Verizon Wireless has agreed to adopt the MSN Mobile portal and other wireless data services. The deal is part of a long-term campaign by Microsoft to design new wireless data services—online services delivered to mobile devices over commercial wireless phone networks—that will be more useful for customers and more profitable for carriers. Microsoft will need to work closely with carriers like Verizon Wireless to avoid expensive missteps like those that have plagued its efforts in interactive TV.

Microsoft is counting on wireless data services to help its business grow beyond the PC to other kinds of devices. While the company offers software such as Pocket PC 2002 for portable devices, royalties on these inexpensive devices are modest, indicates Pieter Knook, vice president of the Network Service Providers and Mobile Device Unit at Microsoft. "Services that add value to devices is where the business opportunity is."

Deal Highlights Communication

Verizon Wireless and MSN have introduced a new service that allows mobile phone users to send and receive e-mail and instant messages, using Verizon Wireless's two-way text messaging service. Verizon Wireless has also adopted a cobranded version of the MSN Mobile portal (vzw.msn.com), which enables mobile users to view and update Hotmail inboxes and use MSN Messenger instant messaging and buddy lists. The portal also includes specially formatted versions of Web sites, such as MoneyCentral, and allows users to sign up for ".NET Alerts," text messages informing them of important events such as traffic accidents and stock price changes. (See ".NET Alerts Service Complements SSNS".)

Hosted by Microsoft, the new cobranded portal will replace a previous Verizon Wireless portal hosted by Infospace. Microsoft will share Verizon Wireless's subscription fees for the service, which range from US$7 to US$13 per month. For Verizon Wireless, the deal is a chance to market through the MSN portal and to leverage Microsoft's brand.

The partnership could lead to other deals targeting businesses. In particular, Verizon is considering offering companies mobile access to their Exchange servers using Microsoft's Mobile Information Server and Outlook Mobile Manager. (See "Mobile Server Goes into Exchange, ISA" on page 7 of the Apr. 2002 Update.)

Selected Partners for Future Services

The Verizon deal is a win for Microsoft's current wireless data services, but the company is already looking to create new services that can boost carrier profitability, which in turn could draw more carriers.

Microsoft has begun working with Verizon Wireless in the United States and with Germany's T-Mobile in Europe to design a new generation of wireless data services. The goal is to create services that appeal to broad audiences and that can also serve as building blocks for corporations creating custom services (such as delivery driver dispatching). Several factors could make new services take off faster than the current generation:

Smarter devices. More powerful mobile devices and software could support more useful data services than today's phones. High-resolution color screens, for example, have contributed to the success of NTT DoCoMo’s popular iMode service in Japan. More powerful devices will also be able to download applications (e.g., games, vertical applications) that users can employ when they are out of wireless coverage, and that carriers can update over the wireless network.

Better networks. Network technologies now appearing, such as General Packet Radio Service (GPRS) and the 1xRTT technology used at Verizon, provide two to four times more bandwidth than existing digital networks. More important, they provide relatively short connection setup times (another factor in iMode's success), and do not block voice calls. (See "Wireless Connectivity Options for the Pocket PC" on page 15 of the Apr. 2002 Update.)

Location and presence. Information about a user's location and the devices currently being used could make services more useful and less intrusive. For example, a location- and presence-aware traffic service could send alerts to a user only when the user has the mobile device on and is between home and work.

To create services that take advantage of these factors, Microsoft will have to forge close links to carriers, who control location and presence information for their mobile users, and who can offer integrated, tested packages of devices and services that work correctly the day a user signs up.

Most important, Microsoft must work closely with carriers to make packages of services and devices that users want and that carriers can afford to roll out. It might also have to wait to offer services on a large scale until industry consolidation and an economic turnaround have strengthened the capital-starved carriers. Otherwise, Microsoft's mobile services unit could meet the fate of its interactive TV unit: investing in providers and advanced services, but failing to attract users or to convince operators to deploy Microsoft’s solutions.

A starting point for MSN wireless data services is mobile.msn.com. For information on Verizon Wireless's wireless data services, see www.verizonwireless.com/internet_data.