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EuroWireless, 3G Rules Have Changed
EuroWireless, 3G Rules Have Changed

3G Rules Have Changed

We've all heard the promises that 3G will deliver a plethora of full-motion, audiovisual streaming applications and services. But at what cost? Operators will have to charge for these - over and above anything delivered so far - then convince you that they'll be worth paying for. Exaggerated subsidization of handsets could well be a thing of the past.

Packaging, Packaging, Packaging
Recently in the UK we had the BT Wireless launch of GPRS (very quietly, I might add. See WBT's interview with WBT's Mike Short.) We've also heard of the pitfalls facing European 3G testing. Score GSM 1 - UMTS 0. The key to a successful 3G proposition is clear - packaging, packaging, packaging. We are bound to see, although unlikely from the outset, an entire mix of the following types of services obtainable: e-mail, unified messaging, a/v broadcasts, voice mapping, location-based services (baptized as advertising utopia!), mobile microcommerce, multiplayer gaming, and a host of other less useful services that someone will no doubt exploit.

Have they got them in the pipeline? I don't think so. I hear only panic ensuing from within the firmly bolted doors of product development managers across Europe. The marketing folk have been ordered to cease and desist until there's a "real" story. Operators, as a whole, are treading very gently on this frozen ocean in an attempt to minimize risk.

The real question (apart from how to segment highly affluent consumers likely to want such services) is: "Who's going to supply the content?" It's open to all at the moment, but it's obvious that some contenders are more likely than others. In the WAP world, content was relegated to a degree, but it has resolved its differences with technology, and is firmly set to be positioned top dog once more. With the emphasis on higher bandwidth content, the "wireless content" world now steps up a pace.

The Small-Screen Entertainer
Much emphasis has been given to information- and transaction-based applications, intended to give a belated kick to the rise of m-commerce. It's fast becoming apparent that mobile entertainment services could become the major source of revenue for operators.

Webnoize, a U.S.-based group of analysts specializing in digital entertainment, predicts that by 2006, more than 50-million consumers worldwide will use mobile devices to access streaming music and video content. In its report, "Wireless Entertainment: What is it worth?" Webnoize states that, "Cellular devices are the entertainment centers of the future. The rollout of devices supporting music and video, along with the emergence of high-speed wireless networks, will contribute to the explosive growth of mobile multimedia." Webnoize predicts that the global market for the wireless delivery of streaming video and music-based services will be worth $2.9 billion by 2006.

I suggest that, rather than seeing a dominant killer app for the broadband future, the wireless multimedia era will be characterized by several common features:

  • Anytime, anyplace, anywhere access (the 3 As): Mobile devices equipped with music, video, and Internet access will come to dominate people's niche or idle time.
  • Point-in-time services: Require the immediate attention of the user in order for them to be effective.
  • Location-based services: Based on knowing the location of a device, these services include navigational, directory, and people or telemetry services.
  • Premise services: Based on a specific or known environment such as an airport or shopping center. They would be available to all mobile users within a specified vicinity, and would provide information that users might need to know if it had an added value for them.

    Content Is Still Undoubtedly King
    Few seem to doubt that enhanced multimedia services will become available on a large scale. It's far less certain that all operators who currently possess 3G licenses will actually launch services, and be able to profit from them. In some cases where operators have already paid hefty amounts to acquire next-generation licenses and face the additional costs of constructing 3G networks, delays in service launch are not unlikely.

    Mounting debt, volatility in the financial markets, and technical obstacles are just some of the problems they face. Many mobile operators are anxious and, as such, have appealed to their governments for support. In Germany, six operators paid a total of $47.5 billion in the country's UMTS auction. RegTP, the German regulator, seemed to be moving in favor of allowing its operators to share the costs of network construction. This is the opposite in the UK where OFTEL has stood firm against such a move as it feels that allowing practices such as network-sharing would endanger the development of a competitive 3G market.

    Either way, operators that survive the ensuing obstacles even before consumer launch, must build foundations with a whole host of content and technology partners. The sheer breadth of services to be made available will necessitate partnerships with news agencies, Web portals, banks, and travel companies, to name a few. This not only presents the operator with revenue-sharing issues, but also implies the development of alternative business models and processes.

    The Yankee Group argues: "Customer ownership, branding, and revenue distribution models clearly need to be developed to optimize the dynamism of the marketplace. Across Europe, operators appear to be gradually coming to terms with the idea that sharing risk and success is crucial to enlarging the market for model data."

    Despite the need for a new approach, there seems to be an air of optimism within the industry that operators are well positioned to dominate the value chain of services. There will be a slice for all. Gone are the days when the operators dictated terms on content deals. Revenue-sharing agreements with cellular operators have the potential to be equally weighted, if not in favor of, third parties. There's a severe lack of broadband content out there at the moment, and existing content companies will have to adapt to new technologies themselves, to repurpose their content to this new platform. If you look at i-mode, NTT DoCoMo has a transaction fee for traffic revenue. It takes 9% of the applications revenue for 38,000 or so current applications ranging from horoscopes to "joke of the day."

    Large multimedia content providers stand to gain lucrative revenue-sharing deals with mobile operators. But ultimately, it's the operators who will benefit most. Some operators will use the brands of their content partners to define and differentiate their own service offerings. The value chains will be split up so you'll have network operators and service providers, mobile virtual network operators (MVNOs), and so on. A fresh approach to thinking is definitely needed.

    About Tom Dibble
    Tom Dibble , a wireless entrepreneur, is a cofounder of
    Global Wireless Forum, a forum dedicated to dealing with commercial, strategic,
    technical issues on the evaluation of the wireless age in Europe and
    the U.S.

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