On the move - Industry Trend or Event

CommunicationsWeek International, May 8, 2000 by Joanne Taaffe

Following the United Kingdom's hugely successful auction last month, governments across Europe are preparing to dole out 3G licenses. The winning operators will have to come up with some innovative services, for corporates as well as consumers, to get a lead in the market and cover the cost of moving to the next generation.

When the dust finally settles on the multiple rounds of third generation licensing in Europe, many in the telecoms world will be waking up to the fact that there will be a price to pay for the much-vaunted migration to 3G.

In the United Kingdom alone, the five 3G licenses up for grabs were last month auctioned off by the government for a colossal [pounds]22.5 billion ($35 billion), the highest going for [pounds]5.96 billion to Vodafone AirTouch plc, of Newbury, England.

The reality is beginning to hit home: Operators that have invested huge amounts to win licenses and build 3G networks will need to fill them with highly profitable services and applications. And that means they'll have to come up with some innovative services--for businesses as well as the vast but typically lower-margin consumer market.

"The business concept [of mobile operators] must change. The only way to compete in the future is to create new services and target [specific] user groups[ldots]the voice market is very competitive[ldots]Services are where the money is," says Matti Kuosmanen, senior consultant at Omnitele, a consultancy based in Helsinki.

So far there have been few signs of a smooth path to such services. A quick glance at recent and upcoming Wireless Application Protocol (WAP) services--such as on-line news headlines, traffic directions, travel information and weather--reveals a strong consumer bias and a traditional take on the kind of content that should be delivered. But there is a growing recognition of the importance of the corporate market--an area that until now operators have neglected in favor of building up their subscriber bases.

"I have a feeling that mobile telecoms operators have focused on growing customers. All have [now] recognized that [many of) these people don't use it very much. They have been neglecting the installed base and don't provide anything for heavy users. There's now a shift from acquiring [customers] to selling more to business customers," says Alexandre Haeffner, president of Cap Gemini Telecom, Media & Networks, in Paris,

A mix of analysts' figures predict that 30%-50% of business-to-business use of the Internet will be carried out on mobile devices by 2004, according to Haeffner. The largely unanswered question for operators is what these services will be and what their role will be in delivering them.

"Everyone is debating what the applications will be for the [mobile] business-to-business market," says Val Rahmani, vice president of telecoms, utilities, media and entertainment at IBM,

One thing is clear, say many observers: operators cannot afford to make the mistake they made with short messaging services where interoperability problems occur between their different networks. "They have messed up the functionality of SMS, and de facto it has not been used [to the extent it should have been]," says Cap Gemini's Haeffner. SMS was slow to take off and has not made an impact in the corporate market, he says.

To date, few distinctly corporate data applications are available from wireless operators, and for some very good reasons: WAP phones are only now leaking onto the market; data connection speeds are still very low, at 9.6 kilobits per second for standard GSM networks, restricting the kinds of applications operators can offer; and calls, charged by the minute, work out very expensive for end users.

Rocketing speeds

Speeds, at least, are set to rocket, however. By the end of the year GPRS (General Packet Radio Services) will provide rates of 64-115 Kbps, and once network operators reach their 3G destination in the guise of the Universal Mobile Telecommunications System (UMTS)--in two years or more--they will be able to offer maximum data access connections of 2 megabits per second for stationary wireless terminals; speeds will drop to a maximum of 384 Kbps for pedestrians, and 144 Kbps for moving vehicles.

This means the delivery of new applications, such as videoconferencing, to mobile devices will become feasible, even if the predicted demand from mobile devices for 3G services is still far from proven.

With 3G networks users will also have simultaneous call support, enabling them to make voice calls while sending and receiving data, a feature that will not be available with the initial GPRS systems, according to Steve Walker, U.K. marketing director for UMTS at L.M. Ericsson AB, of Stockholm. 3G's main advantage over GPRS, though, is the extra capacity it offers operators, its enhanced delivery speeds and its more efficient use of bandwidth, he said.

In spite of this, the big sea change in applications and services will come later this year and early in 2001 with the introduction of GPRS. This IP overlay architecture will enable GSM operators to deliver data at maximum speeds of 114 Kbps, and because GPRS establishes a permanent connection, it will resemble the functionality of fixed-line Asymmetric Digital Subscriber Line (ADSL), providing uninterrupted data delivery.