a way that involved actors may become bored of the repeating tasks,
consequently, losing creativity.
Content
The New Economics has different values than it was before and these values have to be
appreciated in a right way. Knowledge and information is used for joint value creation.
Personal and social properties

Logically, human beings possess different personal traits, talents, which are grounded in the
unique nature of each individual. To name some of the distinctive categories, these are education,
family background, nationality, religion, race, sex, political beliefs, and many others, being
important more or less in shaping the concrete personality.

Now, when the general properties have been laid out, relationships that are of most importance in
context of this research are briefly looked upon.
4.4.3 The electronic relationship

Gummesson proposes that "electronic relationships are formed through the new media of the 'IT
triangle': computers, telecommunications, and television". The warning that he issues is that IT
mainly serves as a medium of interaction and does not provide the content by itself. True,
whatever the content is, it is being affected by the medium and recipient’s reaction is different
depending on the type of the medium. However, nowadays companies do not appreciate to the
full extent possibilities of IT infrastructure and often too heavily rely on the notion of IT itself.
4.4.4 The mass media relationship

Unquestionably, media is one of the most powerful tools of creation of certain public image.
Substantial part of marketing efforts is directed to reach audience through the means of media. At
the same time, the aim of this section is to illustrate the importance of using media as a tool for
shaping customer expectations before these expectations have emerged by themselves.
Three types of media relationship are identified by Gummesson: 1) the relationship between an
organisation and media, 2) the relationship between media and their audiences, 3) the relationship
between an organisation and the media audience. In terms of this paper, we emphasise the
importance of right upstart relationship between an organisation and media. Through this channel
of interaction company has to release information on coming products well before they hit the
market. It is known, if the new revolutionary-kind-of product is to hit the market, there is a lot of
hype well before it has happened. The hype, which is created by journalists, usually does not
reflect the reality of the product but what it does is that potential future users are exposed to the
wrong type of information. This information will primarily govern the formation of their first
expectations about the product. When this has happened, the company will face substantial
difficulties in marketing their product, because what they will have to do, in essence, is to re-
market it by breaking the previous wrongfully created expectations.
Gummesson points out that "editors and reporters have many incentives, such as passion for the
truth, personal integrity, reaching a larger audience, fame, esteem among colleagues, vanity, and
revenge." In this way, there might be often a goal conflict between companies and media.
However, "the ability of business leaders to create relationships with media can sometimes be
their most importance marketing activity, the activity that determines a corporate image".
What is of importance to understand is the distinction between investigative journalists and so-
called news coverage journalists. The first group will dig deep into the essence of the issue and
therefore provide worthwhile analysis in the course of communication with somebody from
inside the company. The second group, unfortunately, may end up with a story reflecting on a
subjective opinion of journalist or an expert who does not possess the true and fair amount of
information. The effort of company’s media relations should be made in the direction of both of
these groups.

5 I-mode and NTT DoCoMo
In Japan, the operators play a major role on the mobile market and therefore are the ones that will
have a dominant role on the wireless Internet as well. Up to date, they are also the ones that profit
the most from this new developing market. This is based on keeping strong relationships with
customers, offering a wide range of services and exercising a significant control on handset
manufacturers. Therefore, the analysis of the success of wireless Internet in Japan will be based
on operator side, namely, the dominant player - NTT DoCoMo and its service i-mode.
As a main operator, NTT DoCoMo has a 55% market share (see Graph 3). Other big operators
are KDDI/au, KDDI/Tu-Ka and J-Phone. NTT DoCoMo was established in 1991 by the Japanese
telecommunications operator NTT (Nippon Telegraph and Telephone Corporation). DoCoMo
stands for "Doing Communications over Mobile networks". Today, Japanese government owns
the majority of NTT, which, in turn, owns 2/3 of NTT DoCoMo. NTT DoCoMo has a big
advantage over its competitors in terms of national coverage, because it was the only company
allowed to have a nation-wide coverage. Monopoly power of NTT DoCoMo became less
dominant when it had to sign interconnection agreements with other two mobile operators.
The Mobile Phone Operators' Market S hare
Tu-Ka
J-phone Others
6%
15% 1%
NTTDoCoMo
au
J-phone
au
23% Tu-Ka
NTTDoCoM
o Others
55%
Graph 3: Japanese mobile telecoms' market shares (Source: Telecommunications Carriers Association, 2000)
5.1 DESCRIPTION OF I-MODE-
“First introduced in Japan in February 1999 by NTT DoCoMo, i-mode is one of the world’s most
successful services offering wireless web browsing and e-mail from mobile phones. Whereas
until recently, mobile phones were used mostly for making and receiving voice calls, i-mode
phones allow users also to use their handsets to access various information services and

communicate via e-mail.10”. It is very important to mention that i-mode is a complete wireless
Internet service that at present is covering almost the whole Japan. Therefore, it is irrelevant to
compare WAP with i-mode directly. In essence, WAP is a protocol while i-mode is a service
based on cHTML programming language.
5.2 WHAT KIND OF TECHNOLOGY?
Technical solutions for wireless Internet vary between different Japan's mobile operators.
Programming languages are used to translate the content of web sites into data that is compatible
with limitations of mobile phones and networks. These mark-up languages are cHTML, MML
and HDML. Due to the focus of this thesis, only cHTML is discussed.
The language used to create i-mode sites is a subset of HTML - programming language for
conventional Internet. For this reason, it is very ease for any Internet developer to program i-
mode's sites since little additional knowledge, apart from HTML, is needed to learn it.
Consequently, steps that web-site developers have to take to translate existing sites into cHTML
are relatively easy. This has geared a creation of a great number of private and commercial i-
mode sites during last two years. This trend was also supported by the fact that cHTML has
always been an open standard. The obvious consequence is that a positive spiral between users
and good and plentiful content is maintained.
Due to the fact that the network used by NTT DoCoMo is based on a packet-switched technology
and therefore is closer to computer network than to a phone system, i-mode offers continuous
Internet connection – “somewhat like a slowed-down cable modem, but without the cable (Kunii,
2000)”.
5.3 WHAT KIND OF SERVICES DOES I-MODE PROVIDE?
Figure 6: NTT DoCoMo’s network structure (Source: NTT DoCoMo’s web site)
NTT DoCoMo, as well as other mobile operators, has adopted a “walled-garden” approach to the
content offered to subscribers. This means that they are restrictive in terms of what kind of
information and applications the users can directly access through their portals. In the case of
NTT DoCoMo, this system is different (See figure 6), since anybody can operate an i-mode site,
10
http://imodelinks.com/desktop/faq.html; “I-mode frequently asked questions”

but needs to sign a contract with DoCoMo to appear on the official menu. The content providers
are divided into official and unofficial sites, and only the first ones are these that are listed on the
screen of the phone. In order to access any site, the user can do three things: 1) access through the
official menu; 2) enter a URL manually and 3) click on a link for a site in an e-mail or in the
bookmarks list.
What is common for both official and unofficial sites is that they can reach any potential
customer only through a relay station, called “i-mode server” or “i-mode centre” and owned by
DoCoMo. DoCoMo also allows Internet connection, because it relays its packet network to the
open Internet network. The greatest disadvantage for the unofficial sites is that their data is
transported over Internet on its way to the user, while the official ones are connected directly to
the server.
Many researchers in Japan and Europe (Funk, 2000) are maintaining that the key to i-mode's
success is the range of applications available to subscribers through its network. From the start,
NTT DoCoMo ensured it had services for its users by signing up with 67 partners who produced
over too sites. For the last two years, this number has been growing and now the company is
offering to its customers more than 600 official sites (see Table 3 and Figure 7).
Table 3: Wireless Internet services in Japan Source: Mobile Media Japan, modified as from Devine and
Holmqvist (2001)
NTT DoCoMo J-Phone Au Tu-Ka

Wireless
Internet i-mode J-sky Ezweb
Service
Number of 17.4 million 4.5 million
5.2 million (Dec 2000)
users (Jan 2001) (Dec 200)
Number of 618 414
339 (Nov 2000)
official sites (Sep 2000) (Oct 2000)
300 Yen
Fees for the (monthly basic No monthly fees; 2 200 Yen (monthly fee) and 0.37 per a
service fee) and 0.3 Yen Yen per request packet
per a packet
Markup
CHTML MML HDML
language
Digital Packet-
Digital Packet- Circuit-switched
Network Switched Circuit-switched PDC
Switched PDC PDC
CDMA one
Capacity 9.6 kbps 9.6 kbps 64 kbps 9.6 kbps
These 600 sites offer a great variety of opportunities and services. NTT tries to make the use of
them easier and organises them into 11 categories. At the beginning when the company was
targeting the business segment, they were organised into four groups: Transaction, Database,
Entertainment, and Information and the first group was the biggest. It was covering many
business areas - from bank account transfers to booking train tickets. Nowadays the categories
are: News/Weather/Information; Mobile Banking; Credit cards/Securities/Insurance;
Shopping/Living; Melodies/Images; Travel/Traffic/Maps; Gourmet/Recipes; Games/Fortune-

telling; Entertainment; Administration/Town Information; and Dictionary/Convenient tools (See

Figure 7 and Appendix 4)
Takeshi Natsuno, media director of the gateway business department, says that the quality of the
sites offered through the official menu is the key to success. These sites have to represent not a
global wireless Internet service strategy, but the Internet business model for i-mode. In that case,
all content providers have to consider carefully four criteria: “It should be fresh”(update once a
day is too slow); “It should be deep”(i.e., more than a SMS); “It should encourage repeat visits”
(e.g., games) and “The user should be able to see the benefit”.
NTT DoCoMo's i-mode
Transactions
Mobile Banking
Entertainment
Ticket reservation Karaoke
Credit card bill inquiry FM on-air information
Mobile trading Network Games
Purchasing books Fortune-telling
Call Life insurance/Mobile ATM
Mail
(PDC) Incl. E-mail
Database Others
News
Restaurant guide
Weather forecast
Mobile phone directory
Transportation information
Mobile recipes
Rental opening
Dictionary search
Town information
Cellular Phone Network
Figure 7: Structural model of i-mode's services
5.4 BUSINESS STRATEGIES
"Walled Garden"
Mobile operators aggregate the content and control the official sites. One of the most important
aspects of the wireless Internet market in Japan is the fact that the operators control the whole
market. Apart from being just voice and data telecommunication service providers, they also act
as terminal providers, access providers and content providers (see Figure 8).

From the value chain, we will focus only on the right wing, because in the light of this paper it is
the most important aspect (see also Appendix 9). It shows how all of them and in particularly
NTT DoCoMo acts as a dominant content aggregator.
If we refer Figure 8: The wireless Internet value chain as influenced by the operator (Devine
and Holmqvist, 2000)
to the
definition
provided by Devine and Holmqvist (2000), content aggregators are “companies that aggregate
content on a site, often called a portal. They are concerned only with collecting content for their
specific portal, not adding content or services themselves”. The operators’ role as content
aggregators is very important due to the existence of official and unofficial sites. Since the
service menu on i-mode's phone is the most convenient way to access the sites, the official ones
become most popular. That is why NTT DoCoMo is very restrictive of what is shown on the
menu of every mobile phone they are selling. The company is trying to promote an attractive
selection of official sites to the user. Being the biggest mobile operator (its main competitor has
only 29% market share and 5.2 million users) and offering the greatest amount of services has a
strong influence on the companies and sites that want to appear on the official menu. NTT has
achieved a critical mass and is driving towards the mass acceptance, creating a positive loop
between number of existing users and benefits potential users see from using the service. This
positive loop is referred to as a snowball effect and can result in a network effect. Wurster and
Evans (1999) maintain that there is no guarantee that this critical mass will be achieved. The
Japanese market proves this statement, but what is even more important is that whoever achieves
it first will force its standard (despite high technological advantaeges) to become a global
standard, although it may not offer as much resources, intelligence and managerial power as
another player on the market.
As NTT acts as a dominant content aggregator, it is very easy to transfer this controlling power
over the content of the offered sites. Although NTT does not participate in the production and
developing of these sites, it uses its strength and good market position to make sure that the

content is of good quality to the customer. One of the values of company is establishing and
maintaining a strong brand name. Therefore, NTT DoCoMo takes measures to prevent sites
offering explicit and offensive content. In order to do that, NTT DoCoMo has imposed three
rules that were subject to minor changes.
Advertising: The restriction to include any advertisements was based on the feature of billing
system, which makes user pay for the amount of data transferred, in this case - involuntary
advertisements. However, due to the importance of revenues from advertising in June 2000 NTT
DoCoMo removed the ad ban and implemented changes in the billing system. Now the payment
for the downloading of banners covered by the advertised company. Some sites even pay users
small amounts of money for clicking on banners and links.
Links: At the beginning NTT was afraid of loosing control and profit from the market, so it did
not allow any links on the official sites. NTT DoCoMo had no means of checking all links from
the official sites and ensuring they do not lead to sites of unacceptable content. However, after
liberating the advertising strategy, the company had to reconsider this rule as well. When offering
an advertising also includes a link to a site with thorough information. Therefore, since
November 2000, links from one official site to another are permitted but in each case NTT
DoCoMo reviews the site.
“People-to-People sites": All sites that allow communication between previously unknown to
each other users are explicitly forbidden. This group includes chat sites, bulletin boards, and
dating services. In addition to that, it is very important to say that NTT acts as a dominant access
provider and terminal provider.
Although Japanese mobile market can not be regarded as monopoly due to the existence of three
other operators apart from NTT DoCoMo, this situation can definitely be described as oligopoly.
Incumbent operators are not likely to loosen their control over the market and Japanese
government has not announced bids for a fifth mobile operator license. The European market in
general, therefore, can be considered as being more liberal.
5.5 GENERAL BILLING STRATEGIES
5.5.1 Revenue for NTT DoCoMo
Our research proved that DoCoMo is the company that profits the most out of the innovation of
the mobile traffic. Its revenue from offering wireless Internet services amounts for 25 times as
much as all the official content providers put together.
The reason for this is very simple. While content providers have only one revenue stream – 90%
of the content subscription fees, DoCoMo has three profit drivers. They are based on the different

fees that the user pays for accommodating the phone and the network: subscription fees, traffic
fees and percent of content subscription (see Figure 9).
Traffic Fees are the main source of revenue from wireless services. These fees are based on the
traffic that every user generates on the network. Packet-based network allows NTT DoCoMo to
charge for every packet (128bytes) of data acquired by user 0,3 yen. This network allows large
economies of scale, because the capabilities of the network allow more people to use it at the
same time.
Subscription Fees are collected on a monthly basis from customers willing to access the block of
service offered via i-mode. Main monthly-billed services include sending e-mails and SMS,
browsing the Net, and reaching the official sites. DoCoMo charges 300 Yen in comparison to Au,
which charges 200 Yen and J-Phone, which does not charge at all. One has to bear in mind that
300 Yen is approximately equal to 2.5 USD.
Traffic fees
User Monthly fees

NTTDoCoMo
Commission
Subscription fee
Content
provider
Figure 9: I-mode's payment scheme
DoCoMo receives approximately 10 Percent of Content Subscription fees that content providers
generate. The logic behind this decision is that content providers use DoCoMo's network and,
indirectly, mobile phones, which are subsidised by the company.
All these fees lead to the fact that “on average the i-mode users pay 2000 Yen per month in
packet fees and between 400 and 500 Yen in content charges. About 50% of the users subscribe
to official content and on an average each of these users subscribes to four contents" (Funk, 200).
5.5.2 The content providers business models

There are a number of billing methods/business models that are being used by content providers
to generate profit. These are the “Clearinghouse” model, “Pay-to-have-Contents-Loaded” model,
the “Marketing Core Business” model, the “Shopping” business model and the “Revenue
sharing” model (Funk, 2000; Devine and Holmqvist 2000).

The “Clearinghouse” model is the most widely used billing method. It is based on fact that it is
safer and quicker to use a third party when providing a wireless Internet service to a customer,.
Third party acts as a payment collector and extracts certain percentage fee for this service. In the
case of DoCoMo, it acts as a third party and collects fees from subscribers including it in monthly
telephone bill. Usually the amounts charged are quite small and the customer is paying for more
than one content, so it would be very impractical to make the content providers handle this
process. It is important to mention that only the official sites are allowed to utilise the billing
system offered by DoCoMo.
“Pay-to-have-Contents-Loaded” model (also referred to as Advertising model) is based on the

traditional Japanese way of promoting businesses. This implies that companies are paying to have
information about their services presented in a positive way on an i-mode’s site. Due to the fact
that advertisements on i-mode have higher viewer and click rates, Funk (2000) maintains that this
model is different than the usual fixed-line Internet advertising model. The reason for this lies in
the pattern of usage of i-mode’s phone. In detail, Funk explains that Japanese often use their
telephones to “kill the time”. Often users are rewarded with various discount coupons for clicking
on banners and viewing company offers. The provider benefits form that because it is paid by the
advertising company and some of these discount payments are handled through the providers
billing system.
The “Marketing Core Business” model is largely used by government offices, ticket providers,
airlines, and rental car agencies to attract customers to the organisations’ core activities. This
includes providing free information or free services to customers in order to get them acquainted
of organisations’ offers.
A variation of previous is the “Shopping” business model. It allows users to order a product or a
service from their i-mode-enabled telephone. The content provider has to ensure that this
possibility is legal and the delivery will be made. The payment takes place either online or at the
time of delivery. Funk (2000) maintains that shopping on the mobile phone and the fixed-line
Internet in Japan is still in the infant stage. He explains that with high cost of credit cards and the
lack of confidence in using them. Still, the statistics show that sales over the wireless Internet
amounted for about 100m Yen (0,87m USD) in July 2000.
Last, the “Revenue Sharing” model utilises the cases when content providers mainly use content
from other parties (often referred to as content owners). In this model, content provider either
pays the content owners for the access to their content or alternatively is paid for exposing it.
5.6 SUBSCRIBER GROWTH AND USER CHARACTERISTICS
Wireless Internet/ Mobile phone users. If one analyses the charts in Section 3.2,statistics for
WAP appear to be sad in comparison to i-mode. The Japanese market development during past
two years has been enormous. 27 million out of 58 million people that have mobile phones are
wireless Internet subscribers. Not to forget that all over the world there are 40 million wireless
Internet users and 70% of them are in Japan. Additionally, the predictions for user growth in

Europe are controversial (see Section 3.2) and make many specialists to assume that European
companies do not have a clear vision what the future will bring to the industry.
Subscriber Growth. Most recent statistics11 show that so far i-mode has attracted more than 19
million subscribers (as of February 2000). The average growth of 9% a month is far beyond any
previous expectations and predictions. At the beginning DoCoMo was aiming to reach 10 million
subscribers within the first 3 years12, which actually was achieved in 18 months time- in August
2000 (see Graph 4).
Growth of Wireless Internet Users

Number of users (million)
22
20
18
16
14 I-mode
12
10 Ezweb
8
6 J-Sky
4
2
0
feb
ma 9
no 9
feb 9
ma 0
no 0
feb 0
au 9
au 0
v-
v-
g-
g-
-9
j- 9
-0
j-0
-0
9
0
9
Graph 4: Growth of Mobile Internet Users. (Source: Telecommunications Carriers Association, 2000; Devine
and Holmqvist 2001, NTT DoCoMo)
User Characteristics Graph 5 of the age distribution of the i-mode users shows that the majority
of the people (about 62%) are people less than 34 years. The biggest age group is the one
between 25 and 34 and it accounts for more than 30%. Additionally, 30% of the customers are
younger than 25, while the people between 35 and 44 account for only 17%.
11
http://www.nttdocomo.com, accessed on 18/02/2001
12
Mobile Media Japan’s website, Aug 2000

The Age Distribution of i-mode Users
35% 32%
30% 27%
25%
20% 17%
15%
15%
10%
4% 3%
5% 1%
0%
under 18 19-24 25-34 35-44 45-54 55-64 over 65
Age groups
Graph 5: The age distribution of i-mode users. (Source: D2Communication, 2000; modified as of Devine,
Holmqvist, 2000)
Recent surveys carried out by DoCoMo show that considerable number of people older than 45
are buying the i-mode enabled phones for their children. This means that the usage rate among
young people is even bigger.
If broken down by occupation, the largest group of i-mode users is students and this accounts for
45%. Around 39% are business people and 16% are housewives (Devine and Holmqvist, 2001;
derived from a Research by NTT-X and Mitsubishi Institute, Oct 2000). One of the most
important characteristics of the Japanese market is that unlike Europe, where in many cases the
company is their employees’ phone expenses, in Japan, more than 60% are paying themselves.
Only 10% of users have their expenses covered by employers. The rest accounts for people that
are depending on another member of the family (Devine & Holmqvist, 2001).
5.7 CHARACTERISTICS OF THE MARKET
The popularity of i-mode is also dependent on specific national factors (see section 4.2.2), as well
as conditions of the Internet and telecommunications markets.
First of all, the fixed-line telephone service is expensive and, as a consequence, the number of
mobile phones is larger than the number of fixed-line telephones. Second, the fees the users have
to pay for browsing Internet are $3,36 per hour compared to $1,50 in USA and $1 in Sweden.
Japan also has one of the highest costs for personal computers. Therefore, the percentage of users
accessing Internet from desktop computers in Japan is the lowest among the developed countries.
The PC penetration rate in Japan is 40%, as compared to Sweden’s 60%. The penetration of
fixed-line Internet is even worse – 20%, while in Sweden and Finland this rate is respectively
50% and 60%. In the middle of August 2000, Japan’s wireless Internet subscribers outnumbered
all those that use top 15 fixed-line Internet providers.

The fact that the level of fixed-line Internet penetration rate is higher than that of mobile
penetration, explains why Japanese people are more willing to use wireless Internet than anybody
else. “For the notoriously unwired Japanese, this whole world is a novelty (Kunii, 2000)”.
We also have to take into consideration that all consumers in Asia and especially in countries like
Japan, Taiwan, South Korea and Hong Kong are extremely trend-conscious. This fact can easily
be explained with the characteristics of the eastern culture. The construction of these societies is
based on homogeneity, on the fact that differences between members in a social group are almost
nonexistent. Therefore, almost everybody in a certain class has similar needs and requirements.
Low-cost manufacturers use this characteristic to obtain a critical mass on home markets and
secure their enter in the global arena.
All these, combined with the Japanese love for new technological advancements, turns Japan into
the hottest field in this competitive market and it is likely that it will remain in forefront of
innovation in the wireless Web (Kunii, 2000).
5.8 WIRELESS INTERNET TRAFFIC
Statistics described in the previous point explain how much the concept of richness and reach is
reflected in the market for i-mode services. Wurster and Evans argue that Internet and other new
developing technologies allow providing both more richness and more reach at the same time.
Funk (2000) supports that by saying that the number of Internet users is increasing enormously
and soon the number of people seeking for information via Internet applications will exceed the
number of those using old means like newspapers. Therefore, the “reach” of Internet will surpass
the “reach” of newspapers. Also, “the links between home pages will make it possible for users to
simultaneously and easily obtain rich information on the Net”.
As can be seen from the practice of some European companies, they assume that this
characteristic of the New Economy is transferable to mobile phone. But is that possible? Is it
possible to access the same level of rich information you can access with your computer? It is
obvious that because of their mobility and greater diffusion mobile telephones have a greater
level of reach. However, the fact that the number of mobile phones will soon exceed the number
of wired-Internet computers does not mean that the level of richness will also increase. The
reasons why customers would like to use a wireless service are different (see Chapter 7.4) and
therefore telephones have a different position on the trade-off chart (see Figure 10).
What does the experience of NTT DoCoMo show about this assumption? The most popular
category on the i-mode menu is Entertainment. It accounts for 64% of all the accesses. In this
category Games, Melodies, and Images are the most popular and more important – the most
successful and profitable content services on i-mode in general. News and Information are second
to Entertainment followed by Shopping/Living. Mobile Banking and Dictionary/Convenient tools
share the fourth place. For all that, Mobile Banking/ Credit Card/ Securities/Insurance accounts
for only 4% of the access to the official menu. The fact that the largest number of sites, 243 out
610, supports mobile banking does make it popular. Devine and Holmqvist (2001) explain the
number as a remnant of the introduction strategy, which focused on the transaction section.

What is the conclusion? All of the i-mode customers tend to use all the services that have
relatively low level of reach. There is far less information in the mobile phone (either via the
main sites or links) than in a newspaper, but still people prefer to use this means. This obviously
refers to the three main opportunities that all operators should turn into advantages-
personalisation, timeliness and positioning. This also shows and proves the idea that the market is
the big node that will decide what is and what is not popular. So far downloading images, playing
games, downloading information about music are the most attractive services and European
operators have to base their strategies on similar taking into account these trends.
Another implication of the trade off between richness and reach is that it is a function of age. In
the case of wireless Internet and particularly i-mode, the statistics show that more than 35% of i-
mode subscribers are less than 25% and almost 70% of them are less than 35. Even more
important is the fact that the majority of people with biggest bills are under 25. It is
acknowledged that most of the young people value more reach and less richness than older
people do. Main reasons for that are being less experienced, spending greater amount of time
away from home or office, travelling a lot, paying more attention to entertainment (Funk, 2000).
We also know that young people under 35 are the ones that adopt any new technology first. Due
to difference of education and technology perspectives obviously at the beginning they will be
the ones that that run up the biggest bills and therefore support financially the development of the
new technology or concept, in this case – wireless Internet (see sections 4.2 and 4.3).
Figure 10: The position of different Internet access devices on the

trade-off chart (Source: Funk, 2000)
In the long run, however, richer information will be required. It is not our objective to say
whether it is going to be on the same levels as these in the Internet services. What is more
important is that nowadays there are many constraints that prevent the spreading of high quality
information (the definition of high quality is a personal activity; still we compare it with Internet)
on mobile phones. Some of these limitations are network capacities, bandwidth, small displays,
means for input, restrictive policies.

5.9 SUMMARY OF THE SUCCESS FACTORS OF NTT DOCOMO
5.9.1 Good marketing

As we have shown in Chapter 4 and discuss later in Chapter 7, the way every company markets
any technological improvement is a critical issue and its success depends very much on the
customer. The logical conclusion that can be drawn from the Japanese experience is that any new
technological advances have to be done only if they meet customer needs (see Appendix 9). In
Japan, the marketing strategy has been around what i-mode can deliver to customers. Throughout
its short existence, i-mode has never been promoted as a means to bring Internet to the cell
phones. Unlike the European companies, DoCoMo focuses on the possibilities rather than on the
limitations. That is why there are no disappointed customers in Japan and plenty of them in
Europe. Secondly, the strategy is focused on the specific national characteristics of the market.
Additionally, the company was flexible enough to admit encountered mistakes, analyse them and
take correction measures, implying the use of PDSA cycle (see Chapter 7). For example at the
beginning, the wireless Internet service was promoted as a virtual private network application.
Later, when it came out that business users did not show interest, the service was repacked for
private use and directly marketed towards other groups.
5.9.2 Very good content offers and applications

When i-mode was introduced NTT DoCoMo offered customers not a technology, but a new
advanced service concept. It showed them how they can actually use and benefit from it. From
the start, the operator knew that the success depends extremely on the range of applications
available to subscribers. DoCoMo ensured this by signing contracts with 67 content providers
that produced over 200 i-mode sites. Nowadays the official i-mode menu offers connection to
more than 600 sites (See Appendix 4).
In Section 7.4, we analyse the specific features of wireless Internet and come up with the
conclusion that any wireless application – either cHTML or WAP based, has to reflect them.
These are personalisation, timeliness, and positioning and to make sure that the service will be
accepted by the users at least one of them has to be adopted. Otherwise, the service offer will be
just theoretically good but have no value to the customer. NTT DoCoMo wisely used that
concept and came up with fairly simple and straightforward services.
Yoon (2000) strongly supports the idea that the early adopters of any new technology are young
people. Since almost 63% of the users of i-mode are under 34 years, the answer is that young
people are actually the ones that “roll” i-mode. Additionally the most popular sites are connected
to some form of entertainment – like downloading images, getting music information, fortune
telling, network gaming, dating services. A large proportion of content in Europe might be the
similar or might be very different. However, it will definitely reflect the western culture and the
real needs of the users.
5.9.3 Good billing system
The efficient system of micro payments charged on the mobile phone bill is one of i-mode’s most
important success factors. In Europe there is still an intense discussion how the billing system is

supposed to work, who will provide the content, how content operators will receive the payment.
In these terms, DoCoMo offers a variety of business models that actually work. Funk (2000)
defines the practice that exists in Japan as a win-win situation. By combining the potentials of
each side, a Pareto efficient situation is reached.
First of all the content providers are able to charge the customers and get the money in a secure
and comfortable way. It would be expensive for them to establish a separate billing unit that
would have to collect the money. Outsourcing this activity allows them to focus more precisely
on their core competence – making and providing good information and content. Additionally,
they are actually making money for the services they are offering. Furthermore, they do not have
to worry about developing direct relationships with customers or building a database.
From a customer’s point of view, this system provides an easy way to handle the payments. Since
they receive the bills as a part of the mobile phone bill, they do not have to spend more time than
usually to pay separately. The element of trust and security is a very important element in this
relation as well. The users have already experienced safe and reliable relations with the operator
and by channelling these financial activities through the operator they do not have to worry about
credit card numbers and confidential issues.
Obviously the operator, NTT DoCoMo benefits most from this system. The company is able to
offer to its users a value-added service and be paid for that. Because the content providers use the
network, they pay around 10% of the subscription fees. Also, the customers pay monthly (of
about 300Yen) and traffic fees. On the other hand, they can focus on the process of distributing
and improving the quality of the service and do not be distracted by costs and revenues. At the
beginning when DoCoMo was considering the promotion of i-mode, it was considered as a good
way of making the company thrive. Until that moment, the telephone was used only for voice
transfer and to a very small degree for data transfer. These 10 percent gathered from the content
providers are unlikely to cover the whole cost, but more importantly, by offering this new service
opportunity, the operator made the users rediscover the mobile phone. From a pure financial
view, the statistics (Goldman Sachs; Mar 2000) show that i-mode is an extreme advantage for
NTT DoCoMo. Thanks to the good business strategy, including very effective billing system,
DoCoMo’s i-mode propelled the operator’s share prices to around $38,000, for a market
capitalisation of $340 billion, which is greater than any other telecom in the world.
5.9.4 The dominance of NTT DoCoMo on the market-

One of the strongest reasons why NTT DoCoMo has a strong position on the wireless market is
its monopoly status. Through controlling almost every part of the value chain, the company can
maintain its strategic goals and make sure that the customers get what they really need. Our
research proved that NTT DoCoMo, the mobile branch of NTT, has little if any competition as a
mobile service provider. Apart from being just a mobile operator, they have strong influence on
the manufacturers, the content providers and retailers. Not to forget that DoCoMo is developing
strong relationships with its customer either through building high entry barriers or providing the
users with the best services. That is why whatever technology the company develops for the
market (i-mode or maybe something else later) it becomes a standard. Its dominance turns easily
into a control and this leads to a moment when it is not a threatening issue anymore to obtain a
critical mass.

It is a fact that NTT DoCoMo is a member of the WAP forum. For long time it was assumed that
the success of i-mode worldwide depends on the support of the big players in USA and Europe.
However, the situation is a little bit different nowadays, since NTT DoCoMo is turning to be a
big player as well. It has the power and financial potential to set the rules.
In this sense, the Japanese market is incredibly different from any other mobile-phone market.
The power balance there is no even close to this in Sweden or Europe. The success of DoCoMo
does not mean that this dominance should be transferred to Europe. It just implies that all
European manufacturers and operators have to work together to reach that point when all of them
will profit from this new market opportunities. The development of the western markets is based
on competition through which the customer obtains the most valuable offer. However, this is
different in the eastern culture and as Deming (1993) says in that society every single person
works more for the society than about himself. In that line of logic, a monopoly has the best
chance to be of maximum service to the world, and has a heavy obligation to do so. Innovation
and new business models may change the Japanese market a little bit, but this seems very
unlikely, since the success of the existing companies is “pushing the ball” faster and faster. The
snowball and network effects will make sure that these firms stay on the same position for the
near future. What the future will be like is very hard to say, but the directions are clear- co-
operation between all the players in the value chain will lead to a win-win situation for
everybody.
5.9.5 National characteristics of the market

What we have noticed in the research process is that the Japanese market is very specific and is
dominated by social and cultural issues. The homogeneity and trend-susceptibility have made the
penetration of lots of the new technologies much easier. The first term refers to the fact that the
majority members of a specific social class have similar personal requirements and therefore
form one uniformed group. It that case form a marketing point of view it is really easy to come
up with a product that meets most of the customers’ needs and is targeted at a large market
segment. The second term refers to the fact that the Japanese are very social oriented and can live
only as a part of the society, which takes different shapes- a company, a family, or any other
small groups. The desire to be a part of something, to share the same goals etc. turns into a strong
fear of being different. That is why all Japanese people are so trend oriented- whatever it is, they
have to be a part of that. These are some of the psychological aspects that explain the exponential
growth of the wireless Internet market in Japan.
Another national special feature is the fact that among all developed countries Japan has one of
the lowest computer penetration rates. Additionally, Japan has one of the lowest percentages of
users accessing the Internet via desktops as well. Because of that to a Japanese person buying a
wireless Internet phone is like getting access to the real Internet13. Because of not having long
experience with the Web, nowadays they refer to the “reach” quality of the mobile phone as
“richness”.
All this makes us think that i-mode was exactly what the market at that particular moment was
waiting for. This does not mean that it would not be successful now; this just reflects the fact that
13
Discussion with Saori Ishikawa, Sweden, Jan 2001

is strongly represents some national characteristics. Therefore, it would not be able to succeed on
another market, unless it is slightly changed or adapted to the local cultural and economical
issues.
5.9.6 Technological simplicity and quick launch

Trying to get out of the technological hype spreading in the high-tech industry, NTT DoCoMo
applied a very simple technological strategy. The company was sure that there was a potential on
the market and it had to be used. The way to do that should not be very complicated- simple
technology and functional solutions, rather than technological revolution. With the existing
network, imposing limitations in terms of bandwidth, speed, etc., it is impossible to bring Internet
on the screen of a mobile phone. So, they did not try! The statistics show that technical
superiority does not necessarily lead to a market leadership. Just the opposite, the simplicity
makes a concept popular. WAP is more technically advanced, but still has a small market share,
which keeps on shrinking.
The simplicity of the technology that was used was also triggered by the WAP Forum who at that
time has been strongly debating some development issues. DoCoMo was willing to launch a new
wireless service and while waiting for WAP Forum to come up with something, decided to go on
its own and developed i-mode. I-mode is based on a mark-up language called cHTML (compact
HTML). This open source standard is very similar to HTML- the mark-up language of Internet.
That is why everybody who is familiar with web designing is capable of making an i-mode site.
The number of the official sites, of the ones that are approved by DoCoMo is more than 600,
which implies that the number of all cHTML-based sites is incredibly high.

6 Development of WAP standard and its adoption in Europe
6.1 REASONING
The logic behind the creation of WAP was driven by the rapid development of the Internet and
mobile networks across the globe. Predicting the convergence of these two streams of
communication, dominant players in the industry took an effort to form standards within this
field. The initial justification of projects carried out during 1995 - 1997 was the creation of basis
for new value added services on mobile networks. Consequently, various local standards were
created none of which representing a sufficient platform for new stream of services. It was
realised that a number of different standards would benefit no one.
In 1997, with the mission to create a unified standard, which would be acceptable and convenient
for most of the parties that would-be involved into the chain of value-adding services of new
standard, Phone.com (formerly known as Unwired Planet), Nokia, Ericsson, Motorola founded
WAP Forum. This organisation was established with the aim of supervising and co-ordinating the
development of WAP standard for the achievement of common goal and promoting the standard
so to ensure its future position on the market.
It is recognised that WAP Forum today is the most influential formal body in connection to WAP
standard and has attracted many members representing most of the stakeholders. The number of
members in WAP Forum today is more than 400. The membership is open and the fact that WAP
Forum is not a producer of products on its own but formal body is stressed. Due to the
supervisory role of WAP Forum in the process of introduction of WAP, the concrete actions of
this organisation are looked upon.
The latest publicly available report from WAP Forum states that four main goals of this
organisation are:
• to bring internet content and advanced data services to wireless phones and other
wireless terminals
• to create a global wireless protocol specification that works across all wireless network
technologies
• to enable the creation of content and applications that scale across a wide range of
wireless bearer networks and device types
• to embrace and extend existing standards and technology wherever possible and
appropriate
WAP Forum has initiated contacts and works together with other official bodies that contribute to
the telecommunications industry, the Internet and others. The WAP standard is being promoted
as license-free so that companies willing to participate in the chain of value adding face no
constraints in this direction. In addition, the specifications of the standard are provisioning the
need for future additions and adjustments to the protocol in order to avoid the need for creation of
another standard, which would be again difficult and resource consuming.

6.2 IDEA
The future services that WAP addresses are the ones, which customers will use while on the
move with consequential inability of accessing a desktop computer and conventional Internet.
The important distinction is being made between the suppressed functionality of hand-held
devices and desktop computers. Limitations of devices are their computational power (CPU),
information storage, random access memory, data input (keyboard) and output (display).
Wireless networks suffer from high latency, unpredictable availability and stability as well as low
bandwidth. Therefore, services aimed at WAP users are designed with a focus on practicality
with no possibilities of making it graphically attractive and catchy. The idea of surfing the web
on WAP enabled device is unquestionably still in future. In essence, the idea of wireless internet
can be summarised in two short notions: immediate retrieval of information that is needed at the
particular moment of time (as describing the business side of the process) and entertaining and
user engaging applications for fun at any moment of time (as illustrating the need to provide the
customer with means to “kill the time").
6.3 TECHNOLOGY
From a technological point of view, WAP uses a programming model similar to the one used by
Internet in order to ease the associated workload for involved IT professionals who have the
experience in developing applications for the internet environment. The programming language
used in WAP is called WML (wireless mark-up language) and is specifically aimed at
applications for small devices like mobile phones and PDAs today. WML can be compared to
HTML (hyper text mark-up language), which is used for development of Internet pages. With the
purpose of adding more functionality to WML applications, WML Script has been deployed,
which, in turn, is similar to JavaScript technology used on the conventional Internet pages. The
transmission on the Internet today is based on HTTP (hyper text transfer protocol) and TCP
(transmission control protocol), which ensures that packets of data sent from one location do
reach the intended location in form they were intended to. The transmission protocols WAP uses
are similar to HTTP and TCP but adjusted to the limitations of wireless networks.
The design of WAP pages takes a form of cards, each of which is suitable to be displayed on a
screen. This can be compared to the usual structure of HTML documents where the user can use
the mouse to scroll down the page if it does not fit on the display. The problem lays within the
different individual design of WAP enabled mobile phones, as well as other devices. In designing
the page for conventional internet the developer is usually faced by the constraints imposed by
the different user-agents (Internet Explorer, Netscape Navigator and others) as well different
screen sizes (14”, 15”, 17”, 19”, 21”) and screen resolutions. In wireless Internet there are much
more constraints of a kind. According to Martin Jonsson14 there are more than 30 different WAP
enabled handsets on the market from different manufacturers, as of today. WAP was posed to be
a common standard whereby many companies and organisations are taking an effort to develop it.
At the same time, there is no apparent agreement among phone manufacturers as to the exact
specifications of phones. The burden of development of WAP sites that would look similar and
be equally functional on all these handsets is passed to content providers.
14
Email interview

6.4 CURRENT CHALLENGES
6.4.1 Market share and price curve challenge

There is a strong difference between the fixed-line Internet and the wireless Internet. The first
was created by scientists who wanted to share their research and put special attention on the
openness and free aspect of the shared data. The latter one- the wireless Web is the creation of
operators and manufacturers that need new sources of revenue as competition drives down the
prices of handsets and voice-transmission fees. This is a common feature for all different wireless
Internet markets- Japan, Europe, etc. As Kurt Hellström, president of Ericsson, says in an
interview for Wireless Asia, “in order to have a reasonable margin on the model you have to
introduce new products all the time”. The reason for that is very simple- when the models are
introduced for the first time they have very high prices, but then they start to slide down the price
curve.
The competition on the market at the moment is very high and the only way to keep the same
market share the company has is to sell more and more telephones and, for all that, offer cheaper
prices. The market of mobile phones used only for voice transmission is getting saturated, so the
companies have to offer some new ideas and/or models. The wireless Internet was one of them.
The scheme is very simple- they develop new technology, create hype around it and then sell a
great number of telephones enabled to perform that new service. Where is the problem? The
problem is that in this quick process, the manufacturers forget about the customers. And the
customer is the one, who is buying the phone and therefore providing the manufacturers with
lifeblood capital. All customers, loyal or disloyal, are attracted by good services and WAP is
offering them a simple technology they cannot use without the appropriate applications. The
challenge is in trying to combine all contemporary market share strategies with strategies that
focus on the customer and his/her needs (see Chapter 7, as well).
6.4.2 Service concept

The current problem in terms of marketing of WAP is that it is not being advertised as a service
concept but more or less as a technology. This can be considered as both major difference and
major mistake compared to highly successful i-mode, which is a service concept. If NTT
DoCoMo would promote i-mode in the way WAP Forum did with WAP, they would have to use
the name cHTML, which is a programming language for i-mode’s sites. Meanwhile, all mobile
companies have to understand that wireless Internet services will be different and they have to
implement such service concepts that utilise this differences (see section 7.2.).
6.4.3 Range of services

As it is known from the previous chapter, prior to launching its i-mode service NTT DoCoMo
had signed a number of contracts with service providers in order to ensure the sufficient range of
services to be used immediately by very first i-mode’s subscribers. In case of WAP, this simply
was not done. The authors of this paper could not find out the reasoning of telecoms and WAP
Forum on this point. One of the possible reasons could be that the founders of WAP Forum were
three phone and equipment manufacturers and a technology company, which in this case have
proved to be extremely production (not service) oriented.

In any case, services that are technologically possible and are currently on the market will not
always attract customers. The need for human interaction as illustrated by high-tech/high-touch
trade-off implies that the most successful CRM is the one that does not employ too much of
technology. An example of combination of tech and touch would be a ticketing system, whereby
a customer first approaches an online operator to receive the initial guidance on how to use the
system most effectively, receives the data s/he needs on its WAP enabled phone, disconnects
from the live conversation. Then, already having the data to choose from on its WAP phone,
takes the time to think, which possibility is the most appropriate one and then makes a
reservation/purchase or decides otherwise. Due to the sophisticated process to which few are used
to by now, the opportunity to call to the operator and being explained the most difficult part in
the technological interaction would save the time and customer would be satisfied in more cases.
6.4.4 Segmentation
The segment at which WAP was targeting initially was the segment of business users, people
who need and can afford it. Unfortunately, stemming from the initial failures with speed of data
transmission over WAP and customers’ negative evaluations of the service, business users never
reached the critical mass needed for initial adoption of the technology. It is being indicated that
often the ones first to adopt new offers are young people who have no problem taking advantage
of the new technology. Due to their lifestyle, beliefs and ease of identifying underlying benefits
and functionality, they are considered as the pioneers of any new service. Europe did not consider
this point, counting on the fact that business users will provide initial impetus for the technology
while later it will be slowly targeted at other segments. And even, when, the mistake was
recognized, they did not change the strategy. Until recently, Nokia, Ericsson, Motorola and some
operators were still focusing on the elusive businessperson in an airport, checking his e-mail or
transferring money.
6.4.5 Overall marketing strategy
Due to the choice of targeted segment, the services which were stressed as being the critical
decisive factors to lead customers to the behavioural intention to use WAP were booking of
airplane tickets, accessing stock quotes and basic stock transactions, timely information on traffic
jams. As suggested by previously introduced theory, the attention has to be given to the issues of
fun and entertainment, which was clearly not a priority at all in case of WAP. The case of a new
technology, which WAP is, suggests that users should be convinced that it is useful and
especially easy to use. As illustrated before, particularly the ease of use has a main effect on
behavioural intention and outweighs the impact of usefulness in the initial stages of technology
acceptance. In the case of WAP, the operators did not only miss that aspect, but also
misunderstood the immediate negative experience of accessing Internet using WAP.
Additionally, there was a lack of universal concept for the promotion of the technology. All
operators and manufacturers launched advertising campaigns, which main message was- the
wireless Internet is upon us. In the real life, the story is not so straightforward. Most commercials
follow Vodafone’s promise of “the Net anywhere”. BT Cellnet (one of the highest spending
advertiser of mobile services) offered a computer-generated commercial, that presented a tag line
“surf the BT Cellnet” smoothly browsing the wireless network. It is no argue that these adverts
promise too much, too much of something that the operators cannot deliver yet. The explanation

that Parsons (2000) offers is that “the race is to establish a link in the market’s mind between the
operator and the new generation of mobile Internet services”. This means that the focus was on
building strong brand names. Following that strategy, the companies considered the discrepancies
between user experience and promises as a small price for linking the name of the operator as the
future provider of wireless Internet services. However, isn’t that price too high? Doesn’t it
threaten the promotion of the whole industry? If mobile companies do not drop their obsession
with market share and focus on the customer needs WAP and 3G will fail to make any further
developments.
Only now, one may observe actions to be taken towards the promotion of the idea of wireless
Internet as a conceptually new service and avoiding the technological hype. For example, Telia
started recently a new advertising campaign emphasising on the fact that telephones are not only
for speaking, but also can be used by deaf people for any kind of data transfer. Additionally,
Ericsson recently changed the focus of the commercials and instead of advertising the possibility
of retrieving information about congestions on the roads now points audience’s attention to
possibility of buying flowers. Indeed, how many cities in Sweden do have serious traffic jams on
the road? In Stockholm, Göteborg or may be Lund. To continue this point, the idea of congestion
does not invoke positive emotions in the potential consumer’s behavioural intention to use
process, whereas shopping flowers is a far more pleasant experience to think about. As John
Johansson, Cell Network15, maintained when a new product is advertised, the commercials should
not focus on the negative cases but on the positive and pleasant moments of use.
6.4.6 Content providers

The cash flow is said to be the lifeblood of any company. Speaking of WAP, content providers
were not offered the opportunity to sign contracts with telecoms prior to the introduction of WAP
to the market and in the process of co-operation develop the initial range of services thought to be
needed by customers. This has driven content providers to the point where they mainly had to
guess the needs of customers and develop the content already after negative feedback has
acknowledged the market. The resources invested in the creation of new WAP-based services
have so far yielded mainly negative rates of return16. Given that prospects for the foreseeable
future are not any much better, existing content providers either withdraw themselves from this
line of business or simply go bankrupt. By no means this can serve as a good example to
companies considering of entering the market of WAP content. Even big players like Excite
(ibid.) will not make substantial investments in this area because even the business area of
conventional internet has yet to prove its ability to generate rates of return that will satisfy
shareholders.
15
personal interview 15/02/01
16
Email interview, Doug Lucas

Graph 6: Most popular content categories of WAP (Curtis, 2000)
6.4.7 Stakeholder expectations

The white paper published by WAP Forum in 1999 warns: “Just as many other things in life,
expectations matter very much. Anyone who have tried to access the Internet by using a laptop
and a cellular phone, knows that the expectations we have created using the Internet at the office
or at home are not fulfilled; as a matter of fact it is usually a quite tiresome experience”. Bearing
this idea in mind and remembering that initially (before the launch of the service), WAP has been
promoted as a technology that would “bring the power of internet to the mobile phone”, it is not
hard to imagine what kind of expectations has been created by this hype. In effect, expectations
have been boosted to the Moon.
Just as the protocol rolled out, disappointment of early adopters was huge. The hit-back
experienced by WAP can be characterised by 4S: small screen, slow speed. Unfortunately, it is
only now considered pretty stupid and adventurous to assume that the revolution in technology
would immediately bring about revolutionary handsets and phenomenal network speeds. The
latter was impossible because the existing networks did not have the capabilities and nobody
acknowledged the fact that these new networks will be developed at earliest in 2003. WAP came
out as a protocol, while apparently networks were not ready and nor were handset vendors. The
lesson of 4S is that before any new technology hits the market, the market itself has to be
prepared for it in terms of expectations and infrastructure.

6.4.8 Pricing
Kelly (2000) puts forward 12 new rules for the New Economy. One of them, the Law of
Generosity suggests that the products that were proved to be the most successful in the New
Economy were the ones initially given out for free. As an example Kelly mentions Microsoft’s
Internet Explorer, Netscape’s Navigator, Adobe’s Acrobat Reader, Qualcomm’s Eudora,
McAfee’s anti-virus software. The trial versions or even the full versions of these products have
been distributed on cost-free basis with the purpose of promotion. WAP’s pricing, on contrary,
has been reported by customers as been inappropriately high for the kind of quality (the 4S
factor) it offered.
Graph 7: Distribution of spending limits of WAP users (Curtis, 2000)
What if the cut-down promotional WAP services would have been for free? Most probably, much
more people would at lease try to use it because they would have nothing to lose. The demo
versions of software suits and games have proven to be an effective tool to gain user acceptance
and create favourable intention to use. Theoretically, it is also about a sense of control that the
user has over the demo version - as time passes s/he does not have to worry about the payment.
The so-called lemons problem for those WAP services that user is unfamiliar with can still be
cured in this way.
It has been brought to our attention by Lars Vestergaard that a total factual pay for WAP services
is so inappropriate, that sometimes accessing a couple of sports results via WAP can cost as much
as buying a whole newspaper, without comparing the presentation and amount of information.
Graph 7 shows the spending limits of WAP users.
6.4.9 Approach
The concept of richness and reach suggests that there will always be a trade-off between these
two factors. In the European case of mobile Internet, the mistake was that WAP was aimed and
initially promoted as the means to bring the richness of Internet to wireless devices. Nowadays,
considering the existence of trade-off the very idea seems unnatural - taking the richness of the
wired Internet (so richness remains the same) and transferring it to the wireless networks, just

because these networks provide higher reach aspect. Wurster and Evans provide the example of
bandwidth as one of the dimensions of richness. Wireless networks today have considerably
lower bandwidth, which, according to the trade-off, puts them down the curve (see Figure 10).
The use of the corrected richness/reach model suggests that WAP Forum has to be more careful
in pushing the new technology forward. Human interaction still counts a lot; therefore, offsetting
the technologically feasible solutions of overloading consumers with large amounts of data in
their everyday life is very dangerous.
6.4.10 Critical mass

The impossibility of having very high richness and at the same time reach on the mobile phone,
has resulted in customer unwillingness to use the standard. The current hurdles with reaching the
critical mass for the consumer acceptance of WAP may result in its total failure as a standard. As
illustrated in theoretical part, sometimes even the existence of a powerful coalition, in this case -
WAP Forum, may not help.
As it has been announced recently, highly successful i-mode is soon to be launched in Europe:
particularly, in Italy and the Netherlands. Having the extremely strong home market, NTT
DoCoMo is now pushing its service to Europe challenging WAP Forum’s statement about
worldwide potential of WAP. The existing critical mass of i-mode’s subscribers in Japan allows
NTT DoCoMo to experiment in Europe with little risk of failure. The providers supplying wide
range of content in Japan have the competence and competitive advantage over existing or
would-be providers in Europe. This is an example of positive cycle.
6.5 VICIOUS CIRCLE
As it is evident from the analysis of the preceding paragraph, the current state of introduction of
WAP in Europe faces a vicious circle. Each of the negative factors is linked to another one and
leads to a situation where all sides (operators, manufacturers and customers) loose. Despite WAP
Forum’s propaganda that WAP “is the de-facto world standard for the presentation and delivery
of wireless information and telephony services and other wireless terminals”, the reality is not so
straightforward. This perspective represents only the members’ point of view. The customer
perspective in this case is mistakenly neglected. It is important to remember that it has been
proven that currently there are no incentives for existing content providers as well as potential
entrants. Figure 11 illustrates the negative loop of current challenges.

Neglection of Service Concept Creation of unsuitable

Stakeholder Expectations
Poor Promotion
Inadequate Pricing
Lack of Segmentation
Mistreatment of Content Providers
Irroneous Approach
Limited Range of Services
Absence of Critical Mass
Figure 11: Vicious circle of WAP's troubles
Naturally, the logical connections in this figure can be distributed in both directions. For
example, limited range of services and absence of critical mass are positively correlated.
In order to break the vicious circle and switch to the positive circle, industry needs to improve
significantly in various directions. Effective customer communication has to be established and
promotion has to be based on actual performances of the technology. Relationships with media
will help in creating favourable expectations. Comprehensive business models, which involve
content providers as well, and positive atmosphere in general will attract more content providers.
Thus, range of services will grow and quality increase. Increasing numbers of subscribers will
generate cash flows for telecoms and content providers, as well handset vendors and, in longer
run, equipment manufacturers. The need for breakthrough is apparent yet only easy in theoretical
terms. In practice, WAP Forum’s members have to take a series of positive outcome centred
actions, which have to be previously analysed and agreed upon.
6.6 WAP IS DIFFERENT
Perhaps, there is one more critical thing that has so far been neglected by both technology
advocates and critics. The aim of WAP was initially much different (if similar at all) from that of
i-mode. WAP has been created as an ultimate technical standard for any of upcoming wireless
applications and devices. I-mode, on contrary, had a strong focus on a small number of issues –
bringing some basic additional content. The fact that it somewhat overlaps with usual Internet
content is just an indication of the necessity of that particular content on any device, either wired
or wireless or anyhow else connected to content server. A person who wants to check the latest
news headlines will find the most convenient way to do that - either on the TV, in the newspaper,
magazine, radio, or Internet. If the most convenient way to access the particular content will be

mobile phone, a person being aware of this possibility will use it. That is why i-mode became so
successful so fast. Literally speaking, i-mode’s attempt was to lift the stone, whereas WAP’s – to
move the massive piece of granite.
I-mode created no expectations before the launch but relied on its carefully planned strategy and
word-of-mouth, which generated an exponentially increasing positive feedback. This service
came as a proposition and by its various useful functions and easy to use interface became
eventually so popular. Now, look at WAP, which has first created the hype because the related
companies were afraid that competitors would be first to associate their brand with WAP
buzzword. I-mode offered a service, which would help its customers – they had exhaustive
coverage of basic content from the start. WAP offered everything. As everything was pretty hard
for anyone to comprehend, it turned out to be as much as – nothing. Doubtless, there were people
in every sphere realising that the promise is too big but, on the other hand, the stakes seemed too
high to even imagine that WAP will be so clumsy, in all the previously discussed aspects.
The big promise of WAP is that it will soon become the major base for wireless B2B solutions,
which are to come as soon as corporations realise that it is as necessary as a PC mouse. That is
going to be the point where the happy-hour of i-mode will be gone. According to Tony Dennis17,
“in reality, i-mode is a massive B2C success story”, because “it’s a system which handles
millions of micro payments from teenagers”. Moreover, Dennis notes that “it also had a very little
impact on security because the Japanese trust each other (generally speaking)”. Well, one of the
headline WAP promises already two years ago was that “you can buy and sell stocks, etc.” The
reality is that before the new version of WAP is implemented (version 1.2), there is little sense to
discuss shopping options via any WAP-enabled device since the current version of protocol does
not yet support the secure transaction layer. However, according to Lars Vestergaard18, this fact
has been hidden from customers who have already used WAP for such financial services as
checking their bank accounts.
The conclusion to derive from above mentioned points is that WAP is a “giant baby” of the
wireless Internet of tomorrow while i-mode – “a very smart fast growing kid” of today. As a
“giant baby”, nobody can really control WAP’s evolvement while NTT DoCoMo operates i-
mode in relatively small market and exercises notable degree of control on certain critical factors.
Most probably, once the potential will be fully realised and real market needs anticipated, WAP
will evolve into something, which, according to WAP Forum, it already is – a de-facto wireless
platform for all kinds of networks and all kinds of devices.
17
Email interview, 15/02/2000
18
Telephone interview, 12/02/2000

7 Advisory tools and concepts
Make WAP worth it – all companies that are planning to develop wireless web sites or operators
or vendors have to address a number of very important issues. It is obvious that they can obtain a
competitive advantage, but they have to realise that not every application is suitable for a cellular
phone. Obviously, data transfer services require a learning curve for both operators and the
market. Therefore, before even beginning development they will have to come up with a clear
wireless strategy. Should the applications be created for customers, employees, or both? Which is
the most important segment? What kind of business strategy is most appropriate?
7.1 BUSINESS MODELS FOR THE OPERATORS
The analysis of the market practices and existing theories showed that there are two main
business models that worth considering. The first one is the open business model, which is
referred as an extension of the Internet. The second one is the closed business model or also
called the “walled garden” model. The difference between the two concepts emanates from the
fact the wireless Internet is compared to Internet. With all the new wireless technology
applications like WAP and I-mode, any operator has the possibility to offer the possibilities of
Internet to a closed domain of people, just like in intranet domains. The first model offers to this
domain access the free Internet, while the second one limits its users to services it offers and
considers as appropriate. Obviously NTT DoCoMo uses a closed model and most of the
European operators- the open model.
Heijden and Taylor (2000) say, “As market development shows, the lesson has been learned that
users want the open Internet model”. However it is arguable whether the success of Yahoo! and
Altavista is translatable to the wireless world. As we have seen in the previous chapters this world
is different and it will be wrong to consider WAP and I-mode as simple extensions of Internet.
NTT DoCoMo is an example of a closed model and its quick adoption raises lots of questions.
Chapter 5 showed that one of the critical success factors for the Japanese market was the
operators control over the service domain, which ultimate aim was to create the highest possible
value for the customer within the value chain.
When deciding what kind of model the operator should apply, it must consider the main elements
and try to evaluate them from customers’ and operator’s perspective (ibid.). This means that on
the customer level a thorough analysis is needed on the following factors: service portfolio, ease
of use, pricing/service transparency, and value of offering. Operator’s perspective should be
evaluated by other factors: potential for differentiation, control over offering, market potential,
development/administrative costs, and potential for customer retention.

7.2 MANAGING CUSTOMER EXPECTATIONS
The key factors behind the success of all new and coming technologies and applications are
infrastructure, terminal performance and education of users in order to foster their adoption of
new offers. The problem is that many technological advances, like the television, the Internet and
WAP, were created for their own sake because engineers have figured out how. Doubtlessly,
most of the new technologies would seem too complicated for the usual consumer. Therefore, to
consumers the technology means nothing unless they explicitly know what and how they can do
with it. (Suh-kyung, 2000)
Unlike the Old Economy companies, which develop products to meet consumer needs, hi-tech
firms work in reverse. They create a new offer and then have to stimulate or even create the
demand. One can argue that Old Economy companies often fail in developing products that do
actually meet consumer needs due to oversights encountered in the development process. In case
of the New Economy, companies have to be extremely precise in estimations they make before
launching the product. This is because the lead-time to market has decreased along with the
embracement of fast communication channels.
As any service concepts implies, the success depends on managing customer expectations. In the
light of that statement one has to understand that customer requirements reflect dramatically their
expectations. Therefore, the operators have to realize that the way they introduce and promote
these new services will crucially influence the expectations (see section 4.4). If the WAP and I-
mode services are compared and positioned as wireless Internet applications, the users will
compare them with Internet in terms of speed, usage patterns, functionality, security, operability,
etc. And that is definitely a difficult objective, considering all the differences between the
wireless and wire-line Internet (see section 3.1 and Appendix 5). However if these new services
are promoted as value-added services (what exactly they are), the comparison in the user mind
will be with the existing services – SMS and voice-transfer services. Through positioning in the
right way, the operators can easily maintain its competitive edge and achieve customer retention.
The possibilities that WAP and I-mode offer are conceptually new and it is extremely hard for the
customer to imagine what kind of services s/he will be offered. Therefore it is almost impossible
to use only TAM and TRI to predict the rates and ways of adoption. Therefore concepts like
Cognitive Absorption and State of flow (see section 4.3) have to be considered. They maintain
that psychological user barriers can influence dramatically the attitude towards any new
technology. A logical implication for the wireless world is that people with extensive experience
with technologies are more psychologically ready to adapt WAP or I-mode than people without
any relevant experience. In this case it is dangerous to assume that customer requirements can be
derived from Internet applications. This can be done only to a limited extent because of the
difference characteristics of the two applications.
Having in mind all the previously mentioned features of the wireless Internet world some of the
possible ways (although they seem obvious) are:

7.2.1 Football Coach

One of the commonly known strategies for managing customer expectations is purposefully
setting the level of expectations low so that these expectations can be easily met. This method has
both its positive and negative aspects. The main positive aspects are presumably the high level of
satisfaction of external customers and perceived high performance among the internal customers
– employees. The negative aspects involve risk associated with initial customer engagement and
disconfirmation of expectations if they are exceeded. Under-promise and over-deliver is the short
notion for this strategy. However, continuously exceeding expectations will inevitably lead the
level of expectations rise over time. Theoretically, the strategy can be illustrated by Figure 12.
Zone of tolerance indicates that if expectations are not fulfilled to the fullest extent or, on
contrary, performance has exceeded the level of expectations, customer will to some extent
tolerate both types of disconfirmation with his/her initial expectations. The company should
always aim to widen its zone of tolerance to safeguard its satisfaction ratios. In case the opposite
is true, the risk is that very often customers will end up being unsatisfied with the company.
Expectations about WAP
High expectations
Zone of tolerance
Actual performance
Zone of tolerance
Low expectations
Figure 12: Levels of expectations, actual performance and zone of tolerance
Before WAP was launched its idea was promoted as having Internet in your pocket. No one dared
to clarify to potential users that data transfer speeds will never be the same on wireless devices as
nowadays on office computers. All the limitations of size of wireless devices and consequences
arising from the size constraint were also heavily neglected. The result, as depicted, was that
expectations’ level was set well above the possible actual performance and, worse enough, above
the upper limit of tolerance. This explains why users of WAP were disappointed of its
performance.
The appreciation of mistakes encountered in the previous interactions with the external
environment will definitely lead company’s way to better market interaction in the future.
Therefore, the documentation of critical practices, with the emphasis on the best ones, should be
done. Many well known companies use this technique to improve their operations. A particular
example is a computer manufacturer (and distributor) Dell. This kind of documentation has to
direct company’s actions while shaping customers’ perceptions of past outcomes with the

company. This again can be explained by the figure in the way that, retrospectively, the attitude
towards past outcomes shapes customer’s future expectations.
7.2.2 PDSA cycle

This is a practical and easy to comprehend process tool (Shewart, 1939, 1968), which relates to
the cycle of continuous improvement. The first stage – plan – studies the customers’ needs,
evaluates the competencies of the company and in detail plans the intended action. Second stage
– do – launches the action. Third stage – study – evaluates the results. Fourth stage – act –
initiates the change process and continues in to the next PDSA cycle. In other words, when the
final stage is reached, the cycle may be adjusted. The idea here is to make process improvement
constantly and ensure that it is not a drastic leap forward if it is successful and worse yet, gigantic
leap backwards and lot of customer complaint. By its nature PDSA cycle provides a viable basis
for staying in touch with the external environment all the time rather than just conducting
customer surveys when the over dissatisfaction becomes apparent for many involved groups of
stakeholders.
7.2.3 Improvement programmes

The importance of constant education should not be neglected. The changes in outside
environment do not only affect customers and their values, perceptions and expectations. The
inside of the company – internal customers – may also start thinking in stereotypes while the
conditions are changing all the time. It is recognised that customer values can and should be
studied and translated to the employee level.
Considering general types of knowledge – business knowledge, customer knowledge, technology

knowledge and methods’ knowledge – it makes sense to keep the employees updated in all of
these directions.
7.2.4 QFD
The purpose of Quality Function Deployment is to translate all kinds of customer needs into the
concrete product characteristics. This method is the most precise one to ensure that the product
being developed is the one that users will accept most. Naturally, the use of QFD can be rather
limited in IT industry due to evolving customer needs and technologies, which come to market
faster than those needs. Nevertheless, QFD can be employed as a part of improvement
programme due to its excellent “features”. Namely, implementation of QFD even at the basic
level requires increased communication between the layers of the company and all of the
departments. This results in enlarged information sharing and critical competencies of the
company can be utilised in the better way since employees would be more aware, which person
to contact in one or another case when a problem situation arises.
The models put forward in this section in practice aid the New Economy companies to preserve
their competitive position. The uncertain and changing environment outside the company will
only seem friendly if the company maintains the spirit of continuous change, adoption and
improvement. The Old Economy view that suggested that the market needs must be firstly
studied and analysed, has to be changed in order to prosper in the New Economy.

7.3 SERVICE CONCEPT
The successful introduction of I-mode and the shortcomings of WAP proved that the winning
applications are those that focus on the services and customer benefits, rather than on the
technology.
7.3.1 Perceiving WAP, I-mode as service concepts, not as technologies
While comparing the two most popular standards WAP and cHTML (cHTML is considered as
the relevant technology representing i-mode), it is very easy to see one of the most prominent
differences. i-mode has been handled as a “service concept” and not just as a technology. At the
beginning WAP started promoting this new wireless concept and following the “machine
engineering process” approach (see section 7.2) advertised it as a new advanced technology. That
is why when NTT DoCoMo offered a proprietary initiative called i-mode almost everybody
considered it as a technology. Everybody started comparing WAP and i-mode. However, WAP
stands for Wireless Application Protocol and i-mode for “Internet-mode”. As Niraj K. Gupta
(2000) says there is even more behind this name. The “i” in the name can represent many things-
I am (personalisation); “anywhere” in Japanese (positioning) and intelligent mode.
This way of promoting represents one very important challenge for the New Economy. Any new
technology adds value. However this link is not direct, it is not the technology itself that makes
the user live better and obtain more knowledge. There is another node in that linkage- the service
implication of this technology, i.e. the content applications. Without that node the customer will
view the new offer, just as a technology and will be unable to use it. All companies- operators or
manufacturers have to understand that wireless Internet adds value only through appropriate
services. Norman and Ramirez (1995) introduced the concept of value-constellation, which tries
to avoid looking at the production only as a sequential flow of value adding. If we apply this
logic to the telecommunication companies we ca say that the winners will be these companies
that can offer and form the best value-constellations. The aim of this concept is to bring value to
end-customers, by understanding how value is created for every customer. When introducing
highly technological consumer products, it becomes really difficult to implement and understand
customer needs or requirements. However, there is one thing that our research proved to be true-
lots of new technological advancements are possible, but they will become probable only if
combined with value-adding services
7.3.2 "Data Smog"

This section of the paper deals with a particular shortcoming of the nowadays high-tech society in
the age of new information systems. The aim of the paragraphs would not be to provide a
solution to the problem, but to describe the problem and make sure that this information is useful
to the managers of any New Economy company.
This problem refers to the term “information glut” or “data smog” (Shenk, 1997). To be able to
understand its complexity we have to start looking at our society at an early stage of its
development. For many years “information technology has been an unambiguous virtue as a
means of sustaining and developing culture” [Ibid.]. Information and communications have made

us steadily healthier, wealthier and more tolerant. The knowledge obtained out of the acquired
information helped the human kind to overcome the basic challenges of everyday life, to make
food more abundant, to build more stable societies, etc. In the last couple of decades something
marvellous happened to human kind. Information started to move faster and became more
plentiful and consequently everybody was benefiting from this change. However, this process
was characterized by the fact that we began to produce information much faster than we could
process it. When it comes to information flow, “at a certain level of input, the law of diminishing
returns takes effect; the glut of information no longer adds to our quality of life, but instead it
starts to cultivate stress, confusion and even ignorance”. This information overload that threatens
for example our ability to educate ourselves, and “leave us more vulnerable as consumers and
less cohesive as society”, Shenk defines as data smog.
Shenk also maintains that the only way to counteract these unintended consequences and make
the most of the information revolution is to understand the main properties of this New Economy
conflict. This perspective, however, has to be considered as techno realistic, because it is
appreciating the benefits of technology, while recognizing and responding to its drawbacks.
Additionally, a critical distinction has to be made between information and understanding.
Shenk summarizes these features in 13 laws of data smog. It is not the purpose of this paper to
analyse these laws or draw conclusions how to cope with the information glut. That is why the
laws are just listed and in some cases, which reflect precisely our research, we would elaborate
more.
1. Information, once rare and cherished like caviar, is now plentiful and taken for granted
like potatoes.
In a very short span of natural history, human kind have jumped from a state of information
scarcity to one of information surplus, where the amount of information is so huge, that people
have stopped to appreciate it and are unable to absorb its multidimensional qualities. Meanwhile,
the flavour of information has changed dramatically. “With hypermedia, “dense TV”,
multiplicities of images at once, straining our attention has become one of our most popular
forms of entertainment.” It is not the content or ubiquity of the messages that worries, but the fact
that information does not have to be unwanted or unattractive to be harmful. If we take
advertising, for example, we would realise that the messaging information is everywhere.
Everybody is usually so used to it, that does not accept it as harmful. However, with the
introduction of wireless Internet services, this process will reach new dimensions. Some stores
are planning to beam advertisements from stores that the user is close to (e.g. “go inside the store
and receive 20% discount”). It is time managers and people promoting this new service to ask
themselves: Will the user like this intrusion in the private life? and Is the information valuable
enough to compensate the negative feelings?
2. Silicon circuits evolve much more quickly than human genes.
The quick technological advancements are changing some basic society features. The technology
is changing so fast that the natural capacity of humans to process information is increasingly
inadequate to handle the surfeit of change, choice, and challenge that is a characteristic of modern
life.

3. Computers are neither human nor humane.

4. Putting a computer in every classroom is like putting an electric power plant in every
home.
5. What they sell is not information technology, but information anxiety.
This point is based on the contemporary marketing strategies of almost all companies operating
in the information industry. Their goal is to convince the customers that whatever the users have,
it is not enough. Or from another point of view, whatever the companies offer on the market, the
consumers need it and must buy it. Yoon (2000) discusses almost the same issue and calls it
technology hype. It refers to the fact that nowadays all high-tech companies are not customer or
market driven, just the opposite, they first create a new information software or hardware and
only after that stimulate demand for it. Scott Goldman, chief executive officer of WAP Forum,
says, “Hype has become the new currency”. If there is no hype about a new product, there is no
possibility you can attract the attention of the big investors.
The information anxiety is also maintained by another problem, called the Thunderbird problem.
It summarizes the concept that upgrades are the lifeblood of the information industry. If we
understand this, we can also understand the new social dynamics of the information society.
Shenk (1999) gives a very good example of this problem. He recalls an episode of Gillian’s
Island, where the castaways come upon a boat to take them back to the civilization. However,
they overload the boat with too much unnecessary baggage and it sinks twenty seconds after they
cast off.
6. Too many experts spoil the clarity.
The proliferation of expert opinion has created a virtual anarchy of expertise. With the reduction
in the cost of information production and distribution, nowadays almost everybody can be
considered as an expert. Consequently, the expertise has turned to be an endless argumentation.
7. All high-stim roads lead to Times Square

8. Birds of a feather flock virtually together.
9. The electronic town hall allows for speedy communication and bad decision- making.
10. Equifax is watching.
11. Beware stories that dissolve all complexity.
12. On the information highway, most roads bypass journalists.
13. Cyberspace breeds libertarianism.
All these facts should not lead any reader to the conclusion that any new technology trying to
provide more information is bad. Just the opposite! The problem is that our anxiety with
technology has made us forget the key purpose of information: to inform people (Davenport and
Prusak, 1997). Many of the people that manage information technologies in companies- IT
(Information Technology) professionals, developers, etc. continue to apply the “machine
engineering process” approach. Those people do not take into consideration to the needs of the
“end users”, and whatever the information problem, they believe that:
− “Information is easily stored on computers- as data;

− Modelling computer databases is the only way to master information complexity;

− Technology change will improve the information environment. (ibid.)”
However, the experience many companies have nowadays with new information technologies
(esp. wireless Internet applications, as can be seen in the previous chapters) teaches that this is
not exactly the truth. Rather than a narrow focus on the technology, information ecology puts
how people create, distribute, understand, and use information at its centre. Managers who want
their firms to be successful, should apply an ecological approach and maintain the following
ideas:
− Information is not just data and is not easily stored on computers;

− The more complex a technological information model, the less useful it will be;
− Information can take on many meanings;
− Technology is only one component of the information environment and often not the
right way to create change.
Lack of understanding of this problem will lead to wasting lots of money on unnecessary
technologies. “Ironically, as information becomes ever more important to us, we must think
beyond machines (ibid.)”
7.4 THE IMPORTANCE OF CONTENT
As we have already seen, the development and introduction of wireless services in Japan proved
that that technology is not enough. People usually accept new advanced technologies slowly and
gradually and the only way to convince them that it is good and they actually need it is to provide
them with appropriate applications that they can use. In terms of wireless Internet, when a
customer is buying a mobile phone, s/he does not buy it because of its speed capabilities, but
because of the connectivity to the Internet. Therefore, it is crucial to translate the technology into
things that people will want and have a reason to use. Moreover, the only reason why people
would like to access Internet through their mobile phone is the content.
What is content? According to the Webster’s New College Dictionary, content is: a) all that is
dealt in a course or area of study, work of art, discussion, etc. b) essential meaning; substance.
When content is discussed, especially the one carried out through highly technological means,
one of the most important elements that are taken into consideration are used medium for transfer
to the users, technical prerequisites and requirements, interface, user behaviour, and usefulness
(Devine and Holmqvist, 2001). It is true that content on wired Internet and the content on
wireless Internet have similarities, but if we compare the before mentioned points, everybody
would realise that they have principle differences, differences that make the authors think that
they should be considered separately. The experience and problems that wireless Internet
providers have in Europe are based exactly on not differentiating these two concepts. It is
impossible to transfer the richness of any Web site to the small screen of a mobile phone. The
PC-accesses Internet may have boundaries, but wireless Internet has many!

Information has always been precious to our society and people, benefiting from this value have
improved the whole society. Only recently, however, when information started to move faster
and became more plentiful, people started to realise this basic concept. The value of the
information is the information itself, because this information can be turned into knowledge, with
which the life of every person can be improved. This obvious concept has to be applied to
wireless Internet as well. Only after that we can understand that “good content is content that
takes advantage of the specific characteristics of the mobile Internet and provides the user with
the information that s/he needs” (ibid.). Therefore, it is very important to look at some very
simple questions: What are the customer needs? Why would the user access Internet through the
mobile phone, instead of through the PC? How can the user obtain (or be given) the greatest
value? What kind of stimuli should the companies use?
We are presenting a model that encompasses all these questions and gives a clear vision of the
content of a wireless Internet service. The ideas for the model are stemming from four main
questions: How is the customer using this service? When is s/he using it? Where is this activity
taking place? What is the customer using it for? (see Appendix 5).
7.4.1 Technical requirements

When the first question is discussed, we refer to the idea that there are a couple of limitations,
based on the fact that we use a different medium to access the Internet. The mobile phone is a
different terminal that has its own specific characteristics - user interface and technical
prerequisites. This user interface includes two main constraints. First, there is a limit of how
much can be shown on the small phone’s display. Even if this is technologically improved, the
user cannot receive content that is as good as the content on a 21-inch computer screen. The
established architecture of the PC universe, e.g., big colour monitors, ergonomic keyboards,
multi-gigabyte disk drives, broadband has very a very strong influence on the human mind and
perceptions. That is why many people still do not understand why somebody would like to go
back to the sketchy images on a 2-inch liquid-crystal display from the picture-perfect 3D graphics
(Baker and Kunii, 2000). The size of the screen imposes the use of short messages, overviews of
articles or news, limited media applications, etc. Therefore, it is logical to expect a trade-off
between richness and reach. The user has to sacrifice the quality of the information for reach and
the providers try to leverage between simplicity and value of the content. The second limitation
of the user interface is the key panel, which nowadays is the means for input from the user. It is
not only small, but also very difficult to handle. Many manufacturers in Europe and Japan are
trying to propose solutions that cope with this problem, but the interaction with the user trough
typing will always be restricted. Matsushita Communications Consumer-Electronics Group was
on of the pioneers in trying to reinvent the user interface(Kunii, 2000). Detachable keyboards
were the beginning of improving the size-sensitive world of cell phones, but as the experience
shows endlessly pecking at tiny buttons on a phone keypad also gets old quickly. In Japan, some
investigations proved that, this process would be effective if we use terminals that are held and
manipulated much like musical instruments or game controllers (ibid.). Whatever happens, the
success of any wireless service will depend on the user interface and any manufacturer or
operator, who does not realise these restrictions, will fail to obtain any share on this new
developing market.

The disadvantages posed by the user interface are further aggravated by the technical limitations
of the mobile phone and the telephone networks. Bandwidth is probably the most important one.
In today’s low-bandwidth environment, at rates of 9kbps, it is time consuming to send even small
amounts of data through the network. The development of 2.5 and 3G promises developing
networks that will offer speeds comparable to these offered by wired lines. However, the first
new high speed network technologies will roll out at earliest in 2001-2002 and obtain critical
mass in 2006-2007.
7.4.2 User Behaviour

Everybody dealing nowadays with the issues of promoting WAP, i-mode, and wireless Internet,
generally speaking is aware of the fact that mobile Internet is not used in the same pattern as the
fixed-line Internet. This mainly refers to time and place.
7.3.2.1. This group of research questions summons all the possibilities that the mobile phone, as a
device that is easily carried everywhere, gives to the every person. The wired-Internet connection
requires a personal computer and a wire to connect to the Net. With the phone, you connect
anywhere you want. Not to forget that by using the location-based applications, which determine
where the customer is by pinpointing signals from a wireless device, every user can receive any
kind of information. However with the development of new technologies and the high penetration
rate of PCs, it is expected that the places where you can “get wired” to Internet will be
everywhere around us.
7.3.2.2.The third group refers to the fact that any mobile phone can be used anytime (as long as
the user has recharged it and has coverage) the user wants. With the fixed-line connection, there
are time-limitations and when the time is a particularly critical element, you do not have a PC
around you. Therefore, it is generally acknowledged that mobile Internet will be used at the
beginning to utilise or kill short periods of time when the user is not occupied with anything else
or for time-critical activities.
7.3.2.3.The final group encompasses the most important issue- what type of information will the
user try to download on his/her mobile phone. As we have seen in chapters 4,5, and 6, this is the
most critical element for the success of new wireless Internet promotion. The theoretical part
proved that the companies have to focus on entertainment at the beginning to attract young
people- the early adopters of any new technology.
7.4.3 Specific advantages of wireless Internet content

These four points mentioned above lead us to the conclusion that the differences between wired
Internet and wireless Internet can be used and the operators and service providers could offer
such customised services that target exactly at the specific customer needs. These opportunities
can be summarised in three groups: personalisation, positioning and timeliness.
Personalisation refers to the fact that if we compare a mobile phone and a computer, the phone is
really a personal tool. Unlike the computer that may be shared by a couple of people, either
through the network or manually, the phone is a real personal tool. This aspect allows providers
to offer customised services that respond exactly to the user’s needs.

Positioning refers to the idea that “value can easily be added to the offer by taking advantage of
the knowing the users current location (ibid.)”. As the authors have mentioned before the
location-based applications are the most popular ones on the market, especially in Europe now.
By determining where the customer is by pinpointing signals from a wireless device, every user
can receive an information about the nearest restaurant, cinema, and information desk or even
automatically send a message to an approaching friend. Devine and Holmqvist (2001) divide this
type of service into dependent and independent. The dependent aspect refers exactly to the fact
that you know where you are, and the second one to the fact that you can access Internet at any
location, since the mobile is always with you.
Timeliness (time opportunity) is based on the major characteristic of a mobile phone; you can use it
at any time you want. There are many examples (already mentioned in the previous chapters)
when time is a very critical issue and the providers can take advantage of it. Devine and
Holmqvist (2001) also divide this opportunity in two layers- dependency and dependency. By
doing this it is easier to encompass the cases that the services is used at any time and the cases
when the user is able to utilise the right content at just the right time.

8 Conclusions
The aim of this research was to highlight the critical success factors in the New Economy as well
as possible mistakes that can lead to failure with the focus on the developing area of wireless
Internet. This was achieved by the evaluation of performance of two emerging standards for
wireless Web - WAP and i-mode. The secondary objective was to highlight general tools and
models that aim to improve the understanding the cornerstones in achieving competitive
advantage to the New Economy companies. This was done by analysing the possibility of
adoption of i-mode's positive example and transferring its success to Europe. Following sections
briefly summarise the research questions posed at the beginning of the paper.
1. What are the critical success factors (CSFs) for Japan’s wireless Internet market
development?
We have identified 6 main CSFs of i-mode. First, good marketing. When NTT DoCoMo
introduced its wireless Internet service, it focused its strategy on the possibilities that the
networks and the telephones offered at that moment, rather than on the limitations, provided by
the same. Following that approach, it targeted the most popular customer needs by offering good
service applications. Second, extensive content offers aimed at existing users needs. A large
portion of i-mode's early adopters are young people. That is why, the operator focuses on
entertainment, offering capabilities for downloading images, network gaming, fortune telling,
dating services. As our research proved - betting on fun is definitely a win-win situation! Third,
good billing system. By offering a concept that encompasses the interests of content providers,
the operator and customers, NTT DoCoMo created a situation where everybody is satisfied. The
payment system is very good optimised, the price for services is fair, and revenue stream goes to
both operators and content providers. Fourth, the dominance of operator on the market. NTT
DoCoMo has control on every node in the value chain. In other words, it has strong influence on
content providers, handset manufacturers and retailers. In Japan the monopoly is considered to
have the best chance to be of maximum service to the society, and has a heavy obligation to do
so. This does not mean that this should be transferred to Europe, it just shows the direction for
development- the co-operation between all participants in the value-creation process will lead to a
situation where all sides win. Fifth, national characteristics of the market. The Japanese society
is very homogenous and trend susceptible. This allows many companies to obtain quickly a
critical mass and later play on the global market. Another national was low computer and Internet
penetration rates, but one of the highest mobile phone penetration rates among the developed
countries. Sixth, technological simplicity and quick launch. By applying this concept, one of the
biggest problems in the realms of the New Economy - “technological hype” - was avoided.
2. What were the shortcomings of introduction of m-commerce protocol WAP in Europe?
In the case of Europe and WAP, failures are just the opposite of i-mode's success factors. Ten
factors making the adoption of WAP very hard so far have been identified. The main are the
following. First, market share and price curve challenges. The wireless Internet is a creation of

operators and manufacturers that need new sources of revenue and increase market shares (as
always!). Second, (unfortunately) customer focus was neglected and service concept was not
created. Therefore, third, lack of services was poor because operators did not work on the getting
content providers to develop new services. Fourth, bad marketing. The promotion lead customer
to believe that WAP will deliver speed and content of wireless Internet yet accessible from any
place and time from mobile device, which has not proved to be true. Fifth, revenue to content
providers. Inappropriate business model or, rather lack of it, did not ensure cash flow to content
providers. This is why existing and new content providers are not motivated to develop good
applications. Sixth, high price. Given the price/quality relationship WAP charges users way too
much for what it offers. To summarise, vicious circle multiplies the negative effect of one factor
on another and the way out is a complicated process that has to involve efforts from all the
affected sides.
3. Is it possible to apply Japan’s positive experience on the European market? What kind of
tools/concepts should the telecommunication companies implement to be successful in this
market?
Managing Customer Expectations - The research has proved that New Economy requires new
approaches to the promotion of new high-tech products and services. It is no more enough to try
to calculate in numerical terms the readiness for new technologies because market changes very
quickly. The marketing strategy of a company has to take a different focus - not trying to appraise
customers' needs but rather create them. Creation of the needs inevitably includes creation of
positive customers' expectations about usefulness and ease to use. The ultimate goal must be to
prepare customers exactly for the product that company will soon deliver to the market. There are
a couple of ways to do that: first of all, companies need to increase zone of tolerance, which
refers to customers being satisfied even if they do not get the level of service they have expected.
Second, using PDSA cycle will help companies implement changes in the course of action
systematically and achieve desired result by reflecting on previous actions. Improvement
programmes safeguard company's position in the industry by continuously adapting to changing
environment factors outside as well as inside of the company. Finally, QFD is a set of tools
allowing companies to translate customer needs into concrete product requirements. Although we
argue that customer needs have to be created, the management of existing expectations is equally
important and the use of QFD will help every company. I t will also increases the internal
communication and knowledge sharing tremendously.
Service Concept - Any new technology adds value and offers new dimension of possibilities to
the customer. However this link is not direct, it is not the technology itself that makes the user
live better or get profound knowledge. There is another node in that linkage- the service
implication of this technology, i.e. the content applications. Without that node the customer will
view the new offer, just as a technology and will be unable to use it. The comparison between
WAP (its service implication) with I-mode proved that any possible technology would become
probable only if it is presented with relevant value-adding services. Encouraging the creation of
more WAP sites will be the key to attracting and retaining customers.
When considering all new wireless applications, it is very important to consider the information
glut (“data smog”) in our society. The development and distribution of data have reached a point
where this information no longer adds to our quality of life, but instead it starts to cultivate stress,

confusion, and ignorance. In that case, people have to start considering information in a different
perspective: information is not just data and is not easily stored on computers; the more complex
a technological information model, the less useful it will be; information can take on many
meanings; technology is only one component of the information environment and often not the
right way to create change. If companies do not apply these ideas in their service strategies, they
risk loosing customers and consequently money. Ironically, in a world where information
technology become ever more important to us, we must think beyond machines.
The importance of content- our research proved that in the case of wireless Internet content is
one of the most important critical factors. Operators (using WAP, cHTML, etc) will attract
subscribers if only deliver good content. That content has to be considered in its specific
dimensions that come from its principal difference from the fixed-line Internet. They refer to user
interface, technical prerequisites, and user behaviour. In that case, providing good wireless
Internet means utilising these differences through personalization, timeliness and positioning.
Answering the third research question, we embrace the positive experience learned from Japan
and mistakes encountered in Europe. We questioned whether it is possible to apply i-mode's
example on Europe's WAP and offered a number of general tool to be used. The conclusion
drawn from i-mode and WAP is that these two concepts are in fact very different. WAP has been
created as a global standard, taking into account interests of software developers, handset
vendors, equipment manufacturers and may be also some of the content providers. Most
importantly, WAP has been created on the base of future expansion on the market in the near
future. In fact, NTT DoCoMo has not adopted WAP simply because it had lower objectives,
focussing only on the Japanese market. The evolution of WAP can be compared to the emergence
of universal standard for railways. When the railway system started to develop, there were many
proprietary standards in different places around the planet, and it took long time before universal
railway specifications were unified. The time scale is somewhat different for WAP and i-mode,
but the general trend is the same. Presently, i-mode satisfies the needs of customers quite neatly
but it is also largely dependent on limitations of networks. In the nearest future it will probably
face a serious need for revision, which will be hard to implement compared to WAP. To conclude
with, Kelly’s 12th law of the New Economy states: do not solve problems, because “in the coming
era, doing the exactly right next thing is far more ‘productive’ as doing the same thing better”.

9 Appendixes
9.1 APPENDIX 1: STATISTICS OF INTERNET AND MOBILE PHONE USERS IN WESTERN EUROPE

9.2 APPENDIX 2: WIRELESS DATA DEVELOPMENTS
Wireless Data Developments
Service Data capability Expected deployment
GSM Circuit Switched Data 9.6 Kbps or 14 Kbps Available worldwide now
HSCSD 28.8 Kbps to 56 Kbps Limited this year, as many
operators will wait for
GPRS
GPRS IP with typical data Rollout in 2001
rates of 28 Kbps to 56
Kbps
EDGE IP to 384 Kbps Rollout in 2002 or 2003;
operators may go directly to
W-CDMA
W-CDMA (also known as 385 Kbps outdoors, 2 Initial deployment in 2002;
UMTS) Mbps indoors widespread deployment may
not happen until 2005 or
later
TIA/EIA- EDGE/EGPRS-136 IP to 384 Kbps; roaming Initial deployment in 2002;
136 possible with GSM and widespread deployment in
W-CDMA networks 2003
TDMA Wideband TDMA or W- Adds 2 Mbps indoor No announcements
CDMA capability per IMT-2000
requirements
CDMA Circuit-switched data 9.6 Kbps or 14.4 Kbps Available from some
carriers now
IS-95B IP to 64 Kbps Available in Japan and
Korea
CDAM 2000 1X IP to 144 Kbps Trial deployment in 2001;
rollout in 2002
CDMA2000 3X IP to 384 Kbps Initial deployment in 2002 or
outdoors, 2 Mbps 2003
indoors
1XEV IP to 2 Mbps Trial planned for 2001;
deployment uncertain

9.3 APPENDIX 3: WHO IS WINNING THE 2G-STANDARDS WAR?
Who’s winning the 2G standards war

Standard North Latin Asia Europe World %
America America
GSM 7.5m 1.1m 93m 215m 345 68
CDMA 23m 8m 33m N/a 65m 13
TDMA 26m 17.5m 1m N/a 48m 9
PDC 0 0 48m 0 48m 9
IDEN 5m N/a N/a N/a 6m 1
Total 61.5m 26.7 175m 215m 512m 100

9.4 APPENDIX 4: I-MODE CONTENT STATISTICS
Category Sub-category Number of Number of fee-

sites based sites
News/Weather/Information General Newspapers 12 8
Investment Newspaper 1 0
Regional newspapers 17 16
Foreign newspapers 5 0
Total: 35 24
Mobile banking National banks 10
Regional banks 66
Other savings/Loans 167
Associations
Total: 243
Credit Credit cards 4
card/Securities/Insurance Securities 7
Insurance
Total: 11
Travel/Traffic/Maps Airlines 5 0
Trains 2 2
Hotels 5 0
Rental cars 1 1
Traffic information 2 2
Maps 2 2
Total: 17 7
Shopping/Living Tickets 3 2
CDs, games, books 9 0
Rentals 4 0
Employment 4 4
Cars 4 0
Education 3 0
Total: 17 6
Gourmet/recipes Restaurant information 7 3
Recipes 2 0
Total: 9 3
Melodies/images Melody downloading 19 18
Character downloading 35 33
Total: 54 51
Games/fortune-telling Games 16 16
Horoscopes 17 17
Total: 33 33
Source: Devine, Holmqvist (2001)

9.5 APPENDIX 5: CHARACTERISTICS OF WIRELESS CONTENT
Characteristics of wireless Internet content

How is the customer using the service?
User Interface Technical Prerequisites
Bandwidth
Limitations of display
Speed
Input from the user
Networks
User Behavior
What
is the Internet used for?
Where
Dependency
is the Internet used?
When
Independency
is the Internet used?
How to utilise and take advantage of?

9.6 APPENDIX 6 THIRTEEN KEY ACTIVITIES IN THE NEW PRODUCT DEVELOPMENT PROCESS
Initial screening
Preliminary market assessment
Preliminary technical assessment
Detailed market study
Predevelopment business and financial
analysis
Product development
In-house product tests
Customer product tests
Trial sell
Trial production
Pre-commercialisation business analysis
Production start-up
Market launch
Source: Cooper, 1993

9.7 APPENDIX 7: OVERVIEW OF THEORIES BEHIND THE CONCEPT OF COGNITIVE ABSORPTION
The Dimensions of CA and of Related Constructs

CA Related Constructs
(current Flow Flow Flow Engagement Flow Network Cognitive
study) (Csikszentmihalyi (Ghani & (Trevino (Webster & (Novak et al. Absorption
1990) Deshpande & Ho 1997; 1999) (Agarwal
1994; Ghani Webster Webster & et al. 1997
et al. 1991) 1992; Hackley
Webster 1997)
et al.
1993)
Temporal “transformation of Telepresence/time
Dissociation time” distortion
(antecedent to
flow)
Focused “attention is Concentration Attention Attention Focused attention Attention
Immersion completely focus focus (antecedent to focus
Dimensions
absorbed by the flow)

activity”
“nothing else
matters”
Heightened “pleasure and Enjoyment Intrinsic Intrinsic Intrinsic
Enjoyment enjoyment” interest interest interest
Control “involving a sense Control Skill/control Control
of control” (antecedent to
flow)
Curiosity Curiosity Curiosity Curiosity
Source: Agarwal and Karahanna (2000)

9.8 APPENDIX 8: THE FRAMEWORK OF COGNITIVE ABSORPTION
Perceived
Personal Usefulness
Innovativeness
Behavioral
Cognitive Intention
Absorption to Use
Playfulness
Perceived
Ease-of-Use
Self-Efficacy
Source: Agarwal and Karahanna (2000)

9.9 APPENDIX 9: THE VALUE PARADIGM OF NTT DOCOMO

9.10 APPENDIX 10: LIST OF INTERVIEWS
Andrea Vey, Public Relations manager at T-Mobil, Germany’s biggest mobile telecom operator,
email interview on 09/02/2000;
Doug Lucas, senior Business Development manager at Excite Corporation UK, email interview
on 08/02/2000;
Göran Frödin, Cetevo, Sweden, email interview on 14/02/2000;
Johan Holmgren, Director of Public Relations, Europolitan, Swedish mobile network operator,
email interview 15/02/2000;
John Johnsson, Vice President at Cell Network, office in Karlstad, Sweden, personal
communication on 18/01/2000;
Ken Young, senior Internet market analyst at VNUnet, UK, IT journalist, series of email
communication;
Lars Vestergaard, senior analyst at IDC Denmark, market research and consulting company,,
telephone interview on 12/02/2000;
Martin Jönsson, technology business manager in strategic business management division,

UMTS-GSM business unit at Ericsson Mobile Communications, Sweden, email interview on
07/02/2000;
Robert Horvath, Nordic Springs AB, Sweden, telephone interview on 26/02/2001;
Tom Fitzpatrick, Wireless Internet Development Manager, Parallel Internet, Ireland, email
interview on 01/03/2001;
Tony Dennis, Consultant Editor, WAP Insight (a free online newsletter for the WAP development
community), UK, email interview on 19/02/2001.

9.11 APPENDIX 11:INTERVIEW QUESTIONS
General
1. Is the Internet a suitable platform for wireless value added services?
2. Which m-commerce services will be demanded most?
3. Is the necessity to abolish some physical elements like a wire to connect to the Internet, big
desktops or laptops big enough to promote WAP?
4. Is it possible to transfer the richness of the current networks into the wireless world?
5. How big is the potential threat of I-mode to WAP?
6. In Europe there is lots of disappointment about WAP. Is it possible to overcome the negative
attitude?
7. Whose responsibility is to promote this new technology? Who failed in promoting it in the wrong
way?
8. What were the shortcomings of WAP’s in Europe?
9. In what ways can Europe learn from Japan’s experience?
10. Which scheme do you think would be most applicable in transferring common Internet content to
mobile phones?
Customers
11. What are the current customers’ expectations of the wireless web content?
12. How to deal with current promises to build fair future expectations that can be met?
13. What is the importance of Japanese culture for the success of I-mode?
14. Which is the most important customer segment for m-commerce services in Europe – business
people or young people?
15. Should telecoms promote the usage of m-commerce among young people by subsidizing handset
prices?
16. What is your guess or estimate prediction of the number of WAP users in Scandinavia at this
moment?
Telecoms
17. What kind of business models should telecom companies use in order to promote the spread of
usage of wireless Internet?
18. Having in mind the network and snowball” effects (the greater the penetration rate, the greater the
competitive advantage), do you think that WAP may loose the competition?
19. What are the odds that WAP Forum and other major WAP supporters will not achieve a “critical
mass” and will fail in making WAP a global standard?
20. What are the critical success factors (CSFs) for Japan’s mobile Internet market current
development?
Content providers
21. Should telecoms provide value added services themselves or outsource them?
22. Which services should be given the highest priority in terms of development and promotion?
23. Why did telecoms fail in providing sufficient range of wireless services together with the launch
of WAP? Are content providers waiting for a critical mass?
24. How many companies in Scandinavia are providing value added services for wireless web?

9.12 APPENDIX 12: GLOSSARY OF TERMS
Access Fee A monthly charge for the ability to connect to a wireless network. This fee is assessed
monthly whether the phone is actually used or not.
Activation Configuration of a wireless phone so that it is ready to be used to transmit and receive calls on
the wireless network.
Activation Fee A one-time up-front charge for activation of a wireless phone.
Airtime Total time that a wireless phone is in connected and in use for talking. This includes use for calls
both received and placed.
Analogue A method of modulating radio signals so that they can carry information such as voice or data
Authentication A feature used to reduce fraud by confirming the identity of a phone to the wireless
network.
Bandwidth Describes the transmission capacity of a medium in terms of a range of frequencies. A greater
bandwidth indicates the ability to transmit a greater amount of data over a given period of time.
Bluetooth A short-range wireless protocol meant to allow mobile devices to share information and
applications without the worry of cables or interface incompatibilities. The name refers to a
Viking King who unified Denmark.
Broadband Describes a communications medium capable of transmitting a relatively large amount of
data over a given period of time; a communications channel of high bandwidth.
CDMA (Code Division Multiple Access) A digital communication technology used by some carriers to
provide personal service. Other technologies used are TDMA and GSM. This technology allows
numerous signals to occupy a single transmission channel, optimising the use of available
bandwidth.
CDMA2000 this is a network standard popular mainly in USA. It leverages Internet developments
and includes Point-to-Point protocol to link users to a packet data-serving node and Mobile IP to
support customer roaming among CDMA2000 networks. This will allow the customers to have
their own IP addresses and keep them while roaming in the network. This 3G technology comes in
versions 1X and 3X.
CDMA One This is a 2G technology, first established in 1993/
cHTML (compact HTML) This is the markup language that NTT DoCoMo uses for its wireless Internet
service – i-mode. It is a subset of HTML.
CDPD (Cellular Digital Packet Data) A technology for transmitting data over analogue cellular
networks. Requires a special modem and the wireless carriers network must be upgraded to
accommodate such data transmissions.
Digital A method of encoding information using a binary code of 0s and 1s. Most newer wireless phones
and networks use digital technology.
Dual band A feature on some wireless phones that allows the handset to operate using either the 800
MHz cellular or the 1900 MHz PCS frequencies.
EDGE Enhanced Data for GSM Efficiency
GSM (Global Standard for Mobile) A digital communication technology used by some carriers to
provide Personal Customer Services (PCS) service. Other technologies used are CDMA and
TDMA.
GPRS (General Packet Radio Service) An emerging technology standard for high-speed data
transmission over GSM networks. It is packet based and allows rates from 56 to 114kbps.
Handset Any hand held device used to transmit and receive calls from a wireless system. Also known as a
wireless phone, a cellular phone, a mobile phone, a PCS phone and many other terms.

HDML Handheld Device Markup Language. This a programming language that allows to translate and
present content of web pages on mobile phones or PDAs via wireless Internet connection.
HTML Hyper Text Markup Language; a set of markup symbols and codes, used to display on a World
Wide Web browser page.
ISP Internet Service Provider.
LAN Local Area Network
LCD (Liquid Crystal Display) A flat panel screen used to display numbers and/or characters. Often
found on a wireless handset
MMDS (Multipoint Multi-channel Distribution Service) Often referred to as 'wireless cable' as it is a
wireless system used to distribute cable television and other broadband signals to multiple users
by way of a single transmitter
PDA Personal Digital Assistant; a device that provides computing, information storage and retrieval
capabilities for personal and business use.
SMS (Short Messaging System) A feature of PCS phones (primarily GSM) that allows users to receive
and sometimes transmit short text messages using their wireless phone.
Spectrum The entire range electromagnetic frequencies.
Spread Spectrum A communications technology where a signal is transmitted over a broad range of
frequencies and then re-assembled when received.
TDMA (Time Division Multiple Access) A digital communication technology used by some carriers to
provide PCS service. Other technologies used are CDMA and GSM.
3G (Third Generation Wireless) The next generation of wireless communications beyond today's digital
technologies. When available, 3G wireless technologies will allow for much higher transmission
rates to wireless devices leading to more useful services and a better user experience.
UMTS Universal Mobile Telephone System, also known as W-CDMA
URL Uniform Resource Locator; the address of an Internet file.
WAN Wide Area Network.
WAP (Wireless Application Protocol) A global protocol used in many newer wireless devices that
allows the user to view and interact with data services. Generally used as a means to view Internet
web pages using the limited transmission capacity and small display screens of portable wireless
devices.
W-CDMA Wideband Code Division Multiple Access; The 3G solution for GSM is W-CDMA, also
known as Universal Mobile Telephone System (UMTS). It will require new radio spectra since it
operates in ultra wide 5-Mhz radio channels. W-CDMA will meet the IMT requirements 2 Mbps
indoors and 384 Kbps – outdoors, but its official launch will be at earliest in Japan in 2002 by
NTT DoCoMo.
Wireless Carrier A company that provides wireless telecommunications services.
wISP Wireless Internet Service Provider.
XML eXtensible Markup Language; a language used by WAP that provides an easy way to
create common information formats and share both the data and the format on the Web.

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Critical Success Factors in The New Economy: How To Make WAP Worth IT. A Study of Mobile Internet

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Critical Success Factors

Karlstad Master Thesis in Service Management

Prof. Per Norling Our supervisor at Karlstad University, who gave us

Ivaylo N. Todorov Andrejs Jerkins

Andrejs Jerkins & Ivaylo N. Todorov i

Andrejs Jerkins & Ivaylo N. Todorov ii

Andrejs Jerkins & Ivaylo N. Todorov iii

4.4.3 The electronic relationship............................................................................................38

Andrejs Jerkins & Ivaylo N. Todorov iv

7.3 SERVICE CONCEPT ....................................................................................................................69

Andrejs Jerkins & Ivaylo N. Todorov v

TABLE 1: INFORMATION SOCIETY IN 1999/2000 (SOURCE: A.C. NIELSEN)....................7

TABLE 2: NUMBER OF WIRELESS INTERNET USERS (AS OF DECEMBER, 2000).........10

TABLE 3: WIRELESS INTERNET SERVICES IN JAPAN SOURCE: MOBILE MEDIA

FIGURE 1: TRADITIONAL TRADE-OFF BETWEEN RICHNESS AND REACH (SOURCE:

FIGURE 2: COMING REVOLUTION IN TRADE-OFF BETWEEN RICHNESS AND REACH

FIGURE 3: TWO APPROACHES AT CRM: THE TRADITIONAL AND THE NEW..............25

FIGURE 4: CORRECTED RICHNESS/REACH TRADE-OFF...................................................26

FIGURE 5: THEORY OF PLANNED BEHAVIOUR. SOURCE: CHANG (1998), COMPILED

FIGURE 6: NTT DOCOMO’S NETWORK STRUCTURE (SOURCE: NTT DOCOMO’S WEB

FIGURE 7: STRUCTURAL MODEL OF I-MODE'S SERVICES...............................................42

FIGURE 8: THE WIRELESS INTERNET VALUE CHAIN AS INFLUENCED BY THE

FIGURE 9: I-MODE'S PAYMENT SCHEME..............................................................................45

FIGURE 10: THE POSITION OF DIFFERENT INTERNET ACCESS DEVICES ON THE

FIGURE 11: VICIOUS CIRCLE OF WAP'S TROUBLES..........................................................63

FIGURE 12: LEVELS OF EXPECTATIONS, ACTUAL PERFORMANCE AND ZONE OF

GRAPH 1: DISTRIBUTION OF WIRELESS INTERNET USERS WORLD-WIDE.................10

GRAPH 2: GLOBAL DATA BY TECHNOLOGY GENERATION (SOURCE: STRATEGIC

GRAPH 3: JAPANESE MOBILE TELECOMS' MARKET SHARES (SOURCE:

Andrejs Jerkins & Ivaylo N. Todorov vi

GRAPH 4: GROWTH OF MOBILE INTERNET USERS. (SOURCE:

GRAPH 5: THE AGE DISTRIBUTION OF I-MODE USERS. (SOURCE:

GRAPH 6: MOST POPULAR CONTENT CATEGORIES OF WAP (CURTIS, 2000) .............60

GRAPH 7: DISTRIBUTION OF SPENDING LIMITS OF WAP USERS (CURTIS, 2000).......61

Andrejs Jerkins & Ivaylo N. Todorov vii

Mr. Mouche climbed on his horse and rode it beautifully.

Motion picture "Hackers" 1995, hacker nicknamed the Plague

Andrejs Jerkins & Ivaylo N. Todorov viii

1.1 PROBLEM AREA

Andrejs Jerkins & Ivaylo N. Todorov 1

1.2 RESEARCH QUESTIONS

Andrejs Jerkins & Ivaylo N. Todorov 2

• Focus is put on the transfer-of-data telephony market and specifically on the

Andrejs Jerkins & Ivaylo N. Todorov 3

− Gathering information about the market and the industry;

The qualitative research was based on the following considerations:

− Open-ended interviews with experts in Japan and Europe – it is believed that in

Andrejs Jerkins & Ivaylo N. Todorov 4

Andrejs Jerkins & Ivaylo N. Todorov 5

Andrejs Jerkins & Ivaylo N. Todorov 6

3 The Background of Wireless Internet

3.1 GENERAL DESCRIPTION OF THE MARKET

3.1.1 What is Wireless Internet?

Internet users (Nov. 2000) 98 154 39 71% 407 NUA

Mobile phones (Dec. 1999) 147 86 57 60% 481 ITU

Andrejs Jerkins & Ivaylo N. Todorov 7

Andrejs Jerkins & Ivaylo N. Todorov 8

3.1.4 Wireless Applications for both consumers and businesses

3.2 MARKET STATISTICS AND PREDICTIONS

Andrejs Jerkins & Ivaylo N. Todorov 9

Number of wireless Internet users (million) % Users of WAP Users of i-mode

Japan 30 73% 4,5 17,1

47% Users of WAP