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 / Summer 2003 / Issue 31(originally published by Booz & Company)


Rational Exuberance: The Wireless Industry’s Killer “B”

M-business has fallen well shy of most expectations, however, prompting some to view m-business as simply an untethered extension of traditional telephony. This sluggish growth and disillusionment can be attributed to seven causes:

Lack of Network Capacity. In its current form, the second-generation (2G) wireless Internet cannot deliver the speed and ease of use required for most revenue-generating m-business applications. For example, our study indicates that on average, a two-megabyte file takes more than three hours to download to a mobile phone on current technology, more than 200 times as long as it takes to download to a desktop PC with broadband wireline technology.

Lack of Consumer Demand for the Technological Capabilities. Third-generation technology is substantially faster than 2G; a two-megabyte file will download in about five seconds on a full-fledged 3G network. But customer demand is influenced by today’s reality rather than tomorrow’s promise, and has remained low.

Mobile Device Limitations. The real estate on a phone screen is a fraction of a laptop computer’s. “Browse and Buy,” an activity ubiquitous enough in wireline e-business to turn eBay into a household name, cannot easily be transferred to mobile devices. Such constraints also all but eliminate another common form of revenue generation in e-business, online advertising. And newer mobile marketing communications activities, such as sales promotions, are falling prey to the “law of diminishing astonishment.”

Consumer Unwillingness to Pay. Because revenue growth is so slow, consumers are being asked to bear the brunt of financing new m-business applications through pay-per-use or pay-per-download mechanisms. But consumers haven’t yet shown their willingness to be both guinea pigs for new business models and financiers of new applications.

Lack of Worldwide Wireless Technology Standards. To overcome barriers to interoperability around the world and provide end users with seamless service, wireless providers are required to have tri-band phones and service. In the U.S. alone, multiple technologies result in dropped calls as customers move from digital to analog networks. Furthermore, device manufacturers face the significant challenge of developing a new breed of 3G handsets that can juggle music, video, e-mail, and voice over three different radio bands within the next 18 months, when European 3G networks are expected to be built-out and functional. These new-generation devices must combine the wealth of applications of a computer with the roving versatility of a mobile phone. Many industry observers are skeptical that telecom manufacturers will be able to rise rapidly to this challenge.

Ubiquity of PCs. The ubiquity of PCs in large markets such as the U.S. is also a big barrier to m-business adoption, suggesting that consumers who have mobile access to the Internet do not necessarily use their mobile devices to complete revenue-generating transactions. With larger display screens and faster transmission available in homes, offices, and schools, consumers’ need for wireless use is diminished. The online tracking firm ComScore Networks reports that U.S. consumer e-business from PCs reached $17.9 billion during the third quarter of 2002, a 35 percent increase over the previous year — a statistic that highlights the continuing use of PCs for Internet transactions.

Failure of Firms to Understand Customer Value Creation. Finally, and most importantly, firms that really want to derive value from m-business will have to reexamine customer value creation. Service providers must recognize that m-business probably won’t thrive by re-creating Web experiences on the phone. Rather, m-business will succeed by providing customers with information and applications they can use to solve problems more economically than they can with alternative means. The bandwidth requirements to fulfill these needs are at least four years away; until then, m-business providers will have to build their customer bases through services and applications that are simple, timely, location sensitive, and more cost-effective than current alternatives.

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  1. Caroline Junqueira, Sajai Krishnan, and Gregor Harter, “Capturing Value in the Wireless Enterprise Market,” s+b enews, 12/19/01; Click here.
  2. Raul L. Katz, Maximilian E. Weise, and Daniel H. Yang, “Consolidation: The Wireless Way,” s+b, Fourth Quarter 2002; Click here.
  3. Venkatesh Shankar and Tony O’Driscoll, “How Wireless Networks are Reshaping the Supply Chain,” Supply Chain Management Review, July/August 2002; Click here.
  4. Venkatesh Shankar, “Wireless Internet: Growing Pains vs. Gains,” working paper, University of Maryland, 2001; Click here.
  5. Pooneh Fooladi, Ned May, and Euan Davis, Understanding Client Needs: Succeeding at Wireless Professional Services, IDC (2001); Click here.
  6. Ravi Kalakota and Marcia Robinson, M-Business: The Race to Mobility (McGraw-Hill, 2001)
  7. Falk Müller-Veerse, Mobile Commerce Report, Durlacher (November 1999); Click here.
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