The rise of the smartphone since Apple launched its genre-defining iPhone has been credited with many things. High on the list is the long-awaited arrival of meaningful progress in the sphere of location enabled services. And it wasn’t the conception of a particular service that gave LES this fillip, rather it was the more ready availability of GPS functionality in high end handsets, and the growing popularity of those handsets themselves.

Overall handset shipments were down 6.1 per cent year on year for the second quarter of 2009 but smartphone sales increased by 27 per cent to reach almost 41 million, according to research firm Gartner. The analyst predicts that, globally, 26 per cent of mobile devices will be GPS-enabled in 2009, with the figure leaping to 76 per cent for North American sales. In Europe the number is more moderate, at 30 per cent, while Asia Pacific is a long way off the pace at 13 per cent.

For a long time a range of companies laboured to deliver reliable network-based location technologies, labours that now appear to have been fruitless, in some senses.

“I think those investments were very challenged,” says Simon Buckingham, CEO of Mobile Streams, and of Zoombak, a mobile tracking solution available in the US. “I don’t think there was any return on investment there.”

Nonetheless, he says, GPS alone does not provide all the location information required for effective service. Line of sight is required to three satellites, he points out, which is why GPS is famously useless indoors. So the benefit of all the work that went into network based technologies is in supplementing the performance of GPS when it is unavailable, or to speed the time to first fix.

Assisted GPS, or A-GPS, says Informa Telecoms and Media, is “a de facto pre-requisite for providing a level of positioning accuracy sufficient to give LBS enough practical functionality and a high enough quality of service to make them worth paying for.”

Now that the technology exists to provide reliable location awareness, and location has been repositioned as an enabler rather than a service in its own right, analyst projections about uptake are starting to flow more freely.

ABI Research predicted last month that LES revenues will grow at 156 per cent year on year from $1.7bn in 2008 to $2.6bn in 2009. By 2014, the firm said, global LBS revenues will have surpassed $14bn.

Five of the best

Informa Telecoms and Media research reveals the five most likely revenue generating location enabled services for the carrier community.

Personal navigation

The most mature location service at the start of Informa’s five-year forecast period in 2008, personal navigation is also the service type expected to generate the greatest actual increase in annual service revenues, showing a net increase of $2.2bn at a CAGR of 45 per cent to 2013. Personal navigation benefits from being the LBS that has been on offer commercially for the longest time and is a service with which end users are readily familiar.

Enterprise services

This will prove the second most important location service for revenue generation, forecast to grow with an increase in annual revenues of $1.9bn at a CAGR of 47 per cent. It is not uncommon for enterprise location services to be based on proprietary solutions originally developed in-house by operators for co-ordinating the workforce. When this is the case operators do not need to make any revenue sharing payments to any downstream, third-party service developers or content providers.

Family tracker

Family tracker services are anticipated to be the second-placed consumer location service in terms of annual revenues by 2013. This is largely the result of the premium charges that are applied to them, prices which are likely to show greater stability over time than those for other location services. Led by the security conscious US market, family tracker services are projected to show a net increase across the forecast period of $665m at a CAGR of 72 per cent.

Friend finder/point of interest

These two service types are the most likely to feel the negative impact of competition from free services. Usage profiles are also likely to be different from other profiled applications in that the services will be used more sporadically. Despite their clear mass market appeal, users are unlikely to want to continue paying for them and they have the least stable subscription rates of the five service types. Friend finder services are expected to increase by $299m over the forecast period at a CAGR of 69 per cent while point of interest sill show a net increase of $585m at a CAGR of 58 per cent.

More detailed information and forecasts from Informa Telecoms & Media on location enable services and a wide range of other industry sectors can be found at www.intelligencecentre.net

Drilling down to a specific service sector, research house iSuppli suggests that personal navigation devices-TomTom and Garmin products, for example-will be overtaken in the personal navigation market by mobile phone-based solutions within five years. While there will be 114 million PNDs in use at the end of this year, the firm says, compared to 57.8 million smartphones, growth in the PND market will tail off, with only 128 million units in use by 2014. By contrast there will be 305 million smartphones being used for navigation by the same time, the firm says.

Gartner, meanwhile, calculates that there will be more than100 million LES subscribers by the end of this year, rising dramatically to exceed 836 million by 2013, when the annual spend on such services globally will hit $12.7bn.

Informa Telecoms & Media focuses in on operator service revenues with its projections for what it believes will be the four most popular location enabled services: friend finders, family trackers, enterprise services and personal navigation, as shown in the table.

That Informa restricts its assessments to services offered by carriers and associated revenues raises an interesting question, one that is relevant to the wider mobile services environment as well as the location subsector.

Will operator-delivered services be as or more successful than services offered by other entities, including handset vendors, internet service firms or handset OS software groupings? And, if not, how do mobile carriers retain their stake in the game?

The problem is illustrated by an observation from ABI’s practice director Dominique Bonte: “One of the main drivers of the strong growth in LBS is the popularity of an impressive number of off-deck LBS applications available for a one-off fee on smartphone platforms,” he says. “Apple’s iPhone is leading the way, followed by Blackberry, Nokia, and Android. There seems to be no limit to developers’ creativity in using location for functions such as search, social networking, messaging, micro-blogging and augmented reality. Combined with the astonishing popularity of the new generation of GPS-enabled touch screen smartphones, this will continue to constitute the lifeblood of LBS in the coming years.”

Simon Buckingham reckons operators will need to play on the crucial improvements that network-based location technologies can give to GPS, but that this will not allow them to control the LES environment. “Networks who are smart will realise that they have a role to play in enhancing GPS; that’s one thing that carriers can do to help them protect their position in the value chain. They’ll use that to offer their own services, but also to make the APIs available to third party developers,” he says.

Teléfonica’s UK arm O2 is one carrier that has recently launched its own service, a navigation solution developed in co-operation with navigation specialist Telmap. The service, which will be rolled out across other networks in the Spanish player’s portfolio, will see Telmap’s Navigator software deployed on the majority of GPS-enabled handsets offered by O2 UK. Part of O2’s contribution is cell ID information to support the GPS feed that enables the service, but Magnus McDonald, who manages O2 UK’s service and applications portfolio and was responsible for the Telmap deal, says that the firm could and will do more to exploit its network based location technology.

“We do see it as an asset, but it’s not something that we’ve positively or actively tried to exploit up to now. But it will feature in other location services that we launch.” The ability that McDonald believes O2 is better placed to exploit is its skill in customer management. “Our expertise is in understanding our customers,” he says. “It’s knowing what they want and bringing the right proposition to the right users, and managing their interaction with the application. That’s how we bring the value and remain the key, critical part of the value chain.”

McDonald says that O2 didn’t want its new navigation service to be “just another application”. The carrier has opted to take responsibility for frontline customer service for the new offering, to have full billing integration, and is looking to integrate some of its own content to the service to add value. Telmap is a firm that believes the best route to users for mobile navigation services is through the operators, despite the firm’s CEO, Oren Nissim, conceding that “technically the operators aren’t necessary to deliver the service, but we need to work with the people who know the users best-and that’s the operators.” Not all organisations see working with carriers as desirable, though.

The application store model that has come to prevalence this year poses a now familiar dilemma for carriers’ ambitions in the location arena. They lack reach; even the largest international players can only offer 20 or 30 per cent of a given market and application developers and online services firms want to get to all users. The likes of Nokia and Google in particular pose a serious threat to carrier opportunities, not least because of their control over the handset. Despite the rise of a new breed of smartphone, Nokia is still dominant in the high end and Google’s embedded presence on mobile phones-either through agreements with vendors or its own Android operating system, which is now gaining some momentum-is fast becoming ubiquitous. Gartner predicts that these two firms will fight for leadership in location services.

And that crucial network information that only the operators have may not be so crucial after all. For some time now Google, for example, has been developing its own international cell ID database, covering more than 200 countries, and not restricted to individual carrier networks within each market. The firm has gathered information from Google Maps users who have A-GPS handsets by using the handset report of which base station it is using to feed back enough data that Google can start to locate the base station. As Google explains on its blog: “Over millions of such updates, across multiple phones, carriers, and times, the server clusters the GPS updates corresponding to a particular cell ID to find their rough centre.

So when a phone without GPS needs its own location, the application on the phone queries the Google location server with the cell tower ID to translate that into a geographic location [based on] lat/long coordinates,” As Google starts to make this information available to external developers, the carrier USP comes under threat. Social networking sites like Facebook, says Simon Buckingham, will not be interested in using only Vodafone’s location APIs (which the firm made available as part of a wider move to attract developers earlier this year) because its members are spread across all networks.

“The operators aren’t working together so they can offer location information from all of the networks in one go,” he says. “What the mobile industry needs to do if it wants to have relevance in the future is collaborate across all the local network groups so that any application vendor like Facebook, or any advertising company or games company can offer a great location-enabled service across all UK subscribers, or all German subs.

No advertising company or community cares about providing a service to Vodafone alone, even on a pan-European basis,” he says. Equally worrying for carriers is the fact that the likes of Google will be offering their location services at no cost, while the carriers are wed to subscription charges. “We’re a carrier,” says O2’s McDonald, “and what we sell are contracts and airtime. The way we do that is by using the device as a facilitator.” The pricing specifics of the firm’s new navigation service have yet to be finalised, according to McDonald, but he gives a rough idea. “It will be start at around £3.50 and go up to £10/month or more, depending on whether we end up rolling out a Europe-wide version,” he says.

Google’s strength is in leveraging its advertising business to subsidise services, while Nokia looks to be moving in the same direction. As this issue of MCI was going to press, Nokia-owned mapping firm Navteq announced it had acquired location based advertising firm Acuity Mobile.

Navteq and Acuity are long-term partners with a jointly developed interactive advertising platform deployed by the mapping firm. Navteq launched its LocationPoint advertising platform earlier this year, using Acuity’s precise location targeted advertising. While Nokia’s acquisition of Navteq was its biggest to date, at $8.1bn, the earlier purchase of mobile advertising specialist Enpocket suggests the Navteq/Acuity deal is part of a wider trend.

Nokia only offers the most basic version of its map service for free at the moment, but its focus on advertising makes it a racing certainty that it will move to free and ad-subsidised service models in the near future. According to Gartner: “The portion of users who use advertising-sponsored or free applications will grow during the coming months and years. In North America and Western Europe the share of users taking advantage of free services is around ten to 15 per cent today.

However this will grow to 40 to 50 per cent in 2013. Strong influencers of this trend will be Google, Nokia and, to some extent, Apple.” The carriers are aware of the challenges that lie in wait for them, says Magnus Mc-Donald. “I think I would be naïve to say there wasn’t a risk of carriers being squeezed out, and naïve to think that the ability to charge for these services is time limited. Quite how time limited it is, I don’t know,” he says.

Regardless of who wins out, it seems clear that location is set for ubiquity. No longer a service in its own right, neither is it an enabler only in the sense that it gives birth to new services. The real movement will come when the range of services and applications already in existence add location to their mix. This, say the location evangelists will add context to content, to connectivity and to consumption.