The report opens with an in-depth analysis of Sha-mail, Japanese operator J-Phone's hugely successful picture messaging service, and the lessons European operators could learn from its success.

"Operators win everything by being first," says James. "After its 12-month head start the Sha-mail brand was so strongly established that the other Japanese operators found it hard to compete, even though they too have now launched their own picture-messaging services.

"Ericsson Mobility World helps operators to decrease their time-to-market with new applications and services by offering them tested and ready-for-market applications developed by members of its Associate Program. But James warns: "European operators should not focus too much on short-term revenue payback but on capturing the middle and long-term potential of MMS."

The big revenue success stories in SMS and MMS have all involved operators offering cheap or free services at the beginning. James says: "Take i-mode, Sha-mail or SMS in the Philippines. They all offered free or cheap services on launch. If I was to be really radical, I would say to operators: 'Give it away for the first six months. The loyalty and brand awareness you will build will more than pay it back'."

The report warns European operators not to restrict MMS to person-to-person messaging.

To maximize MMS revenues, it says, operators should offer a broad selection of images, image-enhanced information and entertainment services, packaged and promoted under a common brand. SMS, it reminds operators, is used today for far more than person-to-person text messaging, attracting the attention of advertisers and companies as diverse as Tesco, Armani, the BBC and Coca-Cola.

"People value the content of messages, not their ability to send them," says James. "A bottle of Chanel probably costs a few cents to manufacture, but it is priced by brand. Similarly if you send an image of Homer Simpson via MMS, people pay for Homer Simpson, not for the bytes or technology that sends it. The 'right' price for a service is, quite simply, the price people are willing to pay."

The report emphasizes that MMS is the perfect back door through which users might enter 3G without being put off by technology or hype.

"The most important thing about MMS is the potential it has to change user behavior," says James. "In the minds of ordinary people, going from SMS to MMS is a simple evolution: it's the same as SMS but with pictures. Of course we know in reality they are using WAP over GPRS, for example, to deliver those pictures, but why scare people off by telling them this? If they play their cards right, operators could start delivering 3G services via MMS without ever having to use the actual phrase '3G'. Think how much promotion money that would save."


Mark Du Bois