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1.4 New Internet Business Models

The universal network will provide a new chance for startups to play an important role. In Chapters 2 and 3 you will see some startups that already play a significant role in home automation networks and m-commerce. But the complexity and scope of the pervasive computing market means that it is difficult to single out any one type of player within any particular supply chain as having an advantage over any other. So, let us have a look at the different players in this new market segment (see Figure 1.2).

We will certainly see that six players in the market will make a lot of money. First, the device manufacturers: if they have a good story to tell, people will buy new devices. Infrastructure providers and network operators will be the next to quickly benefit from the new opportunities—even more than they did with the traditional Internet since the number of participants is much higher on the universal network. The large software infrastructure vendors that have the most expertise in providing the necessary solutions will realize the technological opportunities. They will have to bring their solutions to market through partnerships with brand owners. But technology alone will not enable pervasive computing.

Once the infrastructure, the devices, and the network are up and running and the new business ideas are accepted by the consumers, the following three players will be able to generate money in the market: Content providers, service providers, and content aggregators will offer information, products, and services through the universal network to the consumers and businesses. Service providers that can attain "critical mass" will have the potential to take up positions of strength by acting as brokers of service agreements and other commercial relationships and by specializing content, applications, and services for particular usage contexts (combinations of users' identities and preferences, user roles, and delivery channels). Branding strength lies in the hands of device manufacturers, service providers, and content aggregators because they are most likely known by the users and therefore able to drive the market forces.

Once the market is up and running, a new value chain (see Figure 1.3) will be in place. The device manufacturers will create handsets and other types of terminals for the users. Accessories manufacturers will provide new types of add-ons, such as headsets, car kits, PC cards, and much more to supplement the offerings of the device manufacturers.

The wholesaler manages the distribution of handsets and accessories and provides the intermediate service between manufacturer and distributor. The distributor then moves the devices to the end users via physical shops or electronic distribution channels.

On the other hand, software suppliers will write new software for the devices and the servers to support the business models of the companies in this emerging market. By making the software device independent, the whole concept of pervasiveness is established.

The network manufacturer will have to develop new network components to support the extended infrastructure of the universal network. Infrastructure operators will buy the network components to operate a network infrastructure on behalf of a licensee, which may also own and build infrastructure and sites. Existing network operators will enter the market and try to retain their leading role in the networking segment.

The third segment of the market, service (see Figure 1.4), will be dominated by the service providers that sell network services on behalf of the network operators. They typically operate billing systems and customer services and collect a margin for doing so.

Content providers work in the background and collect, edit, and create information to serve content aggregators that provide menu services and protocol conversions to enable access to content. The content is packaged and passed on to a regular service provider or a value-added service provider.

The difference between regular service providers and value-added service providers is that the value-added service provider has a billing relationship with the subscriber that is independent of the network operator.

1.4.1 Device Manufacturers

The main opportunity for device manufacturers brought about by pervasive computing is for higher volume mass-market sales and the introduction of new devices and surrounding services. With the correct marketing and partnerships in place and the greater availability and accessibility of content, applications and services will make new and existing devices more appealing to purchase. By introducing next-generation devices, manufacturers can attract customers that refused to buy the old device for some reason.

Device manufacturers will no longer be able to sell hardware products in the future. If they want to remain an important player, they need to move away from promoting hardware and start to create value-added services for devices. The device manufacturers can easily use their established brands to move into this arena. Services could include a recipe database for the oven, a direct link to the next grocery store from the refrigerator, or an interactive TV information site from the television set.

Device manufacturers should not try to provide a single device as the solution for all problems. People like to have a device per problem, especially if the solutions provided are hardware dependent. People do not like to rely on a single piece of hardware, where if one of the functionalities is broken the whole device and all the other included functionalities need to be seen for repair. The devices should solve a simple question and should be even easier to use. Devices like VCRs that are difficult to program will not be salable in the future. Car stereos that have five buttons and 25 functions will also not be salable anymore. The devices of the future do not need any configuration; people buy them and are instantly able to use them, just like mobile phones, for example.

1.4.2 Infrastructure Providers

The universal network requires infrastructure. Infrastructure providers create the necessary devices and services to allow the connection of all devices that are enabled for pervasive computing services. The current Internet infrastructure based on routers, switches, and servers can be used for most of the universal networks needs, but new technologies are needed to support the increasing requirements of the new network. This means that the current network infrastructure must be replaced by new and more devices to support traditional Internet and universal network services.

The desire of content providers and content aggregators to offer their products and services to customers through multiple channels means that pervasive computing brings huge potential opportunities to infrastructure providers of all kinds. Infrastructure providers will have the opportunity to sell existing and new products into multiple industries that may have been closed to them in the past. For example, as the mobile telecommunications industry gears up to offer increasingly sophisticated digital content and services to subscribers, operators and service providers need sophisticated platforms that will enable them to make content available over wireless data network services.

The Internet infrastructure is already changing. It is, for example, moving from IPv4 to IPv6.19 This means that every device on earth can have its own Internet Protocol (IP) address. With IPv4, the number of devices with their own IP address was limited. ATM backbones allow the creation of service level agreements (SLA) on quality of service (QoS) on the Internet. This means that video and audio streams can be viewed over the Internet in good and consistent quality. Today, the quality of video streaming over the Internet is variable.

New services will have other requirements from the architecture and infrastructure of the network. Infrastructure providers therefore need to create an open environment that allows users to plug in new functionality and services whenever required. In Chapter 4 we see several steps toward a unified infrastructure for a universal network.

1.4.3 Network Operators

Network operators provide data traffic to service and content providers and connect them to their customers. The most obvious benefit for network operators from pervasive computing will be the significant increase in demand for data traffic generated by two things. First, people will access content, applications, and services within a wider range of usage contexts. More people will access them through more diverse devices. Second, and even more important to network operators in the future, will be services and devices whose communication is initiated automatically by one of the participating services or devices. That one service or device handles context-switching and config-ures the other services and applications so that all devices can access crucial information without human interaction. More participating services will soon become available.

With pervasive computing technologies, network operators will be able to obtain more user-relevant information. They will know who uses what, when, and where. If permitted by the customer, they can leverage their customer information databases in order to cross- and up-sell new products and services. Selling targeted advertising space is also an option for the future. All mobile phone users in a certain area of the city could be informed about a price reduction in a nearby supermarket, for example, or all Madonna fans could be notified by their CD-player about a ticket auction for a concert in the area. Context-relevant information will become the new currency on the universal network.

1.4.4 Service Providers and Content Aggregators

Pervasive computing will erode current notions of subscriber segmentation. If people can access your service wherever, whenever, and however they like, it becomes very hard to tell whether a person is acting as a business user, for example, or as an individual consumer. On the one hand, you are able to offer your current service to more people around the world in more situations than ever before. On the other hand, your services need to be even more tailored than before to the needs of the individual user since the context of the usage can vary a lot.

Pervasive computing allows service providers and content aggregators to take advantage of this erosion and offer packages of content, applications, and services that can be tailored both to particular delivery channels and to content consumers, depending on the context in which they are consuming the content. Context-awareness services will become a major service that will provide the right flavor of service to a particular person. This key value-added service will greatly enhance content aggregators' value proposition. Content, therefore, must be provided in a device-independent way that allows users to maximize the potential service offering without being disturbed by conversion of content or unusual handling of a device. Pervasive computing technology only then becomes truly invisible.

Like network operators, service providers and content aggregators will also be able to leverage their customer databases to cross- and up-sell new products and services and to sell advertising space on their "portals." Forget today's portals with their personalization capabilities. Compared to the future, today's portals look like the good old printed Yellow Pages. Portals today require customers to come back to one place on the Internet to find a host of information and services. Next-generation portals will follow the customer around and offer a set of services based on the needs and the context of the user.

1.4.5 Content Providers

Content providers are highly interested in reusing their content as often as possible for as little incremental cost as possible. This inexpensive reuse can only be achieved if the content is created in a sophisticated and high-quality manner. Pervasiveness makes possible the reuse of a certain type of content in several contexts. Pervasive computing promises content providers multiple new routes to existing customers and the possibility of reaching entirely new customer bases.

Imagine the content type of an "account statement" from your bank. With the use of pervasive computing technologies, this content type can be provided through multiple channels. Content providers can not only reach larger audiences but can reach them more often. Today, many people view their account statements online with their computer. In the future, they will be able to review it through a large set of devices such as the mobile phone. This allows them to make decisions faster and more correctly because they can review all necessary information whenever they need it. If someone wanted to buy a car, she could verify the balance of an account and compare the price of the car to the current market value. Such audience expansion possibilities also offer content providers the opportunity to cross- and up-sell other products and services to customers. If more money than expected is available on that particular account, the purchaser might buy a better car.

1.4.6 "Regular" Businesses

Once the infrastructure has been set up, regular businesses will be able to profit from pervasive computing. Any company providing information and services will be able to participate in the universal network regardless of size, location, or business. The Internet today already provides a great enhancement, especially for small-to-medium enterprises. In the near future, through pervasive computing, all companies with a network connection will be able to provide services, target customers, and deliver value to new value chains.

For many companies, pervasive computing will mean that new competitors will show up, new business models will appear, and new products and services will become available. This sounds very much like what happened with the economy a few years ago when the Internet started to boom. The next boom will create another extraordinary situation to cope with. Don't forget what you learned during the first Internet revolution. Flexibility will remain a key. Businesses will have to adapt even more to their customers, because customers won't use a single standard interface called a browser. They will have an unlimited number of ways to communicate with your company.

Customer relationship management (CRM) therefore becomes even more important. While it is important to open new channels to your customer, at the same time you must centralize all efforts around CRM to make sure that all interaction with the customer is recorded. Only then are you able to provide the perfect trading environment because you can anticipate the needs of the clients even better. Customers become even more valuable than they are today. Knowledge about your customer will influence the value of your shares. The more you know, the better the company will be valued.

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