3GScottishUser
11th April 2007, 02:16 PM
The following is an extract from a lengthy article published by Business Today Egypt. It is a bit of an eye-opener in terms of 3G......
The Great 3G Scam
Once seen by operators as the gateway to a new generation of high-value, high-profit mobile services, the third generation of mobile phone technology (known as 3G) has instead become symbolic of the challenges faced when trying to raise ARPU in a highly competitive, rapidly changing market.
Coming as it did in the bullish, exuberant days of the dot-com bubble, 3G was hyped as being the future, both for customers and operators. An advanced new system and infrastructure that would offer high data-transfer speeds and all the new services associated with them, 3G quickly became the great hope of network operators looking to grow their ARPU.
Governments soon realized that the auctioning or sale of 3G licenses represented a cash-cow of vast proportions in the year 2000, over $130 billion was spent by mobile operators in Europe alone to acquire 3G licenses. Many of these operators have since struggled to recoup the high expenses especially given that a number of 3Gs supposed hit features have turned out to be flops.
Hong Kong-based Hutchison Whampoa Telecommunications (in which Orascom Telecom is a significant shareholder) knows better than most the risk and opportunity that 3G represents to the mobile industry. Hutchisons billionaire chairman Li Ka Shing one of the worlds richest men, with a well deserved reputation for flawless business acumen hedged much of his companys telecom bets on the uptake of 3G, spending over $25 billion on developing 3G networks in Europe, Asia and Australia.
Hutchison Whampoas 3G business has hemorrhaged money ever since, losing $2.56 billion in 2006 on top of the $11 billion that it lost between 2003 and 2005. The companys struggle is symptomatic of that of the industry: Enormous licensing and set-up costs have not translated into increased 3G revenues, as users fail to flock as expected to the much-hyped new services.
In the UK and Australia, 3G launches have not been successful. People talk about it as a product it is a technology. If youre going to launch, you need to offer customer benefits. How does it help people in their day-to-day lives? says Fergusson. He continues to explain that third-generation technology is aimed primarily at white-collar users.
It allows them to do mundane things right away, [such as] mobile banking, checking email and checking the news. People want to optimize time that is spent waiting for a meeting or while stuck in a traffic jam, explains Fergusson.
Video calling was a poster child of 3G enthusiasm. Those who have grown up in the world of Star Trek and James Bond imagine a video communicator facilitating face-to-face conversation between people a world (or galaxy) apart, and assume that such a product would be destined to succeed.
Experience has not validated this assumption. Of the hundreds of 3G networks across the world now offering video calling to their customers, none have seen the service become a widely used success. In the high-technology East Asian havens of Japan, South Korea and Hong Kong (where 3G and 3G-like services have been around much longer and seen wider adoption), video calling has not proven to be the killer app that operators hoped it would be. Services such as music and ringtone downloads have seen greater success particularly in Japan, where the mobile-music market now easily tops $1 billion per year.
Usability issues, cost, hardware challenges and marketing of the service are all seen as reasons for the unexpected flop of video calling, but customer demand (or lack thereof) is also a major factor. In November 2006, the GSM Association, the leading mobile industry body, released the results of a survey of mobile users in Europe, Asia and North America. The survey asked users to rank their preference for different mobile data (i.e. non-voice) services. Video calling came in at a miserable twelfth out of fourteen options, ranking behind services like mobile radio, instant messaging and what could turn out to be the unexpected star of the ARPU scene email.
The great success of the Blackberry mobile email device is a sign that mobile email is a viable service most importantly, one that is in demand by big-spending users. For the business market, always-on instant access to email while on the road is a highly lucrative product, with the Blackberry now as much an icon of corporate America as the mobile phone itself once was. As of December 2007, Blackberry makers Research in Motion (RIM) reported 7 million Blackberry users, with over 800,000 added in the previous three months alone. Both Mobinil and Vodafone offer the Blackberry in Egypt.
EDGE All Gain, No Pain
Many of the emerging mobile trends that show promising potential for ARPU growth are actually services that do not require the expensive 3G network infrastructure at all, and can be rolled out almost immediately on the current second-generation networks. This is good news for network operators looking to grow ARPU quickly and among the widest possible base of users but bad news for operators who shelled out huge sums of money for the privilege of operating 3G networks that no longer seem as lucrative as they once did.
[Third-generation technology] is a big investment and its priority is growing. There isnt a need for the market to migrate, though. They [Etisalat] need to be more aggressive [in the market] to make people adopt the concept. They can already work off of 2.5G [see below]. The only major difference between 3G and 2.5G is that 3G is a few seconds faster, says Fergusson.
Vodafone Egypt recently splurged LE 3.34 billion on a 3G license, after Etisalat got one thrown in with their unexpectedly high LE 16.7-billion bid for the third operator license. Both companies may come to regret the large sums spent on the licenses and Mobinil, the only company that has not paid for a license as yet, could be the last ones laughing.
EDGE technology which Mobinil deployed in early 2006, only to be rebuffed by the regulator, who claimed it was technology not covered by the companys existing 2G license offers most 3G-style services without 3G-size costs. If Mobinils efforts to convince the regulator that EDGE is not a 3G service and thus does not require the multi-billion pound investment that goes with it is successful, it could represent a stunning coup for Mobinil management.
EDGE represents for the mobile telephony landscape what ADSL does for the internet a huge increase in data-transmission speed over the same old fashioned network. Just as the upgrade from dial-up internet to ADSL did not require the laying of new phone lines, EDGE can offer a data service comparable to 3G without any new infrastructure being needed. Like ADSL, it is an innovation in how the data is packaged and transmitted, not in the physical-transmission system itself. Depending on how it is implemented, the EDGE platform can deliver performance as fast as, and faster than, 3G. Because of this, it has variously been dubbed 2.5G by some (including Mobinil, in attempt to have it classified under the companys license) and 2.75G by others.
In March 2007, network-equipment maker Ericsson announced that their next-generation EDGE platform, named EDGE Evolution, would be rolled out by 2009, bringing truly 3G speed and features to current networks. The new technology only requires a software upgrade by network operators, meaning expensive hardware updates are not necessary. It will offer data-transmission speeds of 1,000 kilobits per second (kbps), comparable to the high-speed DSL currently available in Egypt, and faster than the average transmission speeds of 400-800 kbps currently experienced by the average 3G user. Other key network-industry players such as Siemens and Nokia also support the technology.
Ericsson also announced that there were now 196 commercial EDGE networks in the world, which strongly suggests that the system is here to stay.
Whether through EDGE, 3G, or another acronymous technology being developed in a telecommunications lab buried deep inside a faraway mountain, it seems certain that a plethora of new, sometimes exciting, sometimes useless services will be offered to Egyptian phone users in the coming years. The hopes of the network operators lie largely in such services being adopted not necessarily with the raging enthusiasm that greeted the mobile itself, but with more than the mild disinterest shown toward 3G gimmicks such as video calling. Ferguson believes that people will adopt 3G services only when the benefits are compelling enough and the jury is still out on exactly when that will be.
Full Article here: http://www.businesstodayegypt.com/article.aspx?ArticleID=7304
The Great 3G Scam
Once seen by operators as the gateway to a new generation of high-value, high-profit mobile services, the third generation of mobile phone technology (known as 3G) has instead become symbolic of the challenges faced when trying to raise ARPU in a highly competitive, rapidly changing market.
Coming as it did in the bullish, exuberant days of the dot-com bubble, 3G was hyped as being the future, both for customers and operators. An advanced new system and infrastructure that would offer high data-transfer speeds and all the new services associated with them, 3G quickly became the great hope of network operators looking to grow their ARPU.
Governments soon realized that the auctioning or sale of 3G licenses represented a cash-cow of vast proportions in the year 2000, over $130 billion was spent by mobile operators in Europe alone to acquire 3G licenses. Many of these operators have since struggled to recoup the high expenses especially given that a number of 3Gs supposed hit features have turned out to be flops.
Hong Kong-based Hutchison Whampoa Telecommunications (in which Orascom Telecom is a significant shareholder) knows better than most the risk and opportunity that 3G represents to the mobile industry. Hutchisons billionaire chairman Li Ka Shing one of the worlds richest men, with a well deserved reputation for flawless business acumen hedged much of his companys telecom bets on the uptake of 3G, spending over $25 billion on developing 3G networks in Europe, Asia and Australia.
Hutchison Whampoas 3G business has hemorrhaged money ever since, losing $2.56 billion in 2006 on top of the $11 billion that it lost between 2003 and 2005. The companys struggle is symptomatic of that of the industry: Enormous licensing and set-up costs have not translated into increased 3G revenues, as users fail to flock as expected to the much-hyped new services.
In the UK and Australia, 3G launches have not been successful. People talk about it as a product it is a technology. If youre going to launch, you need to offer customer benefits. How does it help people in their day-to-day lives? says Fergusson. He continues to explain that third-generation technology is aimed primarily at white-collar users.
It allows them to do mundane things right away, [such as] mobile banking, checking email and checking the news. People want to optimize time that is spent waiting for a meeting or while stuck in a traffic jam, explains Fergusson.
Video calling was a poster child of 3G enthusiasm. Those who have grown up in the world of Star Trek and James Bond imagine a video communicator facilitating face-to-face conversation between people a world (or galaxy) apart, and assume that such a product would be destined to succeed.
Experience has not validated this assumption. Of the hundreds of 3G networks across the world now offering video calling to their customers, none have seen the service become a widely used success. In the high-technology East Asian havens of Japan, South Korea and Hong Kong (where 3G and 3G-like services have been around much longer and seen wider adoption), video calling has not proven to be the killer app that operators hoped it would be. Services such as music and ringtone downloads have seen greater success particularly in Japan, where the mobile-music market now easily tops $1 billion per year.
Usability issues, cost, hardware challenges and marketing of the service are all seen as reasons for the unexpected flop of video calling, but customer demand (or lack thereof) is also a major factor. In November 2006, the GSM Association, the leading mobile industry body, released the results of a survey of mobile users in Europe, Asia and North America. The survey asked users to rank their preference for different mobile data (i.e. non-voice) services. Video calling came in at a miserable twelfth out of fourteen options, ranking behind services like mobile radio, instant messaging and what could turn out to be the unexpected star of the ARPU scene email.
The great success of the Blackberry mobile email device is a sign that mobile email is a viable service most importantly, one that is in demand by big-spending users. For the business market, always-on instant access to email while on the road is a highly lucrative product, with the Blackberry now as much an icon of corporate America as the mobile phone itself once was. As of December 2007, Blackberry makers Research in Motion (RIM) reported 7 million Blackberry users, with over 800,000 added in the previous three months alone. Both Mobinil and Vodafone offer the Blackberry in Egypt.
EDGE All Gain, No Pain
Many of the emerging mobile trends that show promising potential for ARPU growth are actually services that do not require the expensive 3G network infrastructure at all, and can be rolled out almost immediately on the current second-generation networks. This is good news for network operators looking to grow ARPU quickly and among the widest possible base of users but bad news for operators who shelled out huge sums of money for the privilege of operating 3G networks that no longer seem as lucrative as they once did.
[Third-generation technology] is a big investment and its priority is growing. There isnt a need for the market to migrate, though. They [Etisalat] need to be more aggressive [in the market] to make people adopt the concept. They can already work off of 2.5G [see below]. The only major difference between 3G and 2.5G is that 3G is a few seconds faster, says Fergusson.
Vodafone Egypt recently splurged LE 3.34 billion on a 3G license, after Etisalat got one thrown in with their unexpectedly high LE 16.7-billion bid for the third operator license. Both companies may come to regret the large sums spent on the licenses and Mobinil, the only company that has not paid for a license as yet, could be the last ones laughing.
EDGE technology which Mobinil deployed in early 2006, only to be rebuffed by the regulator, who claimed it was technology not covered by the companys existing 2G license offers most 3G-style services without 3G-size costs. If Mobinils efforts to convince the regulator that EDGE is not a 3G service and thus does not require the multi-billion pound investment that goes with it is successful, it could represent a stunning coup for Mobinil management.
EDGE represents for the mobile telephony landscape what ADSL does for the internet a huge increase in data-transmission speed over the same old fashioned network. Just as the upgrade from dial-up internet to ADSL did not require the laying of new phone lines, EDGE can offer a data service comparable to 3G without any new infrastructure being needed. Like ADSL, it is an innovation in how the data is packaged and transmitted, not in the physical-transmission system itself. Depending on how it is implemented, the EDGE platform can deliver performance as fast as, and faster than, 3G. Because of this, it has variously been dubbed 2.5G by some (including Mobinil, in attempt to have it classified under the companys license) and 2.75G by others.
In March 2007, network-equipment maker Ericsson announced that their next-generation EDGE platform, named EDGE Evolution, would be rolled out by 2009, bringing truly 3G speed and features to current networks. The new technology only requires a software upgrade by network operators, meaning expensive hardware updates are not necessary. It will offer data-transmission speeds of 1,000 kilobits per second (kbps), comparable to the high-speed DSL currently available in Egypt, and faster than the average transmission speeds of 400-800 kbps currently experienced by the average 3G user. Other key network-industry players such as Siemens and Nokia also support the technology.
Ericsson also announced that there were now 196 commercial EDGE networks in the world, which strongly suggests that the system is here to stay.
Whether through EDGE, 3G, or another acronymous technology being developed in a telecommunications lab buried deep inside a faraway mountain, it seems certain that a plethora of new, sometimes exciting, sometimes useless services will be offered to Egyptian phone users in the coming years. The hopes of the network operators lie largely in such services being adopted not necessarily with the raging enthusiasm that greeted the mobile itself, but with more than the mild disinterest shown toward 3G gimmicks such as video calling. Ferguson believes that people will adopt 3G services only when the benefits are compelling enough and the jury is still out on exactly when that will be.
Full Article here: http://www.businesstodayegypt.com/article.aspx?ArticleID=7304