Vodafone Group PLC launched its micropayments billing system on Thursday, a technology that allows an operator to charge users small amounts for wireless data downloads on their monthly bills and share that revenue with the content providers. Micropayments are generally agreed to be the way that developers can make some cold, hard cash from their applications and content -- which might actually save the ‘wireless Web’ from dying on its feet. That’s why it’s surprising that so few operators have proper micropayment systems in place.

Vodafone’s “m-pay” bill system will enable users to pay for ringtone downloads, specialized SMS alerts, WAP content, games, and all the other wonders of mobile living without ever divulging their credit card details. Instead, the operator can charge an incremental amount – say, 15 to 50 pence -- each time the user downloads content linked to this system. Vodafone will then share a portion of the micropayment revenue with the content provider and pocket the call charge. The operator will only see a tiny sum from each transaction, but if enough people download their content that should, in theory, translate into profit.

Vodafone has inked deals with sites like Arsenal Football Club to kick off the service. The U.K. soccer club will charge 50 pence per match to send video clips of goals and highlights to the user’s PC, adding the cost to their mobile phone bill. Eventually the club will send the clips direct to the user’s phone. The Vodafone system is based on technology from iPin Inc., which manages the transaction from the consumer payment to the clearing and settlement, as well as the customer care.

Vodafone’s m-pay system is the first major micropayment system to be launched in the U.K. “Reverse Billing is more or less absolutely critical for the success of the mobile internet,” says Amrish Kacker, senior consultant with Analysys Consulting.

Yet when Unstrung spoke to Vodafone’s major rivals in the U.K., Orange SA and mm02 PLC (formerly BT Cellnet), neither company could tell us when they will follow their competitor’s lead. Both already operate minor reverse billing systems, such as premium SMS alerts, and Orange has a micropayments system in place in Denmark. A spokesperson for mmO2’s Genie mobile Internet arm agreed that micropayments are “absolutely key” to the growth of the wireless Web. But neither operator could say when they will have such a system in place.

The benefits of micropayments have been known in Japan for a while. Revenue sharing between the operator and developers is one of the cornerstones of the success of NTTDoCoMo’s I-mode system. Analysts argue that the fact that Japanese developers have known from the start that they will see a return on wireless content they develop has stimulated innovation on I-mode applications. In other words, developers have put their heads down and developed wireless applications that subscribers actually want to use.

If Europe is year or so behind Japan with micropayments, then the U.S. is another year behind Europe, reckons Anil Malhotra, chief alliances officer with Bango.net, a company concerned with helping businesses develop, and make revenues from, wireless content. “In the States, I’d say carriers have just got past the idea that they’re not TV companies and they shouldn’t be controlling the content,” he jibes, referring to the “walled garden -- you can only see these sites” approach that so many operators first brought to their WAP portals.

Malhotra notes that U.S. carriers are “losing money, hand over fist” and face other priorities, such as sorting out roaming and SMS interoperability, before they get around to looking at micropayments.

He says he really can’t fathom why European carriers are not putting in place micropayment systems to try and bolster their revenues andencourage developers to create some better content. The need for this wasunderscored earlier this week when Deutsche Telekom AG’s T-Mobile unit reported a net loss for the 2001 financial year.

“You would have thought that would give operators the impetus to find new ways of making money,” Malhotra commented. Indeed, micropayment billing is something that carriers could be working on now, so as to have it in place before they start talking up third-generation services like audio or video downloads. It is pointless having all the whiz-bang technology in place if it does not pay.

— Dan Jones, Senior Editor, Unstrung
http://www.unstrung.com