3G - Your personal portal into cyberspace

December 2001 With the recent launch of the world's first commercial 3G service in Japan, the reality of broadband mobile multimedia moved a step closer. While much hyped, what kind of services can subscribers really expect and will they generate significant revenue for the operators?

On October 1 2001, Japan's leading mobile phone company, NTT DoCoMo, launched the world's first third generation (3G) voice and data service, called Foma for 'Freedom of Mobile multimedia Access'. Foma's top of the range handsets have colour screens for access to DoCoMo's i-mode Internet service - at a maximum downlink speed of 384 Kbps - and allow the user to see the person at the other end (provided he or she also has a videophone).

However, not content to stop there, in November, the operator also launched a video-clip distribution service, called i-motion, for the delectation of its growing subscriber base. Audio-visual content, including film trailers, news highlights and sound-only music clips, will be provided from 37 i-motion sites. Full video and music distribution services are planned for Spring 2002.

This, then, is really what '3G' is all about. Forget simple telephony and text messaging, operators of these next generation mobile networks want to make their 'telephones' the portals into a rich, and increasingly diverse, digital 'cyberarcade'.

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Europe

In Europe, 3G services are not far behind Japan. "This year, operators are putting out may be a dozen base-stations, and next year, most of them are supposed to start rolling out," says Christopher Kingdon, vice president of strategic relations at SignalSoft.

Although Kingdon concedes that higher bandwidth will provide what he describes as the 'luxury' of a more interesting user interface, he does not believe that this characteristic of 3G is the real appeal of the technology. He believes that users are far more likely to be attracted by some of the 'fun' uses of 3G, for example, location-based services.

SignalSoft is currently working with Telia, the Swedish operator, on a friend-locating service. In its most basic version, the service will let you know which of your friends is close by. "You can easily build on this, so that the next step is that you can chat with your friends," he explains. "Then you can join your friends in games, or find new friends with a dating service."

Kingdon also believes that other location-based 'killer applications' will start as simple Yellow Pages-type services, of the sort that are available today under 2G via short messaging service (SMS) or WAP. "Once I know where the nearest cinema is, I want to find out which movies are available and to book a ticket through the system," he says.

Applications?

While many companies are obviously keen to point out the benefits of their own applications for 3G, independent consultants, Roke Manor Research has been assessing which applications would suit the technology's particular facets of high bandwidth data access, 'always-on' data connection, and location-awareness, in a more objective manner.

"One of the key components we've been looking at is what would people pay for," says John Cundall, Roke Manor's research manager for Internet applications and mobility. He points out that, over the last five years, the amount of money people spend on an ordinary 2G handset has been absorbed into the household budget. "The challenge is to make people feel the same way about 3G," he says.

Additionally, with 3G, the user may well be using a handheld personal digital assistant (PDA) or a laptop connected to a mobile phone. "The service has to be sensitive to what bandwidth is available, and what the terminal characteristics are," he says. "Is it a colour display, or monochrome, for example?"

Cundall points out that one aspect of 3G that has not been given much consideration is its ability to replace the home PC's wireline modem. "The 3G handset becomes your 'personal portal', providing full Internet access at home and on the road," he says.

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Billing

Of course, with all the potential new services offered by 3G, traditional time based billing models will become obsolete, which poses a difficult challenge to operators. "For voice services, we've had per-minute pricing, with some pretty sophisticated marketing offers and discounts," says Andy Tiller, product marketing director at billing software supplier Convergys. "With the success of SMS, a small per-message charge was introduced."

More recently, says Tiller, there has been something of a crisis in mobile billing, initially created by the advent of the General Packet Radio System (GPRS), often referred to as 2.5G. "As it's an always-on data service, it doesn't make sense to charge for GPRS on a per-minute basis," he explains.

Tiller does not believe, however, that the per-megabyte pricing model being used to charge for business services will appeal to a mass market. He points to the successful implementation of the i-mode business model for data in Japan. "The pricing model is very simple," he says. "You pay for content, such as horoscopes, news and weather, as a monthly subscription of three or four euros."

NTT DoCoMo bills for the services, keeping nine per cent of the subscription fee, and passing the remaining 91per cent to the content provider. "Another way DoCoMo makes money is to charge per data packet," explains Tiller.

"I think this is the model that will be adopted around the world," he says, but points to some severe limitations in the i-mode model. "It only really works for content that can be delivered on an 'all-you-can-eat' basis," says Tiller.

"If the content needs to be charged per use, for example, chart music or short video clips, a content provider couldn't offer that on a subscription model," says Tiller. "It would have to be offered on a charge-per-use basis, which the DoCoMo model doesn't cover at all."

In addition, says Tiller, as broadband comes to the 3G mobile world, much richer content can be delivered, requiring much higher bandwidth and with much larger data volumes. "At that point, the data transport charges might become quite large," he warns. "Customers are not going to accept that basis for pricing."

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Cost sharing

In April 2000, the British Government auctioned five radio spectrum licences for third generation (3G) mobile telecommunications. The successful bidders, Vodafone, BT, Orange, One2One, and TIW (now Hutchison 3G), paid approximately E36 billion to the UK exchequer - an amount seven times higher than expected.

"Current market conditions, including accumulated debt and a downturn in share prices, are encouraging new 3G licence-holders to look at ways of reducing costs," says Debbie Morgan, an analyst with telecoms consultancy Analysys.

"Financial savings in network expenditure of up to 38 per cent can be achieved through network sharing, which could greatly reduce [licence-holders'] debt burden," says Morgan. Savings of up to 14 per cent in operating expenditure could also be made, she calculates.

mmO2 (formerly BT Wireless) and T-Mobile International, the wireless business of Germany's main operator Deutsche Telekom, agree with Morgan's conclusion. In June, the two companies said they would work together on the roll out of 3G networks by their subsidiaries in the UK (BT Cellnet and One2One) and Germany (Viag Interkom and T-Mobile).

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