Mobile services: third time lucky?
Europe's major telcos have mortgaged their future on the success of third-generation mobile communications. Were they right to do so?
The recent 3GSM World Conference and Exhibition in Cannes was buzzing with enthusiasm and anticipation of the latest third-generation (3G) mobile communications technologies.
The fact that the event was packed with both exhibitors and visitors demonstrated a strong commitment to the technology from vendors and original equipment manufacturers in what is still a weak and uncertain economic climate.
However, the exhibitors were adamant in their determination to ensure the future success of 3G. Indeed, many of the presentations could easily be described as evangelistic when it came to promoting this 21st century technology.
There is little doubt that, when it arrives, 3G will offer huge new opportunities for vendors and resellers alike. Completely new ways of conducting business while on the move will revolutionise communications, according to Bernd Eylert, chairman of the UMTS Forum, a European non-profit making cross-industry organisation which is committed to the market success of 3G.
"The Forum's market studies predict that three key features will revolutionise the market: speed, capacity and new services. Capacity may not be glamorous but, with extra bandwidth and spectrum, 3G services will offer people the opportunity to access a wide range of personalised information and entertainment services on the move," he explained.
New services
Jonathan Klinger, telecoms marketing and communications director at wireless navigation company Webraska, said: "New capabilities will be available to the mobile user including automatic subscriber location determination, integrated cameras and video cameras, colour screens and the launch of services from mobile dating to fleet management.
"Nevertheless, 3G alone isn't going to revolutionise much. At the end of the day it's just a bigger pipe. It is the convergence of other technologies which become commercially viable on the back of 3G which will revolutionise mobile communications."
While it is generally agreed that 3G is a revolutionary technology, there are some concerns as to whether the market is ready for it and if it will meet expectations.
Is it too far ahead of its time? Do people really need such sophisticated services on a mobile device with a tiny screen? Will there be a killer application that makes 3G a must-have technology? Given the massive investment in 3G licences can it ever be cheap enough for the mass market?
There have been plenty of demonstrations which prove that it can be made to work, at least in theory. But when it comes to the practicalities of implementing 3G in the real world there are some doubts over how easily this can be achieved.
Fredrik Naslund, European managing director at metering and billing specialist WaterCove Networks, believes that the management and billing for complicated services could be a stumbling block.
"The main obstacle to rolling out 3G is not the shortage of handsets or the fact that no one knows what the killer application will be," he said. "The real problem is the lack of a suitable infrastructure to support and bill for these services. 3G cannot be a viable proposition until this infrastructure is in place."
Technical problems
Richard Barber, head of strategic development at network security firm Integralis, explained that there is an even more fundamental problem to be addressed before 3G can be delivered on a wide enough scale to be useful.
"There are technical issues to be resolved that have political and environmental impacts," he maintained. "For example, the density of base stations for 3G services has to increase by about a factor of three to get reliable, wide-bandwidth data links.
"But there are already many disputes over environmental issues with existing cellular phone base stations, and for 3G we need even more."
With regard to the predicted demand for 3G-based services, there is still a big question mark over whether people will actually take to the concept.
It is all very well being able to deliver web pages, pictures and video direct to someone's mobile phone, but who really wants to view a movie or surf the web using a phone?
Barber is particularly sceptical as to whether the market is ready for the technology. "No one let the Wap movement develop properly before starting to deliver on GPRS. You need to let the market get hungry before you feed it," he said.
"Now, we haven't even got stable GPRS with international roaming and we're already talking about rolling out 3G and finding services that can feed that market. It's a nonsense.
"The service and application developers don't have time to mature their offerings and see return on their early investments before they are overtaken by something else. Business plans and companies go to the wall over less.
"And all this in the face of an economic downturn. It's simply crazy and it doesn't make plain marketing or business sense."
However, according to Naslund, in the past year the mobile industry has 'got real' in terms of the potential of GPRS and 3G services as a result of the failure of Wap.
Japanese success
He explained that in Japan, DoCoMo's i-Mode service has exceeded all expectations, acquiring over 30 million profitable users in three years. "It has given European operators an insight into the successful ingredients required for GPRS and 3G services," he said.
"Handheld devices such as the innovative new Pogo - an amazing GSM device including colour web browser, MP3, cellphone and email calendar - highlight the potential of GPRS and 3G networks. If European operators can provide technology that consumers trust and have confidence in, they will breed loyalty and revenue."
Klinger agreed that the typical mobile phone is not suitable for handling 3G-based content. "Sophisticated services cannot and will not be launched on devices with tiny screens," he insisted.
"Increasingly, phones will be things that you look at, rather than things that you listen to. Large screen video phones are already available in Japan. It's only a question of time before they arrive in Europe."
Pinpointing the application which will make 3G a must-have technology is extremely hard. Look at how SMS has taken off. Ten years ago no one could have predicted that there would be 15 billion text messages sent every month.
With 3G, most people in the industry think that there will not be a single killer application; instead it will be a combination of various services and features that will appeal to end users.
Bent Gabelgaard, senior executive adviser on mobile solutions at communications infrastructure provider Tellabs, pointed out that the ability to use voice and data simultaneously is a significant factor.
"The search for the killer application has been fierce at times for the mobile data market," he said. "However, the two things that separate 3G from previous mobile technologies is the ability to have multi-application contexts active at any given point in time, and the ability to dynamically extend bandwidth for any given terminal.
"To the best of my current knowledge, voice, in combination with some kind of data usage, will be compelling features which will attract users to the system."
Killer 'cocktail'
Eylert suggested that the challenge is to create compelling services that take advantage of the promise of 3G technology and provide a satisfactory end user experience.
"We do not feel that there will be one killer application for 3G because of different individual preferences and differences in national culture," he explained.
"Instead a killer 'cocktail' of services will exist, customised to suit individual user needs for personalised information and entertainment.
"These services will include simple voice, rich voice, location-based services, internet access, messaging services, intranet/extranet and customised infotainment. Voice communications will continue to be important throughout."
Finally, the major issue which is likely to affect the adoption of 3G in the marketplace concerns the question of cost. With telcos spending billions of pounds on 3G licences, there is considerable doubt as to whether 3G services can be offered at price levels low enough to achieve any significant market penetration.
Neil Bonner, manager of mobile devices at mobile computing and wireless specialist Symbol Technologies, said: "The volume business is in the consumer space, but that is very price-sensitive so it will require a leap of faith on the part of the service providers to price low enough to build a business.
"There already exists a viable service at a known price. All they will have is a faster access method so they have to focus on large data volumes.
"Music files allowing you to pick your own tunes for the trip to work instead of the radio may be an option. Telcos face a challenge charging for content because people are used to getting stuff off the internet for free."
Eylert believes that, balanced with long-term return on investment and the number of services that will be available, demand will be high.
"With the number of mobile users increasing in the next decade, mass market pricing will have to be introduced. When 2G was introduced, its demand was underestimated greatly," he said.
"However, today the technology is directed towards the mass market. With 3G, all services enjoyed on the internet can become mobile services. In 20 years' time, the industry will be looking back at the cost of 3G and be commenting on what a bargain price the operators paid."
SUMMARY
- The whole telecoms industry is buzzing with excitement over the introduction of 3G mobile services.
- While 3G technology is truly leading edge, some believe it has been over hyped.
- Huge question marks surround the telcos' ability to provide an adequate infrastructure in a reasonable time.
- Many people doubt that the market is ready for 3G and whether the customer is willing to pay for such services.
- The telcos need to recoup the huge costs associated with acquiring 3G licences and it could be years before they actually start to profit from the services.
CONTACTS
Integralis 0118 930 6060
www.integralis.co.uk
Symbol 0118 945 7000
www.symbol.com
Tellabs 0870 238 4700
www.tellabs.com
The UMTS Forum 020 7331 2020
www.umts-forum.org
Webraska 0139 128 880
www.webraska.com