Profiting from value-added wireless services

Energized by the prospect of a mobile commerce era, wireless telecommunication providers have spent hundreds of billions of dollars just to buy radio spectrum rights in auctions around the world. Costs for wireless infrastructure, equipment, and marketing will add hundreds of billions more. Wireless providers do not expect payoffs from such a huge investment any time soon but instead are focusing on rapidly gaining market share before the rollout of third-generation (3G) wireless technology. Many wireless providers are struggling to turn their infrastructure services into a profitable business. By tying with differentiated value-added services, a wireless infrastructure provider can increase its market power and thus its profit. The large size, stability, and long-term presence of wireless infrastructure providers should allow them to overcome inherent constraints on their ability to differentiate products. By continually striving to build up relations with certain types of service providers, they can gain reputations as specialists, even if the cooperating service providers repeatedly change. As a result, wireless infrastructure providers can attract a pool of loyal consumers and use this asset to negotiate favorable contracts with service providers