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DIFFUSION OF THE MOBILE COMMERCE:
ANALYSIS OF THE ITALIAN SITUATION
A study submitted in partial fulfilmentof the requirements for the degree of
Master of Arts in MultilingualInformation Management
at
THE UNIVERSITY OF SHEFFIELD
by
ROBERTO LECCA
September 2007
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Abstract
This study aims at analysing the general status of the Mobile Commerce evolution inItaly and provides a background for further studies on this topic.
TLC companies have been almost obliged to direct their attention towards Mobile
Commerce services, because in many social contexts they have already exploited
effectively the voice telephony market. This shift has encountered both extreme and
rapid appreciation in some Asian markets, Japan and South Korea above all.
Their successful experience has therefore represented a peculiar driving force to all
the other mobile telephony companies, pushed by the need to generate new sources of
competitive advantage.
Nevertheless, so far this effort has not produced the same positive outcomes achieved
within the major Asian contexts.
Italy surely represents an ideal setting for the implementation of m-Commerce
policies, mostly due to the very high level of penetration of mobile telephones and the
attitude of its population towards innovations. However, although being introduced
by one of the most important ICT firms a couple of years ago, m-Commerce has not
breached into the Italian society yet.
In order to obtain relevant results and significant answers to these issues, this study
has been developed following both qualitative and quantitative patterns. A case study
covering the best example of Mobile Commerce success was selected and examined
in deep. Additionally, an online survey was formulated and sent out.
Finally, reviewing part of the literature available has constituted a fundamental step to
form a solid background to put this analysis through.
Overall, the research project has tried to cover the most influent aspects regarding the
development of the Mobile Commerce and contributed to explore such a phenomenon
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from a critical point of view, trying to provide significant recommendations for
further investigation.
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Acknowledgments
First of all, special thanks to my supervisor Dr. Angela Lin, for her patience and
guidance throughout the whole dissertation preparation period.
Secondly, thanks to all the people who contributed to the research project, particularly
those ones who spent part of their time completing the online survey, which has been
fundamental in order to reach the goals established. Among these people, I would
also like to thank Mr. Bryce Winkelman of Qualtrics for his scrupulous aid and
understanding.
Last but not least, a very special thanks goes to my family, which gave me the
possibility to do a master course and supported me in all possible ways during this
fantastic experience.
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Table of Contents
1. INTRODUCTION ...............................................................................................................................4
1.1. RESEARCH AIMS AND OBJECTIVES ................................................................................................61.2. ORGANISATION OF THE DISSERTATION..........................................................................................8
2. LITERATURE REVIEW.................................................................................................................10
2.1. LITERATURE OVERVIEW..............................................................................................................102.2. LITERATURE REVIEW: THEORETICAL BACKGROUND ...................................................................12
3. THE MOBILE PHONE IN THE MODERN SOCIETY................................................................15
3.1. THE EVOLUTION OF THE MOBILE PHONE AND ITS IMPACT ON THE SOCIETY .................................163.1.1. The mobile phone as a tool that enhances security and safety ..............................................173.1.2. Unadvised use of the mobile phone and reduction of safety..................................................193.1.3. The connection between mobile phone and public place utilisation .....................................193.1.4. The mobile phone and the maintenance of relationships ......................................................203.1.5. The role of the mobile phone within non-verbal communication ..........................................21
3.2. THE DIFFUSION OF SMS..............................................................................................................223.3. THE MOBILE PHONE DOMESTICATION WITHIN THE ITALIAN YOUTH SOCIETY ..............................243.4. THE BEEPING PHENOMENON: NOT ONLY AN ITALIAN PRACTICE ...............................................27
4. THE MOBILE COMMERCE..........................................................................................................29
4.1. THE CONCEPT OF MOBILE COMMERCE........................................................................................304.1.1. Differences and analogies between e-Commerce and m-Commerce ....................................32
4.2. OVERVIEW OF THE M-COMMERCE BUSINESS MODELS .................................................................334.2.1. User fee business models.......................................................................................................344.2.2. Shopping business models.....................................................................................................344.2.3. Marketing business models ...................................................................................................34
4.2.4. Improved efficiency business models.....................................................................................35 4.2.5. Advertising business models..................................................................................................35 4.2.6. Revenue-sharing business models .........................................................................................36
4.3. CASE STUDY:NTTDOCOMOS I-MODE SUCCESS ......................................................................364.3.1. The Japanese background at the end of the millennium and the contextual factors thatenabled NTT DoCoMos i-Mode service to stand out on the market...................................................374.3.2. The launch of NTT DoCoMos i-Mode: analysis of an innovative business model...............404.3.3. Conclusions ...........................................................................................................................45
4.4. OTHER SUCCESSFUL EXAMPLES OF M-COMMERCE IMPLEMENTATION AND THE SITUATIONIN THE MOST IMPORTANT AREAS OF THE WORLD .......................................................................................46
4.4.1. Mobile providers offering m-Commerce services in Italy .....................................................49 4.4.2. Mobile Commerce and the issues concerning security and privacy......................................52
4.5. OVERVIEW OF THE ITALIAN SITUATION.......................................................................................53
5. METHODOLOGY ............................................................................................................................57
5.1. OVERVIEW ..................................................................................................................................575.1.1. Rationale behind the choice of the research method .............................................................57
5.2. OVERVIEW OF THE CASE STUDY ..................................................................................................595.2.1. Resources employed for the case study .................................................................................59
5.3. OVERVIEW OF THE ONLINE SURVEY ............................................................................................605.3.1. Survey tool employed.............................................................................................................605.3.2. Ethical issues.........................................................................................................................60 5.3.3. Sample ...................................................................................................................................60
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5.3.4. Composition of the survey .....................................................................................................615.3.5. Delivery of the survey............................................................................................................62
6. SURVEY OUTCOME: EVALUATION OF THE RESULTS.......................................................63
6.1. SURVEY STATISTICS ....................................................................................................................636.2. DISCUSSION OF THE RESULTS ......................................................................................................63
6.2.1. Demographics .......................................................................................................................636.2.2. First part: broadband and e-Commerce ...............................................................................656.2.3. Second part: the role of the mobile phone.............................................................................676.2.4. Third part: the diffusion of the m-Commerce........................................................................73
7. DISCUSSION.....................................................................................................................................85
8. CONCLUSIONS................................................................................................................................89
BIBLIOGRAPHY .......................................................................................................................................92
APPENDIX A: ORIGINAL VERSION OF THE SURVEY .................................................................101
APPENDIX B: TRANSLATED VERSION OF THE SURVEY...........................................................113
APPENDIX C: INTRODUCTION TO THE SURVEY.........................................................................119
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List of Tables
TABLE 1DEMOGRAPHIC CHARACTERISTICS OF THE RESPONDENTS (N=125).........................................64TABLE 2 SQ22:IF YOU HAVE NEVER PURCHASED ANY GOODS OR SERVICES VIA YOUR MOBILE PHONE,
WHICH OF THE FOLLOWING SERVICES WOULD YOU INTEND USING?.............................................80
TABLE 3 SQ23:PLEASE STATE, IN ORDER OF PREFERENCE, THE MEDIUM BY WHICH YOU WOULDPREFER TO RECEIVE INFORMATION ABOUT MOBILE COMMERCE AND MOBILE SERVICES .............81
TABLE 4 SQ24:PLEASE INDICATE THE IMPORTANCE OF THE FOLLOWING FACTORS IN USING APARTICULAR M-COMMERCE SERVICE ..........................................................................................81
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1. Introduction
We may say that mobile phones have by now conquered almost any society in
the whole world, particularly those contexts that belong to the most developed
countries. However, also thanks to the poor level of fixed infrastructure in their
territories, many of the so called underdeveloped countries are already playing
a surprising role in the evolutionary process of such a phenomenon, concerning
the exploitation of both B2B and B2C mobile services (Muthigani, 2007; Rice,
2007; Vodafone, 2005; Wangui, 2005).
One of the foremost conditions for the establishment of the m-Commerce has
been, especially in the Western countries, the deep penetration of wireless
devices. Among that type of devices, the principal role is surely played by the
mobile phone.
In the EU-25, two countries have reached unexpected results, going beyond the
100% for what regards mobile phone penetration: in 2003, the best outcome
belonged to Luxembourg, which registered nearly 110% of mobile phone
subscriptions. Italy placed second with around 101.8%, and a constant pace of
growth that will possibly lead to the first position in the forthcoming future
(Bueti and Obiso, 2005).
Outside the EU, the trends for 2006 foresaw a penetration ratio of 74% for the
USA, while Japan (95%), South Korea (94%) and China (93%) symbolised the
huge potential of the Asian market (Ipsos Insight, 2006). Finally, Africa
constitutes a context where mobile phone users are growing rapidly: in 2004 it
accounted for 50 million mobile subscribers (7% of the population), while it isexpected to reach over 160 million users by the end of 2009, with a pace of 35%
per year (Batchelor et al., 2004).
Therefore, it can be argued that the mobile phone has literally conquered its
relevance in the new millennium society, constituting an essential tool that has
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been by now incorporated in our everyday life so to affect our personal
dimension.
Mobile phones extreme spreading has evidently generated a huge business,
mainly based on voice and SMS traffic. Nevertheless, the partial saturation of the
market in relation to those two particular features of mobile telephony has
pushed TLC companies to look for further areas of exploitation, creating new
products and services that would meet the needs of their costumers. Japan can be
considered the pacemaker in this field: in 1999 NTT DoCoMo, the most
important mobile provider launched i-Mode service, reaching in a short time an
impressive number of subscriptions and in fact projecting the Japanese society
towards the new mobile era. In 2007, it still represents the most successful model
of m-Commerce service.
Moreover, i-Mode introduction has given boost to the other telephony
enterprises, whose aim has been to emulate the Japanese performance in the
most profitable markets of the world.
Going back to the data that have been discussed at the beginning, many represent
examples of countries in which the Mobile Commerce would find an ideal
ground for its growth, thanks to the massive presence of mobile phones and the
high standards of innovation. Among them, Italy is certainly one of the most
profitable socio-economic contexts in terms of new mobile services exploitation.
However, although being introduced with great expectations in 2003 by the
provider H3G1, the popularity of m-Commerce in Italy can be still considered at
an embryonic stage.
In fact, the mobile phone still appears far from being deemed as a tool that goes
beyond the communicative scope, remaining still anchored to its original
conception.
1 H3G was later followed by the other 3 major mobile providers, Vodafone, TIM and Wind.However, H3G has been the only one to provide m-Commerce services based exclusively on UMTStechnology.
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1.1. Research aims and objectives
Following the conceptual background highlighted before, the main aim of this
research has been to understand the reasons why the mobile commerce is
struggling to make an opening in the Italian society. But that is not all. In fact, it
would be relevant to know how the use of the mobile phone is conceived among
the Italian youth population. The reasons behind the selection of such a peculiar
target will be explained later on.
Also, determining at what extent Mobile Commerce awareness is present within
that share of the Italian population will be interesting, together with its possible
relationship with the diffusion of the broadband and the internet, and the
presence of any electronic commerce (e-Commerce) culture.
This study would help to draw a scenario useful for the future development of
this kind of technology.
More precisely, for what regards the spreading of the mobile phone within the
Italian territory and its usage among the Italian youth generation, this study aims
at finding an answer to the following questions:
Concerning the popularity of the Internet and the well known practice of making
transactions online (e-Commerce), these are the interrogatives that this
investigation will try to answer to:
i. How is the mobile phone conceived within the Italian youthsociety?
ii. What are the most popular features connected to the usage ofmobile phones within the Italian youth society?
iii. What is the mobile phone potential in the Italian market?
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The last part of the research project will focus on Italian mobile phone users
current knowledge regarding the Mobile Commerce potential, together with the
most outstanding factors that drive (or would drive) their choice towards the
embracement of such a new frontier of mobile telephony:
iv. To what extent the Internet can be associated to the use of mobilephones?
v. How deep is the utilization of the internet among the Italiansociety?
vi. How frequently do they use the Internet to make purchases(Electronic Commerce)?
This final set of questions (and especially the last two ones) is particularly
interesting from a marketing point of view. In fact, the answers to those queries
would be very useful to understand how mobile commerce appeals the Italian
mobile phone users, highlighting both those elements that still constraint its
evolution and the major elements that they take into consideration for its
acceptance.
vii. Is there a Mobile Commerce awareness/culture in Italy?
viii. Do youth Italians perceive any benefits/improvements in their lifefrom the exploitation of Mobile Commerce?
ix. What are the major factors taken into account by Italian users inrelation to the m-Commerce utilization?
x. What are their needs and potential interests in terms ofexploitable services through the use of mobile phone?
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1.2. Organisation of the dissertation
The organisation of this report reflects the conceptual framework underlined in
the initial part of this chapter, with a descriptive process that moves from a more
general point of view, studying the role of the mobile phone within the modern
society, to the m-Commerce as a phenomenon, which is expected to contribute to
the announced shift towards a ubiquitous society based on the concept of
convergence of mobile and fixed telecommunication services (Alleman and
Rappoport, 2007; Bueti and Obiso, 2005; EC, 2006; Feldmann, 2003).
After a chapter dedicated to a brief literature review of the most relevant sources,
the analysis focuses on how the mobile phone has penetrated the modern society
and which part of the population represents its heavy users. As expressed before,
a special emphasis will be given to the Italian social context.
The fourth section goes straight to the foremost issue of this topic: the Mobile
Commerce.
After giving a definition of such a particular innovation, the report will discuss
the relationship lying between m-Commerce and e-Commerce.
Subsequently, after a review of the most common business models, the
discussion will shift to the close examination of the most successful case of m-
Commerce service implementation: NTT DoCoMos i-Mode.
The analysis will explore how that change has been domesticated by the
Japanese society, how it shaped it, how it fitted into the technological pattern
featuring the country and enabling it to become the most advanced nation in the
TLC circle with many years of anticipation in comparison to the many other
advanced countries. In relation to this, further cases of m-Commerce model
implementation will be presented.
The chapter ends with an overview of the Italian situation, trying to understand
what elements define the Italian TLC market and why it can be still considered at
an embryonic stage. Valid examples concerning this issue will be provided.
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The fifth part is entirely dedicated to the presentation of the research
methodology.
The choices regarding the various methods selected to carry out the research
project will be reviewed. Within this section, the survey definitely occupies a
core position because it reflects the direct opinion of the Italian mobile phone
users.
However, as it will be underlined many times during the discussion, the sample
chosen does not represent the whole segment of the Italian users; therefore its
outcome must be retained cautiously, as it does not have any statistical value.
A brief note regarding the choice of the online survey tool chosen for this task
will be included.
Consequently, the sixth section of the dissertation centres on the interpretation of
the results obtained through the online survey, which will be graphically
displayed.
The seventh chapter, instead, embodies a discussion concerning the data
analysis, which will be compared to the findings and considerations made in the
previous parts of the dissertation pattern.
Ultimately, the last chapter concentrates on a quick review of the core features
and findings obtained by the research procedure. It will also involve suggestions
for further research, along with final recommendations useful for the further
expansion of the Italian TLC context.
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2. Literature review
As it has been observed in the previous chapter, the literature available has
resulted necessary in order to build up a well-grounded background concerning
the many issues dealt with during the research task. Considering the high level of
complexity of the topic chosen, many types of sources have been taken into
account.
2.1. Literature overview
Books have been the principal source of information. Beyond a doubt, they
represent the most appropriate channel from where to get the necessary
knowledge to manage sufficiently the topic in question.
Unfortunately, due to the short evolutionary path of the mobile commerce, it has
not been simple to retrieve a large number of books dealing with such a
technological phenomenon.
Nevertheless, a few sources that deal in a very comprehensive way with the core
topics of the research are:
R. LingsMobile Connection The Cell Phones Impact on Society N. SadehsM-Commerce Technologies, Services and Business Models M. Ito, D. Okabe and M. Matsudas Personal, Portable, Pedestrian
Mobile Phones in Japanese Life
G. Elliott and N. Phillips Mobile Commerce and Wireless ComputingSystems
E. RogersDiffusion of Innovations
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Apart from books then, a concrete contribution has been given by:
Official reports from world and national telecommunication/ITorganisations (e.g. ITU, AITech-Assinform, WapForum, DVB, PCIC),
world economic/financial committees (e.g. CPSS), political and
economic institutions (e.g. EU and EU Commission, OECD), national
statistics committees and marketing consultancies (e.g. Abacus, Censis,
Ipsos Insight), political organisms (e.g. Japanese Ministry of Internal
Affairs and Communications (MIC) and finally important magazines
(e.g. The Economist). Such reports have provided updated statistical data
and information with respect to both general and specific trends affecting
different types of technological innovation. The details extracted from
those documents have been also efficacious in order to draw a
comparison between the situations of the most developed countries in the
world scene.
Previous research papers published by various reviews, in particular bythe journalNew Media and Society. This review, signalled by Dr. Angela
Lin during the first phase of the dissertation preparation, resultedprominently rich of research content focusing on mobile phones, mostly
considering the sociological implications of its adoption.
Also, relevant documents have been retrieved from The Journal of the
Communications Network, The Journal of the Electronic Commerce
Research, Computing and Electronic Markets.
Articles extracted both from paper-written and online magazines (e.g.The Economist), online newspapers (e.g. Financial Times, Il Corriere
della Sera, USA Today, The Guardian) and a large number of online
websites. This last set of resources has been fundamental in order to
obtain updated and global information about the mobile phenomenon.
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2.2. Literature review: theoretical background
The diffusion of mobile phone has had unpredicted implications since the early
stages of its evolution (Feldmann, 2003; Wei and Lo, 2006). However, in the
first years of its introduction, it faced a very slow diffusion rate, mostly due to its
high costs (Campbell, 2007). Therefore, it was strongly considered a technology
tool directed to the business area usage; on the top of that, usage of mobile
phones by businessmen had initially a vulgar acceptation (Feldmann, 2003;
Fortunati, 2005a; Ling, 2003, cited in Fortunati, 2005a; Rogers, 1995).
Subsequently, from the early 1990s, contemporaneously with the decrease of
handset prices and general service cost, mobile phones selling registered a
sudden increment. The advent of the GSM technology also accelerated the
process, with features that included the support for roaming and SMS texting
(Ling, 2004; Sadeh, 2002). The worldwide youngest population has proved to
constitute a base of mobile phone heavy users (Businessonline.it, 2006;
Entrepreneur.com, 2006(?); Ito et al., 2005). Ling (2004) studied the diffusion of
mobile phones in Norway, and found out that by 2001 approximately 90% of
the teens interviewed in a representative national sample owned a mobile
telephone (p.84). Interestingly, Ling (2004) noticed the popularity of text
messages within the sample analysed, fact that was accompanied by the adoption
of a peculiar but (in the majority of the occasions) simple written language. This
aspect is also strictly connected to the concepts of personalisation,
individualisation and construction of identity discussed by Fortunati (2005a)
and by Katz and Sugiyama (2006). To reinforce this last concept, Fortunati
(2002 and 2005a and 2005b) highlights the mobile phone as a symbol of fashion,
especially among the Italian users, a powerful feature for communicating ones
personal identity. Fashion is also identified by Leung and Wei (2000, cited in
Wei and Lo, 2006). In their study regarding students from the US and Japan,
Katz and Sugiyama (2006) found out a directly proportional relationship
between attention to fashion and mobile phone usage. Those findings confirm
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the conclusions obtained from the studies concerning students from Korea,
Norway and Namibia (Katz and Sugiyama, 2006).
When in Europe the 2G telephony standard was still in its process of expansion,
in Japan the major telephony provider launched the service that would
revolutionise the TLC sector: it was 1999, and NTT DoCoMo challenged the
mobile telephony market with the i-Mode service (Elliott and Phillips, 2004; Ito
et al., 2005; Ling, 2004; Sadeh, 2002). This new model aimed at satisfying
Japanese mobile phone users needs, shaped by the raising mobility.
Contemporaneously, with i-Mode NTT DoCoMo conceived a new service with
whom they intended to gain competitive advantage from a sphere other than
voice telephony market, now almost completely saturated.
Therefore, Japan opened the way to the Mobile Commerce, yet standing as the
best example within this telecommunications area (Sadeh, 2002).
Nowadays, although the situation in the rest of the world appears still pretty far
from the results gained in Asia and mobile commerces adoption pace is still
slow, the current premises adumbrate an effective spread of 3G services and
mobile commerce in the forthcoming years (Bradbury, 2006; OECD, 2007;
PassioneMobile, 2006). The level of mobile phones penetration in many
countries (both developed and least-developed ones), the level of mobile
infrastructure and the policies adopted by national governments and continental
institutions that point to convergence, ubiquity and the reduction of the so
called digital divide portend the intention to follow the footsteps traced by the
Japanese culture. However, the evolution of m-Commerce is still at its first
stage, due to various reasons (Feldmann, 2003; i-dome.com, 2001; OECD,
2007).
Although being the second nation in EU for mobile phones penetration with one
of the highest indexes in the world and being one of the leaders in 3G network
coverage, Italy is one of those many countries that still struggle in terms of 3G
telephony adoption, mostly because of the services high costs (OECD, 2007).
Nonetheless, cost is not the only factor that thwarts the proliferation of the new
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mobile standardisation within the Italian society: further limiting causes will be
analysed and spotted later on throughout this report.
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3. The mobile phone in the modern society
Among all the mobile devices available today in the global TLC market, the
mobile phone surely plays the role of the main character, having conquered a
great number of countries regardless of the age of the users. Ling (2004) defines
it as a taken-for-granted part of the social landscape in many countries (p.21).
Its success is due to many factors, depending on the situation of every single
socio-economic context in which it has been adopted (Feldmann, 2003). But, as
a general consideration, we might say that one of the major reasons for its
enormous popularity is its striking ease of use. This characteristic enables
anyone to employ it, regardless of any particular knowledge (Ling, 2004).
According to the report Mobile overtakes fixed: implications for policy and
regulation published by the International Telecommunication Union (ITU), in
2002 the world assisted to the phase of a process that represented an authentic
milestone in the sphere of telecommunications: the number of mobile subscribers
outpaced the number of fixed lines, reaching a quantity of subscriptions that
went beyond 1200 million units (Feldmann, 2003). Surprisingly, thisphenomenon comprised both developed and the so called least developed
countries, but was evidently forced by diverse drivers. However, this upshot
demonstrates how developing countries constitute markets with great potential
and thus ideal scenarios for future investments in TLC technology and services.
In Africa, for example, mobile companies registered a strong demand for mobile
voice services mostly due to the growing need of the populations living in the
rural areas of the continent to keep in touch more comfortably with the
respective families. Moreover, this was also a direct effect of the improving
general economic condition within many African societies and the widespread
aim of reducing personal risks. Such an increasing demand brought unexpectedly
the percentage of subscribers from 3% in 2001 up to 7% in 2004, reaching a
number of 50 million users (Batchelor et al., 2004; Feldmann, 2003). As shown
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in the right part of figure 1, the African continent is going at an impressive and
constant pace of growth in terms of mobile phone subscribers. That datum is
even more astonishing if compared to the world growth average, sign of the great
rapidity with which Africa is coping with the technological (and economical)
divide in comparison with the most advanced areas of the world. Particularly
interesting is the percentage relative to Asia, another geographical context that
has exploited only a small part of its immense potential so far. Its high number of
inhabitants makes Asia one of the most appealing catchment areas of the world.
This view is supported by an NTT DoCoMos recent declaration, in which they
announce their intention of investing part of the companys resources in that
market (Turner, 2006).
Figure 1 Mobile phones outpacing fixed lines and annual growth rate
Source: ITU World Telecommunication Development Report, 2003.
3.1.The evolution of the mobile phone and its impact on
the society
According to the figure 1, then, the mobile phone is quickly pushing off the fixed
line connection; this trend leads to the conclusion that, in the next future, mobile
phones will probably replace completely the fixed line as the principal
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communications medium (Feldmann, 2003). As it has been mentioned before,
that is what is already happening in the African continent at the moment.
Before its spread among the majority of the world populations, the mobile phone
connoted a tool designed just for very few ones. In fact, due to its huge cost
and the high prices of the services provided, the ones who could employ such an
expensive innovation were almost only wealthy people (Feldmann, 2003; Ling,
2004; Rogers, 1995; Srivastava, 2004).
As already stated in the paragraph 2.2, Fortunati (2005a) talks about this aspect
and reports the common reputation regarding the higher classes as bearers of
vulgarity (p.41). Later, with the prompt decrease of handset prices, services cost
and the introduction of prepaid services (Feldmann, 2003, Ling, 2004), the
mobile phone has become a technology tool popular within the masses, with the
consequent shift regarding its consideration. It passed from being reckoned as an
object symbolising status, to the idea of a trendy and fashionable object
(Fortunati, 2005a:41; Katz and Sugiyama, 2006). Ito et al. (2005) identify the
very same pattern in the penetration of the mobile phone within the Japanese
society.
3.1.1.The mobile phone as a tool that enhances security
and safety
Its common reputation is not the only one generated by the astounding popularity
of the mobile phone. As yet, a sufficient number of research studies have been
carried out with the aim of understanding better the role of the mobile phone
within the sphere of modern communication. And in that direction, the results
obtained by Ling appear extremely valuable. Talking about the mobile phone, he
asserts that one of the most common popular images is that it provides us
with a form of securityand safety (Ling, 2004:35). Following this statement
and focusing on the results obtained from investigations conducted in Norway,
Ling underlines how the mobile phone is seen as the most efficacious device for
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maintaining a high degree of security and safety. However, he points out that
granting a complete level of security and safety seems a pure utopia, since the
mobile phone is prone to technical limitations (such as battery power and
network coverage). Therefore, as those boundaries restrain from the total
attainment of such a goal, the mobile phone [it] is not something on which we
can rely absolutely (Ling, 2004:46).
Enhancing security is also the most important adoption factor within the young
people. In fact, parents are said to have found in the mobile phone a very
effective tool in order to increase their control over their children. Ito et al.
(2005), referring about Japanese young students use ofkeitai2, highlights their
parents common relief when their children carry a mobile phone with them, as it
enables contact at any time of the day. However, as Humphreys (2005) remarks,
children put in practice downright strategies to get around their parents
intrusion: screening the incoming calls or switching the device off are just two
of the most popular tricks to avoid bothers. The introduction of the caller-ID
function has definitely enabled the process of screening, giving more power to
the recipient (Humphreys, 2005).
Apart from the matters concerning security, parents see the owning of a mobile
phone also as an efficient method with whom their children can learn how to
manage money. This factor was largely favoured by the introduction of prepaid
services, extremely popular among teens. Moreover, taking up their
responsibilities is also a feature highly connected to the personal growth of the
individual (hence of his personality) (Ling, 2004).
2Keitai is the Japanese word for mobile telephone
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3.1.2. Unadvised use of the mobile phone and reduction of
safety
Yet, talking about mobile phones and security/safety, it is relevant to underlinehow its utilisation often coincides with situations of danger (hence reducing the
level of security/safety). The incorrect use of the mobile phone is often identified
with the causes of car accidents (Fortunati, 2002). This factor is evidently in
contradiction with the awareness stressed in the findings obtained by Ling. The
first example is given by a statistical datum reflecting one aspect of mobile
phones use in the US: nearly 27% of mobile phone calls in the USA are made
from vehicles on the move (Entrepreneur.com, 2006?). Such a percentage
illustrates the costume diffused among mobile phone users that contrasts with the
rules imposed by both social morality and legal environment. This proportion is
dramatically confirmed in a study conducted by Redelmeier and Tibshirani
(1997, cited in Ling, 2004), in which they analysed the situation preceding 742
cases of car accident. They obtained that 24% of the drivers were using a mobile
phone at least ten minutes prior to the accident, testifying how a more careful
utilisation of mobile communication tools might reduce the occurrence of
dangerous situations.
Again, that percentage of careless users is reflected in a survey made by The
University of Michigan. Such study showed that the 80% of American mobile
phone users consider using a mobile phone while driving a great risk for safety
(Usatoday, 2005), hence denoting awareness of the risks connected to an
improper usage of mobile devices while on vehicles.
3.1.3. The connection between mobile phone and publicplace utilisation
Within the field of social morality, a further aspect has been at the core of many
studies: the use of mobile telephones in public places. Concerning this issue,
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Humphreys (2005) correctly states that cellphone users tend to be less aware of
their surroundings (p.830), underlining an opinion that is highly shared
nowadays. In addition to this, Ling (2004) asserts that [The] use of the mobile
phone can be seen as an affront to the decorum of a situation (p. 128). This
means that although there might be room for the utilisation of a mobile phone in
a public context, such practice is always strictly subject to the rules proper to the
setting in which the interaction is taking place.
With relation to these conclusions, it is interesting to observe what happened in
Japan, where the irregardless use of mobile phones brought the public transit
facilities to ban it during the rush hours (Ito et al., 2005). The disrespectful use
ofkeitai was associated to young people, in many cases careless of the social
rules (and sometimes even of the legal regulations) proper to the Japanese
community.
3.1.4. The mobile phone and the maintenance ofrelationships
Looking at the verbal communication from another point of view, manyresearchers have found confirmations regarding the mobile phones widespread
use as a tool which increases communication with families and friends (Sofi,
2006). As stated at the beginning of this chapter, that is the case of the
populations living in the rural areas of Africa. The lack of a proper fixed
infrastructure enhanced the diffusion of mobile phones, with the people pushed
towards such a tool by a constant and swelling need of preserving the
relationship with their emotional ties. In this connection, Wei and Lo (2006)
study regarding a sample of Taiwanese students confirms how frequent is for
mobile phone users to make calls to their families and, in general, people they
care of. Their results showed women to be much keener on such practice than
men. Curiously, they also found out that lonely people normally use the mobile
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phone not to improve the level of their relationships, but for its symbolic value
fashion and status (Wei and Lo, 2006:66).
3.1.5. The role of the mobile phone within non-verbalcommunication
A further aspect of verbal communication via a mobile telephone is pointed out
by Ling. He states that such instrument improves the coordination of our
activities and, again, women appear to be the gender that benefits more of that
implication (Ling, 2004).
But there is another side of communication in which the mobile phone plays a
leading role. In fact, coming back again to Fortunati (2005a and 2005b) and her
fascinating parallel between two key conceptions linked to the mobile phones
idealization, individualisation and fashion, it is extremely interesting to note how
such a technological instrument embraces the sphere of communication tout
court: in fact, apart from conveying verbal communication (which is its main
purpose), the mobile phone, as it happens with fashion, is also a powerful
vehicle in the construction of identity (Davis, 1992, cited in Fortunati,2005a:39), thus entering the domain of non-verbal communication. To support
the concept of construction of identity underlined by the Italian researcher, it is
sufficient to exemplify how youth people (as anticipated in the previous
chapters, heavy users of mobile phones) usually personalise their own devices
with featured attributes like ringtones, covers, logos, screensavers etc. As a
matter of fact, that practice is nothing but a way to express ones self identity,
communicating it to the other people through the mobile phone.
This aspect, exactly like fashion, is among teens a feature that often determines
the inclusion/exclusion from a particular community (Ling, 2004).
These findings are also confirmed by the investigation conducted by Katz and
Sugiyama (2006) on a sample of US and Japanese students. They point out that
mobile phone [can be seen] not only as a tool to talk but also as a means to
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communicate symbolically about oneself (p. 324). However, apart from
highlighting the strict correlation between fashion attentiveness and construction
of identity, they also noticed that the former one is directly proportional to
mobile phone usage. This means that the more people care about fashion, the
more they use their mobile phone, but also that the more people care about
fashion, and the earlier they started using a mobile phone.
Presentation of the self is also addressed by Ling and Yttri (2002), when
explaining the two forms of social interaction via the cell phone: instrumental
and expressive (p. 55).
Ito et al. (2005) analysed the diffusion of pagers among the Japanese youth
population, and spotlighted the subsequent spread of mobile phones as the direct
consequence of the previous technological phenomenon. In addition to this, they
pointed out that personalisation is a common feature to the two wireless devices
in question.
Going back over the mobile phone attributes listed above (ringtones etc.), it must
be noticed that they are also some of the principal elements of the Mobile
Commerce business conception, which is the core topic of this analysis. Thus,
the idea of expressing the self within the mobile phone usage is (again, as
fashion does) also a valuable concept that can be exploited to gain competitive
advantage and increase revenues.
3.2. The diffusion of SMS
As it has just been seen, mobile phones have definitely changed our lives interms of communication, both verbal and non-verbal.
Apart from the aspects linked to that issue and within the various features
embedded in the mobile telephone, text messages (SMS) have surely represented
a striking surprise in those last years, by many chosen as the preferred way of
interacting (Wright, 2006).
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From a study included in the guide The mobile is open for business published
in 2005 by the company Netsize, it emerged that the number of text messages
sent each month in 20 countries of the EU reaches 200 billion units
(Consulteque, 2005). In another more updated investigation, Netsize affirms that
between 20 and 25% of all operator revenues are generated by data services,
and 90% of all data revenues are SMS (Netsize, 2007:17). The same company
argues that SMS might be the system upon which the m-Commerce will lever in
the upcoming future, although some other strategies can already be discerned in
the distance.
All this statistical information demonstrate how popular and at the same time
profitable is the market generated by SMS texts. Moreover, it is reasonable to
think that much of the success obtained by text messages is due to the high cost
of its direct successor, MMS (Consulteque, 2005; Ling, 2004). People use text
messages to communicate simple ideas, most of the times without having to wait
for a reply. This is surely one of the great advantages of such functionality. SMS
do not require immediate replies; therefore a user can comfortably rely on a
subsequent answer to his message as soon as his interlocutor notices it on his
device. For this reason, Ling (2004) correctly states that SMS are not as
intrusive as telephone calls.
From a communicative point of view, it is relevant to note how SMS are clearly
representative of the youth generation. We could affirm that teenagers use only
text messages to interact with other people. This aspect is strictly connected with
the economic factor, which has been mentioned in the paragraph 3.1.1.
But this element also relates to the concept of personalisation, discussed
previously; in fact, young peoples communication via SMS has proved to be
totally different from any type of interaction. The language they employ is
absolutely peculiar and distinguishable from the oral communication (Ling,
2004).
Therefore there is much truth in the opinion that teens appear to be the real
promoters of text messages. This last statement is also supported by parents
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view: a datum attributed to Cingular (now AT&T), in fact, reports that 63% of
US parents who use text messaging believe that it improves their communication
with their children (Entrepreneur.com, 2006?).
Figure 2. Worldwide SMS growth
Source: ITU Report Internet for a Mobile Generation, 2002; GSM Association.
3.3. The mobile phone domestication within the Italianyouth society
After the considerations made above in relation to the analogies among fashion,
construction of identity and mobile phone utilisation, the analysis narrows down
further and focuses on the Italian society.
This part of the discussion also leads us to the beginning of the research process,
and more specifically, to the first of the ten research questions presented in the
introductive chapter:
i. How is the mobile phone conceived within the Italian youthsociety?
As it has been mentioned at the beginning of this report, Italy represents one of
those countries where the mobile phone has reached unexpected results. With a
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degree of penetration that goes beyond 110% and that is constantly increasing, it
appears like an ideal market for the current and future telephony business.
Most of the factors that have been highlighted previously with respect to the
massive spread of the mobile telephone worldwide are applicable to the Italian
scenario.
Italian researcher Fortunati (2002) explains that the successful diffusion of the
mobile phone within the Italian society is mostly due to cultural reasons.
Fashion, for example, is a feature typical of the Italian culture, which is highly
observable in the mobile phone utilisation made by teenagers as well. But that is
not all. In fact, we might also include to this count the great importance given to
the concept of family and, in general, to all the friendly and emotional ties. The
maintenance of the relationships (together with the improvement of
coordination) is seen as one of the core factors for the owning of a mobile phone
(Hooper, 2003; Sofi, 2006).
Fortunati (2002) introduces another interesting theme related to the Italian
culture.
As a matter of fact, she asserts that what really prompted the spread of the
mobile phone in Italy has been Italians lack of familiarity with technology. She
points out that:
Italians are among the less enthusiastic about technological progress.
(Paradoxically, though, Italy is one of the European nations that have
most widely adopted the mobile phone) (Fortunati, 2002:53).
And also
The mobile [phone] has been a great success in Italy because it was
introduced not as a sophisticated technological instrument, but more
as a friendly, easy-to use gadget, a unique totem. So the early
promotion surrounding the technology showed it not as a serious
communication instrument, but rather as an easy-to-use toy as
simple to use as a wired telephone. (Fortunati, 2002:54).
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In sum, Italian people conceive the mobile phone as a simple tool that enhances
communication, especially towards our most significant relationships.
This opinion is highly supported by another Italian researcher, Barbara Scifo, of
the Universita Cattolica of Milan. She asserts that adolescents see the mobile
phone as a game, while the adults consider it as a pure communication
instrument (Sofi, 2006). This aspect reminds to what has been said previously
regarding teens, how they use the phone and the concept of personalisation.
Moreover, Scifo explains how the use of mobile phones by teens is extremely
conditioned by the economic factor (Sofi, 2006). In fact, in Italy it is very
popular the so called beeping phenomenon, a practice with which users reduce
to zero the cost of communication. Such practice consists on calling a person and
make his device beep, in order to inform him/her about, e.g. of the callers
presence or just to remind him/her of something. This strategy is extremely
popular and represents an effective way to interact without being charged.
According to what has been stressed in the previous sections, beeping finds its
roots in the fact that teens have a reduced economic power, which leads them to
manage their credit studiousness.
This aspect of the topic becomes extremely important, since it recalls the two
following research questions:
ii. What are the most popular features connected to the usage ofmobile phones within the Italian youth society?
iii. What is the mobile phone potential in the Italian market?
The problem connected to cost is something which is also directly reflected on
the way mobile phone users choose which device features they will use.
As the guide The mobile is open for business released by Netsize
demonstrates, among the factors that encumber the diffusion of MMS is their
high cost, nearly twice the cost of a text message (Consulteque, 2005). This
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factor is emphasized by Scifo, which also adds how young people tend to avoid
the cost of sending the files stored in their mobile phone (e.g. pictures or audio
content) to their friends. Instead of using the MMS service, it is much more
common to employ the Bluetooth or a personal computer (Sofi, 2006).
In summary, we might say that the mobile phone is perceived as a pure
communication tool in Italy, regardless of the concepts of convergence and
ubiquity that the EU and other important organisation are trying to promote.
Considering the last two questions, instead, it is clear that there is a great
difference between the utilisation of the mobile phone made by adolescents and
adults. Young people, who perceive it as an instrument for socialisation, tend to
exploit the cheapest functions (e.g. SMS, music, camera etc.). On the other
hand, adults, who have more economic power, consider the mobile phone more
seriously, so appear to be the target to which mobile telephony firms have to
focus on in the next future.
In general, however, being the mobile phone seen as a communication medium,
it will struggle to find another place in the Italian people conception, especially if
the cost of the services will remain too high. This hypothesis is also reinforced
by what Fortunati (2002) calls technophobia. Nevertheless, the research
questions related to these aspects will need to find some kind of further
confirmation throughout the rest of the research paradigm.
3.4. The beeping phenomenon: not only an Italianpractice
The strategy put in practice by so many Italian teens finds some common points
with the beeping praxis so popular in sub-Saharan Africa, although the two
backgrounds in which they take place are substantially different.
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Jonathan Donner (2005), a researcher in the Technology for Emerging Markets
Group at Microsoft Research India in Bangalore3, has developed an interesting
study related to this issue. Basically, he claims that there are three different types
of beeping called callback, pre-negotiated instrumental and relational.
The meaning of the first one (callback) is easily deducible: one person beeps
another one just to be called back, normally pushed by the lack of credit in his
mobile phone. This practice is also adopted by clients and employees, who beep
their providers/employers when they have to talk about work.
The second type of beep (pre-negotiated instrumental) refers to the
communication of pre-agreed messages. Donner cites the example of a taxi
driver that, by flashing his wifes mobile phone, tells her that he has come to
pick her up in the placed they agreed to meet.
The last typology of beep (relational) belongs to the emotional sphere. In fact, it
is mostly used to convey messages like I am thinking of you or goodnight,
without any expectations to be called back from the recipient of the beep.
In summary, these three main diversifications of the beep practice are regulated
by the concept that the richer guy pays (Donner, 2005:7), a consequence of the
serious economic situation that the African continent is facing. Therefore, the
common point with the beeping phenomenon typical of the Italian teenagers is
still the need to bypass the cost connected to the usual transmission of a message
via a mobile phone, forced by a precarious economic condition.
Mawaki (2005) also refers about the practice called bip falado (spoken beep),
extremely diffused in Mozambique. Users exploit the fact that one mobile
operator in Mozambique starts charging after the third second of conversation, so
they interact with short discussions of 2 seconds each in order to avoid paying
for their calls.
3 Information retrieved from Jonathan Donners personal website (jonathandonner.com)
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4. The Mobile Commerce
So far this analysis has focused on the instrument that has changed the way we
interact, reflecting its great power in both verbal and non-verbal communication.
However, that is just the impact that the mobile phone has had on the sphere that
constitutes the main goal for its creation.
In fact, it has also indirectly changed the way we manage our time and simplified
the manner we coordinate our activities.
But with the course of the time, together with its rapid growth and penetration in
almost every society of the world and the constant innovation in terms of
telecommunication technology, the mobile phone has evolved to a tool that
means much more than simple communication.
Following the concepts of ubiquity (as the consequence of the increased
amount of time spent out of home, typical of the modern individual) and
technological convergence (Alleman and Rappoport, 2007; Bueti and Obiso,
2005;; OECD, 2007; Srivastava, 2004), the mobile phone will represent soon the
indispensable instrument whose functions will encompass all the possible
activities of our everyday life, able to satisfy our desires at any time and at any
place.
Looking at the topic from a business point of view, we might be tempted to
argue that the so invoked convergence is just a direction imposed by TLC
companies, which aim at exploiting new prefabricated needs and generating
new sources of revenue following the saturation of the voice market in the most
advanced countries (Jeffries, 2007). Moreover, they have to regain what theyhave spent to obtain the so expensive 3G licenses (Sadeh, 2002).
Nevertheless, the current scenario sees now the telecommunications sphere
projected towards the Mobile Commerce (or m-Commerce), an abstract and
confusing concept to many of us, but at the same time reality for some social
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contexts. Japan is surely the example to imitate, a portrait of the future world
society based on the concepts described above (Bueti and Obiso, 2005).
4.1. The concept of Mobile Commerce
Defining Mobile Commerce is not a simple task. However, many sources try to
explain such a phenomenon in a very simplistic way: exploiting Electronic
Commerce (e-Commerce) from a mobile device.
This aspect must be surely taken into consideration when describing m-
Commerce, since both have many points in common. However, Mobile
Commerce has a broader scope: it is much more than simply browsing the net
and buying something. It is a more complete experience, able to enrich the deep
change begun by the mobile phone.
Here are some definitions of m-Commerce, which cover the topic differently.
According to Elliott and Phillips (2004), the Mobile Commerce is better
described as the mobile devices and wireless networking environments
necessary to provide location independent connectivity (p.3).
Sadeh (2002) instead, reports the description made by Durlacher Research which
defines the Mobile Commerce as any transaction with a monetary value that is
conducted via a mobile telecommunications network (p.5).
Schwiderski-Grosche and Knospe (undated) describe the term m-Commerce as
using a mobile device for business transactions performed over a mobiletelecommunication network, possibly involving the transfer of monetary values.
(p.2)
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Another set of interesting definitions is cited in Bertrand et al. (2001), a group of
students from the Kellogg University. Among the descriptions provided, two are
particularly interesting.
The first one comes from Forrester Research and asserts that the Mobile
Commerce corresponds to the use of mobile handheld devices to communicate,
interact via an always on, high speed connection to the Internet (Bertrand et al.,
2001:4).
The second one, instead, is attributed to Mobilocity, a management consultancy
based in the USA. They identify m-Commerce with the use of wireless
technology to provide convenient, personalised and location-based service to
your customers, employees and partners (Bertrand et al., 2001:4).
Among all these possibilities, the most appropriate seems to be the one proposed
by Mobilocity, which gives a clear and at the same time comprehensive
explanation of what Mobile Commerce really represents. In particular, it
correctly stresses the presence of personalisation, which features the m-
Commerce services.
However, there are a few important elements in the expression used by Forrester
Research, especially those ones referring to the type of connection.
Therefore, the best way to describe mobile commerce would be a combination of
both definitions, that is:
In this way, both the main characteristics that distinguish the m-Commerce
services and the quality of the connection employed are highlighted.
The use of a wireless technology to provide convenient,
personalised and location-based services to customers, employees
and partners via an always on, high speed connection to the
Internet
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4.1.1. Differences and analogies between e-Commerce andm-Commerce
It has been explained in the latest paragraph that the Mobile Commerce is by
many described as the implementation of the Electronic Commerce via a mobile
device.
As we saw, that does not give a correct idea of what m-Commerce really stands
for.
In fact, although there are similarities between the two practices, the m-
Commerce is conceived as a totally diverse experience. It is actually ideated to
be performed in a different manner (via a wireless device, normally out of home)
and to satisfy different needs (buy a ticket for a show, reserve a table at the
restaurant or even get traffic information). Moreover, while with the e-
Commerce it is the user that searches for a specific product on the Internet, the
m-Commerce rests on the concepts of personalisation and mobility.
In summary, although the two technologies share the idea of buying and selling
products/services over the Internet, the m-Commerce enables the user to get
specific services tailored to its preferences and current position.
This topic recalls one of the research questions, and more specifically:
As the relationship between Electronic and Mobile Commerce testifies, the
Internet has an important place in the performance of both technologies.
However, in the m-Commerce the Internet plays a more subordinate role with
respect to the e-Commerce, simply because the former is much more thansurfing the WWW and searching for a determined product/service. It definitely
goes beyond that.
The confirmation of this view is given by Elliott and Phillips (2004), who
observe that the Mobile Internet is but one application amongst many others
within the m-Commerce world (p.3).
iv. To what extent the Internet can be associated to the use of mobilephones?
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Further information to complete the answer to the question number iv will be
gathered in the next chapters. The study will also try to discover whether there is
a direct implication between the existence of an e-Commerce culture and the
potential success of m-Commerce, with a particular attention to the Italian
situation (research question vi).
4.2. Overview of the m-Commerce business models
From the close examination conducted in the previous section, the Mobile
Commerce emerged as a unique technology, if compared to the other ones
present in the telecommunications environment.
Its uniqueness, recognisable in its aims and trademarks, is also distinguishable in
the new business models ideated by the TLC companies.
The conception of m-Commerce has created new scenarios for the
telecommunications business, reshaping its usual value chain and also offering
the chance of gaining market shares to new participants (Sadeh, 2002).
According to Sadeh (2002) above all, m-Commerce is about content and giving
users access to a myriad of mobile services (p. 37). This statement gives
prominence to what has been defined as unique with respect to Mobile
Commerce: the services that users can make use of.
But services are obviously made of content. Therefore, content providers are
seen as one of the most crucial constituents within the m-Commerce value chain.
Their utmost importance is recognisable in the great number of business modelsthat the companies can produce in order to exploit efficaciously the market.
Here are reviewed the most popular patterns within the m-Commerce universe
(Sadeh, 2002).
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4.2.1. User fee business models
The core ideology that constitutes this type of business model is charging users
according to the amount of content they utilise.
Users might be charged in two different ways:
Subscription fees, which prefigure the charge of a fixed cost for theutilisation of one or more services during a pre-agreed period of time.
Usage fees, with which TLC enterprises assign a specific price to eachproduct/service they offer, charging users proportionally to their actual
access to the services. However, this model appears to be slightly
complicated in terms of billing process.
4.2.2. Shopping business models
It is without any doubt the simplest way of conceiving business via a mobile
device, in that it is pretty similar to the buying/selling experience occurring in
the Electronic Commerce.
It involves a mobile buyer and a mobile seller, which start and complete a
transaction. Sometimes there is the participation of a third part, who usually
manages the payment process.
4.2.3. Marketing business models
This particular type of business model is the one that better conveys the idea of
personalisation. In fact, companies use this strategy to send marketing messages
customised to the users profile, in order to increase the possibilities to appeal
the potential consumer.
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The costumers information is normally gathered through the wired Internet, due
to the limitations of mobile devices.
Being personalisation the core concept of such a business strategy, for a
company knowing its customers better than its competitors will result the best
method to reach its business goals.
4.2.4. Improved efficiency business models
The general aim of these business models, as the name suggests, is to reduce
managing costs and contemporaneously improve costumer satisfaction.
Cutting costs may be reflected in many ways: the simplest example is surely the
reduction of personnel employment.
Mobile banking and mobile ticketing are seen as two expanding sectors in this
direction. They enable customers to avoid bothering queues in the respective
offices and manage every single step of the procedure from the mobile device.
4.2.5. Advertising business models
This framework lies in a basic and simple scheme: the advertiser is charged by
the content provider whenever it wants to deliver an advertisement to the
potential costumer.
Advertisements can be sent in two different ways to mobile phone users:
push mode, that is sending specific messages to the users, i.e. via SMS
pull mode,that consists in showing promotional messages (e.g. in formof banners) while the users is accessing a specific typology of content.
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The promotional message is obviously chosen by the content provider
according to the information retrieved by the user
Finally, content providers may charge the advertisers in different modalities,
such as:
flat fees, that is charging a pre-agreed fee for a specific period of time
traffic-based fees, a charging method directly proportional to the numberof times that a message is shown
performance-based fees, or charging the advertiser each time itspromotional message is hit by the mobile phone user
4.2.6. Revenue-sharing business models
The basic pattern that underlies those business models, in their simplest
organisation, sees the content provider sharing the revenue that comes from the
business operation with all those parties that cooperate in creating the
product/service.
4.3. Case study: NTT DoCoMos i-Mode success
Following what has been anticipated in the first chapter, the best example of
successful implementation of an m-Commerce business model still belongs to
the major Japanese telephony provider, NTT DoCoMo, which launched the i-
Mode system in 1999, determining an important change both in the TLC market
and the habits of the Japanese society (Srivastava, 2001).
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Analysing the reasons connected to its prominent results in Japan will help to
obtain relevant information useful to understand better the current situation of
the Italian socio-economic context, as well as draw conclusions for the future
development of the m-Commerce in the Italian market.
However, before considering its successful evolution, one question must be
answered: how was the Japanese telecommunications scenario when the i-Mode
was implemented?
4.3.1. The Japanese background at the end of themillennium and the contextual factors that enabled NTTDoCoMos i-Mode service to stand out on the market
Statistical data show that the i-Mode has boosted notably the level of Internet
penetration, with excellent results right after one year from its launch (fig. 3).
Such a model, in fact, proposed the mobile Internet as a more than valid
alternative to the wired one, which was encountering enormous problems with its
diffusion. Difficulties were mainly due to low pc penetration rates and high
leased line rates (Srivastava, 2001).
Data relative to market research conducted by the Japanese Ministry of Internal
Affairs and Communications also confirm that trend, highlighting, on the
contrary, the extraordinary popularity of the wired Internet within the large
businesses in those years (fig. 4).
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Figure 3. Internet penetration in Japan from 1999 to 2000 (percent)
Source: ITU 3G Mobile Policy: the Case of Japan, 2001
Figure 4. Wired Internet diffusion rate in Japan from 1999 to 2005
Source: Japanese Ministry of Internal Affairs and Communications, 2006(?)
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However, the main factor behind the immediate success of the mobile Internet
format has been undoubtedly the great penetration of mobile phones (keitai),
which jumped from around 45% to 53% over the two year period 1999/2000.
Contemporaneously, this growth had been largely pushed by the introduction of
colour display devices, which granted a much better exploitation of the new
mobile services (Srivastava, 2004).
In turn, the rapid diffusion of mobile phones has been favoured by a strong
governmental policy (deregulation) started in the 1990s: customer ownership of
the devices was introduced in 1994, and in 1996, following the Ministry of Posts
and Telecommunications (MPT) modification of the mobile calls charge
regulations, tariffs could be reduced, determining a sudden increment of keitai
purchases (Ito et al., 2005; Srivastava, 2004).
Another fundamental element that facilitated the spreading of keitai, who
subsequently enabled the mobile Internet evolution, was the great popularity
achieved by the pager (in 1996, pagers subscribers accounted for over 10 million
people).
Extremely popular in the 1990s among Japanese students, the pager was the
communicative instrument which contrasted the diffusion of the mobile phone
within the wealthy class. Ito et al. (2005) refer of a well-established pager
culture among the Japanese young students, which created the background for
the future establishment of mobile phones. As a result of this, pager messages
(popular especially among the Japanese young girls) can be considered as the
precursors of the email, largely preferred to SMS in Japan.
Last but not least, a cultural element rooted in the Japanese society which must
have notably bore on the evolution of such phenomena has been the great
proneness towards innovation and technology. Japanese people are reported to
be constantly interested in new valid technologies and, given their high
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purchasing power, they configure as the best example of early adopter society
(JETRO, 2006).
In summary, the mobile Internet in Japan has emerged almost at the same time as
the wired Internet, as an alternative solution rather than a subsequent
phenomenon, as occurred in many other countries, favoured by a strong mobile
communication culture commenced with the diffusion of pagers and continued
by mobile phones.
These conclusions relative to the link between the evolution of the Internet and
mobile phones popularity result as an interesting contribute to formulate an
answer to the research question (iv).
4.3.2. The launch of NTT DoCoMos i-Mode: analysis of aninnovative business model
As anticipated above, NTT DoCoMo hit the Japanese market with the launch of
its new mobile service, i-Mode, in February 1999, becoming one of the very few
countries to obtain enormous success with the 2G mobile Internet (Srivastava,2004).
Straight after its implementation, its rapid establishment as the most popular
mobile service enabled NTT DoCoMo to obtain the leadership in the Japanese
TLC sector, which also saw other two providers, KDDI and Vodafone (Ito et al.,
2005; Srivastava, 2004).
The big hit got by the i-Mode was due to many factors, and the majority of them
have been reviewed in the last paragraph. Many of them were relative to the
communications environment and its situation in those years in which the
ideation of the system was still in progress.
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Others concerned the physiognomy of the TLC sector and its mutations during
the first period of implementation of the model, for want of the Japanese
government.
In fact, the launch of the i-Mode model was perfectly inserted in the
governmental program called e-Japan Strategy, a large plan ideated in January
2001 with the aim of transforming Japan into the best IT country in the world.
The development of the program would have taken five years and it was divided
in two phases.
The major aim of the government was to drive Japan straight to a ubiquitous
networked society within a very short time, based on high competitiveness and
reduced costs. One of the keys for the success was the creation of an adequate
infrastructure framework, a task clearly saddled to the Japanese TLC private
sector (Srivastava, 2004).
But the main reason for the success of NTT DoCoMos model was surely due to
the fact that it was (and still represents) a pure breakthrough.
The system lays its foundations on a strong and innovative business model,
which offers an easy-to-use service at a very cheap price to its customers.
Considering that Japan offers a catchment area of about 127 million people
(Srivastava, 2004), proposing a revolutionary model like i-Mode also meant the
chance for huge revenues.
The greatest advantage offered by NTT DoCoMo was the possibility to exploit a
packet-switched technology, which in turn granted an always on feature (Ito et
al., 2005). That meant enabling users to only pay for the actual content they
access while the device is on. In a few words, a fairer way of charging the user
based on the actual amount of data transferred (Sadeh, 2002). The monthly fee
for the i-Mode subscription is around $3 (JPY 300 per month, plus JPY 0.3 per
packet) (Srivastava, 2001). However, the packet-switched technology was
extended to the voice traffic as well: every phone call was charged 10-yen per
unit (Ito et al., 2005).
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The transfer speed was initially of 9.6 Kbit/s, which might appear too slow at a
first sight. Actually, due to the limited maximum application data size (10
kbytes) and the very small dimension of the content sent and received (e.g.
emails), the apparently slow transmission speed did not affect the quality of the
service (Elliott and Phillips, 2004; Srivastava, 2001).
Among its main services, which range from mobile Internet, email, mobile
banking, infotainment (information services regarding traffic, weather, download
of screensaver, ringtones etc.) and location-based services (information and
services depending on the current location of the user4), the i-Mode offers the
possibility to choose from around 3000 official websites, regularly checked by
NTT DoCoMo and made available from its portal. But that is not all. One of the
most striking features of this new system stays in giving the chance to anyone to
contribute in the enlargement of the i-Mode universe, creating and submitting his
own websites (thus not a walled garden approach). In fact, the i-Mode is based
on a particular version of HTML (together with a special version of JAVA)
called cHTML or compact HTML, which meant that the language used to create
the website was the same as the wired Internet. That is also the main difference
with the first WAP technology (based on WML language), popular in Europe
and in many other areas of the world.
Unofficial sites were supposed to be around 50000 in 2002 (Elliott and Phillips,
2004), and their amount kept growing, due to the great enthusiasm generated by
such model. These sites (together with the official ones) are part of the multiple
sources of revenue pattern elaborated by the Nipponese TLC giant. More
specifically, the mobile service provider keeps 9% of the subscription fees that it
collects on behalf of the content providers, which exploit NTT DoCoMos well-
established billing system to gather their revenues (Sadeh, 2002).
The first positive results were not late. Elliott and Phillips (2004) assert that
81% of the worlds wireless Internet users were resident in Japan in the year
4 Location-based service were further subdivided into three main categories: services for the movinguser, services for the moving objects and services when both the user and objects are moving (ITU,2004)
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2000, and of these over 61% accessed the mobile Internet using the i-Mode
service (p. 142). At the beginning of 2001, instead, NTT DoCoMo estimated
around 20 million i-Mode subscribers (Sadeh, 2002), which became 24 million
in July of the same year (Srivastava, 2001). In 2003, NTT DoCoMo calculated
USD 236 as average annual revenue per i-Mode user (Srivastava, 2004). Finally,
at the beginning of 2006 the NTT DoCoMos subscribers were over 50 millions,
while data subscribers accounted for the 91% of the total subscribers (OECD,
2007).
In June 2000 NTT DoCoMo was awarded with one of the three 3G licenses
available for the Japanese TLC sector. Winners were selected under those
participants that comply with the minimum requirements established by the
government (beauty contest)5.
The Japanese major provider launched then its own 3G services (called FOMA)
at the end of 2001. Such services were based on one of the five ITUs IMT-2000
standards called W-CDMA, which allowed voice and data services, circuit and
packet connection modes and high speed connections (from 384 kbit/s and up to
2Mbit/s) (Srivastava, 2004). At the end of January 2004, NTT DoCoMos 3G
service subscribers went over 2 million units.
Another important step made by NTT DoCoMo still at the end of 2001, with a
clear aim of getting ready for future investments abroad, has been the passage
from cHTML to xHTML basic, the same language adopted by WAP Forum for
its last WAP version (WAP2.0). The intent of both parts has been to cooperate to
the creation of a more uniform mobile Internet environment, based on the
languages used within the wired Internet (DellAquila, 2003; Sadeh, 2002; WAP
Forum, 2002).
As anticipated before, sending and receiving email is the most popular feature
among the Japanese i-Mode users (Ito et al, 2005; Srivastava, 2004), who
5 Information obtained from ITU website (www.itu.int/net/home/index.aspx)
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considered such practice the most important reason for the use of the mobile
Internet (fig. 5).
Figure 5. Most important reasons connected to the mobile Internet use in Japan
Source: ITU Shaping the Future Mobile Information Society: The Case of Japan, 2004
According to Ito et al. (2005), the mobile Internet is particularly widespread
among young people. Teens between 13-19 years register a 90% of keitai
Internet usage (the heaviest users in Japan). After that age, mobile Internet usage
tends to decrease gradually (to advantage the voice traffic), proportionally to
age. However, mobile Internet adoption is still high among 20-29 year old
mobile phone users (86.4%).
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4.3.3. Conclusions
This case study has given a portrait of the i-Mode introduction in Japan and has
highlighted its most important features, showing that such a success has been
achieved thanks to many factors.
Apart from a simple and at the same time incisive business model, the i-Mode
has been successful because it has been proposed to a market that was