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HORIZONS Issue 2, Vol. One: US Mobile Marketing of 10, May 2007

Hewlett Packard: Ami H. Mehta: [email protected], Scott Berg: [email protected] Denuo Group: Christian Kugel: [email protected]

MAY 2007

At 75% household penetration, the US mobile market represents an attractive frontier for advertisers. Not just because of the penetration, but also because the mobile phone is an incredibly personal place for communicating messages. And yet some marketers thus far seem reluctant to incorporate it. What is keeping them at bay? And how might HP make use of this personal platform?

US Mobile Marketing

US Mobile Market: The Essentials

New Opportunities, New Challenges

Unique Ecosystem Defines Approach

Carrier Differences Go Beyond Brand

MAY 2007

To bring a mobile effort alive, marketers need to under-stand the ecosystem in which the industry operates. This deep dive looks at the six interconnected entities of the ecosystem, what roles they play and how far in ad-vance planning should start. Pages 6-7

RIZONS H P E R S P E C T I V E & A N A L Y S I S O F E M E R G I N G T E C H N O L O G I E S

A PUBLICATION OF THE DENUO GROUP TM

THIS MONTH WE FOCUS ON

Snapshot

What age segments are fueling US mobile growth? And why exactly are they signing up? These are just some of the questions an-swered in this month’s Snapshot. The overview also provides a look at what costs are associated with a mobile effort. Page 2

Framework Deep Dive Deep Dive

If US mobile penetration is so high, then why isn’t every advertiser embracing the platform? Exploring the history of mobile and look-ing at what drives con-sumer usage begins to shed light on the delicate complexities behind mobile marketing. Pages 3-5

Four companies essentially make up the US mobile marketplace: AT&T, Sprint-Nextel, T-Mobile and Veri-zon. Most consumers might be hard-pressed to see too many differences between them, but that doesn’t mean differences don’t exist. Pages 8-10

MAY 2007 ISSUE 2, VOLUME ONE

www.denuogroup.com

Contacts

Entire Contents © 2007 Denuo Group. All Rights Reserved

HORIZONS is a Denuo Group publication developed in partnership with Hewlett Packard. Its objective is to help inform HP divisions of emerging marketing platforms and new technologies. Throughout its coverage, HORIZONS aims to provide understanding, perspective and marketing relevancy as it pertains to HP initiatives, businesses and/or products.

Hewlett Packard Ami H. Mehta [email protected]

Scott Berg [email protected]

Denuo Group Christian Kugel [email protected]



MAY 2007

US Mobile: The Essentials Mobile marketing represents the use of a communications platform to integrate content delivery and facilitate conversa-tions directly with consumers. This is often achieved as a cross-media communications program or as a component of a distribution strategy. Mobile marketing is unique in that it often requires the consent or active participation of the consumer before programs can be initiated or content ex-plored.

Target Relevance In the US there are 233 million mobile subscribers. World-wide penetration recently eclipsed two billion, capping off an amazingly strong year of growth in 2006 (It is estimated a billion mobile phones were sold last year; approximately 150 million inside the US). Teens (13-18) and young adults (25-29) are the fastest growing mobile segments in America with almost three-fourths of each age group owning a mobile phone. There does not appear to be any gender skew in the US sub-scriber base (52% female, 48% male).

User Experience Although an older age group may comprise the largest segment of the US mobile subscriber base, use of data services invariably skews younger. In fact, 75% of those under 40 use such services while only 17% of those above 40 subscribe to them. Although mobile phones are capable of a broad range of features, text messaging, web brows-ing, and search are the three most prominently utilized functions. Text messaging usage continues to be the lead-ing feature among those with data plans. It is estimated 4 out of every 10 mobile users actively send and receive text messages. In the coming year, continued consumer adop-tion of web browsing, streaming video, and multi-media messaging is expected. Continued carrier roll-outs of ad-vanced networks and education/familiarity of these func-tions will contribute to the anticipated rise in everyday use of mobile data features and functions.

Key Players Mobile represents one of the most complex ecosystems in marketing, involving a variety of companies that serve dif-ferent functions. To effectively and efficiently launch a mo-bile marketing initiative, an advertiser needs to work with partners through each stage of the process. These part-ners can be categorized into the following groups:

• Carriers/operators

• Aggregators or gateway partners

• Publishers

• Developers

• Brands

Regional Relevance Few platforms are as globally relevant or as well pene-trated as mobile. Adoption rates in some regions may vary, but most advertising efforts can be scaled across markets to activate an experience regionally, domestically or globally.

Cost Drivers The majority of mobile programs are not sold like typical media opportunities. As such, there are few to no rate cards available to determine how much a mobile initiative might cost. There are known cost drivers, however, for the different activation possibilities. For example, when considering advertising on a site (delivered to a mobile device via a wireless application protocol or WAP), CPM costs vary widely even for standard banner ads – some can be as low as $35, others as high as $100 or more. If constructing a branded WAP site from scratch, an ad-vertiser can expect to invest for development, production, and hosting fees. These too vary based on the complexity of the build. A messaging program requires opt-in functionality, and therefore is not priced on a CPM. For these executions, a flat cost for messaging tiers, along with development and hosting fees, are standard. Including any downloadable items require additional development and production fees, as well as partnering with a second vendor to host and serve the content.

Recommendations Messaging and WAP based programs are viable today. However, we do not believe mobile marketing programs belong as elements of every HP advertising initiative. However, we do recommend HP actively consider mobile for any of the following:

• Marketing communication programs that involve promotional elements

• CRM initiatives

• As an element of search initiatives

• Programs that enable content to be shared in a new manner

Snapshot

Framework Deep Dive

75% of those under 40

subscribe to data services such as text messaging, mobile video and music channels, and on-the-go Internet

access

MAY 2007



MAY 2007

Mobile Offers New Opportunities, Challenges Boasting an adoption rate that outpaces those of PC ownership and Internet ac-cess, the mobile phone stands as one of the fastest growing consumer technology platforms ever. Today, three-fourths of U.S. households are mobile subscribers, and sales of the devices remain strong despite some slowdowns in other consumer electronics.

And with domestic penetration projected to grow an-other 16% by 2010, nearly every American may soon have a mobile phone. Continued advancements in functionality and “dummy-proof” design, coupled with cost decreases in technology, are helping fuel con-sumer purchases. However, while usage figures continue to rise, US marketing efforts have not followed suit. For in-stance, in 2006, only 13% of interactive marketers used a text messaging effort and even fewer (11%) leveraged a WAP based initiative. Such statistics, however, should not be solely perceived as advertis-ers being reluctant to embrace mobile marketing – after all, $1.4 billion was spent by advertisers in the US on mobile marketing in 2006 and that figure is set to double in the next five years. The initial reluctance can be viewed as a positive signal that most marketers are recognizing mobile as a uniquely personalized communications platform – and for that reason want to be very careful and con-siderate about any messaging approach. If there is hesitation on the part of marketers, some of it might be due to the complex ecosystem within which mobile resides. Regardless, there is tremendous opportunity and reward in mobile for those advertisers who can con-nect. For example, one popular chain store used SMS mobile coupons to encourage sales of a new product. A geographically targeted WAP (Wireless Application Protocol) effort provided a 4% click-through rate and lifted that region’s store traffic by over 20%. While this approach would not work for every marketer, it does demonstrate that understand-ing the inherently different value exchange of mobile can result in powerful engagement and monetary success. Landscape It is amazing how far the mobile marketplace has

advanced since Motorola first introduced the bag phone in 1983. What is even more amazing is that through the late 1980s, mobile phones remained large, clunky devices, and were out of reach for the average consumer. It was not until the mid 1990s that significant advancements transformed mobile phones into the sleeker, smaller iterations we have become accustomed to today. This is around the same time carriers also made strides in digital signals, improving the communica-tion. This, coupled with lower prices, started to make mobile phones attractive to a broader range of consumers. The current form of data transfer through the cellular network is considered the third generation (3G) of mobile communication technol-ogy; the majority of carriers utilize the 3G format. The advancements in data transfer have made recent mobile phones capable of a wide array of features. It was only several years ago that text messaging was considered revolutionary. Nowa-days, it is standard fare. More attention is brought to functions such as mobile web browsing, stream-ing music and video, and built-in cameras or cam-corders. Content such as ringtones, games and radio are also fighting for consumer interest. Typically, the US market has been slower to embrace some of these new features, though higher adoption is evi-dent amongst the younger demographic. At pre-sent, most of these newer technologies and accom-panying features launch in Asia, particularly in South Korea and Japan, before moving west to Europe and finally, the United States. With each year, however, the technology divide between the US and its international counterparts narrows. The Most Personal Medium Few media platforms can match the mobile phone’s level of personalization. This partly explains why a

$1.4 billion was spent by advertisers in the US on

mobile marketing in 2006 and

that figure is set to double in the next five years.

Snapshot Framework

Deep Dive

MAY 2007



MAY 2007

SMS Crazy: In 2006, Americans sent 160 billion text messages — that’s 300,000 every minute.

mobile phone shopper will evaluate dozens of op-tions before settling on a particular model and car-rier. Shoppers look for the right combination of aes-thetic appeal, size, and functionality. Once pur-chased, the personal connection people have with their phones continues to grow. From the address-book to fancier ring-tones to colorful wallpapers, users can shape when, how and where they see and receive information through their mobile phone. While every age group may have their own inter-ests, there is a resounding similarity in how they define and perceive their relationships with their phones. These key themes are the following:

• Provide a human connection

• Allow for self-expression of one’s iden-tity

• Provide entertainment

• Serve as a lifeline to the outside world when away from the computer or TV

Consumer Usage and Functions While it is true that those over the age 40 consis-tently use their mobile phones for traditional calling and younger consumers are more likely to use the more advanced capabilities, activities like checking sports scores, getting weather forecasts and order-ing movie tickets are common among both ends of the age spectrum. Another function that appears to be least influenced by age is the Short Message Service (SMS), or text messaging. From tween to seniors, Americans sent 160 billion SMS messages in 2006 – that is roughly 300,000 every minute. The simplicity and straight-forward nature of the function may explain why it has been adopted by over 50% of US subscribers, and why it remains amongst the top services shoppers look for when choosing a carrier and phone. Recent data suggest banking via mobile web, watching video and GPS services are the next three likely features to break into mainstream usage. According to proprietary research recently con-ducted by Denuo, the cell phone is the quintessen-

tial embodiment of what media is being used for to-day. For teens, the phone is a form of human connec-tion as it enables greater autonomy and facilitates their social lives. At the same time, their personal style is reflected and reiterated through their phones’ appearance and functionality. The same perspectives are shared by young adults who tend to rely even more heavily on their mobile phones. Perhaps unsurprisingly, older adults share a different perspective. For them, mobile phones are a utility most akin to the traditional telephone. Consumer Receptivity to Mobile Marketing If you ask consumers whether they would prefer to watch TV and listen to the radio without commercials, the responses are likely to be “yes”. That is, until it becomes clear that the programs they enjoy would no longer be possible to produce without the support of advertising revenue. Given the more personalized nature of mobile phones, it is hardly surprising that consumers dislike the notion of mobile marketing when asked about it — at least until they see benefits from it (more content, access to information on the go, incentives etc). This suggests that mobile communications may need to be especially relevant, valuable and useful to capture the attentions of its viewers. Some US consumers realize that advertising helps subsidize costs associated with content generation and de-livery. Others are simply used to seeing advertis-ing everywhere else. While consumers may con-sider the idea of mobile ads annoying, this does not mean they will ignore them, especially if they should be presented with engaging and worthwhile messages.

M O B I L E O F F E R S N E W O P P O R T U N I T I E S , C H A L L E N G E S

MAY 2007 ?

Untapped Potential: Consumers admit they’d rather not have advertising on their mobile phones. But when the advertising brings value, their opinions change.

Given the exceptionally personalized nature of mobile phones, advertising may need to be very relevant, valuable, and useful to capture the attentions of its viewers



MAY 2007

M O B I L E O F F E R S N E W O P P O R T U N I T I E S , C H A L L E N G E S

MAY 2007

Thus in developing mobile marketing initiatives, HP should always seek to respect the user experi-ence by minimizing the level of disruption an ad will create, and ensure the communication gives users a valuable information exchange. One example of minimizing disruption in mobile advertising is the use of a “double opt-in” for SMS campaigns. In this process, the consumer is asked to complete an online form that grants the advertiser permission to include him on an outbound email newsletter. Once that form is submitted, the advertiser’s message is sent to the consumer’s cell phone. Before the consumer can view the message, he is asked one more time to affirm his interest in the newsletter subscription. The “double-opt-in” is seen as preserving the integrity of the experience. In addition, it en-sures that the subscriber list reflects a very in-terested set of individuals who desire participa-tion. A mobile message, when delivered in the right context and during the appropriate time, can successfully extend brand communication in ways other platforms cannot necessarily achieve. Mobile programs that successfully tap into the consumer’s motivations can reap signifi-cantly higher-than-average interaction results. Marketing Considerations When creating a mobile marketing initiative, it is recommended HP keep in mind the following:

• Momentum of the marketplace: There is scale and viability in the mobile mar-ket whether amongst those that are en-

gaged or those likely to be engaged. Remember three quarters of US house-holds own at least one mobile phone.

• Consumer receptivity: While younger consumers do tend to spend the greatest amount of time with mobile data services, marketers can achieve connections with other demographics as long as the acti-vation is relevant, timely and valuable.

• Extending the message: Mobile encom-passes both an extension of habitual be-haviors (i.e. heavy users of search will tap into the mobile functionality) and of traditional promotional activities. As on other platforms, promotional opportuni-ties are not long term engagements, but they are currently the largest area of op-portunity for most brands.

• Build around existing media behav-

iors and campaigns: For example, ad-vertisers have permission to actively pur-sue poll or voting activities, effectively using mobile as a complimentary channel to existing communication platforms (i.e. a means to enter a contest or sweep-stakes). Behavioral targeting is now also available.

• Over-manage consumer expectations:

Always adhere to best practices provided by the Mobile Marketing Association. Consumers use their mobile phones with a very different mindset compared to how they use their TV or computers. As such, a mobile marketing message should be timely, location-relevant, and – whenever possible – immediately action-able.

Mobile Feature Pros Cons

WAP Banner Ads

Banner placements with-in on and off deck carrier Web browsing pages

• Extension of digital strategy

• Real time nature of device

• Uncluttered environment

• Available carriers and content publications

• Creative experience by agen-cies for necessary executions

• Unknown consumer reaction

Dedicated WAP Sites

Specific mobile web browsing destination

• Additional channel for online content

• Fulfills consumer on-the-go needs

• Growing usage among cell phone sub-scribers

• Domain extension debate

• “Off”-deck

• Consumer value

Search

Text based and voice based search functionality

• Natural extension of surfing behavior present today

• Development is ongoing

• Revenue and branding opportunity

• Ensuring simplicity and rele-vance to the consumer

• Ability to deliver a purchase

• Available content to satisfy searches

Multi-media

Messaging

Messaging that combines au-dio, image and text

• Delivers on sight, sound and motion

• Known behavior

• Developed technologies

• Not yet interoperable with all carriers

• Available assets

Current Options: The above chart displays four advertising roads marketers have tried on mobile, as well as some advantages and disadvantages for each.

A mobile ad, when delivered in the right context and during the appropriate time, can successfully extend the brand message in ways other platforms cannot necessarily achieve



MAY 2007

for an agency or brand to have direct interaction with a carrier unless it is part of a larger alliance.

• Agencies & Advertisers: Newest to the ecosys-tem, marketers entering the mobile space are from a range of verticals. While early participants were primary from within the entertainment industry, the past year has seen a vast range of activity from brands such as Coca-cola, Kellogg’s, Starbucks, P&G, HSBC, Nike and ESPN. A recent Forrester study found that one-fifth of all advertisers use mobile as a communications channel; an additional 23% plan to get involved in the near future.

• Aggregators/Boutique aggregators: They repre-sent a handful of mobile telecommunication com-panies that act as a third-party between content providers (brands or publishers), mobile operators and the consumer. They are the gateway between the carriers. It is the responsibility of the aggrega-tor to not only facilitate the development, distribu-tion, and hosting/payment of messaging and con-tent programs, but also to ensure that each pro-gram abides by best practices and is approved by the carriers. Most timelines and processes are dictated to agencies and brands from these enti-ties. It is important to understand the capabilities of potential aggregator partners because some are held in higher esteem than others. Additionally, due to the early infancy of the marketplace, it is not rare for some to alter their business plans. As such, few are fully profitable today. Some major aggregators include Crisp, Third Screen Media, mQube, and mblox. Boutique aggregators include ipsh! and Hyperfactory.

• Content Publishers: Almost all major media com-panies have begun to offer their content via the mobile phone (i.e. CNN, ESPN, MTV, or Nickelo-deon). Once those same media companies navi-gated the complex waters of the ecosystem to make their own offerings available, they began to investigate mobile marketing opportunities to sell to their advertising partners in print, online or in broadcast. This happened slowly through beta

Unique Ecosystem Defines Market Approach One of the major challenges of incorporating a mobile component into a marketing plan is managing and working within the industry’s complex ecosystem. Unlike the worlds of analog or conventional interactive media, the marketing ecosystem of mobile is very different and interacting with it often requires specialized skills.

Snapshot Framework Deep Dive

MAY 2007

Due to sensitivity around control over their networks, the wireless carriers are much more than ISP-like data pipes. While few carriers will admit it, the worst fear these compa-nies have is becoming a simple middleman that merely transfers content from one end to the other. To avoid this outcome, carriers try to maintain strict control over data services and which content is given what level of attention. Additionally, the carriers closely monitor all marketing ef-forts as a means to ensure they are not placing too much demand or stress on the network. Most carriers reserve the right to shut down a marketing campaign if they feel that it doesn’t abide by their best practices or if it causes unmanageable spikes to network traffic. This dynamic is driven by the carriers’ desires to preserve a positive user experience, abide by strict privacy policies and to capture some of the value associated with market-ing budgets. The carriers essentially demand a piece of the action to allow marketing programs to run across their networks. As a result, different suppliers and processes have evolved to manage this aspect. Third Parties: Content & Service Providers The mobile marketing ecosystem is complex. Platforms that have come before mobile (and those that will follow) have all required dedicated resources, technologies and processes to facilitate marketing programs. Mobile is no different. By working to understand who the players are and what technology requirements are necessary, HP can establish itself as a leader. In the process, HP will be bet-ter prepared for future changes that happen within the mobile ecosystem. Examples of current content and ser-vice providers are listed in the sidebar at left. Defining the Mobile Ecosystem The mobile ecosystem is comprised of six interconnected entities: Advertisers, aggregators, content publishers, carri-ers, industry organizations and consumers. Each of these has distinct partners, providers and most importantly, a role in the process. For a brand or advertiser to bring a mobile program to market, they need the direct partnership of an aggregator or content publisher (at a minimum). It is rare

Examples of Content Providers

Examples of Service Providers



MAY 2007

Process & Timelines The unique players within the mobile ecosystem exist to help facilitate more mobile experiences for con-sumers. While at first the process of activation seems multi-layered, the ecosystem is designed to ensure that the consumer experience is not compro-mised. It is important to:

• Strategically plan a mobile extension as it relates to overall program goals, not as an afterthought

• Identify the best mobile features and consumer behaviors to activate against (WAP site, WAP banner ads, messaging, etc.)

• Select the best suited vendor or publisher partner to facilitate program activation

The process can then be summed up with two words: “plan” and “partner”. The hardest part is planning early enough to success-fully activate within the mobile platform. The planning cycle for mobile is significantly longer than that of digital — something often not realized by digital agen-cies or marketers responsible for digital. In reality, mobile is most akin to the timelines of print or the production of a 60 second commercial. The option to offer a mobile program across a single carrier or cross-carrier presents lead times of up to several months. The carrier has ultimate approval of the program and each carrier sets their own pace for those program approvals. The vendor partnership also impacts timelines. Contracts need to be agreed to and signed. Because no buying tools exist for mo-bile like they do for TV, print or online, a contract or licensing agreement with an aggregator is most often a subcontracting process. Allocating dedicated re-sources within both the agency and at HP will ensure that all key timing milestones are clearly communi-cated and known in advance. The easiest way to think of the mobile planning proc-ess is to actually work backwards. Start by asking when the program will launch. From this date, move backwards at least eight to 12 weeks. That is when a completed program overview needs to be presented to carriers for approval. Note the time needed to compile all the elements of a carrier overview may vary. Generally, it is recommended to have four to six weeks of development time. This is not inclusive of the time needed to select a partner. That could add anywhere from two to four weeks depending on legal reviews and contracting requirements. Throughout this process it is critical to keep in mind the overarch-ing goals of the program. Whether it be entries to a sweepstake or sponsored integration to facilitate a mobile vote, the partners selected should be the best of breed at facilitating the activations that most align with the goal. It is highly recommended that potential partners be evaluated consistently across the organi-zation and that no long term partnerships be agreed to until several program implementations have taken place.

tests and exclusive partnership opportunities but now mobile is quickly becoming a consistent proposal element. Despite low adoption to date, companies like MobiTV and Qualcomm with its MediaFlo product are bringing video content to the phone. Challenges exist for any entity that brings mobile content to the marketplace as all content must be adjusted for the mobile platform and to various screen sizes. This translation has sometimes led to frustrating results – each experience, however, becomes one to learn from.

• Mobile Carriers: Although there is a lengthy list of US “mobile phone” companies, the big four own nearly 70% of the market. The recent con-solidations of Cingular and AT&T and of Sprint and Nextel have further increased the strong-hold of the leading carriers. Each is constantly fighting for market share and average revenue per user. Voice services are no longer a money maker for them. At the end of 2006, Verizon announced it would begin, at a cautious pace, WAP banner advertisements with certain pub-lisher partners. This announcement came sev-eral months after Sprint-Nextel began serving WAP banners within their on-deck mobile web browsing pages. In effect, some of the carriers are becoming media companies themselves. Others such as Cingular have touted exclusive relationships – namely, with HBO and Apple iTunes – to entice subscribers.

• Industry Organizations: The mobile market-place has no governing organization today. Unlike the role that the FCC plays for broadcast and radio, the entities within mobile are essen-tially self-governing. The Mobile Marketing As-sociation, CTIA and the Interactive Advertising Bureau have all stepped forward to establish committees, best practices and to provide an outlet for those within the ecosystem. The chal-lenge is that membership to these organizations is voluntary and there is not yet consistency across each group’s published guidelines.

• Consumer: The ecosystem exists to benefit the consumer. It is important to consider where they fit into the mobile experience and that they chose their own interactions within mobile.

The additional elements of technology and marketing strategies further contribute to the complex ecosys-tem. Carriers in the US operate on two competing networks, GSM or CDMA. This means that sub-scribers to one carrier will not have the exact same features and functions available to them as others on a different network. Further, Verizon operates a BREW platform which requires different developer specifications compared to other US carriers that operate a JAVA based plat-form. There are also several activation options for marketers today. Most often, the strategies are separated between Messaging and Content. Mes-saging is comprised of SMS or soon Multi-Media Messaging programs. Content is recognized as WAP sites, WAP banners or downloadable content.

U N I Q U E E C O S Y S T E M D E F I N E S M A R K E T A P P R O A C H

MAY 2007

The hardest part is planning early enough to successfully activate within the mobile platform. In reality, mobile timelines are most akin to those of print or the production of a 60 second commercial.



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Carrier Differences Go Well Beyond Brand Names

Snapshot Framework Deep Dive

More than ever, carriers face challenges to their core business offerings and are forever competing amongst each other to keep and win new subscrib-ers. This coming year promises to bring continued change within each of the four carriers as new tech-nologies continue to roll-out nationwide and as part-nerships are forged to continue the ongoing battle of differentiation. Headquartered in Atlanta, Georgia, AT&T is the top carrier with nearly 61 million subscribers. It will be the network carrier for the much anticipated launch of the Apple iPhone in June. America’s Largest Network AT&T is the nation’s largest wireless network in terms of overall subscribers. AT&T’s network operates on GSM for voice and GPRS for data. They are the only carrier in the US that has launched a UMTS 3G net-work, although it is still a work in progress as only the most populated areas can rely on full coverage. The hope is that the network will be fully functioning across the US by the end of 2007. This will enable more customers to have access to MobiTV content, iTunes, XM radio, SMS, mobile Web, MMS and pic-tures. All this in addition to relationships that AT&T has with MySpace, Yahoo Music, Napster and Ameri-can Idol continue to make it a dominant and innova-tive force. AT&T aggressively promotes to its customer base (current and anticipated) that they offer “Rollover” service, or the ability to carry unused minutes over from one month to another. This is also in tandem with their recent marketing efforts aimed directly Sprint-Nextel which claims that it has the network with the fewest dropped calls. The recent name change from Cingular to AT&T is a result of a late December 2006 approval by the FCC to merge AT&T and BellSouth Corp. The move was

MAY 2007

The domestic mobile marketplace is dominated by the “big four” carriers: AT&T, Sprint-Nextel, T-mobile and Verizon. These four have come to existence through a long history of mergers and acquisitions. Two of the carriers also have strong roots in the global marketplace.

somewhat surprising given the commission had been deadlocked for months on end. The re-branding effort has started, however, with new service offerings, bun-dle options and undoubtedly some consumer confu-sion. AT&T also announced that they will look to ad-vertising on mobiles as additional revenue. No Longer Just About Voice AT&T’s video service has a notable offering not avail-able on competitor’s services: HBO. Scenes from top HBO shows like Sex and the City, Entourage and the Sopranos are available for an extra monthly subscrip-tion fee (on top of the monthly charge to access AT&T Videos). AT&T also maintains the exclusive on embedded iTunes software in phones. It is by no means a per-fect solution and still suffers from many drawbacks but for iTunes devotees, it is an option to keep their cell phone music files organized in the same manner as they do their PC files. Although AT&T leads in total subscribers, it is second when it comes to use of mobile features like web browsing and checking email: 17% and 13%, respec-tively. With headquarters in both Kansas and Virginia, Sprint-Nextel came into existence in 2005 through a widely publicized merger. With 51.9 million subscrib-ers, the company owns just below 23% of the market. A Merger of Equals Today Sprint and Nextel are one but they have two nationally recognized brands: Sprint PCS and Nextel. The merger was first proposed to the FCC in 2004 and approved in August of 2005. The two companies were third and fifth, respectively. The net outcome of the merger created the third largest US carrier (a po-sition previously held by Sprint). Sprint-Nextel, or Sprint which is the accepted shortened name, also

AT&T (Formerly Cingular)

Sprint-Nextel

Now more than ever,

carriers face challenges to

their core business

offerings and are constantly competing amongst

each other to keep and win new

subscribers



MAY 2007

provides a pre-pay ser-vice via Boost and is the network behind some of the leading Mobile Vir-tual Network Operators. Before the merger with Nextel, Sprint’s network lagged far behind that of Verizon. Since the merger, Sprint has ag-gressively rolled out new features and phones to better service its customer base. They operate a CDMA voice network and the Power Vision EV-DO service which provides most of the mobile en-tertainment services to subscribers. The net-work does, however, lack full voice coverage across the US, making the carrier dependent on analog roaming to fill the void. They have also had some difficulty in combining the CDMA and iDEN backend network infrastructures introduced as part of the merger. Power Vision is the public face to Sprint’s EV-DO offer-ing. Content in the form of Sprint TV (MobiTV and Sprint content), Sprint Radio, Music Store, Web, Pic-tures, games and wireless chat are all made available through this service. Unlike Verizon, Sprint Power Vision customers don’t have to be in an area fully cov-ered by EV-DO to experience the content. Slower data speeds still make the content available, but with a lesser quality than when viewed/downloaded with a full EV-DO connection. Sprint has also deviated from Ver-izon in that it has deployed a JAVA based application system as opposed to a BREW based one. This al-lows for Sprint customers to more easily use third-party applications and software. Additional Revenue Streams & Sponsorships Sprint has developed a couple of key ventures over the past couple of years to open additional revenue streams and expand its customer base. Two years ago, it announced a partnership with several cable entities that allows for Sprint service to be bundled with cable bills. Those same cable entities announced at the same time an initiative to build out advanced fea-tures that would work with Sprint handsets. Along those same lines, Sprint and Nextel have long enjoyed major sponsorships that extend the brand presence. Sprint-Nextel is the official sponsor of the NFL and NASCAR. It holds the naming rights to the Sprint Center in KC and is a corporate sponsor of the Las Vegas Monorail. Sprint also announced the Sprint Mobile Media Net-work last year which makes available WAP banner

C A R R I E R D I F F E R E N C E S G O W E L L B E Y O N D B R A N D N A M E S

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inventory to advertisers. With 25 million subscribers and 10% of the market, T-Mobile represents the smallest of the major net-works in the US (it’s the world’s sixth largest wire-less service provider). The brand is a subsidiary under Deutsche Telekom and was previously known as VoiceStream Wireless. Making Up for Lost Time T-mobile is generally the laggard of the domestic carriers and is currently fourth out of the four top tier US carriers. T-mobile has the smallest network but does have an extensive roaming agreement with Cingular (Now AT&T). Typically, the brand competes on price: consumers get more minutes for the dollar. It is a message that is especially rele-vant to a young audience, which T-Mobile adver-tises heavily against. It is no secret that much of the brand recognition for T-Mobile comes from the young Hollywood set, some of whom are rarely without their sidekicks. Look for the new Sidekick 3 to be the hot accessory item for some this year. While T-mobile has gone to great lengths this year to improve its GSM voice coverage, it still has a long way to go with regard to data offerings. It cur-rently offers an EDGE data network connection to subscribers but it has yet to roll out a real 3G

Fierce Competition: As production and tech-nology costs have declined, the fight between carri-ers to win over subscribers has intensified. Al-though AT&T currently has the most US customers, its lead over Verizon remains razor thin.

T-Mobile

AT&T’s re-branding effort has

started with new service offerings, bundle

options and undoubtedly

some consumer confusion. AT&T also announced that it will

look towards mobile

advertising to generate additional revenue.



MAY 2007 MAY 2007

broadband offering. Despite T-Mobile operating on the internationally recognized network and having handsets with SIM cards, customers do not have automatic access to international roaming. T-mobile does stand out against the rest of the competition in one key area. In 2006, T-mobile was given 11 awards from J. D. Powers. Most no-tably, they swept all surveyed regions in the cus-tomer care category. They also took home awards in customer satisfaction and call quality. Additionally, T-mobile was the first U.S carrier to launch a ring-back tones service nationally ("CallerTunes"), video messaging and "HiFi Ring-ers" which are ring-tones of actual songs. These entertainment options play nicely into agreements that the carrier has with Atom Films, FIFA, the NBA and the WNBA. Expect to see even more services and features like these once T-mobile rolls out broadband network speeds. It’s all in the Licenses In October of 2006, T-Mobile stated that it planned to spend in excess of $2 billion to install the equip-ment necessary for it to deliver multi-media ser-vices to its customers. This was after the company spent over $4 billion in cellular licenses to be the top bidder in the FFC auction held during the sum-mer of 2006. T-mobile estimates that by 2008, it will have new services rolled-out to its customers. These ser-vices will enable multimedia functionality currently unavailable from the carrier such as music downloads and streaming video. Until then, current T-mobile users are a long ways off from being able to use their phones in the same way that some

C A R R I E R D I F F E R E N C E S G O W E L L B E Y O N D B R A N D N A M E S

mobile users are with rival networks. T-mobile is however bullish on its anticipated sub-scriber growth over the coming years. The carrier expects to grow from the current 24 million customers to between 35 million and 40 million by 2015. Formed from the Vodafone Air-Touch joint venture in 1999, Verizon is one of two US carriers exploring WAP banner that is offering “on-deck” WAP Banner advertising as a means to explore new revenue streams. With 59 million subscribers, Verizon con-trols just under a quarter of the mobile marketplace. It’s the Network Despite the fact that Cingular (Now AT&T) overtook Verizon as the largest carrier by subscriber, Verizon is still by far the best provider of coverage from the East to the West coasts. Thus, its current advertising slogan, “It’s the Network.” Verizon surged ahead of the competition last year with the long awaited launch of the Motorola Q. This handset has the ability to combine functions. Think email, windows mobile, text messaging and pre-recorded video with good call quality all rolled up into one machine, and designed to fit slimly in a suit jacket pocket or woman’s clutch. CDMA, BREW, V Cast, and EVDO Verizon provides the largest CDMA coverage in the US and also leads the other top carriers in 3G data coverage with its EV-DO service. Additionally, Veri-zon throws into the mix two other acronyms: BREW and V Cast. While sometimes (to the average con-sumer) they appear to offer the same features, they are in fact different. BREW or “Get It Now” is the implementation of Qual-comm’s technology. It is essentially a walled garden of mobile data options. These options are one-way, meaning a user is not able to download content of their choice to a BREW handset. V Cast is also a BREW application and the content is heavily protected by digital rights management soft-ware. Video and gaming content are the two big draws to the service. John Harrobin, Vice President, Digital Media and Ad-vertising at Verizon Wireless has recently described Verizon’s consumer messaging mantra as “engage and educate”. Verizon is taking the time to educate, and hence, upsell its customer base on data services that help personalize the device and create an aura of coolness or practicality amongst specific target seg-ments. At the end of 2006, Verizon announced that they would begin — at a cautious pace — WAP banner advertisements on certain Internet sites browse-able on its handsets. While this might have been news to some, it came as no shock to Sprint, AT&T, and other players within the mobile ad-serving space.

Verizon

This coming year promises to bring continued change within each of the four carriers as new technologies continue to roll-out nationwide and as partnerships are forged to continue the ongoing battle of differentiation

Capturing New Users: Carriers hope the addi-tion of video and music — as well as a host of other features — can help grow consumer usage and open doors to new revenue streams.

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