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The Killer App For Wireless? Still Voice

Wireless companies may be scrambling to offer next-generation messaging and data services to their customers, but new market research suggests the majority only want to use a mobile phone to call someone.

The report issued Monday by Research and Markets Monday said about 95 percent of all revenue generated by mobile operators is based on voice. The remaining 5 percent of the revenue, according to the Dublin, Ireland-based analyst firm, comes from messaging, with a less than 0.5 percent coming from data services such as General Packet Radio Service (GPRS), Wireless Application Protocol (WAP), Enhanced Data for GSM Evolution (EDGE), Bluetooth, 802.11, and the rest of all those new acronyms.

"New innovative uses of Short Message Services (SMS), both in permission based marketing models and in combination with TV, are looking more promising. However, all of these services will not reach more than 15 percent of total mobile revenue," Senior Manager Amy Cole said in her report

According to Research and Markets, GSM is still the major global mobile platform. Other platforms such as Code Division Multiple Access (CDMA) and its variants have support in some countries, but it is expected to remain less used than GSM globally, even into the 3G era. Regionally, the consulting firm suggests Korea is the most exciting example of new mobile data services, but so far it is the only country that is scoring success. Even in Japan it 3G is not catching on and, despite the i-mode success, the net money gains remain questionable.

"While 3G does offer excellent infrastructure features, there is little chance that operators will be able to ask premium prices for services over this new infrastructure," Cole said. "Unless there is a network need for it there is little chance that 3G will be deployed on a large scale."

"One area that seems softer than first anticipated is smartphones. Jupiter Research, a division of Jupitermedia and parent company of this Web site, found that when choosing a cell phone, U.S. consumers prioritize small size and voice-related functionality over more advanced features such as integrated digital cameras, games, PDAs or music players. Given the choice of a free basic cell phone or paying for a cell phone with a built-in PDA, digital camera or MP3 player (also known as a smartphone) - a choice offered by nearly all U.S. carriers - most U.S. consumers were not willing to pay as little as $49.

"Basic cell phones with voice and text messaging capability will continue to make up the majority of sales, followed by cell phones that can run small Java or BREW applications without overly increasing cell phone size or price," Jupiter Research Analyst Avi Greengart said. "But cell phones with cameras, MP3 players and/or PDAs will not be widely adopted in the U.S. over the next 12 months."

Because interest in converged devices is low, Jupiter Research is advising carriers and handset vendors to create single purpose cell phones, PDAs and MP3 players, and allow them to function as a single unit using Bluetooth wireless technology.

That can be a boost to operators whose fixed wireless services are slowly being replaced in some areas by mobile services. According to the Research and Markets report, the release of higher frequency spectrum has allowed for the development of new technologies, and hence new applications. Wireless local distribution technologies such as Wireless Local Loop (WLL), Wireless Local Area Network (WLAN) and Bluetooth have shown potential.

"The problem here is the lack of solid business models," Cole said. "The smaller players don't have the scale to become substantial players and the exiting players will be wary of cannibalizing their existing mobile and fixed broadband services."

The overarching problem, according to the Research and Markets report, is that after many years of high growth, the mobile market is slowing, despite the increased level of competition and rapidly falling prices. Many markets have now reached saturation point.

Outside of earthly constraints, the report says satellites have not advanced much during the early 2000s. Geo-stationary satellites (or GEOs) are still providing good service, say analysts, but Low Earth Orbit (LEOs) and Medium Earth Orbit (MEOs) have shown a constant stream of financial disasters. It is not expected that this situation will change for several years to come.

The report is part of Research and Markets' larger "MARKET ANALYSIS 2003" study. Jupiter Research's full analysis is called, "Next Generation Handsets: How To Succeed In Wireless Without Really Converging." Both reports are for sale from the perspective firms.