3G Operators Face Big Pressures
By Jean Hydleman, AsiaWise
6 Apr 2001 10:30 (GMT +08:00)
Our first 3G report (See 3G Opportunities in Hong Kong and Singapore) on Wednesday looked at the lack of interest from international operators in Asia -- in our concluding report, we look at the hurdles operators will need to overcome in order to make money.
The most significant challenge for 3G operators will be managing customer expectations. We saw the impact of mismanaged expectations with wireless application protocol (WAP). WAP at best enables text and simple graphics transmission, but was hyped by handset manufacturers and some operators as Internet access by mobile phone. Slow data transfer, combined with disappointing black and white graphics, proved a huge disappointment to users and lack of WAP take up is testimony to that.
A key problem with WAP is that data transmission still uses circuit-switching technology. Data transfer is slow and users pay for the length of time they are connected, not for the amount of data transferred. Speeds should radically improve when GPRS, or 2.5G, packet-switching technology is introduced later this year. Packet switching also allows users to stay connected in the same way broadband users (theoretically, at least) enjoy uninterrupted connection.
Users will also be able to receive message alerts and data without having to switch on their phones -- and they also get direct access to servers without the complex dial up procedures required of WAP.
They will, in short, actually get what they pay for. Hong Kong operators are already working on charge schemes based on packets of data transferred and product pricing remains a significant challenge. As with second-generation mobile technology, 3G take off is unlikely before tariffs and device prices come down.
Operators like Hong Kong's Sunday see the real revolution coming with the switch from 2G to 2.5G, with 3G an evolutionary development from that point. Many in the industry now question whether most users will even need 3G technology -- given that 2.5G should eventually achieve six times current dial up Internet speeds.
If they are right, 3G will remain a pricey premium service only available within business and commercial districts.
If 3G were to be available hot on the heels of 2.5G, there is a strong likelihood users would hold off on 2.5G and wait a few months for the latest technology. Herein lies the second huge challenge for would-be 3G operators. Handsets are nowhere near ready for third generation technology. One indication of growing industry concern over the handset problem was NTT DoCoMo's decision to delay its scheduled May 3G launch for that very reason.
Those who remember the launch of WAP may remember how users and operators were ready, but handset makers were not. Awaiting the availability of suitable devices, 2.5G is already late. The large handset manufacturers will get supply going, working with companies like Palm, Handspring and Sony. But short term, the picture is less rosy.
Content also remains a huge challenge. Hong Kong-based Hutchison, among others, says the availability of good suitable content will drive 3G take up. Most operators are already conducting research to identify what 3G users are likely to want and expect in terms of content. But until producers know how their content is to be displayed, the options for development are likely to be limited -- and late in coming.
Content is king but if users cannot get access to the court they won't want to play. Users will give 3G a miss if it comes in a complex and bulky black and white product. It all comes down to content and how it is viewed -- two factors largely dependent on the device manufacturers. If traditional handset manufacturers are unwilling or unable to rise to that challenge with billions of dollars at stake, somebody else surely will.
Jean Hydleman is a media, Internet and telecommunications consultant.
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