Finding A Safe Bet

Mobile-phone companies are always trying to sell you the next big thing. Phones that can stream football games, send you movie clips, download a new song or snap pictures are what beleaguered telecom operators hope will bring in the big bucks over the next few years. European carriers are counting on such whiz-bang data services to rack up an extra $90.2 billion in revenue in the next six years, according to a recent survey from Forrester, the technology re-search firm. But analysts say they may be overestimating those figures by at least half. They also say that telecom companies in both Europe and the United States need to start looking east for inspiration, and a better business model.

The future of the mobile Internet is already on display in Asia. European and American carriers continue to lag behind on developing mobile payment systems, easy-to-use content and common standards for new services, while Asians are coming up with simple, cost-effective offerings. One example can be found in the mobile betting system used by the Hong Kong Jockey Club, a nonprofit group that generates more than $1 billion in revenue from horse racing every year for charity.

In 2001, the Jockey Club introduced a system of gambling in which users could place and pay for bets via their mobile phones. Last year the service generated an additional $5.2 million per year for the four mobile carriers that support it. It has also increased margins for the Jockey Club, which pays less to process text-message bets than those placed over the phone or in person, and has cultivated a whole new group of gamblers--women--who are drawn to the anonymity of the mobile phone.

The success of the Hong Kong betting system reveals many of the key differences between Asian and Western strategies. For starters, Asians are partnering up. It's no accident that many of the best ideas for new data services come not from telecoms themselves, but from outside organizations. While many European and U.S. firms continue to try to develop their own content (a la Vodafone's Live portal), Asian carriers have embraced their role as a delivery-and-payment service, leaving the hard work of content creation to others. The classic example is Japan's NTT DoCoMo, which makes it easy for outside content developers to use its system, and takes a 9 percent cut of whatever they earn. Consequently, mobile-data traffic in Japan is among the highest in the world.

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Asian companies are also focusing more on what works now, not on the distant cutting edge. While the future may lie with streaming video, mobile teleconferencing and other fancy features, few people today have phones that will support such things, and even fewer know how to use them. While so-called 3G phones are beginning to trickle onto the market, "mobile operators don't tell you how to use all the features," says Adam Daum, an analyst at Gartner research. "It's like giving an American Express card to some tribe in the jungle--it's just way ahead of where the market is." Again, Asian carriers seem to have grasped the concept of starting with a simple idea to gain critical mass. One of NTT DoCoMo's most successful data services was a Hello Kitty cartoon that users could sign up to have delivered to their phone, once a day, for about 70 cents a month. The first month, 700,000 users signed up. The familiarity gained by this simple offering encouraged users to register for more complicated services.

Once they do, Asian carriers make it easy for them to pay for the content. While local-market dominance meant companies like DoCoMo could impose a payment system on users, European carriers are only just coming together with each other and with banks to develop a common payment process.

Finally, Asia is capitalizing on technology that's already in place. The Jockey Club's system runs not on 3G, but via SMS, or text messaging. Consumers don't have to be educated about how to use it, and it's cheap. "Text messaging is the data service at the moment," says Nomura analyst Richard Windsor. "There are many more creative ways in which operators could be exploiting it." Forget the football: for now, telecom companies would be well advised to stick to the basics.

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