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Monday, March 03, 2003

3G Hits Europes Streets

So 3G is finally going to hit the streets here in Europe. Only one question, will it be with a roar, or a loud crash. The Economist, as per usual, is hedging its bets.

FORGET the euro100 billion ($108 billion) shelled out by Europe's mobile network operators for third-generation (3G) licences. Disregard the huge debts, the languishing share prices and the endless wrangling over the licence terms. Never mind that several would-be 3G operators have folded their tents and given up. None of that matters to the shoppers who can now see 3G phones available for sale on the high streets of London, Birmingham, Rome and Milan. Admittedly, these whizzy new phones—which can send and receive live video—are only being demonstrated and will not be delivered until mid-March. But now that 3G has finally arrived in Europe, will anyone buy it? Nobody knows, which is why the industry is avidly watching what happens in Britain and Italy, where Europe’s first commercial 3G networks are being launched by 3, a new operator backed by Hutchison Whampoa of Hong Kong. 3 has signed up 140,000 customers in Italy, and a comparable number in Britain. Unsurprisingly, the company is emphasising the unique video capability of its 3G handsets.

But whether videotelephony will be enough to get 3G off the ground remains uncertain.A more cautious approach is being taken by the established operators who, unlike 3, currently have millions of customers using 2G networks. Rather than make a song and dance about 3G, these operators—notably Vodafone and T-Mobile—are instead promoting mobile data services, under the brands “Vodafone live!” and “t-zones” respectively. At the moment, these services, including the ability to send still photos (but not video) from one handset to another, are delivered using enhanced 2G, or 2.5G, networks. But the capacity of 2.5G networks is limited, so as more subscribers sign up for such services, the operators will quietly switch new customers over to 3G networks over the next few years. “People will be using 3G without being aware of it,” says Ben Wood of Gartner.

In short, where 3 is pushing 3G as revolutionary, to lure subscribers away from other networks, the incumbent operators prefer to see it as evolutionary, as they attempt to hold on to them. The 3G hype of a couple of years ago has evaporated, and a new pragmatism is abroad in the industry.But there is, of course, another possibility: consumers may decide that voice calls and text messages are enough, and shun the other new services on which 3G is predicated, in both its revolutionary and evolutionary forms. In that case, operators will have to fall back on 3G’s ability to carry voice calls in higher volumes, and at lower cost, than 2G networks. “Voice is not a market to be sniffed at,” says Mr Lee. Even ten years from now, he says, mobile voice revenues will exceed revenues from sending data. The mobile operators will then set about cannibalising the fixed-line voice business with their 3G networks. It will be quite a come-down for a technology that was once expected to change the world. The vast licence fees will probably never be recouped.
Source: The Economist

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