re: Ovum on 3G & the First Mover (Dis)Advantage
>> 3G's Pioneers Face Rough Ride - Ovum
Anne Young
Total Telecom
19 September 2001
There is hope for third-generation services, but those investors that go all out for first-mover advantage will lose out, according to U.K. consultancy Ovum.
"First to market is not the best strategy," said principal consultant Eirwen Nichols. "There will be a lot of technical difficulties ... You don't want to be the one making the mistakes."
Indeed, Ovum's analysts believe that technology, and not a lack of "killer applications," is holding up 3G's development. "Technology is the bottleneck," said Dr. Virtyt Koshi, senior consultant. "There are loads of applications being developed."
In a white paper titled 3G Survival Strategies: Build, Buy or Share, Ovum expresses a certain amount of optimism about the long-term outlook for 3G - optimism that will come as a welcome relief to an industry facing growing skepticism about when, and if, 3G mobile services will become available.
Indeed, Ovum stresses that the industry cannot afford to fail with 3G, as failure would seriously damage the development of the information society.
But the consultancy warns that many pitfalls still lie ahead, and there is no doubt that costs will be high, although Ovum thinks the cost burden will be lower than initially believed.
Nor will 3G services be available any time soon. Indeed, Nichols thinks it is naive to expect 3G to happen in the next couple of years. "We'll get there in the next five to 10 years," she said. "The key aim now is to minimize capital expenditure."
Ovum believes there are several ways in which operators can better manage their costs in order to reduce capital expenditure and achieve long-term survival. Nichols said operators need to look at all options to reduce the cost of building their networks. And, she stressed, they need to throw away the 2G mentality of thinking that the value lies in the network. With 3G, "the value add is in the customer," she said.
Ovum has put the main cost-saving options into three categories - build, buy or share.
"There is a certain value in owning the infrastructure," said Nichols, "but operators that concentrate on build only are in danger of becoming just bit-pipe carriers."
Buying largely involves national roaming, whereby deals can be made between operators to add capacity in areas where they do not have coverage. But, said Nichols, there are still many outstanding issues. For example, how much will it cost? What will the contractual conditions be? And how do you ensure that a customer gets the same type of service, or that the customer profile will not be lost?
The third option, and a new phenomenon in the mobile sector, is to share the cost of building networks.
Sharing can be done on many levels and has many benefits, said Nichols, but it comes with many potential operational problems.
On the simplest level operators could just share sites, which makes sense in view of the fact that more sites are needed for 3G, and that there are growing environmental pressures against mobile masts.
Other options include geographical sharing, whereby operators would use another network in a different region. Sharing the radio access network involves greater cost savings, but is difficult to implement and manage.
The highest savings would be achieved through sharing both the core and radio access network, but Nichols said this could lead to less service differentiation between carriers and does not believe the approach will be adopted by many.
The main message from Ovum is that operators should not expect too much before 2003 and should maintain fluid strategies, so they can react as the market changes. And what strategy they adopt will very much depend on whether they are an incumbent, a new 3G entrant, a 2G operator with no 3G license, and whether they have a large or small market share.
Nichols stressed that operators should make the most of their existing 2G and 2.5G infrastructure where they can. She added that it is vitally important to ensure that roaming works now: this critical issue should not be set aside and tackled several years down the line. <<
- Eric - |
