Mobile data services key for next-generation technology, says Ovum

While high-speed Internet services are becoming a reality, the increasing yet uncertain demand for mobile data services is moving the industry into the next generation. Large investments are being made to upgrade existing 2G networks and new network technologies have been developed. However, consumer uptake and availability of cheap, highly standardized network and terminal equipment will be key in determining the success of third generation mobile (3G).

A new report released today by respected independent research and consulting company Ovum, finds that 3G networks will carry traffic from one billion (63%) of the world`s cellular subscribers by 2010 - accounting for $548 billion (66%) of the total cellular service revenue.

According to the report, Third Generation Mobile: Market Strategies, operators will need to offer a full range of services on their 3G networks to make 3G appealing to a broad range of customers. Additionally, since full technical capabilities will not be available at launch in 2001, operators will need to develop a gradual, long-term development plan. "It will be important that operators do not rely on 3G to transform the demand for data services," says Dan Gardiner, Ovum analyst and lead author of the report. "Extending existing services and moving to higher speed packet services will enhance the demand for such services over time."

Ovum finds there are multiple market development scenarios for 3G. Countries will move between scenarios as the pace of development and consumer acceptance changes. The report also finds that 3G technologies will be implemented in most regional markets by 2006. Scenarios include:

Slow Growth; slow consumer take-up of cellular data services combined with complex and expensive network and terminal equipment, resulting in limited deployment of 3G technology.

3G Upgrade; with limited consumer demand for data, 3G networks are implemented to meet operational improvements and to deliver "multimedia" services for business customers.

2G + Substitution; A rapid growth in the level of demand for cellular data services, frustrated by the expense and complexity of 3G equipment, results in a high take up of 2G+ while migration to 3G diffuses through the business community.

Rapid Growth; rapid growth of consumer demand for data services is met by 3G technology. The cost of the technology both to the subscriber and operator is reduced through economies of scale.

"The demand for applications which will require 3G networks and terminals will be influenced by a range of factors, some out of the operator`s control," says Gardiner. "Since there is no `killer application` for 3G, it will be important for operators to offer personalisation services to make mobile data relevant to users. It will not just be about repackaging Internet content." This will bring about a shift in power away from the network operators to content providers. "Whoever delivers a compelling package of personalized content, i.e. succeeds with the `wireless portal`, will own the customer," confirms Gardiner. However, Ovum is quick to point out this will not be an easy task. From the `first movers` to the `fence sitters`, content provisioning will require experimentation and even niche market development.

For network vendors, 3G creates a new wave of network investment and the next big revenue source. However, the vendor market will become more competitive. "The shift from circuit to IP creates opportunities for vendors such as Cisco and 3Com," confirms Gardiner. "Traditional telco vendors like Fujitsu and Siemens, who have not enjoyed great success with 2G, will have to address IP and shift more towards software and support services."

Terminal vendors are faced with different challenges. Since 3G networks are expensive, cheap terminals will be needed to make 3G available to a broad range of customers from the start. Additionally, terminals will be required to seamlessly communicate between 2G and 3G networks and have battery life that supports 3G technology. "At the end of the day, users will place the value on the application. The terminals themselves will need to hide the complexity of 3G and be both simple and affordable," concludes Gardiner.