January 19, 2001, 12:00 AM

M Is For Mobile

Don Davis

Editor in Chief

The U.S. "mCommerce" solutions market, or mobile phone-based e-commerce market, while off to a slow start, is set to reach $1.2 billion over the next five years and will eventually surpass that of Europe, says a new IMPACT 2000 study from research firm Datamonitor, New York. The report identifies why the U.S. is currently "defying its traditional role as IT market leader by trailing Europe in the mCommerce arena."

Datamonitor's predicts that there will be one billion Internet users by 2005 worldwide and one billion mobile phone subscriptions by 2004 worldwide. mCommerce solutions consists of the hardware, software, systems integration and professional services necessary to implement a mobile business channel. "Until the current market for these solutions has fully matured, mCommerce in the U.S. will lag behind Europe," says Sohrab Torabi, an analyst with Datamonitor.

Europe's initial lead in mCommerce adoption--it is 18 to 22 months ahead of the U.S. in respect to phone technology, according to Datamonitor--is founded on several factors including improved standardization, favorable pricing structures, increased competition, greater quality of service and declining costs for network operators.

In the U.S., the inability to reach a single mobile telecommunications standard, low wireless device penetration, high prices and lack of awareness have been the stumbling blocks to attaining the critical mass required for introducing new services, says Datamonitor. U.S. companies are holding back on transitioning to 3G networks, it adds, which would provide higher-speed wireless Internet access, as they must leverage existing investments in digital networks.

Another factor contributing to the slow adoption rate in the U.S. is security, says the report. The only way to make customers spend or transact in the volumes that retailers and financial service providers have in mind will be by offering them a secure environment, concludes Datamonitor. As the market evolves, however, U.S. strength in content creation "may shift the mCommerce pendulum back to this side of the Atlantic," it speculates.

Datamonitor predicts that the fastest-growing mCommerce sector in the U.S. will be financial services, which from $90 million in 2000 will rise to more than $1.8 billion in 2004.

The U.S. mCommerce market is ready to surpass Europe for several reasons, says the study: The U.S. has a single language with which to develop application content and internal services for a large population; the U.S. has a greater amount of country-specific content and vendors that can be applied to the mCommerce market; and the U.S. has more of the intellectual and commercial talent that is required to develop the mCommerce infrastructure.

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