Kellogg on Technology and Innovation

Wireless Value Chain

In the past decade, several technologies were introduced but the most popular among them is the wireless technology. It has affected every aspect of life whether it is personal or business related. It has transformed business processes related to operations management and customer management. In the following paragraphs, we will discuss the major parties involved in the wireless value chain. These are:

Equipment Companies :

These companies are putting the necessary infrastructure for wireless communication and can be broadly divided into three major parties. The first set of companies provides components for communication like signal processors and integrated circuits. The second set of companies are building the infrastructure like Cell Towers and Base stations. Though the market will continue growing in this segment as they provide basic infrastructure, the winners in this segment will be companies which provide service differentiation vis-a-vis other competitors. Companies, which are provide devices such as mobile phones, pagers and telephones form the third set of companies. They will register more growth in their market only when the end user i.e. wireless users are satisfied with wireless devices.

Networks:

These are the companies who are going to manage the connectivity between two places and are also responsible for billing the services used by wireless users. These companies add value in the wireless chain by providing connectivity to users. However, these companies have to change their business models slightly as the wireless infrastructure becomes commoditized.

Software:

This segment will be providing software solutions and services to various companies operating in the mobile commerce industry. The value provided by these companies in the wireless value chain include providing various applications to enable mobile commerce and other services like what NTT DoCoMo is providing in Japan. This segment will remain very competitive in near future and success will depend on the value provided to the wireless users.

Services:

The companies, which are taking care of services like information storage, web site hosting and other services will add value to the wireless chain as they are providing additional benefits to companies as well as customers at a lesser cost. Another segment with-in this, is the companies that are providing content and own portals.

Most of the companies and equipment manufacturers are adopting 3G technology. The term 3G refers to the third generation mobile communication technology which has been defined by the international telecommunications union (ITU). The basic purpose behind 3G is to provide one uniform standard all over the world and increase the data transmission speed to 384kbps. Though most of the companies are taking steps to adopt 3G standards but there are number of political, financial, technological as well as the regulatory issues which needs to be solved by the ITU. The applications and technological and financial threat to 3G are explained in the Figure I.

Outlook for 3G:

The 3G technologies will face many challenges in the near future. These include slower download speeds, pricing issues, limited connectivity to other applications, competitive technologies like WLAN and 2.5G compression, financial problems about infrastructure companies, which are responsible to develop the necessary infrastructure for 3G services.

Location Technology:

Other promising technologies apart from 3G services are location technology with its new functionality and support from Federal Communications Commission (FCC), which has made location based services (LBS) in the US mandatory for locating distress calls. A part of wireless communication industry, the location based services are becoming one of the competitors for 3G services in the near future. The market for location-based services is estimated at $5bn in the next three years with the market size of $600m. Some of the companies like Verizon wireless; Vodafone and NTT DoCoMo are busy promoting this technology while other smaller players in US and Europe are also participating in that promotion. The parties involved in the location-based services are:

Equipment manufacturer: A set of companies, which will be providing the devices to final users. Companies like Global Locate, Ericsson, Motorola and others are providing handheld devices to users.

Location Technology: These are companies who will be providing technology to run the devices. Companies, which are in this segment, are Cambridge, Positioning Systems, Cell-Loc and Snap Track. For example Cell-Loc, a Canada based company is developing devices, which can provide driving maps to users devices if they are lost in the way.

Application Developers: Developing various applications for location based services. For example, TimesThree, a company working on the location technology provides location content to the internet portals to track the various information like child and pet tracking, billing services and many others.
Location based service providers: These companies provide end information to the users devices as well as some companies like TimesThree, Cambridge and Positioning Systems.

Wireless Carriers: These are companies, which allow content flow from the source to the users. The companies here include Sprint, AT&T and Verizon in the US, Orange and Vodafone in Europe, Airtel in Spain and NTT DoCoMo in Japan.