Hype kills mobile services

Cellphone service providers are killing the mobile data goose with hype and high prices before it can lay a golden egg or two.

That's the view of analyst Paul Budde, who says mobile usage per user is going down, not up.

He said while camera phones, multimedia phones, phones with mp3 players and other smart devices were becoming more popular, there had been no corresponding boom for the carriers.

"We have had too many mobile data offerings - WAP, GPRS, CDMA - come along and they have all failed to deliver what was promised. User confidence is almost non-existent," Budde said.

"People are trying to sell a technical solution, but the problem is not technical. It is the applications and business models which don't stack up."

Few phones are user-friendly for non-phone applications, so only a few IT-savvy types master them.

He said many mobile data products, such as games or access to information, were impulse buys.

"People would pay a few cents, but they are being asked to pay 50c or $1."

Budde said few mobile content providers were making money.

"Say I am a game producer. It may cost me $100,000 to produce a game. Then I look at all the handsets around, and because I need the maximum number of potential customers, I have to adapt it for 30 or 40 different platforms. That doubles my costs.

"Then the greedy operators demand up to 30 per cent of my revenue."

Budde said many of the markets operators' target did little for profits.

"The teenage market, which is the big user of text, are masters in finding out what the right deals are. They tend to be cash-starved, so they have an incentive to keep their phone bills as low as possible."

He said while the handset manufacturers had targeted young people with features such as cameras and games, they had also set up web portals to bypass the carriers.

"They allow them to go to the internet where for next to nothing they can download games and store and send pictures, rather than use the mobile networks," Budde said.

"The business market, which could afford the data costs, see these things as toys, not tools, and they are reluctant to embrace mobile data because they don't want to pay employees' mobile bills."

He said the cost of emails to and from mobile phones was too expensive to make it a popular in New Zealand, and the devices themselves were relatively expensive.

Vodafone finance director David Sullivan said Budde should have another look at the figures. "I can't talk hard numbers, but we are seeing growth in data revenues, uptake in services, growth in overall revenue and more customer connections," he said. "In the business space, remote email with Blackberry is going very well for us."

Budde's analysis

Mobile services are not taking off because of a history of over-hyping and over-pricing.

User confidence has been dented by a succession of failed offerings.

Mobile phones are often too complicated for typical users to get the hang of.

Application developers are forced to write software for multiple phone types.