2.5G - a wireless staging post on the road to 3G

While press attention has largely focused on the 3G licensing process that has been rocking the European telecomms industry in recent months, much less has been written about the so-called '2.5G' technologies which nearly all European operators are currently rolling out apace. This is strange since the success - or failure - of the services that these new technologies will enable will dramatically impact the future of 3G…

If mobile operators and industry pundits are right, the world of European mobile communications is set to change dramatically over the coming months. This is because virtually the entire industry has embarked on the mass deployment of 'data friendly' IP (Internet protocol) mobile networks that operators hope will allow them to exploit the anticipated explosive demand for mobile data services.

For those operators that spent billions of Euros acquiring a 3G licence, it will be an especially tense few months. Newly licensed 3G operators, analysts and investors will be watching, 'hawk-like', to determine the level of demand for these new data services. If demand soars, they can perhaps allow themselves to breathe a little more easily; however, if any substantial demand fails to materialise, watch out for plummeting stock prices and the vultures that will inevitably move in.

New acronyms for a new era So what are these technologies that have been dubbed '2.5G' and what kind of new commercial services will they enable? Basically, the 2.5G sobriquet encompasses two specific technologies:

- GPRS (general packet radio service);
- EDGE (enhanced data for GSM evolution).

Unlike the current data capabilities of GSM mobile networks - which are limited to a modem-accessed switched data service offering speeds of no more than 9.6Kbps; and an SMS (short message service) that does not require a modem but where message sizes are restricted to 160 characters - these new technologies enable IP data to be sent and received instantly, sometimes referred to as 'always on', at more than ten times the speed.

However, it is not just the data speeds afforded by them that make the technologies so attractive to operators. In a communications' world which is increasingly being dominated by the transmission of data (consider the Internet), not only do these new 2.5G technologies allow the operators to offer a fast mobile data service, but it allows them to achieve it in a bandwidth-efficient way. Thus, they enable mobile operators to exploit the mobile 'data wave' with technologies that optimise their existing infrastructure.

The operators hope that by deploying technologies which enable a relatively fast data service, they will be able to seduce subscribers with a number of new services including: web surfing, file transfer and online gaming. If they succeed, they stand to earn good revenues as subscribers find even more reason to use their mobile telephones. Indeed, in late November 2000, Aspective, an ASP (application service provider) became the first third party to nail its colours to the mast when it announced it had signed an agreement with the UK's BT Cellnet mobile operator to offer a range of ebusiness solutions over the operator's new GPRS network.

Evolution or devolution?
Originally, it was thought that mobile operators would adopt and deploy these technologies successively, on the road to full blown 3G services. GPRS, it was predicted, would be deployed first and then, at a later stage, EDGE would be deployed - which offers even higher data rates via a more efficient modulation technique - before 3G technology, offering data speeds of approximately 2Mbps, were eventually deployed.

However, due to delays with the GPRS standard and the fact that 3G licences have largely been awarded, the window of opportunity for EDGE deployment has closed significantly. "The fact is," says Simon Buckingham, CEO of Mobile Lifestreams, "that EDGE is no longer a strategic choice for operators but has become an operational one. "I've asked lots of network operators if they are going to deploy EDGE, and virtually all say 'no'."

However, while Buckingham believes that EDGE's importance has been significantly reduced, he still thinks that it will have its own particular part to play. "The reality is that not every mobile subscriber in Europe is going to immediately update their service to 3G, and thus use 3G spectrum. EDGE will allow operators to squeeze even more capacity out of their existing networks.

This particularly applies to GSM-1800 operators who have a lot of capacity which they will want to use as efficiently as possible in the future," says Buckingham. He continues: "I think EDGE will end up being very much like HSCSD (high speed circuit switched data - which combines up to four different channels to provide subscribers with an expensive, and relatively slow, data service) - something that maybe a dozen or so operators will eventually deploy."

Not that straightforward
Yet despite the fact that some operators are trumpeting the arrival of GPRS on their networks, Mobile Lifestream's Simon Buckingham says that, in reality, these services are far from ready and exist in their current guise as no more than 'commercial trials'. "They are just trials at the moment. The network operators have pushed their marketing and public relations machines behind their 'purported' GPRS services in order to try and get a competitive edge," he says.

"Even BT Cellnet, the first network in the world to launch a GPRS service, has only got a couple of hundred subscribers out there. The notion that you can go into a store and buy a GPRS device is a fallacy. You are at least another six months away from that," he says. The reasons for the delays in the rollout of GPRS are not unique, in fact, says Buckingham, they are characteristic of the problems inherent in all new technology rollouts. They basically fall into two distinct categories:

- Delays with terminals;
- Problems with GPRS networks and standards.

"Nokia, the world's leading supplier of mobile telephone handsets announced with much aplomb in December 2000 that their latest handset, the 'Communicator 9210', will be available in Q2,2001. Unfortunately, the device does not even support GPRS. Nokia made a mistake by putting a lot of resources into HSCSD which only about ten networks have actually rolled out," says Buckingham.

And while this is unfortunate for mobile operators, it is difficult to lay the blame solely at the feet of handset suppliers. Whenever a new technology is developed, be it: WAP, GPRS, EDGE or 3G, it is always the terminals which are the delaying factor. The problem is, understandably, that with so many new technologies evolving all the time, with their accompanying public relations blitzes, it is difficult for terminal manufacturers to decide which ones hold the most commercial potential - let alone consistently second guess one of the most dynamic markets in the world.

Backing the wrong horse?
As such, the GPRS handset shortage is being compounded by the fact that both Nokia and Ericsson are using their resources to serve other markets. For example, both companies have recently brought out mobile phones that support the burgeoning Japanese 'iMode' standard, while, separately, Nokia has just entered the Korean market with its first CDMA (code division multiple access) mobile phone.

Another problem faced by handset vendors is the fact that newer versions of WAP (wireless application protocol) are continually being developed. "Every six months there is a new release of WAP," says Simon Buckingham, "There was another one in early December 2000. But the problem is that there is not backwards or forwards compatibility, this creates enormous additional pressures for handset vendors."

Yet, despite the pressures faced by handset vendors, it is critical that they act now to address these new handset markets or they stand to lose significant market share says Peter Bellew, CEO of Wapprofit, a specialist developer of wireless Internet tools. If they do not, Bellew expects the European mobile phone manufacturers to lose handset market share to the Japanese and Koreans companies like NEC, Mitsubishi, Sony, Panasonic and Samsung who have the requisite consumer electronic experience - essential to multimedia handsets - that their European and US counterparts lack, he says.

Network problems
Aside from the handset problems, however, GPRS rollout programmes have been hamstrung by the lack of workable standards. "There are a whole range of issues with GPRS on the network side," says Buckingham. "GPRS was standardised by the 3G Partnership Project (3GPP), and it came out in releases. Many networks - including BT Cellnet's - initially launched with an older version of the GPRS standard, SMG29; but it was only with the release of SMG31 that the standard was finally settled."

Many of the problems associated with the rollout of GPRS have come about as a result of an over eager attitude by the mobile operators to deploy the technology. Unfortunately, the technology lacks maturity and stability. "A lot of network operators who are rolling out GPRS are discovering a lot of bugs," says Buckingham.

However, when the GPRS network bugs have been ironed out, terminals are available and a universal and workable WAP standard adopted, the combination of new technologies promises to breathe new life into an, as yet, faltering mobile data market. "When that happens, WAP will become a reasonably evolved standard and will make it workable for a lot of the applications it was designed for," says Buckingham.

"WAP applications like surfing the Internet and receiving news alerts will then be available over a reasonably fast, cheap and immediate 'bearer'. This is probably where we will be in about nine months time - when there are handsets that support both the definitive WAP and GPRS standards," says Buckingham.

And while Buckingham believes that GPRS will definitely help in the development of WAP (and thus mobile data in general), fundamentally, he says, the current problem with WAP is not technological, but economic - what Buckingham refers to as 'the uneconomics of WAP'. "The fact is that no one is making any money from WAP. In the case of iMode, the network operator gives the content provider 91% of all airtime revenues generated by the subscriber calls to content sites. In Europe, however, WAP companies are going out of business because the network operators are the ones making all the money - the content providers are making no money at all," says Buckingham.

If GPRS, and thus WAP, are to find a willing subscriber base, mobile operators are going to have to seriously change their attitude towards content providers. "After all", says Buckingham, "Content is King. Whether the wireless Internet succeeds in Europe to the degree that we would all like, is wholly dependent on the degree to which revenues are divided up fairly and according to responsibilities," he says.

The value of education
Yet striking a more alarming tone for mobile operators, currently in the throes of rolling out GPRS, is Wapprofit's Peter Bellew. He believes that while, in theory, the market appears to be ready to start using faster and more sophisticated mobile data services, in practise, many parts of the industry remain totally unprepared.

Fundamentally, he says, there needs to be a massive reseller educational program. For example, he says, "hundreds of WAP mobile phones are sold each year which have not actually been WAP activated. Sometimes this is a result of a mix up at the manufacturers, but more often than not, it is because sales staff at mobile telephone retail outlets simply do not understand the technology they are selling, and fail to make sure the phones they sell are correctly primed."

Furthermore, he says, "once telephones have been sold - and this will apply as much to GPRS as WAP - after sales support needs to dramatically improved. If after 15 years of the technology people still cannot programme their own video recorders, how are they expected to carry out highly complex technical procedures on the advice of a telephone operative, who themselves are unsure of the technology. It's completely unfeasible."

He also echoes an earlier point made by Buckingham about western handset manufacturers' preparedness and ability to serve this market and highlights an - often overlooked - market peculiarity. "A lot of the market for mobile communications are driven by the desire to possess 'telephonic jewellery', and the first GPRS-enabled west European mobile phones are horrible," says Bellew.

Aside from the cosmetic appearance of the phones, he says, their practical design is of equal importance. "In Japan, the reason the iMode service has become so popular is largely due to the handsets. The screens are about three times bigger than European ones and the experience of using one for reading web pages is much better." Thus it appears that behind the GPRS marketing campaigns of Europe's mobile operators, there are still many issues that need to be comprehensively tackled. There is no doubt that GPRS networks will soon become available, but the degree to which they are successful depends on the joint commitment of the entire industry.

It is also critical for the future of the much vaunted 3G, that GPRS does not suffer the ignominy that WAP suffered when it was initially deployed. If that happens, it will be increasingly difficult for subscribers to become anything but apoplectic in the face of future 3G marketing campaigns. On the other hand, if they get it right, GPRS will provide mobile operators with a lot of experience that will be of particular value when they come to start rolling out GPRS services. For example, for the first time, subscribers will be partly charged by how much data they consume, rather than how long they remain on the telephone.

GPRS is an important staging post on the road to broadband mobile data, a place where the industry can re-group and reorganise before the final push towards 3G. However, if, in its urgency to recoup revenues as fast as possible, the industry is tempted into short cuts, this will only damage long-term prospects. Never has the role of careful planning been more suited to a situation.