Show Me the Money

By eweek  |  Posted 2001-03-05 Print this article Print

Show Me the Money

Operators, developers, entrepreneurs and vendors must clear the obstacles blocking the path to a widely deployed wireless Internet. The roadblocks range from lame user devices and slow bandwidth to lack of consumer education and too many competing transmission standards. The industry may spin its wheels for a few more years, and in the meantime, hopeful customers will be left standing roadside clutching useless wireless devices.

Lucky for wireless operators and mobile Internet start-ups, the wireless Webs vast revenue potential is turning heads at venture capital firms.

Many venture capitalists, burned in the landline dot-com downturn, see hot prospects in wireless. "Wireless remains a relative oasis in todays Internet investment desert," Tom Kucharvy, president and practice director of Summit Strategies wrote in a recent report. In fact, in the first quarter of 2000, $620 million in venture investments flowed to wireless equipment and service providers, more than the amount that reached those sectors in the first two quarters of 1999 combined, market researcher VentureOne reported.

Investment dollars are flowing from new sources and some backers have shifted gears, preferring to stay close to their fledgling companies beyond the start-up stage. These firms, like ideaEdge Ventures, Ignition and iSherpa, have powerful experience in their portfolios and can provide hands-on help.

Vendor funds are also emerging as a significant source of cash for wireless start-ups. Gearmakers are sinking money into new companies that will help them achieve their own strategic goals, according to the Summit Strategies report.

But while the money seems to be there for smart start-ups developing applications or solutions, wireless service providers are still struggling with how to build a business out of mobile data. Thats because wireless data is a new ball game for most operators. "Theyve been forced to be very focused on voice services because thats how theyve been measured by the financial community," said Hans Davidsson, managing partner at ideaEdge.

Operators have begun investing in systems and marketing programs for wireless data services, but the revenue has not yet begun to flow. As a result, wireless carriers must educate Wall Street about what it will take to deliver wireless Internet services. "The financial community isnt necessarily promoting operators that are brave enough to get going on the mobile Internet," Davidsson said. "They are spending more money per subscriber, and thats what [the financial community] sees."

That scenario makes it tough for operators trying to make careful investments and attempting to align themselves with profits and earnings, said Jim Collas, managing partner at ideaEdge. It also forces them to open up to new types of businesses that can help them earn money quickly. For example, in Europe, the concept of mobile virtual private networks has become especially hot as operators consider selling airtime to resellers as a way to fill up their networks and make a quick buck. Davidsson envisions a day when each market will have 25 or 30 service providers, most of which are non-facilities-based carriers.

Operators will also likely establish creative pricing models, charging customers for different services based on speed or content. Carriers will offer tiers of service, packaged almost like cable TV offerings, said Mike Walters, manager of third-generation (3G) system marketing at Nokia. They could offer sports packages, games and entertainment packages, and executive deals. "It takes creativity. It has been easy for operators — all theyve had to say is: We sell voice, " he said.


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