Will O2 succeed with i-mode?

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Throughout the rise and fall of Simpay, O2, the UK’s fourth largest operator remained notably quiet. Now, O2 has launched i-mode, NTT’s successful data platform. Can it survive in the UK? Ashley Ward, CEO of Upaid, (MPW 58, 66) has a theory.

On October 1, O2 announced that it would begin offering i-mode services on its mobile network, making it the twelfth operator outside Japan to invest in the technology. Branded ‘the internet at the touch of a button,’ i-mode enables users to access news, sport and magazine content with a single click on the mobile keypad. This changed the way people used their mobile phones in Japan, but will it do the same in the UK?

O2’s decision to launch i-mode marks a significant development in the mobile content and payments industry. All of a sudden, it’s an operator driving innovation forward in the mobile content market and in doing so addressing some of the business needs which Simpay failed to resolve.

Despite this step, there remain key business issues that need to be dealt with, if the mobile industry is to realize the financial potential of mobile content.

The industry challenge

The issue is twofold. First, customers want to have access to a wide range of compelling content services, the availability of which will be the main driver behind the success of i-mode. Second, the way in which content is paid for has to change if the required level of competition in the content market is to be sustained, in order to push the industry forward.

The real problem is that there is a lack of consistency in the prices mobile operators charge the content providers for delivering the content to the consumer. Current costs vary from between 30% to 50%, making mobile content one of the most expensive billing services known in any industry. O2’s promise to charge a mere 14% for the same service must be a breath of fresh air to many content providers, marking a significant change in the industry and offering the greatest potential to encourage new entrants to the market.

A reduction in the price for billing will have a positive effect on the availability of content, especially outside the i-mode portal. Lower prices will encourage more mobile content providers to come to the fore and in doing so, give the consumer an even wider range of content. While this won’t initially cut the price of content per se for the consumer, it will increase competition, forcing mobile operators to review their billing policies, if they are to keep up with the market shift. Put simply, lowering the costs will increase the range of merchants that can afford to offer mobile services. The wider range of services offered, the wider the customer base attracted.

Beyond earning reasonable margins (14%) for subscription billing, O2 appears to be following the Japanese lead in betting on data services to increase revenues, which already represent 25% of their earnings. O2’s ambitious marketing plan illustrates the mobile operators confidence in its ability to raise the profile of data services in the market, which might result in heightened awareness of the sort of mobile content users can gain access to through WAP.

Increasing consumer choice

In the mature voice market, content is the new battlefield. O2 needs to be able to persuade customers that there is i-mode specific content worth paying for, especially if it’s to attract customers away from other operators and on to specialized phones. Ultimately, there needs to be greater transparency in the way in which content is paid for if, in the UK, i-mode is to become the success the marketing hype makes it out to be.

Diversity in choice must be matched by choice in payment methods. Just as we can pay by cash, credit or debit at the shop, the same choices must apply to the purchase of mobile content.

Reverse billing is already stretched at the seams. While on the one hand i-mode is a step in the right direction because it includes the pu