re: UMTS World Congress Stuff
>> A Week in Wireless
The Informer
22-October-2001
Euphoria, Pain, Pleasure, Perfection: so goes the reaction of observers to the progress of a new technology. In the world according to Jane Zweig, CEO at US consultancy The Shosteck Group, there are no prizes for guessing at what stage UMTS now finds itself. This week, the annual UMTS World Congress pitched its tent in the splendid surroundings of the Estadi Olimpic in Barcelona. Unfortunately the grandeur of the location was not reflected in the general mood.
In hindsight, the same event last year was a watershed. It was when the first inklings that the wireless high was over began to appear. Some within the UMTS community are now feeling the pain so acutely they couldn't bring themselves to show up. Noticeable by their absence were all the major vendors, which was unfortunate from the point of view of service and applications companies like Unisys, who believe that "terminals will set the pace for the introduction of new services." There is some speculation that the absence of the big manufacturers was because they had very little to show. Scott Wickware, director of wireless internet at Nortel, provided a more prosaic answer: the funds aren't there.
Nevertheless, there were still flashes of euphoria from some quarters, notably UMTS Forum chairman Bernd Eylert . He arrived fresh from a trip to Tokyo filled with boyish enthusiasm for NTT DoCoMo's new FOMA service which he declared to be "really brilliant." One suspects his user-experience may have differed somewhat from that of your average salariman. He went on to enthuse about projected annual revenues of $300bn for 3G operators by 2010. Whether anybody takes this kind of crystal ball-gazing seriously was immediately called into question when reality intruded in the form of Hans Meyer, senior vice president at Intel. Capitalising on the propensity for gallows humour inherent in any downturn, he raised a laugh by acknowledging the aforementioned projections but observing that "the only really important projection is that in the long term we are all dead." Ouch!
Even more upbeat than Eylert, but perhaps with more justification, was Mr. i-mode Takeshi Natsuno who swaggered through a presentation replete with the usual mind-boggling figures about i-mode take-up. Natsuno, who is very much residing in the Pleasure Zone, basically had one message to deliver: It's the content, stupid! In his view, business models will have to change. "We need to change the mindset from the telephone company way of thinking to the internet way of thinking," which for him means a radical overhaul of telcos' relationships with third party service providers. He stressed again and again that DoCoMo alone couldn't possibly have made i-mode a success: "The business model for i-mode is best for third party service providers, not the best for vendors or operators."
This view was echoed by Michael Davies, chairman of consultancy Mercator Partners, who pointed out that "even Vodafone are slowly coming to the realisation that they need to have partners to make [3G] work." Alastair MacLeod, managing director of News Omnimedia, suggested that the whole argument about ownership of the customer may be redundant. "I would liken a mobile network operator to a supermarket," he said, arguing that there can be a similar element of choice between own-brand promotions and the sale of branded products. This may raise issues of customer ownership but Sainsbury's does not have an argument with Kellogg's every time it sells a packet of cornflakes, he reasoned. Both parties are happy because they make money and "we could adopt a similar approach with wireless data services," argued MacLeod. But there were dissenters. Roberto Vannini, head of business innovation at Telecom Italia Mobile, is not inclined to let go of the value chain that easily. He believes that "the cellular operators should retain most of the value "because we are providing most of the assets."
Whatever the final business model, the clearest message that emerged from the event was that the advent of UMTS will be massively disruptive, creating a class of winners and a class of losers. In answer to the E120bn question on everyone's lips this week-Can operators make money from UMTS?-Michael Davies was unsparing in his assessment. "Yes, it can be done. Will it necessarily be done? No. The winners will earn great returns, but the losers may go out of business." And he has already picked out the most vulnerable-looking candidates. "If you are an insurgent operator in the UK, Germany and Spain, or a not very good incumbent, you are going to have work really hard." Marina Gibbs from Spectrum Strategy Consultants was equally forthright. "The winners will be large players and we will see a huge amount of consolidation in the next few years." According to her assessment, mobile pure players will be the leaders because "they don't have a parent company riddled with problems with their fixed networks." Scott Wickware is positive there will be consolidation in both the operator and vendor markets. "There will probably be about four or five UMTS operators in Europe and about four UMTS vendors."
Bill Walkowski, industry marketing engineer for Agilent Technologies summed up what operators need to do to become winners in a technological sense. "There are two key network lifecycle areas that are critical to operators at this early stage-network planning and optimisation." Amongst the exhibitors, there was a plethora of companies offering various means of network optimisation and ways to improve network planning. One was Dr. Simon Saunders, technical director of Cellular Design Services."3G increases the demands on planning more so than GSM. Even a small amount of interference can be a big problem and conversely a small effort at optimisation can be crucial. In some cases adding base stations can actually reduce capacity." His message to operators was to "work with reality, with optimisation" and network planning. With the likely advent of widespread network sharing, the problems of coverage planning and tuning will become more acute.
Two competitor shadows hang over UMTS at the moment. One is the threat from WLAN and other 'piranha technologies.' Peter Kirstein, director of research for the Department of Computer Science at University College London, warned that WLAN could take most of the urban market for high speed wireless data and "there is a definite danger that UMTS could suffer the same fate as Iridium." Jane Zweig disagreed, arguing that the two technologies could exist together and serve different needs. As for CDMA1x, the rival technology to GSM/UMTS is on a roll and in terms of the space race to 3G it is well ahead. As Zweig said, "The issue is not about high data rates but profitable data rates," and she pointed to the experience of SK Telecom in Korea, which has chosen to limit its data rates to suit its customer needs. Its "comfort zone" is 30-50kbit/s and it is doing quite happily with that thank you very much.
Nevertheless, UMTS received an unexpected boost during the Congress when the news from France filtered through. The French government had caved in to the demands of operators and slashed the costs of UMTS licences retroactively. This comes barely a week or two after facing down a threat by SFR not to pay the first instalment of its UMTS licence fee. Alcatel's shares jumped 12% on the news. Many now believe this could put pressure on other European governments to ease the way to 3G and benefit the industry as a whole. But hold on a minute. France did not have an auction for its licences, therefore it was not faced with the kind of legal obstacles that would confront governments in the UK and Germany, for example. Nevertheless, one suspects a fix will be found.
And so you have it. Euphoria, Pain and Pleasure all made an appearance at UMTS 2001. Perfection, like the vendors, was nowhere to be seen. <<
- Eric - |
