Bitten by the 3G phone bug
technology.scmp.com
[ GPRS, EDGE, 802.11b etcetera mentioned, but no mention of CDMA 2000 natch. - DPR ]
JON OGDEN
In their gloomier moments, executives at companies which bought
European third-generation (3G) mobile phone licences must ask
themselves the question: have they been sold the world's most
expensive lemon?
They were seduced last year with visions of their customers
paying double or triple their normal mobile bills to do all manner of
fancy things through the Internet while on the move.
Now phone operators have woken up from their mobile Internet
love-in with a financial hangover. They have found their wallet
picked clean and more billion-dollar tabs on the way to pay for
building the networks.
Some industry insiders even wonder if the operators were victims
of equipment vendors who "pushed" 3G technology. But the
operators could also be accused of being naive.
"The revenue models were just crazy," said an industry source.
"They were aiming to get into the black in 10 years. Maybe you
could only plan to do that with a nuclear power station. Any other
technology and you are in danger of it becoming obsolete."
To make a profit after 10 years, phone operators envisaged
average revenue per user (ARPU) soaring from today's US$20 to
US$30 for voice and limited data capability to US$80 to US$100 in
a 3G multimedia world.
That would arrest a global downtrend in ARPU brought on by rising
competition from deregulation and the increasing saturation of
mobile markets in developed economies.
But besides problems with the financials, operators are having to
grapple with questions about whether 3G technology really will be
the "killer application" they had been led to believe.
For starters it will arrive later than expected, a point which was
underlined last week by world leader, Japan's NTT DoCoMo,
delaying the roll-out of its 3G service from May to October due to
technical glitches.
When DoCoMo's commercial service is up and running it will only
have limited availability in Tokyo and two other major cities. The
mass market service will not be operating until 2003 or 2004, said
a Credit Suisse First Boston (CSFB) telecoms analyst.
In Europe, where operators paid a staggering US$104 billion for
licences, the initial roll-out will be in 2003 and 2004, with mass
market services as late as 2004 and 2005. Hutchison Whampoa
has so far stuck to a pledge to have 3G available in Britain and
Italy by the middle of next year, though it depends on the ability of
equipment and handset makers to deliver the goods on time.
With the 3G roll-out in the slow lane the expensive technology
might find itself being bypassed like Betamax videotapes.
The concept was built around the need for speed. Standard 2G
phones have been hooked up to the Internet through wireless
application protocol (WAP) at 9.6 kilobits per second or about a
sixth of the speed of a 56 kbps modem typically used to surf the
Web with a personal computer.
WAP has flopped because downloading information with it has
proven too slow and clunky. Telecoms equipment makers claimed
their 3G handset would rev up to speeds of 384 kbps when moving
and two megabits per second when stationary, solving the existing
problems and opening up a vast new field of applications including
the transmission of full-motion video.
But operators may find they will be offering a 3G Ferrari when all
the punters want is a Ford Escort. Surveys show that plain old
e-mail is by far the most popular data service demanded by mobile
phone users.
They will be able to do most of what they want with general packet
radio service (GPRS) or 2.5G phones, which are becoming
available this year. Instead of building new networks, operators will
be able to tweak their 2G systems to provide GPRS. They may at
first provide 20 kbps but should get up to a relatively speedy 30
kbps to 40 kbps.
"Unless you are going to do video streaming or really bandwidth
hungry applications then 2.5G should do," said the CSFB analyst.
"For normal applications such as sending e-mails and surfing the
Web, you don't really need 3G."
With further souping up from a technology called Edge, 2.5G
phones could reach 115 kbps or even theoretically the 384 kbps
touted for 3G. This creates the embarrassing possibility that 2.5G
phones could for a while be faster than 3G phones which in their
first years of operation may only be able to reach 40 kbps to 50
kbps, according to CSFB.
Cash-strapped European operators may want to milk 2.5G as
much as they can before building their 3G networks, though this
may create an opportunity for new entrants such as Hutchison if it
can get the technology working on time.
It will not just be 2.5G which threatens the 3G technological
apple-cart, however. A system with the ungainly name of 802.11
local area networks (LAN) may be just as deadly a rival.
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Thursday, May 3, 2001
Bitten by the 3G phone bug
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(Page 2)
Base stations costing as little as US$300 can provide Internet access at speeds of up to two
megabits per second within 100 metres.
Fast Internet access anywhere is great but you need to be able to sit down somewhere
quietly to use it properly rather than blasting down an expressway in your car.
This plays to the strengths of 802.11 which has already been installed in places such as
airport lounges. "People want Internet connectivity when they are travelling but not when
they are actually travelling, if you know what I mean," said Paul Rogers, global marketing
director of software provider Logica Mobile Networks.
Michael Frendo, vice-president of Cisco Systems' technology research centre, even
questioned whether 802.11 would make 3G deployment unnecessary in some countries. He
saw Starbucks Coffee, for example, providing cheap or free broadband access to attract
customers to its shops.
"One thing that investors always have in mind is that the demand for broadband wireless
services will almost certainly materialise," wrote CSFB telecoms analyst Mark Berman.
"The big question, however, is whether 3G services can be provided at a price that is
attractive to both consumers and carriers alike. Unfortunately, this question may not be
answered for several years."
That is going to mean many sleepless nights for the executives who forked out all those
billions of dollars for 3G licences.
What they have to do, according to Mr Rogers, is to dream up the bandwidth-hungry
applications that will appeal to a young audience so 3G takes off in the way that DoCoMo's
i-mode service has in Japan. |
