Hype vs.Reality of Location-Based Services - LBS at the end of 2001

By Jim VanderMeer

Rewind to 1995 and revisit a time when the Internet was rocketing through the venture capitalist stratosphere and dot-com startups where as thick as weeds in the new economy garden.At that time, the Federal Communications Commission (FCC) was preparing to issue its mandate requiring that wireless carriers be able to locate 911 callers within 50 meters of their location.In addition to the plethora of dot-com companies, there was a legion of small startups eagerly building services, hoping to capitalize on the mandate.Many of these new "wireless location" startups even thought they had a head start on wireless carriers when it came to location-specific content, services and revenue.

Fast-forward to December 2001.Location-based services (LBS) have yet to explode outside the wireless industry in which they are trapped.The year 2001 will be known as the year of the marketing "full-court press" for location-based services.Location determining technology, location-enabled services, and location-specific revenue opportunities were continuously positioned and hyped in anticipation of the availability of E9-1-1 Phase II compliant location technology.Unfortunately, no one bothered to tell the wireless carriers that a whole cottage industry was hanging on their efforts to meet an un-funded government mandate for locating wireless phones.

What does this mean to the masses of wireless consumers who are becoming increasingly addicted to their wireless phones? Nothing. These technology savvy consumers are not disappointed by the lack of services.Instead, they are either uninformed about the capabilities of location-based services or are just uninterested in location-based services at this time.

Finding Location in the FCC Mandate

Six years have passed since the FCC imposed the E9-1-1 Phase II mandate, and the wireless carriers are nowhere closer to finding your wireless phone.In response to the unobserved October deadline, the FCC has only raised a disapproving eyebrow at the pile of waivers from nearly all major carriers claiming that location-determining technology is not ready to meet the overly optimistic expectations of Phase II.The FCC expected wireless carriers to be able to zero in on emergency calls to within 50 to 300 meters (depending on the network in question) -by October 1st, 2001.Instead, the major carriers have been granted another year (until December 2002) to build out networks and were given additional time to meet interim handset deadlines.

The Hype vs.The Reality of LBS

Ambitious location-determining equipment manufacturers and location-based service startups have promoted location-based services with their share of hype.Here are just a few examples of the lessons learned in 2001.

Hype #1: Location-based services can be a stand-alone service rather than a critical component of a wireless data service.

Reality: Location-based services, as a stand-alone offering, were a victim of marketing pitches and unrealistic expectations.In fact, wireless data services, which include mobile commerce, messaging and entertainment often, overlook the natural correlation between these services and the critical role that location plays.As a result, attempts to go-it-alone by location-based services have not grown roots to weather the storm of location technology delays.

Hype #2: Location-based services will result in excessive amounts of spam, which will deter widespread acceptance by consumers.

Reality: Whoever controls your location will control the content of location-based messaging to your mobile device.Many analysts think location-based technology will enable the delivery of location-based spam - a potential gold mine for marketers.Location-specific spam will face even more scrutiny than Internet Service Providers face today concerning e-mail spam - Case in point: Just watch any Earthlink™ commercial offering to control spam as a service differentiator.

Wireless carriers will ensure they do not alienate their customer base by overselling based on location.Instead, they will see location-based services as a way to deliver immediate value to subscribers with minimal investment.Location, in its simplest form, will act as a filter to weed out the vast amounts of irrelevant data and transactions which will begin to bombard wireless subscribers on next generation devices

Hype #3: "People die with a cell phone in their hands, their location unknown".

Reality: Yes, people do die, but not knowing their location is not always the cause of death in all cases.Location-based marketing folks play-up the emergencies situations occurring in rural areas..According to National Emergency Number Association (NENA), nearly one-third of all accident victims in rural areas do not arrive at the hospital with an hour, largely due to the inability of public safety providers to quickly locate the victims, and reach the scene.As a result, the need for locating wireless users is over-hyped, but applicable in emergency situations, which take place in rural settings. This marketing hype reminds me of the slogan used by the NRA - "Guns don't kill people, people kill people." By 2005, the FCC, with the help of the wireless carriers, hopes to minimize the actual occurrences of this over-hyped statistic.

Hype #4: Location-based technologies will drive revenues to offset cost of E9-1-1 implementations.

Reality: The FCC tried to play location both ways with an un-funded mandate for E9-1-1, and wireless carriers are still trying to figure out how to recoup the potential $1 billion E9-1-1 implementation costs.This is one reason why wireless carriers are not meeting the goals of the mandate - they see it as a cost intensive project looming in the immediate future and not as a revenue bearing project two or three years down the road.

Hype #5: Collective fixation on E9-1-1 as the only enabler for location-based services has stagnated technology and service development in the U.S.

Reality: Take a good hard look at Europe.European service providers are slowly rolling out individual location-based services as business cases merit instead of waiting for high-precision location technology to be rolled out in support of a nationwide mandate such as E9-1-1.These European service providers are focused on business opportunities first; locating callers for emergency reasons is an afterthought.E9-1-1 implementation in the U.S.is actually stifling the growth of location-based services.

Hype #6: Consumer oriented location-based services will emerge with the rollout of Phase II E9-1-1 availability.

Reality: Rolling out location technology as well as building markets for location-based services will take years, not months.U.S.wireless carriers have decided that they need to have Phase II compliant networks in place before they begin to deploy consumer-centric services.

Hype #7: Location-based services can generate loyalty among the existing customer base while also generating untapped revenue.

Reality: Implementation and rollout of 3G technologies will drive loyalty as wireless subscribers upgrade their 2G and 2.5G technology.Location-based services will initially be the "throw-in" benefit, which will reinforce the subscriber's commitment to a particular wireless carrier.

Finding Location Opportunities Hidden in the Crystal Ball

Given the over-hype surrounding location-based services in 2001, these are my predictions of what lies ahead for location-based services in 2002 and 2003.

Prediction #1 2002 will be the year the wireless carriers scramble to put location technology in place nationwide.2003 will be the year of launching location services targeted a broad consumer market.

Prediction #2: The FCC may revisit E9-1-1funding for wireless carriers, given the downturn in the economy.This will help offset the lack of location-based revenues, which will have failed to materialize in 2002.

Prediction #3: Many location-based service providers will not make it beyond 2002.Like U.S.Wireless, which filed for bankruptcy protection in September 2001, other location-based service providers will disappear while waiting for the wireless carriers to rollout E9-1-1technology.Location-based service providers will need to re-examine their business strategies and choose one of two paths:

  1. Weather the storm and wait for wireless carriers to rollout E9-1-1compliant technology or;
  2. Re-invent their service offerings and technology for adoption outside the still developing location-based services market

Prediction #4: Location "ecosystems" will begin to appear inside enterprise and niche markets in 2002 and 2003.Location-based information and technology will find promising growth in "proximity" markets.In particular, identifying people and resources in a "closed environment" such as an amusement park, shopping mall, or sporting facility.People or mobile assets will come into the range of wireless LANs or even 802.11 enabled kiosks and will be serviced based on their location.These technology rollouts will be the true litmus test for widespread acceptance of location-based services and marketing.As a result, these "guinea pig" consumers will be effectively targeted with location-specific information and promotions (in an opt-in basis) as a pre-cursor to larger location-based service offerings.

Prediction #5: Building markets for location-based services will take us into 2004 / 2005.

Location-based services are alive and kicking.Unfortunately, the market infrastructure and market development are lagging and, as a result, revenue-generating services are waiting to be discovered.I suspect that not until 2005 will you hear the following the next time you board a commercial airline flight - "At this time the captain has requested that all electronic devices be turned off in anticipation of takeoff.Federal law strictly prohibits the use of cellular phones, pagers, GPS receivers or personal location devices at any time during this flight."

Published Thursday, January 17th, 2002

Written by Jim VanderMeer



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