As carriers develop relationships with wireless portals and content providers, they may find a new and beneficial trend emerging: that is Internet companies battling for the premier spots on wireless phone screens.
The favorable spot for those Internet companies is what is known as “above the line” on phone screens. Most wireless consumers will likely choose Internet portal services from whatever provider is foremost on their screen, say analysts. Internet companies that are highly serious about a wireless play may be willing to pay for these top spots.
This is the case with Sprint PCS and the country’s biggest Internet service provider, America Online Inc. The two companies formed a nonexclusive partnership earlier this year that gives AOL premier placement on the front screen of Sprint PCS Wireless Web phones. Both companies have not released financial terms of the deal, but sources close to the companies indicate AOL paid Sprint around $50 million for this special placement.
That marks a huge turnaround from last year, when, according to sources, Sprint PCS had to pay content provider Yahoo! to jump-start and give legitimacy to the Wireless Web. Sprint PCS was criticized for this move as analysts feared the carrier would be at Yahoo’s mercy as an information pipe. Sprint PCS declined to comment.
Today, Internet companies in droves are banging on the doors of carriers, realizing that wireless access will be a way to grow their pie by driving increased consumer demand, higher use of existing services and a range of new services based on the Internet and wireless technology. And carriers can control where Internet companies are placed on the screen.
“You can see every 20 minutes a new ISP coming through the door here,” said Julie Dobson, chief operating officer of Telecorp PCS Inc., an AT&T Wireless Services Inc. affiliate in the Southeast that plans to launch one-way information services this month. “They believe Telecorp opens the door to AT&T.”
Telecorp hasn’t received any cash offers for premier placement, said Dobson. AT&T Wireless declined to comment.
Whether the fight for top placement on handsets turns into bidding wars remains to be seen. The wireless Internet market is in its infancy, and it’s unclear how partnerships will evolve. Carriers and analyst say revenues will come from a hodgepodge of arrangements, ranging from transport fees to advertising and transaction sharing.
However, Bob Egan, research director with Gartner Group in Stamford, Conn., believes it’s only a matter of time when carriers will begin pointing consumers to sites that will generate revenue. Transport fees are likely to move toward zero pricing, he said.
AOL has become aggressive with its AOL Anywhere strategy, striking deals with a number of wireless data companies and manufacturers to extend its AOL Mobile Messenger services. Paying $50 million to Sprint PCS, the carrier offering the most mainstream and nationwide wireless Internet offering to date, is a way of propelling it to the front of the wireless Internet market.
“AOL, not knowing where to go right away, is making sure it’s positioned to evolve with every piece of the wireless world,” said Bryan Prohm, analyst with Dataquest. “It’s trying to put its thumb in everyone’s pie.”
Yahoo! is just as forceful with its Yahoo! Everywhere strategy. Its key focuses are on distribution and customized products. Part of the distribution strategy, said Sadhana Joilet, producer of Yahoo! Everywhere, is making the Yahoo! the first link users see on the phone’s menu screen.
“We’re working to educate consumers on the wireless Internet to drive usage,” said Joilet. “The first is placement, getting users to see Yahoo! on the phone. Consumers don’t understand when you say Internet on the phone. But they understand Yahoo! on your phone.”
Joilet declined to comment on any specific financial partnerships it is willing to make with carriers.
