MultiMedia Messaging Will Be Slow to Grow, Says Report

For those optimists hoping that multimedia messaging services (MMS) will help to justify the existence of GPRS (general packet radio service) networks any time soon: Think again. Despite some initial launches during 2002, it seems service providers will be waiting a few years yet before seeing significant revenues from the next generation of mobile messaging.

London-based analyst and consulting firm Ovum Ltd. believes that the global multimedia messaging market will be worth nearly US$1.8 billion in 2002, but the vast majority will be accounted for by already up-and-running services in Japan from NTT DoCoMo, J-Phone Co. Ltd., and KDDI Corp.

The outlook for Western Europe provides little comfort for operators and investors looking for some direct revenue from GPRS networks. Ovum, in its new report, “MMS and SMS: Multimedia Strategies for Mobile Messaging,” predicts the total number of multimedia messages generated by European subscribers will be about 97 million this year, bringing in just $21 million in revenues.

Not until 2004 will MMS start to make any real impact on the bottom lines of Western Europe's wireless players, it seems – which must seem like a lightyear away, with mobile average revenue per user (ARPU) figures coming under so much scrutiny. Ovum reckons nearly 19 billion multimedia messages will be created and sent across the wireless data networks in 2004, generating just over $3.8 billion in revenues, the majority of which will be machine-to-person (m2p) rather than person-to-person.

Porn, it seems, will figure quite prominently in this m2p category, according to Dario Betti, an analyst at Ovum's digital media group, and one of the authors of the MMS report: "Adult services, including pornography, will be quite important in terms of generating multimedia messaging traffic. Entertainment services for teenagers and trivia such as daily horoscopes are the other two big areas."

But considering the lack of MMS-enabled handsets, along with other technical teething problems facing the industry, it will take a few years before there is any "critical mass" of people sending each other e-postcards and naughty pictures.

Handset availability is a major issue. Currently, two European GSM operators, Telenor ASA in Norway and Hungary's Westel Mobil Telecommunications Co. Ltd. have launched commercial MMS; D2 Vodafone in Germany has a free trial on the go; and another 20 or so service providers plan to market MMS before the end of 2002. But, although further models are due in the shops this year from the likes of Nokia Corp. and Motorola Inc. (both promising availability in June), as well as Siemens AG and Samsung Electronics, at present the Sony Ericsson Mobile Communications T68i stands alone as the MMS-enabled handset on the market.

The Ovum report cites handset availability, along with packet data capabilities, as the two factors crucial to any growth at all in MMS. Among the factors necessary for high growth come "substantial penetration of MMS handsets," "pre-paid subscriber support," and "inter-operator MMS exchange."

"Substantial penetration means 20 to 30 percent," says John Delaney, principal analyst of Ovum's wireless group and the lead author of the report. With less than 1 percent at present, it's easy to understand why he believes MMS usage will only begin to grow strongly come 2004-2005.

In addition to the need for handsets, there is a need for some cooperation among rival vendors and competing operators. "Vendor interoperability should not be too big an issue as the industry standards are non-proprietary, though, of course, it is essential that vendors ensure that their MMSCs [MMS centers, which handle MMS messages on the network] are interoperable with each other and with the available handsets so that data traffic can run across multiple networks," notes Delaney. "In addition, the operators must strike the commercial agreements needed before they will terminate each others' data traffic."

All this makes life a bit difficult for the GPRS apologists. "This technology has been in action for nearly two years, and now there is an issue of credibility surrounding these networks," says Delaney. "And GPRS networks haven't taken off, because there has not been too much that is interesting to do with them. The operators need to be developing and offering compelling services, and if it isn't MMS then there isn't anything else! They need to take a bullish stance about launching these services."

Lars Vestergaard, mobile research manager for Europe, the Middle East, and Africa, at IDC, also places a great deal of importance on MMS. "GPRS has not been a success so far, because multimedia messaging has not happened as quickly as was first thought. The unity of the systems, the handsets, and the networks has not happened until now. But MMS has real potential, now that SMS is a 'need-to-have’ service, along with voice. People understand about sending messages with their mobile phones, and the technology is now available, but people will have to feel that they need to send these messages before they spend any serious money on them."

For the operators it appears to be a case of "Potential pitfalls? What pitfalls?" According to the GSM Association, which represents the interests of GSM operators, such matters are very close to being resolved and will not provide any barriers to the launch of services. "There are a number of issues that need to be addressed, but none of them are showstoppers," says Graham Trickey, director of the Association's MMS task force. "They will be ironed out by the end of June and make the launch of services relatively painless.”

Relative to what remains to be seen.

Ovum, meanwhile, believes that, with messaging only second in popularity to voice as a mobile service, the global MMS market will be worth a staggering $72 billion in 2007, with Western Europe accounting for about $29 billion of the total. "Don't be scared by these figures," says Ovum's Betti. Scared? No. Skeptical? Yes.

— Ray Le Maistre, European Editor, Unstrung
http://www.unstrung.com