Location location location: Where the mobile industry is pinning its hopes

After tremendous success in the 1990s, mobile network operators are looking at what will jumpstart demand for next-generation services. Heather McLean asks whether location-based services are the answer...

After the disappointing introduction of WAP, and ahead of 3G, or even interim packet-based technologies such as GPRS, telecoms analysts and software developers alike have been talking up the potential of location-based services (LBS). Some have even heralded them as central to the future of mobile communications. But what's the reality? As one analyst, Ovum's Jeremy Green, puts it: "There are those who say location is the key differentiator between mobile and fixed networks." Yet the proposition differs from WAP in one vital way. A Forrester Research survey carried out in September 2000 questioned 8,000 European mobile phone users and the conclusion was that in the future around seven out of the 10 most requested services would rely on LBS. It seems consumers are actually interested in using a variety of applications that rely on or can be enhanced by LBS. Compare this to WAP, which came with a fanfare of hype but few killer apps. LBS hype can be expected to grow as LBS-enabled applications take off. The opportunities are far-reaching, according to LBS developers who cite finding places, being found, proactive questioning for marketing, and tracking family-members as just a few of the possibilities. A US mandate, Enhanced 911 (E911), focuses on an obvious yet technically difficult function of LBS. The Federal Communications Commission (FCC) requires operators provide technology to locate users in emergency situations with accuracies of 100 metres 67 per cent of the time, or 300 metres 95 per cent of the time. E911 Phase II Automatic Location Identification (ALI) defines deployment schedules, accuracy and reliability requirements for handset and network-based technologies. Its deadline was 1 October this year. However, every US operator has failed to come close to this date, which has been deferred numerous times since 1996. The reason is technology. The choice is between Basic Cell ID or its bigger brother, network-based Enhanced Cell ID, Enhanced-Observed Time Difference (E-OTD), and basic or assisted Global Positioning System (GPS). E-OTD and GPS are the two key technologies that enable the high accuracy required of US operators, yet both are problematic. E-OTD has the highest accuracy of non-GPS systems but operators must invest in new networks and handsets to use it. David Pearce, head of corporate development at location software vendor SignalSoft, said: "The big problem for operators is they have no phones with E-OTD capability. They have to consider how much accuracy to 50 metres is worth compared to 200 metres when you have to build networks and subsidise handsets to facilitate it." GPS is accurate but a GPS radio signal will not penetrate a briefcase or pocket. In addition battery power is sapped by GPS use as phones rely on several relays of information to a central server to calculate differentials for location. This means handsets become expensive. Assisted GPS works with Enhanced Cell ID which enables pinpointing of horizontals and verticals (the garage versus the attic). It requires the same network investment as E-OTD and very expensive new handsets. European operators are not in the same predicament. Safety deadlines for accurate LBS are set for 2008 as the European public screams "Big Brother" at the mention of tracking systems, so the continent is instead focused on commercial viability. Pearce says the accuracy provided by Cell ID - between 300 metres and one kilometre - is enough for commercial use. He explained: "You don't need to know what's in the nearest 100 metres because you can see it. Accuracy only pertains to safety." In its favour, Cell ID is inherent in the way mobile networks work and has a ready-made subscriber base. Operators realise it acts as an LBS technology so the debate has turned to what types of service are going to encourage customers. Pearce added: "If operators were to implement assisted GPS or E-OTD today they would have zero subscribers as today's phones don't have the capability to use them." Carsten Schmidt, Forrester Research LBS analyst, says the cost of implementing networks and the horrors of subsidising accurate LBS-enabled handsets in today's economically miserable climate will put off older GSM licence holders in Europe. "Incumbent operators like T-Mobile and BT with only a few years of life left in their GSM licences will not spend big [on LBS]," he said. "Instead, they'll wait for their UMTS [3G] deployments, when they have to roll-out thousands of new base stations anyway." Ovum's Green agreed with Schmidt. He said: "The big empty pipes in the 3G world will make licence holders take more interest in LBS, to make revenue." He added: "If I was an operator I'd experiment with Cell ID until there is a pressing requirement for something more accurate." However, equipment vendors see things differently. Nokia UK communications manager Mark Squires disagrees with the recalcitrant stance of Green. "When SMS came in operators took the risk and paid for the network. It'll cost operators and others money and the uptake will be slow at first, like SMS, but LBS is not a case of 'Should we do it, will we make any money?'. It will mirror SMS with a slow run up and then consumers won't be able to live without it," he said. General opinion - from all except those waving LBS software sales flags - is that the opportunity for services is definitely there and applications will have financial and social implications on mobile users and operators. The question is when. Ovum's Green is among a number of analysts who thinks LBS will eventually reach a saturation point where customers take what they make possible for granted: "LBS will become a hygiene factor, something that users take for granted and won't expect to pay extra for," he stated. "LBS is mature enough to work properly but exciting enough to be a premium service." We'll see.