Navigating the Roadblocks to Consumer LBS Success

By Erica Karlsen

I have come to terms with something that I have tried to overcome for years now. Despite the fact that I work for a mobile technology company, staying on top of current trends and working with industry experts, at the end of the day I am still a mobile user like anyone else. I may know more about mobile location than most people but as a civilian, I still just want my mobile services to be practical or fun, easy, reliable and affordable.

Can’t we all just play together?

For example, I love my cool, new 3G mobile that happens to take fantastic photos and video. But it frustrates me no end that I can’t send pictures to most of my friends because they, like normal people (and in accordance with the chaos theory), have contracts with different carriers and there is no full interoperability for MMS, at least not here in Spain, and not in most other markets either. I often think how much money the operators aren’t earning because of this (and, on the bright side, how much I’m not spending). Apparently there is some way to upload your photos to the Web and your friends can be told to check them, but as a user, that just seems like too much trouble. It’s like a joke that requires so much explanation that it completely loses its funny.

I use this little anecdote to help illustrate why I see interoperability as crucial to the success of many location-enhanced mobile applications. Lots of these services, like buddy-finders and games, require people to participate based upon their personal connection to another user, not because they chose one provider over another. By limiting potential users to subscribers of the home network, participation takes a huge hit. The beauty of social applications is that by sparking the interest of just one person, you can end up attracting a multitude of new users, as friends invite friends to participate. However, an operator offering a buddy-finder application that doesn’t interact with subscribers of other networks will encounter very limited success. It’s unlikely that a simple service will be enough to encourage a person to switch to another provider; especially considering the difficulties often involved with number portability and contract obligations.

This may explain why, up until now, the LBS strategy of many operators has been to offer services that either rely on the "captive” audience of enterprise customers like Fleet Management, or do not require interaction between users, like simple location-based local information and navigation.

It’s not really surprising that operator-operator interworking has yet to be realized for LBS. The more complicated the service, the more difficult it is for mobile providers to reach agreements that are mutually acceptable. And location, that private and personal piece of information, might just be the mother of all complications. Not only do operators have to conform to often strict local/national regulations regarding the handling of sensitive personal information, but they may also devise their own specific processes and procedures that need to be considered when data is to be shared with another party. Reaching agreements under these circumstances can be complex and time-consuming.

But now we see that today’s more sophisticated networks and handsets are making the market for LBS much more attractive and the walls of the operator’s "garden” of services are crumbling. Today, some of the most innovative location-enhanced applications are social or community services which take the ideas of Internet-based communities like MySpace and Friendster to the streets. For a good example, check out Streethive which integrates group text and image messaging with location services like local posting and alerts. It’s in Beta right now but it’s a fair assessment to suggest that it, or another service (perhaps one offered by one of the popular online communities), will make a big splash in the coming months and years and thereby herald the coming of the consumer-oriented mobile location service.

So third parties are picking up where operators left off. But is there a future for operator-operator LBS interoperability? Better question: Should there be? I say no and that LBS roaming will actually be a bigger issue as carriers look to extend the reach of their location-based fleet management services and keep from losing their client base to the growing number of third party service providers. But that’s another topic entirely…

Finding the right price

When several industry experts were asked what they viewed to be the most important barriers to the adoption of location-based services (see the article entitled LBS 2006 - A Breakout Year? at Directions), the answers were all valid, ranging from privacy and positioning technologies to application availability and usability. However, it seems to me that the most challenging barrier identified is price, especially in the case of consumer-oriented services. Before I explain, I’ll just touch upon why the other barriers carry less weight.

The availability and usability of location services is something that mobile application developers worldwide are working industriously to improve as we speak. The graphics capabilities, memory capacity, Web access and other functions of newer handsets enable usability features that just a couple of years ago were limited to text messaging commands, WAP, and I-mode. It’s just a question of time before the availability barrier becomes irrelevant.

More precise positioning? It’s already becoming available in more and more regions, specifically through A-GPS. However, it’s worth pointing out that A-GPS is not a silver bullet (due to its performance indoors) and that high accuracy is not necessary for all location services; some basic applications meet expectations using simple Cell-ID positioning.

Personal privacy? It is my opinion that if some people are sceptical, there won’t be much you can say to convince them that their information will indeed be treated confidentially. If it’s a barrier for certain mobile users, that barrier will be difficult to remove. Let’s also not forget how sensitive this issue will be to negative PR. Any news about the misuse of location information could be disastrous for location services. Fortunately, I’ve only heard stories that show how strictly location information is protected. Here’s one.

Just a couple of months ago, a man in California made news when his car was stolen with his mobile phone inside along with his 11-month old baby. The mobile carrier refused to release the location information even though the phone’s owner was requesting it directly. Instead, they demanded a government subpoena. Fortunately all ended well as the car thieves took pity and left the car and baby to be found before the paperwork became necessary.

Pricing
, however, is key. It’s as fundamental a piece of the marketing mix as it is for any other product or service. Operators and ASPs (application service providers) would be smart to offer several pricing options such as pay per use, flat rates, or bundling application use in subscriber service packages. With the growing number of ASPs, operators will have to work out policies that not only protect their users’ privacy, but also make location data available at prices that make services, especially consumer-oriented services, viable and attractive. I heard about an operator who set a fixed price on its subscriber’s location data and when approached by a company with a proposal for a service that would help fight credit card fraud, it was not willing to negotiate. As a consequence, the deal was not reached and the operator missed out on an opportunity for a new revenue stream. Operators will have to be flexible in their approach to pricing if they want these location services to generate momentum that will in turn boost their data revenues. They have to consider each service’s potential and target market and do their part (within reason) to make location fulfil its promise.

In a nutshell

The two topics I’ve addressed here, interoperability and pricing, are interrelated. As direct LBS interworking between operators becomes less and less likely, ASPs are stepping in to fill the void and provide open access to location-enhanced services. Operators need to review their plans for "selling" location data to ASPs, selecting price points that ensure that the services are viable. The "cool" factor of location is something I believe will ultimately win over a considerable number of mobile users, especially in younger age brackets. But what is needed now is a kick-start that can come in the form of community-based services and accessible pricing.



Published Wednesday, April 26th, 2006

Written by Erica Karlsen



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