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As mobile wireless unfolds, the business-world looks for an assessment of the technical and competitive landscape, for a high return on investment opportunities, for sweet spots in the value chain, and for value propositions of the industry. This requires an understanding of the evolving value chain and market structure of the mobile wireless industry. To help the business-world deliver on the full promise of mobile wireless, this paper describes the elements of the evolving value chain and its major players. The paper also describes how emerging technological solutions are unleashing the potential of the value chain.

A confluence of technological leaps in devices, networks, and applications is setting the stage for wireless to change our lives the way personal computers (PCs) did in the 1980s and Internet in the late 1990s. A measured approach to service adoption and pricing yields revenues of nearly US$15 billion in 5 years, and US$60 billion in 10 years in the US alone (Lundberg & Zucker, 2000a). Extrapolated to other regions, cumulatively, the mobile wireless business represents an opportunity size that is enough to make the business-world tremble. To capitalize on the opportunity, however, the stakeholders investing in mobile wireless have to assess a wide landscape of technical and competitive issues, including the rationale and longevity of the current slowdown in telecommunications industry, surrounding the seemingly easy task of moving a bit of content from a content source to an omnipresent mobile wireless device. Mobile wireless entrepreneurs have to understand the meaning and structure of the entire mobile wireless value chain in order to identify potential sweet spots such as the one Palm spotted in 1996—Personal Information Manager (PIM), or Personal Digital Assistant (PDA)—and establish companies. To identify opportunities for investment, investors have to understand the sources of high returns in the mobile wireless value chain. Further, customers’ perception of mobile wireless value decides the success of the offering of telecommunications industry. The subscriber must understand the value proposition of the mobile wireless services available for subscription. This requires modeling the mobile wireless value propositions. The simplest building block to use is the wireline voice and data traffic model. Mobile wireless data could follow or surpass wireline data traffic trends. According to AT&T Labs Research (2000), Coffman and Odlyzko (2001), and Qualcomm (2001), wireline data traffic increased due to increasing usability enabled at an acceptable service cost. As the subscriber expects the same value from data content along with certain specific additional benefits from mobile wireless in order to switch, the key driver of mobile wireless data will also be the price paid for volume of data download (usage) at an acceptable download rate. Both wireless and wireline content being the same, i.e., voice and data, for a subscriber to adopt wireless services in place of wireline services, the mobile wireless value offer should be equal to wireline world's value-plus-extra. Otherwise, it will defy economic logic for a subscriber to switch to the wireless world considering the premium paid for mobile wireless services over wireline services. Current wireline services are cheaper than their counterparts. Drawing from AT&T Labs Research (2000) and Qualcomm (2001) research studies on wireline Internet and from International Mobile Telecommunications (IMT)-2000,2 and analyzing price elasticity drivers in wireline and wireless worlds to understand expectations of subscribers, the value propositions of mobile wireless are: convenient, secure, reliable, personalized service all at a value-based price (Sabat, 2002a). To deliver this value, traditionally, the network operator managed and owned the entire value chain. With the players in the segments of the value chain and the complexity of interactions among them increasing, market turning competitive and hostile, and surging customer expectations, the value chain is evolving into a set of partnerships to deliver mobile wireless value. In the new regime, then, the wireless network operator no longer owns the entire value chain. Whereas the literature offers many treatise on a few of the aspects of emerging packet networks in a disjointed fashion, the evolution of the mobile wireless value chain and market structure has outpaced the research. In this backdrop, to help the business-world deliver on the full promise of mobile wireless value this paper provides an integrative view of the evolving packet-based mobile wireless value chain, and of the market players that have organized themselves to offer the mobile content—both voice and data as one, but differentiated content. Whereas the segments of the value chain have been fluid and could well be grouped in many ways in response to the dynamic landscape, this paper, based on an analysis of the players in the industry, attempts to flesh out exactly • What the various segments of the value chain have been and what they are going to be • What these segments have been doing and what the new segments will do in the evolved state • Who the players have been in the market and who the new players are • What the existing offerings are, what the new applications and services are and how these fit into the proposed value chain, and • How the companies have been striving together to deliver seamless mobile wireless services to their subscribers, generate revenues and create high-value sustainable organizations. To correlate the value chain with the emerging industrial mobile wireless solutions and benchmark the performance of these solutions, this paper proposes a four-dimensional matrix with user interface, content synchronization mode, content transmission rates, and geographical coverage as its dimensions. These dimensions were arrived at by understanding the fundamental business drivers of mobile wireless (Sabat, 2002a). Equipped with this understanding of the value chain and its elements, all players in the mobile wireless arena can explore new revenue-generating opportunities to increase their market share. By benchmarking the existing value chain against the normative model described in this paper, and by analyzing their portfolios’ strengths and competencies, the players can identify sweet spots and adopt newer business models to harness the potential for new revenues or market share.

Customers’ perception of mobile wireless value will decide the success of the mobile wireless industry. Also, the value proposition of wireless world is more than that of the wireline world. As the value chain evolves to deliver on its full promise of mobility (on-the-go), reachability (always-on capability), convenience, and secure reliable value-based personalized service, the mobile wireless subscribers’ hitherto unmet demands will be satisfied. To support the evolution of the value chain that is described in this paper, the traditional players are repositioning themselves from their old slots into newer niches even as new entrants are rushing in to grab their slots. By understanding the offerings of all of these players and how they come together to offer mobile wireless value to the subscribers, partnerships among wireless operators, service providers, equipment vendors, industry, service bureaus, systems integrators, terminal vendors, end-users and academia, among others, can be explored. Through partnerships, which are a natural requirement of the value chain, creative, new services and applications can be offered in real-time, with reduced risk. This assumes importance in light of the complexities of the offerings and the complex interactions in the value chain to offer the expected benefits. Many companies have product line holes that need to be filled while others are struggling to focus their resources on existing strengths. For example, failing to establish itself in the handset market, Ericsson has replaced its solo venture with a joint venture with consumer electronics giant Sony, called Sony–Ericsson Mobile Communications (CBS MarketWatch.com, 2001). By teaming up, they challenge industry leaders Nokia and Motorola, which control about half of the world's market share (Fig. 6). Full-size image (17 K) Fig. 6. The competitive dynamics in the mobile wireless value chain. Figure options Competitive threats could lead to forming synergistic partnerships in the value chain. The technological challenge and high costs of 3G technology, for example, have forced mobile phone makers around the world to seek alliances to compete against global leader Nokia. Electronics giants Toshiba Corporation and Mitsubishi Electric Corporation became the latest Japanese mobile phone makers to tie-up after Sony and Ericsson, and NEC Corporation and Matsushita Electric Communication Industrial Company Limited (Stevenson, 2002). Players that are strongly positioned in their segment are exploring newer niches to expand their base in the value chain. For example, Nokia, a handset leader, moved into the network equipment segment occupied by Ericsson, Lucent, Motorola and Nortel. Nokia has unveiled its strategy by offering phone makers a standard kit of software and computer chips to build new smartphones. This was in response to Microsoft, an operating system player, making its intentions clear about gaining a chunk in the mobile operating system space (Reuters, 2002a). Intel, the leading chip-maker of the computing industry, is challenging Qualcomm, the leading supplier of handset-chips. Players that are not strongly positioned enough to drive operational efficiencies are being driven out. In the wireless Internet Service Provider industry, the remnants of wireless LAN service provider, Metricom's US$1 billion high-speed wireless network was sold in November, 2001 to Aerie Networks for US$8.25 million. Metricom's downfall appears to be ‘the only logical Darwinian outcome’ in this industry (Charny, 2001). Failing to gain significant market share and economies of scale in applications and services and handset segments, Nortel has retracted from the two. Similarly, Philips has exited the handset market. However, as the chain's segments are still evolving, parts of the architecture are yet to be implemented, especially the packet-based wireless architecture. Further, the degree to which the industry is successful in creating ubiquitous interoperability among the different protocols and standards in the network will ultimately determine the fate of the industry and the pace of wireless technology adoption. Whereas new players may create niches for themselves in the chain, only those players with business models that benefit from economies of scope will survive the hostile conditions. For example, with AT&T Wireless, AOL is attempting to extend its dominance as wireline Internet Service Provider to wireless arena. Another example is Virgin that has struck a deal in the US to resell Sprint PCS’ airtime under its own brand. As the market endures the hostile phase, scale and scope economies are the drivers of the emerging trends. The forces behind these drivers are customer demands, hostile industry environment and operator's business drivers. Customer demands for mobile business value has led to convergence of functionality in products. This, in turn, has necessitated a convergence of technology and standards and divergence of products coupled with differentiation of services along the value chain. As an example, mobile wireless applications development and management platforms, and wireless local service gateways providing high-speed data. Further, competitive industry and business drivers have forced the players to adopt business models that provide economies of scale. For examples, leading R&D houses such as Motorola and Ericsson have initiated retailing of mobile devices’ computing chipset. With this development, the cell phone industry can be likened to the PC industry as these companies have started offering technology modules to any new manufacturer that quickly wants to build its own handset. But it is much harder for these new cell phone companies to come out with a phone that can handle data communications well, let alone phones for the superfast 3G wireless networks. Also, Nokia has recognized the changing environment. From a volume producer of low-end mobile phones for millions of new users, it is putting more emphasis on gadgets and features that will convince long-term cell phone users to upgrade often to fancier and more expensive models (Reuters, 2002b). Other new business models that have been emerging are Mobile Virtual Network Operators (MVNOs) reselling multiple wireless carriers’ airtime under its established retail brand, and network sharing by wireless carriers in common markets of operation. These and other prominent emerging trends that are driving scale and scope economies in the value chain and harness the potential of sweet spots are discussed in another paper (Sabat, 2002e). The fully evolved value chain will incorporate players who possess core competence in specific business operations enabling the value chain to serve customers with integrated functionalities of information, entertainment, communications and computing features. However, in the near-term, the challenges from spectrum bandwidth scarcity, network reliability and network economics loom large. Capital investment patterns in spectrum and network building, as well as wireless subscriber penetration life cycle, which are twin components of mobile wireless economics, will lead the growth of the industry. Further research is needed to understand these capital investment economics and network-related business economics of the mobile wireless industry. Understanding the value chain and network economics will help the mobile wireless companies unleash the potential of the value chain and to sustain profitability levels.