Location Based Services (LBS) could soon become an important new source of revenue for struggling telecoms whose traditional offerings are under pressure from the internet. The Economist reports that the market for LBS could reach $2 billion in the next five years in North America alone – from a measly $30 million today.

The advanced Japanese telecom market has used LBS since the late nineties. As far back as 2005, over 20% of Japanese phones had GPS installed. For instance, KDDI, a Japanese mobile operator, has a voice activated navigation system which guides users to their destinations. It allows searching for venues, such as restaurants, by category and budget and even empowers users to rate their experience.

There are countless applications for the technology. One study notes the major categories:

• Navigation – directions, traffic management
• Information – travel & tourism, mobile yellow pages, shopping guides
• Tracking – product, people
• Games – mobile games
• Emergency – calls for assistance, emergency location
• Billing – road tolls
• Management – fleet, facility, security, infrastructure
• Leisure – location based instant messaging, buddy finder
• Advertising – banners, coupons

The business models are also attractive. Operators can charge for services such as Verizon’s “Chaperone” program which allows parents to find their child’s location from their own mobile or PC. Telecoms could also tap into advertising revenues by letting local businesses list or send their ads based on a user’s location.

To ensure success, telecoms should create and open up their LBS platforms in order to harness the creativity of the host of startups currently working on new applications. Creating a mobile platform where users could browse the real world would bring tangible benefits to telecoms, advertisers and customers alike.