MMS The Next Big Thing?

MMS, touted as the next big thing after short messaging service (SMS), will be a dominating theme in this year’s CommunicAsia, held in Singapore from June 18 and June 21, which brings together more than 1,600 companies, including telecommunications and network providers such as Sony Ericsson, NTT Docomo, Panasonic, Siemens, Samsung, and software giant, Microsoft.

In the past, technologies such as Wireless Application Protocol (WAP) have had so much hype surrounding it when it was first introduced. But after two years, it has failed to impress users because of its slow speed.

Enhanced message service (EMS) was also seen as a likely star in Europe. But it too did not take off in a big way. On the other hand, no one knew that SMS would become such a phenomenal business for operators in Europe and Asia. So, will MMS suffer the same fate as WAP or SMS?

MMS, A Big Deal
Although SMS is generating a lot of revenue for mobile operators, accounting for 10-15 percent of some operators’ revenues, said Ovum, operators need new revenue streams.

Here lies an opportunity for MMS – a technology that will serve as a catalyst for 3G services and content, yet at the same time, it does not require 3G networks for more applications such as sending formatted text messages of any length, photos, audio and video content, m-postcards, entertainment information such as comics and horoscopes, quiz games, dating services and competitions.

Ovum gives an example: a photo which displays well on a phone’s small, low-resolution screen need only be tens of kilobytes in size, and 2.5G networks are quite capable of handling these satisfactorily.

MMS therefore gives mobile operators the first real opportunity to remedy one of the fundamental reasons underlying the slow user uptake of packet data services such as General Packet Radio Services (GPRS): namely, the lack of applications that require packet data services and are likely to appeal to a broad segment of the consumer market, said Ovum.

Although EMS also enables mobile phone users to send text messages exceeding the 160-character limit of SMS, and add simple graphics and sounds, Ovum believes that it is increasingly unlikely that operators will adopt the technology on a large scale. Reason being that Nokia, whose mobile phones account for about one-third of all EMS used globally, has declined to adopt the EMS standard in its products. Instead, Nokia is now agressively pushing MMS networks to operators in Europe and Asia.

On top of Nokia, MMS is also well supported by most major companies supplying mobile handsets, network equipment and software. These companies – which include
phone vendors such as Sony Ericsson and Motorola; IT services companies such as CMG and Logica; vendors of messaging platforms and software such as Comverse and Openwave; vendors of specialized network elements, such as billing systems, file caching systems and imaging servers; and application developers such as Beep Science, ConVisual, Extratainment and Magic4 – are either already selling or rapidly developing MMS-related products.

Who’s In It
Most mobile operators in Western Europe are currently investigating or trialing MMS services. It will also be the region where most of the early MMS services will take place because the key enablers for the success of MMS services are already in place here, said Ovum.

In April 2002, more than 20 operators announced firm plans to launch commercial MMS services by the end of the year. Norway’s Telenor was the first operator to launch a commercial MMS-based service and Vodafone’s German operator D2 has also announced its launch plans. Vodafone D2’s services are being offered on a free basis until 31 July, after which each picture message sent will cost about US$0.37.

Adoption of MMS in Asia will vary from country to country. Asia-Pacific markets in which the key enablers for MMS exist are Australia, Hong Kong, New Zealand, Singapore and Taiwan. Operators such as Hutchison in Hong Kong and Australia, SingTel Mobile and M1 in Singapore are said to have plans of launching MMS services.

In fact, Hutchison Telecom will be launching its MMS this month, the second mobile operator in Hong Kong to do so. Singapore’s M1, on the other hand, has started its MMS trials in May and plans to launch the service by October or earlier and a basic message sent could cost about US$0.30 to US$1.

China too shows great potential for MMS launch where Nokia has already inked a deal with China Mobile subsidiary, Zhejiang MCC, which included trials of micro-payment MMS.

Operators in Japan and South Korea have technology (such as i-Mode by NTT Docomo) not based on MMS which enables them to launch mobile picture and video messaging services. However, the technology does not allow inter-operator message exchange.

North America, on the other hand, is expected to lag behind the leading regions for MMS deployment by around 18 months, Ovum stated.

How Big Will MMS Get

Although MMS holds great promises, Ovum believes that like with all new messaging services, a strong business model is required to make it successful.

Said its principal analyst, John Delaney: “MMS does everything that SMS can, plus a lot more. But to consider MMS as a kind of `SMS on steroids’ can be a dangerously misleading idea. This is an easy idea for customers to understand, and can be an effective way to market services. But when it comes to providing MMS services, different business models will be needed. Operators will need to think very carefully about issues like service pricing, business agreements with other operators, business agreements with Internet service providers and relationships with third-party content providers.”

In addition, growth rate in MMS usage is dependent on the existence of a critical mass of users who are capable of exchanging messages.

Ovum predicts that it will take 18-24 months for MMS penetration to reach the levels required for mass-market uptake, even in the most advanced markets for MMS such as Western Europe and parts of Asia Pacific.

As a result, revenues from MMS will be modest in 2002 and 2003 and SMS will continue to be the dominant technology used for person-to-person (p2p) messaging over mobile phones during the next two or three years. Usage of MMS will only begin to demonstrate strong growth in 2004-2005.

By 2007, the annual consumer revenues from services based on MMS (such as p2p messaging, and an increasingly wide range of information & entertainment services based on machine-to-person (m2p) messaging) – including revenues from associated paid-for content – will reach about US$70 billion worldwide, Ovum projected.

According to Delaney, about US$31 billion of the US$70 billion will come from p2p messaging, with a further US$39 billion from the entertainment and information services such as m2p messaging.

However, Delaney cautioned that while MMS will be one of the most important weapons in a 3G operator’s armory of mass-market services, he does not believe that it is the long-sought killer application for 3G as touted by many.

MMS is not a `killer-application’. Neither is anything else. He said: “No one should expect MMS to provide the complete solution to operators’ revenue woes.”

3G revenues need to be built up from a range of component services. While MMS will provide some of the most important components, operators must not lose sight of the wider mobile data services context.

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