Vodafone 'will launch low-speed 3G'
By Richard Baum, UK telecoms correspondent
LONDON, (Reuters) - Vodafone Group Plc has cut the speed at which it plans to transmit data over its next-generation mobile phone networks, an industry source said on Thursday -- in another blow to high hopes for the technology.
The world's biggest mobile phone operator has decided to run its European third-generation (3G) networks at 64 kilobytes a second (kb/s) when its launches the new mobile Internet service from 2002, the source told Reuters. The move would simplify its network construction and save money, the source added.
Analysts had been expecting data rates of 144-384 kb/s, and predicted ever faster speeds last year when operators spent 120 billion euros ($107 billion) buying European 3G licences.
Vodafone is still aiming for 384 kb/s, but may not get there until 2005/6, the source said.
Vodafone declined to comment.
The lower speed means the networks will be suitable mainly for business applications, such as travelling salespeople accessing their corporate Intranet via their laptop computers, rather than some promised consumer services like downloading video clips onto pocket-sized devices.
It also raises fresh questions over how operators will make a profit on what is the most expensive bet on a new technology in corporate history.
"This is just one more piece of news that reaffirms our view that 3G was never going to be about things like video," said Declan Lonergan, head of European mobile phone research at the Yankee Group consultancy.
"Speeds are coming down and down and down and it's getting less and less exciting from a consumer point of view. It's going to be much more difficult for the operators to show what's different about 3G services and why the average consumer should upgrade from a GPRS phone." The delayed launch of General Packet Radio Service (GPRS) phones, an interim technology that will offer speeds up to 30 kb/s, has already dented expectations for 3G and contributed to a dramatic slump in the shares of operators and handset manufacturers. Vodafone was down 2.8 percent at 138-3/4 pence in early afternoon trade, around its lowest levels in three years.
Expected shortages of phones have also led Vodafone to warn investors and customers that it may not launch its 3G networks until 2003. The UK-based company holds licences in most major European countries.
The source said Vodafone's decision to launch with the lower speed was one reason why it cut its estimates on capital expenditure over the next two years by 10 percent this week. The launch speed of 64 kb/s might be even slower in practice if lots of users cram the network.
Morgan Stanley analyst Paul Brilliant said slower speeds further undermined the argument that 3G would produce significant new services and revenues.
"Reductions in targeted data speeds in 3G networks is a new development suggesting that the challenges of 3G remain significant," he wrote in a research note.
"The implications are that the capacity increase from 3G and the services that it will be able to provide will be more limited that previously expected." There was more bad news for operators on Thursday when a survey showed only four percent of people planned to use the mobile Internet for shopping. The A.T. Kearney/Cambridge Business School survey showed the figure had collapsed from 12 percent six months ago.
Mobile operators believe they can make significant sums from taking a cut of transactions made over the wireless Web. |
