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With the entire telecommunications industry awaiting the launch of 3G networks, there have been conflicting reports about its state, its cost, and its launch date. Not only is it one of the most important events in recent years, it's also one of the most controversial. The market has opened up beyond the established mobile operators and new entrants are keen to stamp out their territory as 3G service providers. Here we examine the reasons for moving beyond 2G, the state of the market, and benefits from the smart-card manufacturer's perspective.

The first point to make is that 3G is already a reality with firm footholds in both Europe and Asia. Negative aspects such as the cost factor, the delays, and the lack of mobile equipment have been widely publicized, but despite all this, 3G is ready to go in various pockets around the world. Furthermore, data services are already available in 2G and 2.5G (GPRS) over a SIM card in existing terminals.

In light of the recent NTT DoCoMo FOMA Introductory Service launch, many operators worldwide are racing to implement data services that will offer new revenue opportunities beyond voice.

Evolution - Why Bother?
Quite simply, operators need to migrate to 3G to increase service and business opportunities. Differentiation is key and it's through data services - billing, roaming, localization, and customer profiling - that carriers can set themselves apart.

The GSM market is facing saturation. Customers need improved capacity and service quality while operators are facing a loss of revenue due to price wars for voice services. European regulatory authorities are applying pressure to encourage operators to migrate to 3G and, in the bid to reduce churn, operators need to offer the latest "hot" applications.

The flip side is that the demand for data services on the consumer side is limited, the price is high, and operators are unlikely to see a return on their 3G investment for many years.

Nonetheless, this is an evolution and, as such, there are steps to be taken. GPRS networks are currently deployed in many countries in Europe, Latin America, and Asia, as well as in the U.S., and it's anticipated that handsets will be available in volume before the end of 2001. Advantages are improved capacity, data-oriented billing capabilities, and an "always on" connection for the end-user. As a first step, it's already expected that GPRS will significantly boost mobile data services.

It comes as no surprise that Japan is about two years ahead in terms of mobile Internet and 3G handsets, so their positioning in 3G is set to have a strong influence on worldwide migration. NTT DoCoMo, Japan's largest mobile operator, recently launched its introductory 3G service, targeting 4,500 customers. After the success of i-mode, it's clear that the Asian demand for data services is high. With more than 147,000 requests to be included in the pilot, it seems that DoCoMo has another success on their hands.

Telenor in Norway is following a similar pattern. They intend to provide a SIM+USIM to select customers at the end of this year with a view to upgrading and expanding the pilot in 2002.

Latin America is starting to operate 2.5G networks and will soon begin providing targeted services (e.g., bill payment) adapted to the different segments of its market.

New 3G entrants are starting to deploy their networks in 2.5G through roaming agreements with established operators. Having made huge investments in the license acquisition, they now need to recover their costs as quickly as possible, and cannot wait for comprehensive 3G rollout.

The Smart Card Perspective
With the predicted explosion of data that will accompany GPRS and 3G, there's a need for enhanced security. Smart cards provide a portable, secure way for operators and mobile service providers to authenticate each user's identity. The smart card is a tamperproof device and the only way to ensure privacy of data, security of transactions, and nonrepudiation. Beyond this, it's also the most appropriate platform for the execution of data applications that will enhance the carrier's value proposition.

The move to 3G is about making everyday life easier. This means ubiquitous access to personal information whatever the handset, whatever the network, and wherever the user. As networks evolve, so must the smart card as it needs to support the operator in their migration. To this end, the same card can run a 3G USIM application with that of a 2G SIM, enabling carriers to not only upgrade their networks, but also their subscribers.

Building up customer confidence is key, and it's well recognized that the smart card provides the most secure method of storage, access, and use of personal data. With public key infrastructure built into the card, service provisioning can be carried out with full security. The operator will become a trusted authority for payments and certificate issuance while providing mutual authentication between the network and m-commerce enabler.

The operator benefits from customer profiling by better understanding their clients so that they can target services accordingly. However, this "insider knowledge" enables services that have come under attack as an invasion of privacy. The card will counter this by empowering the consumer to keep control over the use of personal information. The end user will be able to implement filters about the type of data they wish to receive, and when. The card will allow the operator to push their services while respecting the rights of the end user, subject to local laws and the request of the individual.

The level of convenience offered by the smart card means that the end user will benefit from real-time computing, the ability to roam between devices, offline computation, and the local storage of personal data.

Case Study
NTT DoCoMo, Japan's largest mobile phone operator with about 36-million subscribers, launched the first-ever 3G network based on W-CDMA technology on May 30, 2001. A major first for the mobile industry, the FOMA Introductory Service network uses specially developed USIM cards provided by Gemplus, the only European supplier selected by NTT DoCoMo.

Following initial tests with 4,500 selected subscribers, the network is due for commercial launch in October, and could be rolled out to as many as 150,000 customers by the end of March 2002. With ultrafast i-mode access to receive or download multimedia content, end users will experience the full benefits of high-speed mobile networking for the first time ever.

The NTT DoCoMo FOMA card is the product of close daily collaboration between the Gemplus and NTT DoCoMo research and development teams. It offers matchless efficiency for the secure management of their new generation network.

All this shows that 3G is a work in progress. It's not a phenomenon that will happen overnight, but a planned progression using 2.5G as a stepping stone.

Carriers face the challenge of differentiating themselves from their competitors. Data services give them the opportunity to increase their value proposition and increase their average revenue per user.

Some markets are more advanced than others, but the reality is that all can access and deploy data services from here on in. Returns on investment will take time to come to fruition, but it's clear that operators need to migrate in order to stay competitive.

About Philippe Martineau
Philippe Martineau is VP of strategy, of the Telecom Business Unit of Gemplus. He joined Gemplus in 1989, and has been involved in GSM ever since. Philippe has held various positions in the company, including an overseas period of three years in the U.S., developing the North American GSM market.

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