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Is 3G a toy or a tool?

Who do operators love best, consumers or business customers?

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The mobile telecoms industry is at a crossroads, and IT managers can expect to see some changes in the future, as data services and higher bandwidth appear. But will the operators launch services that make sense for business customers, or will they keep on chasing consumers? The confusion in mobile telecoms is not primarily about technologies, although the mixture of today's GPRS services with newer Wi-Fi hotspots, and the looming possibilities of 3G make for a complicated picture. And it isn't the customer that is confused. IT managers know what services their customers need -- email and access to corporate applications. Given a clear idea of the costs involved, they can decide whether -- and how -- to deliver those services to mobile devices, based on the business need. The main confusion is with the operators. As they bring out 3G services, they do not know whether they should be aiming them at consumers or at business customers. And this is compounded by the fact that they do not know whether mobile technologies should work alongside fixed lines, or compete against them. This confusion could be reflected in the service options for IT managers in the next few years. "The problem is, operators are faced by uncertainty," said Alastair Brydon, of Sound Partners Research, co-author of a report recently published by Analysys. "Face with uncertainty, people sometimes don't take any actions. They might drift along rolling out 3G networks without thinking about the traffic that will run on those networks." Who do you love, the consumer of the IT manager?
Most operators will sell to both markets, of course, and in the case of voice, the service offered to business is really just a variation on the one offered to consumers. The voice contract you have for your firm's collection of mobile phones is really just a more complicated version of the contract an individual has for their phone. The main difference is that there are lots of phones involved, and the itemised bill comes to you on a CD (if that isn't your experience, read our introduction to billing). But in data services, the two markets are so different, that business users can find they are left behind. Because, when it comes down to it, the operators' first love is the consumer. "Their main focus will always be on the mass market, because that's where the big numbers will come," says Brydon. Mobile videophones are not a great business tool, but that is the application that is being sold hard by 3 in the UK, for example. Will mobile oust fixed?
The big question in telecoms now is the relation between fixed lines and mobile services. So many people have mobiles that voice calls are moving towards the mobile networks. When 3G is implemented properly there will be higher bandwidth available, and data calls could go the same way. Operators have to decide whether they are selling mobile services at a premium, and remain a niche alongside fixed lines, or whether to get competitive, install high capacity networks, and cut the prices until customers start to move across from fixed lines. Vodafone, the world's leading mobile provider, and the one with little or no ties to fixed providers is, as you would expect, bullish on the transfer of fixed revenue to mobile services: "It is only a matter of time," said Arun Sarin, Chief Executive of Vodafone at a Goldman Sachs conference in New York in October. "Since wireless only captures 20 percent of telecom minutes and 40 percent of revenue we have ample room to move fixed voice minutes onto our voice network." He isn't in any hurry, claiming to be three years into a seven or eight year master plan, but the progress already is significant. Ten years ago, mobile revenues were only a couple of percent of telecom revenues. Now, although the overall pie has more than doubled from $350 billion to $850 billion, mobile revenues make up a much higher proportion. "There will be many factors that contribute, including price comparisons, fixed-to-mobile calling rates, roaming, and 3G," said Sarin. "We plan to grow revenue by mobilising office applications like messaging." Three ways it could go
According to Brydon, there are three ways the telecoms industry could go. Each scenario is quite possible, he says. The report he co-wrote, Scenarios for the Evolution of the Wireless Industry, draws a detailed picture of each -- arguably the stock response of the analyst who can't actually decide which is going to happen. Premium for Mobility. In this scenario, the operators carry on much as they are now, marketing mobility as a premium service, and boosting the use of data services over 2.5G networks, where users pay a high cost per Mbyte. 3G networks will be implemented slowly, and things will develop slowly. "Services like messaging and WAP browsing generate little traffic," says Brydon. "Operators can make a living but it won't drive a need for a big 3G network. As the volume of traffic generated by the business market on its own is quite small, the question for operators will be, to what extent do they need to invest in 3G to satisfy the business market?" So if the operators focus on business, services will stay expensive and there might be less 3G network build-out in the end. Voice and Broadband data go cellular. In this model, the operators go all out for "substitution" dropping their prices and going for large volumes. "There are new technologies that could help them do this," says Brydon. "They could offer real mobile broadband access." To do this, the operators have to address the consumer market, and move pre-paid consumers onto contracts. Mobile data would become much cheaper and faster, looking more like broadband Internet access, though the operators might not have much attention to focus on what business needs to do with it. Alternative technologies thrive. In this option, things get disrupted. Technologies like Wi-Fi and WiMax get developed quickly and effectively, and take the wireless broadband revenues. "These technologies can nibble away at the edges of the cellular systems," says Brydon. "The operators themselves may choose to partner with or build the new technolgies, and it could extent the service concept." In this scenario, things get more complicated for the IT manager looking for voice services, as a self-confident Wi-Fi world will start to offer voice services itself, in competition with both fixed and mobile operators, and taking part of their business. "There are signs to watch for," says Brydon, suggesting that 3's efforts to win consumers are a sign that it is pushing for the second scenario. 3's Christmas marketing is designed to boost use of consumer data services by cutting their prices. Though Vodafone says it will be pushing for substitution, it has launched a 3G service in Germany and Italy that is aimed at businesses, and looks more suitable for the first option. T-Mobile and BT have both invested heavily in Wi-Fi, possibly steering towards the third option. "Whichever of the three scenarios operators go for, they will try to cherry pick business customers," says Brydon. "However their main focus will always be on the mass market." And this might actually be good news. Services aimed at the mass market may not quite meet the needs of business, but they are cheaper, and their prices come down more rapidly. The first mobiles were aimed at business people, and were huge and expensive. When they were sold more widely, they came down in price very quickly. Business people already use a phone that could also be sold to a consumer. In future when their data service looks the same, they can adapt to that.

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