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To: Peter Ecclesine who wrote (19504)	4/12/2002 8:14:51 AM
From: JohnG	Respond to of 34857

Wireless minus services equals zero Columnist Michael Parsons on how 3G wireless can succeed. By Michael Parsons April 10, 2002 Naive telcos were tricked by greedy governments into paying billions for next-generation wireless licenses as the tech sector collapsed: this is the story of 3G technology in Europe. Now operators have huge debts, a statutory obligation to spend a fortune building out networks, and no credible way to explain to shareholders how they will get their money back. In reality, the only path to success is by coming up with business plans, building out networks, and offering 3G services that take advantage of new wireless bandwidth. In the United Kingdom, there are five license holders: the Vodafone Group, MMO2, Orange, One 2 One, and Hutchison 3G. I imagine they are all working hard to build out their 3G service offerings, but I shall have to just imagine it, as none of them seem very keen to talk about them. It's hardly surprising. The U.K. network operators learned painful lessons about raising customer expectations they can't fulfill when they oversold the wireless application protocol; as a result, the 3G build-out is happening very quietly. These companies have no need to attract publicity until they've been through the long, painful process of building their networks and creating the service deals that will let them support real customers. All initially promised to offer some sort of service this year, but most rollouts have been delayed to 2003. And bear in mind, of course, that "some sort of service" might be defined as "one working handset in a single metropolitan area." The only wireless operator with a couple of things to shout about is Hutchinson 3G, a newcomer with no debt and no existing wireless network--it is also, for obvious competitive reasons, reluctant to talk about its plans in detail. One lucky beneficiary of all this quiet work is British Telecommunications Wholesale, which owns the U.K.'s telecom crown jewels: a massive fiber network that should be able to support the back-end operations of all five network operators. Steve Henderson, head of proposition marketing at BT Wholesale, is marketing the proposition that his company can make it easier for operators to get up and running by offering application services--like delivery of personalized content to wireless users--in addition to providing a network. And while the operators may be feeling poor, he says, they are spending hundreds of millions of pounds on these networks. BT Wholesale's interest in applications points toward everyone's real goal: wireless services that become smash hits. Or, as Mr. Henderson puts it: "They're going to win or lose at the customer end with the services applications." That's the creative problem facing the operators. It doesn't matter how much money they save on infrastructure by going with BT Wholesale or by banding together to lower the cost of the extra antennae needed to provide a decent wireless footprint. In the end, the operators have to come up with cool stuff that people will pay a premium for--just like everyone else in the bizarre business of creating things that get consumers excited. What makes it even harder is that no one, except for NTT DoCoMo in Japan, has ever really done this before. And U.K. operators have failed to learn the most important lesson from DoCoMo's I-mode, according to Steve Flaherty, a mobile-data consultant at the London-based Our 3G Consultancy. "I-mode encouraged people to develop applications on the network, and then NTT rewarded them for taking that risk by giving them a piece of the action," says Mr. Flaherty. "It works because they've created a way to do business that was lucrative for content providers." Technologists seem constantly tempted to climb up the value chain until they fail, a sort of corporate Peter Principle. The network operators don't want to be stolid and unadventurous providers of back-end infrastructure--they can't afford to be. They want to be glamorous, forward-looking application service providers. The U.K. operators don't have the experience to develop the content themselves, but they're terrified of taking a risk and defining imaginative business relationships with content providers. Instead, they are looking at that gigantic pile of debt and the huge costs of their licenses, afraid that if they make too much noise about 3G, shareholders will wake up and ask painful questions about their strategy. We all know what happens when you focus on what might go wrong, instead of getting excited about doing something right. We won't have long to wait. Hutchinson 3G plans to launch its service this September. Based in London, Michael Parsons was formerly international editor of Red Herring and deputy editor at the Industry Standard. He's been worrying about technology for ten years. Write to Michael Parsons. redherring.com