3G prospects look grim

For veteran telecomms analyst David Swift the real story about the future of high bandwidth mobile telephony applications is a grim tale.

Presenting " Mobiles: the real story" at this week's Australia Telecommunication User Group (Atug) conference, Swift, a director of AAS Consulting, said the problem is that the "killer app" for mobile communications is voice, and voice was delivered years ago with what we now call 1G technology.

Added to problem of lack of a real market need for next-generation mobile applications -- such as location-based services -- Swift painted a picture of falling ARPUs (average revenue per user) which has mobile carriers scrambling to invent new business models, but so far with limited success. ARPUs are still trending down at some 8 per cent a year.

This issue is coupled with the daunting prospect of massive investment needed to move existing network infrastructure to 2.5G/3G capacities.

Swift estimated that the ROI period for such investment would be of the order of seven to 15 years - especially since the very expensive 3G spectrum licences have been sold - and "no Treasurer in the world is going to give the money back".

The market is mature and approaching 20 years since inception, with the introduction of analogue networks in the 80s, GSM in the early 90s, fax and data in 1994, WAP in 1999 and GSM and CDMA in 2000, Swift said. Market penetration in Australia is 63 per cent, 80 per cent in Hong Kong and 77 per cent in Singapore, he said.

"[Data carriage is being pushed] but they were not able to [properly] do 114Kbps GPRS data, so would you rely on it in a corporate environment? I doubt it," he said, adding that it costs "55 cents to a dollar to download a standard 50K Web page via GRPS". In Swift's opinion., such cost and reliability barriers will prevent data services from becoming a "cash cow" for the mobile network operators.

Other "economic realities" as Swift sees it are that Australia -- with a population of fewer than 20 million will be overserviced by four mobile phone operators and the 10 other planned networks".

"There will be massive consolidations, there will be surplus spectrum, but no market for the spectrum," he said. "The philosophy -- if we build it, they will come - won't work.

"There will be failure before success, and there will be at least one more player exiting Australia and it's not hard to figure out who that is.

"3G is a huge risk, [requiring] massive investment in unproven technology and the history with WAP is not encouraging. WAP services offer poor content, no killer app, and only 3 per cent of customers use them."

In addition to the currently touted mobile applications having doubtful demand, Swift noted that they would be launched in a competitive environment against information conduits such as newspapers, TV, radio, the Internet, fixed telephony and satellite communications.

"Why would you use 3G?"

Is 3G on your horizon? E-mail Sandra_Rossi@idg.com.au.

Copyright © 2002 IDG Communications, Inc.

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