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Five Years On – Has 3G Delivered?
By Bob Schukai

6/7/08


This week we have a guest column, I asked someone with a rare insight into the world of 3G if it’s working. Bob Schukai  was head of 3G in Europe for Motorola when it launched. He took it from a technology to a reality which gave Motorola twice the market share in 3G that it had in 2G. Today he  looks after all of Turner Broadcasting’s  global R&D efforts in wireless and broadband.  That includes everything from mobile TV trials and deployments, text, mobile internet and getting video from journalists that has been captured on their phones onto air for CNN.
London 03-03-03:    That was the day that “the future of mobile” was opened with the commercial launch of the 3 UK 3G network.  They, coincidentally, had three phones – two from NEC and one from Motorola.  All had appallingly short battery life, were  large and clunky; but new technology has to start somewhere, doesn’t it?

Today most developed markets have 3G networks and have moved into deployment of high speed packet access (HSPA) in towns and cities, offering up to 7.2 Mbps of theoretical download performance.  Even North Korea is getting into the act with deployment of a 3G network this year.  Maybe the Great Leader Kim Il Sung plans on delivering a daily mobile video message of inspiration to his countrymen.

Cat asked me two questions: Does this mean that 3G has finally delivered on those incredibly hyped promises of yesteryear?  And if so, does this bode well for the continued rollout of HSPA and LTE (Long Term Evolution)?
I think the answer to the first question is a clear and unmitigated “Not Yet” but at least  reality is getting closer to the myth.   

Being American, let’s start with what is working:  Handsets have achieved parity with the size/weight/battery life of their GSM counterparts whilst delivering an amazing set of features.  I normally carry 14 handsets with me (don’t get behind me in a security queue at any airport) that typically have a short turnover before I’m onto the next one.   That said, I have had the Sony Ericsson W880i in my pocket from day one of its launch in spring 2007.  Of course the keys are fiddly for texting, but think about all of the technology crunched into this tiny little handset:  3G, triband GSM, a 2 megapixel camera, a massive memory card, and battery life that lets me go a couple of days easily between charges.  Nokia continues to produce stellar handsets like the N95 8GB with WiFi, HSDPA, and GPS all built in.  There is so much choice today compared those 3 original handsets.

Operators are also doing some very good things to drive take-up of 3G.  I actually see operators talking about services and consumer benefits in markets in Europe and parts of Asia.  As someone who helped bring you the Motorola A830 phone, I remain incredibly impressed with 3 and what they do to drive this market forward.  I was impressed with Kevin Russell, now CEO of 3 in the UK, when he was at 3 in Australia, and I expect to see him do more things like X-Series and Skype to drive change and that promise of 3G. The coolest thing that I’ve seen from an operator has come from 3 Hong Kong – an international prepay 3G/HSDPA SIM card that actually delivers roamed services!

From a 3G services standpoint, I see a number of very good things happening with some semblance of intelligence sitting behind those services from a business model perspective – as long as you don’t roam!  Although one of the benefits WCDMA is the ability for operators to relieve their burdened GSM networks that were starting to see rises in dropped calls, the benefit most touted by 3G was the high speed data.  Some of these services are clearly moving more mainstream – so much so, that in the UK, you certainly see operators now starting to chase the fixed broadband market with aggressively priced USB dongle packages.  MMS traffic continues to increase as people realize that hey – you can actually now upload pictures and videos without it taking forever.  Again, picking on my friends at 3, offering products like the Slingbox on X-Series or mobile TV priced on a per-day rate illustrate that there is some reasonable belief that the network won’t completely fall over if people actually use the service.

Being British (actually yes, I’ve got dual nationality), let me now state where I think the problems remain.  I chose to do this with my British hat, because it seems that if you ask any Brit how they are, the inevitable is always in terms of “degrees of bad.”  “How are you?”  “Not so bad.”  “Not too bad.”  Try it. 

I see two main challenges remaining for 3G to ultimately hit the finish line where we can declare it a success.  One is rather easy to solve – the other more complicated.  The first challenge remains network build-out and capacity.   I live in Atlanta where AT&T has deployed not only 3G but HSPA as well.  At my office, I have full bars of coverage and incredible service.  At home, I have no network coverage.  I am 23 miles from downtown.  It is not limited to AT&T – there is no coverage from any of the 5 major network providers in my area.  And thus, when you watch an advert on television from AT&T or Verizon Wireless, they do not talk about new and amazing things you can do with your phone.  Instead, the catchphrase is “it’s the network” or “more bars than any other network.”  No, you don’t.  Until T-Mobile introduced the Blackberry Curve with WiFi and the ability to deliver phone, email, and text via my home network, I was blissfully able to avoid any calls as soon as I rolled into my driveway.  In the USA, our networks are all about coverage, because we don’t have full coverage.  And so, unless you’re within a tight, major metro area, you will drop back to EDGE/GPRS or possibly no coverage.

This isn’t a USA-only phenomenon; consider how recently O2 in the UK nearly faced fines from OFCOM for not ensuring it had reached the population coverage mandated by its 3G license., although at least in the UK you always have 2G coverage. 

With all of this said though, this is a problem that can be surmounted.  Operators universally need to ensure that they build their networks to a sufficient level to deliver a decent experience if they want this increase in data traffic to continue. 

Where the larger challenge lies is in the business model.  Technology is generally not the issue at the end of the day.  Boffins will continue to invent ways to solve problems we don’t have with new technology capabilities.  Every technology goes through the same hype/trough/reality cycle, and 3G is no different.  However, the easiest way to kill a new technology is to have a broken business model, and there are a number of areas where it is badly broken.  Look at the state of mobile television – it was the saviour of our business barely three years ago if you listened to the marketing hacks.  At Mobile World Congress in Barcelona this year, there was nary a mention of it at all.
So let’s look at where these business model problems exist.  Consumers – especially those on prepay – are not going to take up if they think they are unclear of the costs.  A prepay consumer is making a conscious choice to trade voice/text away when accessing any sort of data service, and so, the value of that service must be sufficient enough to make that trade. 

Mobile music is a great example.  Who in their right mind would use an operator music store that has some sort of bizarre DRM, making it impossible to transfer that music elsewhere at a cost beyond what they could get from the Apple iTunes store or the Amazon music store?  Do I really want mobile TV from the operator at £5 or £10 a month if it is a rather limited channel selection?  Don’t even get me started about the rip-off pricing that is called data roaming!  I am not a fan of the heavy-handed action of the EU, but it doesn’t make sense to me as to why my Vodafone tariff changes when I go from one Vodafone network to another.  The internet doesn’t care.  Just because I connect from a Dutch gateway to get to a UK portal should not incur a massive jump in my data charges.  I don’t pay those costs crazy costs if I go to a friend’s house in Amsterdam and plug my laptop in – to check on something carried by ESPN – why should it happen in mobile?  I love what 3 does (see a pattern here?) in allowing you to keep your tariff when you roam onto a 3 network elsewhere, but their footprint isn’t big enough to make this work enough of the time.

It seems to me that we need some revolution in business model here.  If Cat lets me, maybe I’ll write further on this next time, because I do have an idea here.  Of course, it might be no better than what we have today, but it at least has some degree of common sense behind it.  It will take an enormous leap of faith from the operator community, but as someone who now works in media, I have a feeling that it has some merit behind it.

And thus, the answer to question 2 – whether or not HSPA and LTE will be successful, will certainly rely on the answers to the above question.  If we don’t put some intelligent thought into the business models up front, Cat will be having me write this exact same article in 2016.

Next week we’ll be back to the usual Cat Keynes column

Links
Meanwhile the comments on these links are from me, Cat:

Typically analysts do a great job of researching a market, digging out numbers and then either state the obvious or jump to the wrong conclusion. A great example is the Multimedia Intelligence report that the US teen market is saturated (obvious) and that this leads to stagnation (wrong) and that it’s important to get subscribers early (also wrong). Teens have PSPs, Digital cameras and iPods they are a great target for multiple device ownership. Just because they don’t have multiple mobiles now doesn’t mean they won’t in the future as those devices start to include a SIM. And you can’t count on loyalty from a tech savvy, fashion conscious audience in a market that has 20% churn.

The iPhone has brought back an idea from the 1990s: The three year contract what next? Billing by the minute? Analogue?

Vodafone has bought 66.7% of Ghana Telecom for $960m. There are 6 million, low ARPU, mobile subscribers so that’s  $240 per subscriber although of course they get the infrastructure too.

Virgin Mobile has bought Helio for $39m for 170,000 high ARUP ($80) subscribers, that $230 per subscriber, but most importantly it gives tougher negotiating rights with Sprint.

What is it about keeping your friends close? Verizon clearly doesn’t know the next bit, as it wants to buy out Vodafone which might be a little dangerous if Vodafone uses the money to buy Sprint.

Intel paid for Apple to move from the Power PC to Intel processors, now it seems that they have ARM in their sights with an Atom powered iPhone.

The EU, Banks and Mobile Operators are co-operatingsounds like a recipe for disaster.

Being able to read 2D barcodes is something that’s been talked about at conferences for a long time now,  Telstra is doing it Half a million users is more than a trial.

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