U.S. Mobile Commerce Plays Catch-Up With Europe

Mobile commerce in the United States is almost two years behind Europe but is expected to catch up, according to a study released yesterday by market researcher Datamonitor Inc.

Low penetration of mobile devices, lack of relevant content for cellular phones, different telecom standards, consumers' security concerns and insufficient bandwidth are some reasons for slow growth of mobile commerce in the United States.

Another reason for Europe's lead is technology, said Sohrab Torabi, analyst at Datamonitor, New York. Europeans use the Global System for Mobile Communications, or GSM, digital technology, operating on third-generation networks that provide speedy wireless Internet access.

The United States, however, is slowly catching up, though progress is impeded by local broadcasters' control of crucial airwaves.

The Federal Communications Commission delayed from September to March 2001 an auction of the spectrum range, special frequencies that allow quicker downloads and always-online capability for cell-phone users.

“What happened is because broadcasters officially own the spectrum range, they're reluctant to give up without money,” Torabi said. “There is a tug of war between mobile carriers and broadcasters to give up the spectrum, and this could further make problems for implementing the third-generation networks.”

Retailers seeking to expand to mobile commerce bear the brunt of this broadcaster intransigence, thus hindering growth of e-commerce over cell phones.

“Unfortunately, most retailers at this point [in] time can't do much to convince the consumer,” Torabi said. “The thing they could do is partner with the carriers to provide the service.

“Retailers don't [have an] incentive to currently pursue mobile commerce in a full-on way. They have enough stuff to worry about, specifically the Internet,” he added. “They're not going to spend time to catch the extra few customers. The opportunity cost is too high at this point in time.”

But Torabi does see big spending by retailers on software, hardware and people to implement mobile commerce. Datamonitor expects the retail sector to spend in 2001, 2002, 2003, 2004 and 2005, respectively, $50 million, $200 million, $520 million, $730 million and $930 million.

Torabi said financial, news and information services will be the biggest beneficiaries of mobile commerce.

Financial services, in particular, is one of the fastest-growing mobile commerce sectors in the United States and is on par with Europe, Datamonitor said. It projects that $90 million will be spent on financial services made through mobile devices this year, increasing to $1.8 billion in 2004.

By some estimates, there are 89 million cell phones in the United States. Not all have Internet access, however.

According to a separate study released this week by Jupiter Communications, the number of browser-enabled cell phone handsets will surpass 95 million in 2004. But the New York market researcher cautioned that marketers must not impose their Web strategy on those consumers.

Mobile access will create a new medium dissimilar to the Web, and browser-enabled cell phones will dominate in that area. But for success, cellular service carriers should work on a common open platform for services, and marketers must support or align with applications that enable mobile commerce, Jupiter said.

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