EuroWireless - 3G Rules Have Changed
- by Tom Dibble -
Jul. 16, 2001
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.
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.
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