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Predicting U.S. Demand for Mobile Multimedia

Despite a rapid increase in the number of multimedia-capable mobile phones, U.S. wireless subscribers have not yet been persuaded to take advantage of these capabilities, according to In-Stat.

More than one-third of respondents to an In-Stat wireless subscriber survey now carry a wireless handset that can play MP3 music tracks, video files, or FM radio, the high-tech market research firm says. However, this does not necessarily mean that the features are being used. Why is there a disconnect between the "enabled" subscribers, and service engagement or device usage?

"The growth in multimedia handsets has more to do with operators pushing multimedia handsets to the market, rather than a strong desire by consumers to adopt multimedia handsets or use multimedia services," says Bill Hughes, In-Stat analyst. "However, the announcement of the Apple iPhone, in January 2007, changes the underlying dynamics of the market, and may give it a significant boost to all wireless carriers if Apple can deliver on the hype."

I believe that it's unlikely that the launch of one new mobile device can correct the litany of missteps that led to the current under-performing state of the U.S. mobile value-added services (VAS) marketplace. Granted, there are known issues with mobile device usability that the iPhone may help solve. Regardless, the historical sequence of events demonstrate that offering a better device UI alone probably won't be enough to increase overall demand in the U.S.

Clearly, some key problems stem from U.S. service provider's past reluctant and slow adoption of GSM, the global de-facto mobile communications standard. While the leading nations had service providers that were offering subscribers a multitude of device and service options, U.S. carriers were attempting to manage an environment that seemed focused on offering scarcity.

The vast majority of Americans do not view their mobile phone as anything more than a dumb device that enables them to make voice calls, and retrieve voice mail -- and they have this myopic perception for valid reasons. The U.S. carriers were slow to embrace SMS, slow to interconnect carrier SMS gateways, and then made tepid attempts to promote mobile messaging applications.

When SMS demand initially failed to materialize, carriers attempted to downplay SMS development in favor of MMS capabilities (a few also tried using EMS enhancements). When demand for MMS proved to be elusive, the focus was shifted yet again to WAP and mobile internet access. During each phase of this wayward journey, the U.S. carriers lacked an apparent appreciation of the need for a comprehensive market development methodology.

Poorly conceived pricing plans, minimal employee training and restrictive walled-garden platforms with limited content options merely compounded an already bad scenario that had evolved over many months of progressively disappointing results. Therefore, predicting the future success of multimedia VAS in the U.S. market is a very difficult task -- due to the multitude of issues that must be candidly addressed, and fully resolved to a conclusion.

That said, the upside potential is still huge. When Americans are finally presented with a truly attractive menu of service offerings (at realistic price points), then I predict that the user adoption cycle will go into turbo-drive. There is a great potential to stimulate demand, and turn all those irreverent or dormant subscribers into engaged and active users of mobile multimedia applications -- just like the industry-leading developed markets.

In-Stat's market study found the following:

- The number of respondents to In-Stat's survey owning a multimedia handset doubled from 2006 to 2007.

- Few survey respondents currently without a multimedia mobile phone have an interest in acquiring one.

- More than 80 percent of respondents with handsets that already have the ability to play MP3 tracks rarely, if ever, use this feature.

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