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Commentary: Finding the right mobile applications

The greatest challenge carriers face is in the way most consumers view their phones--as something they hold to their ear and talk into, not a device they look at and interact with.

Commentary: Finding the right mobile applications
By Forrester Research
Special to CNET
February 6, 2003, 4:00AM PT

By Charles S. Golvin, Senior Analyst

Mobile operators today pin their revenue hopes on new consumer data applications.

Facing a mature market with declining prices, mobile operators look to their shiny new packet-data networks to retain fickle customers, appeal to new market segments and prop up sagging average revenue per customer. How? With communication, entertainment, information and productivity applications delivered to subscribers' new data-capable handsets.

But choosing the right set of applications is only one of the challenges that operators face as they try to grow their customers' reliance on the mobile network. Carriers must also figure out a pricing model that consumers understand, a compelling marketing message and a retention strategy to keep their best customers.

Special report

Wi-Fi networks will soon link everything
from television sets to cell phones.

The greatest challenge that carriers face is in the way most consumers view their phones--as something they hold to their ear and talk into, not a device they look at and interact with. Operators will rely on voice features such as three-way calling and conditional call forwarding to seamlessly blend voice and data--which will begin to transition phone usage from the ear to the eye. Operators will drive the adoption of these disguised data services by offering applications that surreptitiously integrate data through SMS (Short Message Service) and voice interfaces. When American Airlines sends a customer the flight information the person requested as a text message, the customer's phone can begin to be used for data as well as voice.

Operators will also connect with a small group of high-income early adopters thanks to productivity applications like Sprint's, and Cingular Wireless' Seven Networks-powered tools that extend Microsoft Outlook and Lotus Notes from the PC to a mobile device. Entertainment junkies will pay for good games to personalize their phones and for information on the hottest dining and music venues. These customers will sample applications such as picture sharing on a per-message basis and then migrate to a monthly entertainment bundle once the applications prove their value.

By 2005, data-sneaky services will have begun to change consumer behavior, and people will understand that the handset does more than just complete calls. The natural upgrade cycle will have raised the number of subscribers with GPRS (General Packet Radio Service) and 1X data capability to 66 percent of mobile users in 2006, with SMS capability becoming even more widespread, at 98 percent of wireless customers. Of these data phone owners, 29 percent will use some form of data services other than SMS, although in many cases the data component will be fully integrated, as it is with Virgin Mobile's "Xtras" such as Music Messenger.

The new landscape of mobile users--facile with data applications and more savvy about the voice network--will require a more skilled marketing approach than for simply selling voice minutes. Consumers will not be able to distinguish between carriers' offers as today's confusing pricing options are exacerbated by an expanded range of applications. Operators must learn to craft their marketing message and application mix to specific market segments based on motivation, lifestyle and how the customers view themselves. Operators will also rely on mobile virtual network operator partners to hone the message for desirable cliques, as Nextel Communications recently did with its youth-oriented Boost Mobile launch.

Altogether, these mobile applications will draw $6.2 billion in revenue from consumers in 2006--representing 7 percent of total average revenue per customer. While data services will provide operators with $1.8 billion in 2006, voice services--which represent more than twice the data revenue in 2006--and SMS revenues will dominate pure data applications throughout 2007. Operators will find that entertainment-motivated consumers are the most valuable, as they are the only users who will spend more for data services than voice applications.

When operators try to deliver mobile broadband with the next series of network upgrades in 2006--UMTS (Universal Mobile Telecommunications System) and CDMA2000 1X EV-DV--they will benefit from having already done the hard work of transitioning consumer behavior from voice to data. Instead of another period of turmoil, operators' experienced marketing staffs and deepened relationships with device manufacturers will enable them to more quickly capitalize on these new networks.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.