re: Pyramid Research & Strategy Analytics on GPRS (Some Projections)
FWIW: Views of a few research houses ...
Strategy Analytics:
* Estimates only about 8 million GPRS handsets were shipped to dealers and operators last year. [This jives closely with Gartner Dataquest who estimated 2% of 399 million handset shipments were GPRS].
* Projects that 54 million GPRS handsets will be shipped worldwide in 2002, with 35 million of those shipped to European operators and vendors. [Estimate from Gartner is 60 million].
* In 2003, shipments will reach 190 million, the company says, with 85 million of those going to European companies.
Pyramid:
* Expects GPRS to have a five- to eight-year life span, more than double the two- to three-year lifespan the company initially forecast for the technology.
* 2.5G technology will account for 24 percent of operators' subscriptions by 2005 and 36 percent by the following year.
* "GPRS will be profitable". The study analyzed three different growth scenarios for the 2002 to 2006 time period ... The firm found that One 2 One would start producing positive cash flow from GPRS services by 2004 in both the most optimistic and base case scenarios. In the most pessimistic scenario, it would see positive cash flow a year later.
* "We think there will be a strong viral marketing effect with color screens,"
>> A Break In The GPRS Clouds
Peggy Albright
March 11, 2002
Wireless Week
GSM operators have suffered a lot of grief for their delays in getting GPRS services to market, not to mention the technology's slower-than-promised data speeds and lack of applications, which have hindered customer acceptance and carriers' wished-for revenue.
The outlook isn't totally bleak, however. Pyramid Research recently completed an evaluation of the technology's progress and prospects in Western Europe. The Cambridge, Mass.-based firm says its basic findings are, on balance, sunny. "The main focus is that GPRS is much more than a stutter step along the evolution to 3G," says Jonathan Bell, a senior analyst at Pyramid Research.
The study, "GPRS: Next Generation Now: How Western European Operators are Making 2.5G Work," was completed in February. Assuming that UMTS is commercially available in 2003 and that operators overcome many of the barriers currently preventing GPRS acceptance in the marketplace, the research group projects that 2.5G technology will account for 24 percent of operators' subscriptions by 2005 and 36 percent by the following year.
Pyramid's findings should perk up GSM operators and vendors, many of which still are suffering from a media backlash over perceived GPRS shortcomings, which in turn has discouraged subscribers from embracing the technology. Observers also complain there are virtually no applications to use on a GPRS device today – assuming you can even get a device in the first place.
The Pyramid report also acknowledges another issue that some raise: Setting up GPRS services will not be easy. "Operators are only beginning to grapple with the host of technical and commercial challenges to creating a viable business model with GPRS services," the study states. "The challenges are daunting and will take years to resolve."
Nevertheless, Pyramid analysts believe GPRS, which is intended to be the core network for upcoming UMTS systems, eventually will enhance operators' revenue and continue to provide a platform for marketable services even after UMTS services are up and running and grabbing the limelight.
Bell points out that GPRS network technology is not prohibitively expensive to begin with, and because it is a necessary first step on the upgrade path to UMTS, GSM operators have to deploy it anyway.
While operators likely will configure their services to put their best customers on UMTS, Pyramid believes GPRS still will adequately serve low- to medium-end business and consumer applications as well as telemetry and machine-to-machine communications. As a result, Pyramid expects GPRS to have a five- to eight-year life span, more than double the two- to three-year lifespan the company initially forecast for the technology.
"GPRS will be profitable," Bell says, basing that conclusion on the results of a hypothetical case study of U.K.-based operator One 2 One Personal Communications Ltd., which Pyramid considers representative of mid-range Western European operators.
The study analyzed three different growth scenarios for the 2002 to 2006 time period, which included various levels of consumer demand, traffic buildup, data application success, capital and operating expenditures and maintenance costs for the GPRS network, among other variables. The firm found that One 2 One would start producing positive cash flow from GPRS services by 2004 in both the most optimistic and base case scenarios. In the most pessimistic scenario, it would see positive cash flow a year later.
Even if operators begin generating positive cash flow by 2004, however, they still will face other problems. Daunting debts resulting from UMTS license auctions and network buildouts still must be dealt with. But the possibility that GPRS may bolster operators' coffers for several years to come can't hurt, Pyramid says.
The company lists several "killer opportunities" for GPRS that could help drive revenue, such as multimedia messaging and Bluetooth and hybrid wireless local area network services that could complement other offerings. But the firm also lists a number of "opportunity killers," such as continued handset availability problems, roaming difficulties and lack of content. GPRS pricing also is confusing and expensive, Pyramid says.
GPRS handset problems already are well known, including performance problems, slow data speeds and too little supply to meet the demands of customers who are interested in the service.
According to Strategy Analytics, a U.K.-based research firm, those problems are exacerbated by a serious lack of marketable applications, especially for consumers. Neil Mawston, an industry analyst in Strategy Analytics' wireless practice, believes the commercialization delay itself is hurting GPRS services innovation, which is needed to drive demand. "Operators are not providing any incentives for content providers to produce compelling applications and services," he says.
Nor is there enough penetration of devices in the market to make it worthwhile for people to produce applications, he adds. Mawston's firm estimates only about 8 million GPRS handsets were shipped to dealers and operators last year, which is not a large number considering there are 75 GPRS networks worldwide today, 52 of which are in Western Europe. By comparison, Nextel Communications Inc. last year sold about 7 million Java-enabled handsets for customers using its 2G packet-based iDEN system in the United States.
Strategy Analytics says GPRS numbers should pick up dramatically this year as more handsets hit the market. It projects that 54 million GPRS handsets will be shipped worldwide in 2002, with 35 million of those shipped to European operators and vendors. In 2003, shipments will reach 190 million, the company says, with 85 million of those going to European companies.
But even as GPRS handsets become more widely available, Mawston, like others, believes that GPRS operators still will need to address pricing problems that currently discourage mass-market adoption of GPRS.
To illustrate the problem, Mawston and his colleagues recently conducted a simple pricing experiment in their office. They downloaded a 248-kilobyte e-mail to both a GPRS device and a handset that runs high-speed, circuit-switched data–a high-speed version of GSM that some operators are offering as a temporary, transitional technology–and compared the data speeds and service prices.
Mawston says the download took 79 seconds on the GPRS device, which he estimates would cost about $1.05. It took 69 seconds and cost only 22 cents over HSCSD, which currently is available to about 90 million subscribers in 25 countries.
Pricing aside, Mawston says Strategy Analytics believes that GPRS operators will gain traction quickly once color screens begin to hit the market in greater numbers. Currently, Ericsson, with its T68 GPRS handset, is the only vendor providing a color screen, which is needed for more robust applications such as digital imaging. Analysts expect such applications will further drive enhanced and multimedia messaging services. Other handset makers are expected to introduce their own color screen models this year.
"We think there will be a strong viral marketing effect with color screens," Mawston says. A viral marketing effect means that every handset sold will generate two more sales from the strength of its popularity.
Until such advancements occur, however, operators may find it more worthwhile to put most of their efforts into UMTS. "Until there's something interesting [to do with GPRS devices], and until the devices are there at a price consumers will pay and in a form factor they want, there's no reason for an operator to push this," says Jane Zweig, CEO of the Shosteck Group. <<
- Eric - |
