The Structure of the European LBS Market 2005

April 26, 2006

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Mobile location services have not taken off as rapidly as many observers expected a few years ago. Revenues from location-based service (LBS) in the European market were approximately €108 million in 2004. Over the coming five years, we believe this figure will grow to €2,183 million and account for 4.5 percent of total non-voice revenues. We have identified several important drivers which we believe will bring about a mass market breakthrough for LBS at long last. These include increasingly user friendly handsets, accelerated implementation of high accuracy, high performance positioning technology and an increasing emphasis among operators on data services to compensate for lower voice revenues. New E112 directives from the EU may also drive quicker implementation of high accuracy positioning technology among mobile operators in Europe. Once the European LBS market takes off, we believe the key market segments will be navigation, tracking and location-enhanced instant messaging.

Today, location is regarded more as a service enabler than necessarily a set of services in its own right. Mobile operators have been busy deploying a portfolio of mobile data services, and in this scurry to launch features such as MMS and Java, location-enabled services have been put on hold so far. Pan-European operators have so far been struggling to coordinate their overall mobile data efforts across their networks. Common location platforms are proving to be no exception – they are also taking some time to roll out.

It is still true that location is the key factor that distinguishes the mobile Internet from the fixed Internet. Location-based services are emerging as an opportunity to provide differentiation, a way to build customer loyalty and a new revenue stream. These statements are still valid, but to make it happen takes much longer than have been predicted before by all parties in the value chain.

While takeoff has been slower than expected, the signs are pointing towards more services becoming available. For example, although Europe's operators typically only offer Cell-ID based positioning, they are opening up their positioning information to third parties as well – thus enabling more application and services providers to take advantage of location data.

There are some clear operator trends today in Europe that are very positive for LBS:
  • Growing competition among the operators on more mature markets.
  • e-launch campaigns of LBS.
  • Increasing interest in high accuracy technologies.
  • Position wholesale on a larger scale.
  • Emergency call within EU. There are still possibilities for mandates pushing the operators to invest in location-based services.
  • New handsets offer new possibilities. More attractive LBS thanks to larger storage memory, colour screens, Java, megapixel cameras and MMS.
The foremost reason for the slow up-take is that the services offered up until today have simply been too slow and complicated to use. We do believe in integration of LBS in many services, but it will once again take some time before this is done in a way that is really appealing to end users. Already now it is possible to introduce appealing services within certain areas. One such area is child tracking and alert or positioning services for the elderly. However, a successful service will require some vertical integration, dedicated devices and end-to-end management of the service. Such a service could be delivered by existing operators, but we believe that the first ones to really make it happen might very well be dedicated service providers.

There is a trend of more collaboration among the vendors. This is very important since there has been a lack of collaboration and standards in the past. Several partner constellations have appeared and two examples are a group around TruePosition and one around CPS. These two partner groups have the intention to offer end-to-end solutions including everything from positioning technologies and platforms to end-user applications. To summarise, the time has come for location-based services. Operators you are in the front seat. Some final advice to the operators for making this a success:
  • Make LBS part of your subscriber's everyday life.
  • Use portals for ease of use – good examples are Telia Go, Vodafone Live! and 3Guru.
  • Add location to your existing applications. Increase the end-user value. Sell coordinates to service providers to benefit from the wholesale business case.
  • E112 positioning – fulfill legal requirements.
  • Remember – marketing of LBS is vital for success.
  • Some LBS tend to be very niche – target the right user groups.
Reprinted with permission by the author and Berg Insight AB
Contact Berg Insight AB for the full text of the report.
BERG Insight

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