Mobile technology has just begun to penetrate Latin America. The buzz word WAP (Wireless Application Protocol) is popping up all over the place; on billboards, magazine covers and TV; in the investments made by content providers and in the strategies of every major telecommunications company. The fuss over man’s latest high-tech toy is so great that it makes us wonder whether all this commotion isn’t much ado about nothing… What will be the real impact of the wireless revolution on our lives? How will it change the Internet and e-commerce as we know them today?
If we trust the numbers, we should expect a big change. The CEOs of the main info-tech corporations in Latin America are sure that the impact of mobile technology will be just as big, or even bigger, than predicted. According to a study conducted by Ericsson, a major investor in the new technology, more than 600 milion people worldwide will be accessing the Internet via WAP technology within the next two years. With this number of subscribers, m-commerce (basically e-commerce through wireless devices) will jump from today’s $240 million to $120 billion by 2008.
Brazil to House One Million WAP Phones
In Brazil, where cell phones are more popular than personal computers, forecasts show m-commerce becoming a huge phenomenom of massive proportions. The Yankee Group estimates the country will have 1.4 million WAP phones by the end of 2001, reaching 28 million in 2005. In order to reach the same scale, traditional Internet users would have to grow by 400%. Latin America as a whole could have 7.8 million WAP-enabled cell phones by 2003, according to a Chase H&Q research report.
E-business enterpreneurs sense that mobile Internet technology will open the door to a whole new world of opportunities. With the new service, consumers can buy cinema tickets while chatting with friends in a bar, check the traffic news while driving home or even shop as they tan on the beach. It is no wonder that nearly every week major content providers and telecom companies announce new partnerships and huge investments in WAP technology researcb.
Brazil’s No 1 website and leading Internet service provider, Universo Online (UOL) announced in mid-July it was joining forces with Sweden’s Ericsson and Brazil’s BCP (Sao Paulo’s B band carrier) to develop mobile phone Internet services in Brazil. Its closest competitor, iG, announced a US$ 5 million investment in SeliG, a new division of the company created to develop WAP content. iG has signed deals with two telecom companies, Brazil’s Telesp Celular, a unit of Portugal Telecom which has invested $56 million to implement the WAP, and Telefónica Celular of Spain. The new telephone bands C, D and E, recently installed in the country, will narrow the competition and attract even more investments. Anatel, the National Telecommunication Agency, estimates that mobile Internet will bring about US $10 billion to Brazil through 2005. The most frequent rumor circling the e-business world is that Brazil is set to become WAP’s paradise market.
Analysts predict that about 30% of global e-commerce will switch to wireless devices. The main difference between e-commerce and mobile m-commerce lies in the size and value of transactions. According to CEOs, m-commerce tends to focus on products and services such as e-mail, personal organizers, financial transactions, entertainment, traffic information, road maps and street guides, restaurant reservations and cinema tickets. While personal computers will continue to host most of the person-to-person (P2P) electronic transactions, especially those concerning goods of higher value and all business-to-business transactions. Purchases over the cell phone and other wireless devices, such as laptops and handhelds, will concentrate on products of smaller value and faster turnover.
Don’t Rule Out SMS Just Yet…
The extraordinary excitement WAP technology created in Brazil has made the evolution of mobile technology there different from the rest of the world. In Europe and Asia, WAP technology was preceded by a Short Message Service, or SMS. This uses PUSH technology which allows the users to receive information without having to connect to the Internet and request it. The SMS was initiated as a one-way service, with the message travelling in a single direction. A two-way version was soon developed, but with a very low information exchange rate, which became a frequent complaint among users. The price, on the other hand, remains very attractive, resulting in a great success of the system in the European and Japanese markets. WAP, on the other hand, consists of PULL technology, where the user has to browse in search of the information. The message has two-way travel capability, with much higher data transfer speed thus giving it greater interactivity than the SMS.
Although the SMS and WAP technologies were introduced to Brazil at the same time, WAP immediately became the focus of every IT company’s marketing and advertising investments, while the SMS passed by virtually unoticed. However, the potential of SMS is just as powerful, especially in the short term, where it can reach a larger number of users due to the fact that the service works on any type of cell phone and doesn’t require a special device like WAP. The price of WAP phones in Brazil, currently around R$ 1.000,00 (US$ 558.00), presents an obstacle to many potential users. While WAP service providers have to wait until consumers change their phones for the latest models, the companies and institutions investing in SMS have, at their immediate disposal, more than 10 million consumers with mobile phones. Forty-three percent of these phones are pre-paid, which is more economical for consumers. The preference of pre-paid phone customers for a low cost version suggests that the upgrade to a more expensive model would be highly unlikely.
One of SMS’ biggest markets is the financial services industry. The system can be used, for instance, to provide clients with the latest balance and account information. SMS is particulary useful in brokerage services, where information speed can be critical. EverSystems, the Latin American leader in e-banking solutions, was one of the first IT companies to provide wireless technology in Brazil. In May the company lauched the WAP version of InvestShop, one of the principal financial portals in the country. This gives clients access to real-time information such as stock quotes and financial market news with the ablility to trade in real time.
EverSystems also developed EvMobile Payments, a system through which consumers pay for their purchases using their cell phones. To present the solution to the visitors of a major IT exposition in São Paulo, the company applied it to a vending machine. Visitors were thrilled they could buy soft drinks without using money; all they had to do was dial the number indicated on their product of choice and, in less than a minute, the machine recognized the payment and released the soda can.
Today, the use of wireless technology in vending machines, gas stations, parking lots and movie theaters is restricted to Finland and Sweden. The solution developed by EverSystems has an advantage over those in Scandinavia because it can be used with any type of cell phone, not only WAP devices, thus increasing its potential client base.
Telecommunications Boom in Latin America
For the last four years, Latin America has maintained the highest growth rate in the global telecommunications market, growing by more than one thousand percent according to Deloitte Touche Tohmatsu. The same study estimates that the market will grow by 90% in Brazil by the year 2003. This accelerated movement is pushed by privatization, the region’s technological improvements, and inexpensive pre-paid cellular phone systems. Throughout Latin America pre-paid cell phones attract 81% of all users.
In the future, it is predicted that 40% of cell phone users in Brazil will switch to mobile solutions. But while IT companies are optimistic about WAP technology there are still many doubts. Ultimately, WAP’s success depends on how much users are prepared to pay and what services will be offered. In general, companies admit that they are waiting before placing all their bets on mobile technology. They agree on the need to offer more personal and local services, and that WAP technology is the strongest candidate so far to guide the future of wireless activities in Latin America.
Humberto Aicardi is a director at Eversystems. Tatiana Signorelli, a marketing manager at Eversystems, translated the article.