SOALAN 2

Bincangkan apakah faedah M-Commerce kepada perniagaan dan pengguna di

Malaysia. Apakah cabaran yang bakal dibawa oleh M-Commerce?

Abstract

Mobile phones, mobile Internet access, and mobile commerce are growing much

faster than their fixed counterparts. Several characteristics of mobile networks make

them more attractive than fixed networks for less developed countries and for those

countries that want to “leapfrog” the leading IT nations.

To exploit the new mobile communications infrastructures, companies from

developed as well as developing countries are rapidly integrating m-commerce

technology into their business models. Countries around the world, however, exhibit

considerable heterogeneity in their adoption of mobile phones and m-commerce

technology.

Introduction to M-Commerce

In principle, any transaction with a monetary value conducted via mobile

communication networks can be considered “m-commerce”. As such, m-commerce is

an extension of PC-based e-commerce to mobile devices - e-commerce for users on

the move. However, due to its specific characteristics – ubiquity, user friendliness,

localisation capabilities - m-commerce has the potential to expand to entirely new e-

commerce areas, creating new consumer habits and lifestyles.

Mobile Commerce (also known as M-Commerce, mCommerce or U-Commerce,

owing to the ubiquitous nature of its services) is the ability to conduct commerce,
using a mobile device e.g. a mobile phone ( or cell phone), a PDA, a smartphone

while on the move.

Mobile commerce is currently mainly used for the sale of mobile phone ring-tones

and games, although as 3G services roll out it is increasingly used to enable

payment for location-based services such as maps, as well as video and audio

content, including full length music tracks. Other services include the sending of

information such as football scores via SMS.

Currently the main payment methods used to enable mobile commerce are:

• premium-rate calling numbers,

• charging to the mobile telephone user's bill or

• deducting from their calling credit, either directly or via reverse-

charged SMS.

Mobile commerce was coined in the late 1990s during the dot-com boom. The idea

that highly profitable mobile commerce applications would be possible though the

broadband mobile telephony provided by 2.5G and 3G mobile phone services was

one of the main reasons for hundreds of billions of dollars in licensing fees paid by

Malaysian telecommunications companies such as Celcom and Maxis for 3G

licenses.

Other examples of mobile commerce applications are information-on-demand

systems like news services or stock tickers, banking and stock brokerage

applications by SMS, WAP or iMode.

Trends in M-Commerce
PDA’s and cellular phones have become so popular that many businesses are

beginning to use m-commerce as a more efficient method of reaching the demands

of their customers. Although most trends and advances are seen in Malaysia and in

Europe, North America (Canada and the United States) is also beginning to take

advantage of m-commerce.

Banks and other financial institutions are exploring the use of M-Commerce to

broaden/retain their business by allowing their customers to not only access account

information, for example bank balances, stock quotes and financial advice, from

anywhere, but also the possibility to make transactions, for example purchasing

stocks, remitting money, via mobile phones.

This service is often referred to as Mobile Banking or M-Banking. The stock market

services offered via mobile devices have also become more popular and are known

as Mobile Brokerage, as they allow the subscriber to react to market developments in

a timely fashion and irrespective of their physical location.

News information is also becoming more popular with subscriptions to daily

headlines from anywhere in the world being transmitted to mobile devices. Sports

and entertainment are areas that have also grown with the demand for mobile related

services. Shopping and reservation services are now more accessible when using

mobile devices. Corporations are now using m-commerce to expand everything from

services to marketing and advertisement.

Although there are currently very few regulations on the use and abuses of mobile

commerce, this will change in the next few years. With the increased use of m-

commerce comes increased security. Cell phone companies are now spending more
money to protect their customers and their information from online intrusions and

hackers.

Factors impacting m-commerce and its challenges

1. Inherent diffusion-accelerating attributes

Mobile technologies have inherent diffusion-accelerating attributes: Potential to

save time (relative advantage), ability to connect to existing telephone network

(compatibility), operation method same as the “regular” phone (low complexity),

status-conferral to potential buyers (observability), and possibility to borrow a

friend’s cellular phone or handheld device for trial (trialability)

2. Mobile technology effects

Many factors lower the barriers to adoption: Low fixed and operating costs of

mobile networks, ability to operate in areas with no electricity, low social barriers

to adoption, infrastructure resources less prone to theft and vandalism,

geographical flexibility, and innovative pricing (such as prepaid services).

3. Rapidly deployable technology

Mobile networks can be deployed rapidly: Ongoing reductions in fixed and

operating costs due to progressively cheaper and increasingly powerful

components enable rapid deployment.

4. Infrastructure effects

Large, established fixed-line networks create positive externalities: First and

second generation mobile phones in advanced nations benefited from such

network externalities.
 Relative lack of fixed-line infrastructure favors cellular networks: Mobile networks

are more attractive than fixed networks in developing countries that lack fixed-line

infrastructures.

5. Market size and industrial demand effects

Diversity and size of industries affects uptake of data services: The uptake is

rapid when there are large, diverse industries likely to use mobile

communications and commerce applications.

6. Income and leapfrogging effects

Income levels influence mobile penetration rates and technology generations:

High-income countries adopt early but end up having mixed generations of

mobile phones while low-income countries may adopt later with uniformly new

generations of technology.

7. Cultural factor

Culture influences adoption rate and styles: Cultural factors affect the preference

for mobile phones over fixed phones. They also influence handset size and style

preferences.

8. Policy related factors

Government policies influence the mobile sector: Public investment often funds

backbone networks. Telecom policy affects competition in and reorganization of

the mobile telecom sector.

From our own experience, we can see that the mobile phone itself has an “almost

ideal set” of product characteristics:

• Rapidly falling cost and the potential to save time offer relative advantage
• Ability to connect to existing telephone network increases compatibility

• Same method of operation as the “regular” phone results in low complexity

• Status-conferral aspects of mobile phones boost their observability

• Possibility to borrow a friend’s cellular phone for trial increases the trialability of

mobile devices.

These classic diffusion-accelerating factors help explain the exceptionally rapid rate

of cellular phone adoption. Similarly, several “mobile technology effects” also act as

spurs to mobile technology provision and adoption. These include:

• Low fixed and operating costs of mobile networks

• Ability to have mobile service even in areas with no electricity

• Low social barriers to adoption

• Compared to the expensive copper wiring that is lucrative for thieves, mobile

infrastructure is less prone to theft and vandalism

• Geographical flexibility, in terms of covering difficult terrain without the need to lay

copper wire

• Innovative pricing such as prepaid service plans.

Furthermore mobile sets are becoming hybrids between computers and phones.

Third and fourth-generation cell phones are bundling the functionalities of a phone, a

computer, the Internet and a credit card. These mobile sets allow high-speed data

transmission and the costs are likely to be lower than that of a personal computer,

making the adoption more attractive for broad groups of potential users. In Malaysia,

for instance, the launch of 3G services has potential to fuel the growth of mobile

phones.

The m-commerce challenge: from capacity to content and services

Leveraging present lead in the GSM market is one aspect - excellent infrastructure,

dynamic operators, and strong consumer markets will be key assets. However, m-

commerce goes much beyond mobile telephony. M-commerce is not about selling

capacity, but about content and services, hosting and facilitating e-commerce

transactions. Although Malaysia lags in mobile telephony, but it unquestionably is

catching up in the area of Internet “content” - particularly entertainment and content

aggregation – as well as in the field of e-commerce.

Handset manufacturers (e.g. Nokia, Siemens, Motorola, and Sony Ericsson) will also

play a key role to play in the emergence of m-commerce. For most of these, the

traditional market was telecommunications infrastructure. The liberalisation of the

telecom equipment sector and the development of mobile telephony have pushed

them to shift core business from fixed to mobile infrastructures, and then to mobile

devices.

According to most experts, it is the “content” and services industry, in their many

various forms, which is the most likely to drive the emergence of m-commerce. It is

also these industries which are the most likely to benefit from the shift from selling

capacity (as in GSM) to selling content and services (as in m-commerce).

Mobile portals package end-user applications (such as e-mail, information systems,

calendar, etc) and offer access to these services via mobile operators. These also

convey information repackaged for mobile use by established content providers (e.g.

Reuters, Disney) or from new “content aggregators” who collect and format data

specifically for mobile devices. In this area, established Internet portals (e.g. Yahoo
Mobile, AOL Mobile) are vying with new, m-commerce specific portals. Internet

portals bring recognised brand name, as well as significant know-how in revenue

building (advertising, relationship marketing, referrals, co-branding, etc).

In m-commerce, as on the Internet, “content is king” – but content control the key to

commercial supremacy. In the new environment, mobile industry will need content as

much as the content industry will need mobility. A number of players from the content

industry are now converging into the m-commerce arena, just like they converged

into the Internet four or five years ago. These include entertainment and media

companies (Disney), publishers (Bertelsmann), music companies (Sony Music), and

specialized information providers (e.g. Dow Jones, Reuters). While limited bandwidth

still precludes video (until well into the 3G era), music and specialized information will

represent early “killer applications”, made even more compelling by the ability to

target users on the move.

The m-commerce challenge: Vanishing revenue streams

Growing competition and saturation of the mobile market has put traditional revenue

streams under pressure, resulting in decreased average revenue per user. In the

medium term (2002-3) mobile tariffs are likely come down to the same level of fixed

telephony tariffs. Some experts even expect “free mobile voice telephony” by 2004.

With a subscriber basis stagnating or even decreasing, mobile operators are pressed

to roll out a steady stream of new services just to keep revenues in line with

investment needs. Massive amounts of cash will be needed for infrastructure

upgrade, as well as for the development, jointly with other industries, of new m-

commerce contents and applications.

The m-commerce challenge: From selling capacity to “monetizing” content

As basic voice or data transmission becomes commoditized, mobile operators are

likely to turn to m-commerce as an alternative revenue source. Thus, new value

added services are likely to become a crucial part of the financial equation for mobile

operators in the future. The most forward-looking operators are already positioning

themselves as new m-commerce intermediaries, providing secure payment systems,

financial services, localization-related applications and the likes. In short, to use a

favorite industry metaphor, it is likely that mobile “POTS” (plain old telephone

services) will be gradually displaced by mobile “PANS” (pretty amazing new

services).

The m-commerce challenge: Increased convergence, competition

However, as most of these services are transactional, new players are also

converging from other quarters into the mobile market - banks, payment systems,

retailers, content companies. Coming from a variety of quarters, such players seek to

position themselves on the mobile value chain – particularly at these junctures where

new value is created. Some of these moves are purely defensive (e.g. banks

becoming virtual mobile operators), others are more offensive (e.g.; mobile operators

moving into the area of mobile micropayments). The result will be increased

competition for revenue, notably for advertising and subscription revenues. At the

same time “co-opetition” – cooperating and competing at the same time – is

becoming an inescapable reality for all players involved in m-commerce.

The m-commerce challenge: Expanding core business, climbing up the value chain

Like many other industries in the digital economy, mobile operators will have no

choice but to climb up the value chain. This is already causing a “partnership fever”

with content providers, service integrators, financial services and banking. But getting

the right partners to deliver new services is not enough. With five or more mobile
operators in each regional market offering almost identical services at very similar

tariffs, service differentiation and the strength of brands will be the key to survival.

The m-commerce challenge: Expanding footprint, reaching critical mass

The need to be present in the 3G market is also forcing existing GSM operators to

join forces and to expand beyond their traditional markets. To be competitive in the

new generation mobile services operators must reach critical mass - i.e. provide wide

“footprint” marketing strategies. This trend will be reinforced in the future, leading

some operators, to look beyond 3G into the possibilities of a new, and as yet

undefined, “4G” environment.

The m-commerce challenge: Increased concentration, competition concerns

While concentration will result in strong champions, it may also give rise to new

competition concerns in the future. Similar concentration is also likely to occur for

handset manufacturers, already a very concentrated industry. As far as mobile

content is concerned, centripetal tendencies towards concentration (as in traditional

content industries) will, in all likelihood, be offset by the strong centrifugal tendencies

specific to the Internet, and result in a much more open field.

Future implications

The future direction of mobile commerce development is surrounded by considerable

economic and technological uncertainty. As the recent history of PCs and the Internet

has shown, the growth and success of IT hardware depends critically on the

availability of attractive software packages. Such packages range from specific

software applications (so-called “killer apps”) to portal designs that facilitate the

user’s overall interface with the technology.

Particularly in Malaysia, the development of the m-commerce requires the

emergence of country-specific mobile portals with specialized sites for Web phones.

The evolution of m-commerce in such economies has been hampered to date by the

lack of such portals. In developed countries, on the other hand, a frequent lament is

that the key “killer application” for m-commerce has yet to be identified, again

hampering the penetration of the new technology.

Financial Institutions such as Banks see mobile commerce as offering new channels

of service to customers as well as offering them new and innovative products. These

financial institutions are working to design and implement new applications that will

offer mobile payment (i.e. being able to pay for groceries) and mobile brokering.

The travel industry, in realizing the possible benefits of m-commerce, is working on

technologies that will take care of travel arrangements, update customers on flight

status, notify them when this information changes and will offer to make new

arrangements based on preset user preferences requiring no input from the user.

Therefore, a customer’s entire trip can be scheduled and maintained using only their

mobile device.

The retail sector is also looking into the possibility of using mobile commerce for

making the purchase of merchandize easier. Customers will be able to browse and

order products while using a cheaper more secure payment method. An example of

this is; instead of using paper catalogues, retailers can send customers a list of

products that the customer would be interested in, directly to their mobile device.

Additionally, retailers will also be able to track customers at all times and notify them

of discounts at local stores in which that customer would be interested in. Shopping
will also be easier. Soon, phones will be equipped with “bar-code scanners” and

shoppers could scan an item and find out its pricing and availability.

In the entertainment industry, m-commerce could be used for the purchasing of

movie tickets, verify someone's ID or authorize their reservation information. This

industry will also be able to promote wireless gaming and music.

Conclusion

Mobile technology, mobile Internet access, and m-commerce specifically are growing

rapidly on the global stage; however, growth rates vary widely across economic

regions. The penetration rate of mobile phones, the optimum combination of different

generations of telecommunications, and the combination of different technical

formats vary according to a wide array of economic, socio-cultural, and policy related

factors.

In order to exploit the m-commerce market potential, handset manufacturers such as

Nokia, Sony Ericsson, and Motorola are working with carriers such as Celcom and

Maxis to develop WAP-enabled smart phones, the industry's answer to the Swiss

Army Knife, and ways to reach them. Using Bluetooth technology, smart phones

offer fax, e-mail, and phone capabilities all in one, paving the way for m-commerce to

be accepted by an increasingly mobile workforce.

As content delivery over wireless devices becomes faster, more secure, and

scalable, there is wide speculation that m-commerce will surpass wireline e-

commerce as the method of choice for digital commerce transactions.

The ways in which companies integrate m-commerce applications into their business

models depend upon numerous environmental factors, particularly the combination of

communications technologies previously adopted and the mobile technologies

currently diffusing in their domestic economies. Given the scope for technological

leapfrogging and alternative national mixes of fixed lines and wireless infrastructure,

global heterogeneity in national patterns of m-commerce development – and hence

of business models in m-commerce – appears to be a likely prospect for the

foreseeable near future.

References

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Press, London, 2005

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5. http://www.cellular.co.za/technologies/3g/3g.htm

6. http://www.refreq.com/WAPTech/wap_glossary.htm