Mobile industry struggles in wireless Web
Thursday February 20, 1:00 am ET
Reuters
By Lucas van Grinsven
biz.yahoo.com
CANNES, France, Feb 20 (Reuters) - Tens of billions of dollars are riding on the future of fast, mobile Internet services, but industry leaders leaving the world's top wireless trade show are still struggling to justify the investment.
At the annual huddle on the sunny French coast, the 28,000 visitors as usual overloaded the local mobile phone network, underlining that the young industry still faces basic problems as it seeks to rekindle sales with advanced, data services.
European mobile carriers have sunk over 100 billion euros ($107.4 billion) in third-generation (3G) wireless networks, but they no longer seem convinced that video and fast wireless access to corporate information will push up revenues.
"Operators (in Cannes) suggested an unwillingness to invest heavily in 3G until more signs of life for mobile data services emerge. In general, there is a lack of conviction in the return on investment of new mobile data services," said Jeffrey Schlesinger, a U.S.-based analyst at UBS Warburg (News - Websites).
As exhibitors and visitors pack up their stands and bags for another year, Motorola Inc (NYSE:MOT - News) -- the U.S. telecoms equipment group -- acknowledges the problem.
"The business model still has to evolve," handset chief Tom Lynch conceded in an interview with Reuters. Asked if consumers will ever use enough video services on their mobile phones to pay for the investments, Lynch shrugged: "To be determined."
Wary about predicting consumer appetite for potentially costly new services, companies are pooling resources. They have too much to lose after taking one of the largest gambles in corporate history on an untried technology.
"3G technology is ready. The thing is now to turn it into a mass market product," said Kurt Hellstrom, the head of the world's largest mobile network maker, Ericsson (Stockholm:ERICb.ST - News) of Sweden. "Many different players need to work together," he said.
COMPLEX COOPERATION
Mobile communications have grown into a business with one billion users across the world largely because 15 years ago, European companies decided to back a single technology standard known as GSM (Global System for Mobile communication).
This means a person in London can now send a text message from a mobile phone to a friend in Hong Kong.
But now that the industry needs to take this model to the next step, by enabling consumers to send pictures, play games, get their calendars and receive email on tiny mobile devices -- and cooperation is increasingly complicated.
Despite alliances between providers of software, hardware and services announced in Cannes, analysts are sceptical about any end to traditional recriminations between operators and vendors about who is to blame for delayed services.
"Go back two years, and commentary on mobile services had a uniform message: operators had promoted services well in advance of their arrival, prompting disappointment all round," said Chris Alliott, London-based telecoms analyst at Nomura.
"This year at Cannes we can't help but feel that services are arriving faster than operators know what to do with them."
He pointed at video messages, shown here as the key application for which fast networks are needed, even before the industry has figured out how to send still pictures between different handsets across Europe. But at least the paralysis of last year, when the mobile market was suffering from its first revenue decline after a decade of stellar growth, has been replaced by hope.
"A year or two ago people were still feeling sorry for themselves in the industry. Now they are cleaning up their balance sheets, changing management, forging partnerships," Nokia Mobile Phones vice president Erik Anderson told Reuters.
"It's not optimism but pragmatism," he said.
SEEKING PROOF
This is certainly true for the handset makers. Four of the top five handset makers were profitable again in 2002, compared with just two in 2001. But it has also become a market in which mobile phone makers are less willing to take risks.
Japan's leading mobile operator NTT DoCoMo (Tokyo:9437.T - News) admitted here that had it not splashed out 40 billion yen ($332.7 million) in subsidies for handset makers to develop another ten 3G models, the phones would not have arrived.
"Since the 3G handsets are not selling very much ... makers were not able to get a return on their investments," DoCoMo's Chief Technology Officer Kota Kineshita told Reuters.
It is not up to operators to decide if 3G is worth it. Businesses also need to figure out if they want to invest the millions needed to give their employees access to email and business applications on expensive mobile devices.
Microsoft says a company recoups its costs if employees are in the field at least 30 percent of their working week.
For those who see no future for 3G, network vendors here came up with a once-heralded but since forgotten intermediate technology called Edge -- also known as 3G Lite.
Edge enables almost the same services as 3G but video is of lower quality and the speed, while faster than current networks, is still slower than fully-fledged 3G.
It is certainly cheaper to upgrade networks with Edge, for which no new radio spectrum and radio base stations are needed. The Chief Executive of British mobile operator mmO2 (London:OOM.L - News), Peter Erskine, said Edge could delay fully-fledged 3G further.
"A year ago hardly anyone had heard about Edge. Today everybody is talking about it," he said. Still, the largest network vendors believe Edge will have no impact on sales. |
