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Last Updated: Wednesday, 14 April, 2004, 08:26 GMT 09:26 UK
Promise and peril of future mobiles
By Mark Ward
BBC News Online technology correspondent

Mobile phone firms face tough choices over the coming months as they try to adapt to sweeping changes in the technology behind their networks and the way they run their businesses.

Woman talking on mobile phone, BBC
Flat fees for voice calls could cut profits
So argues Jean-Hervé Jenn, European president of billing firm Convergys and former telecoms consultant at Goldman Sachs, who says that 3G phones will be the catalyst for big changes.

One of the most profound differences that third-generation phones will introduce will be a shift in the way that customers pay for their service.

"We have been brought up to buy time," said Mr Jenn, "the time you take is the time you pay for."

By contrast on 3G networks, said Mr Jenn, customers will pay for what they do, not how long it takes them to do it.

This is likely to mean a move to flat monthly fees for all the voice calls someone wants to make.

And, said Mr Jenn, that meant operators waving goodbye to much of the cash their customers generate by using the phone more or less every month.

"If they do not manage this they are going to cap their profits and we are talking big bucks here," he said.

"There is a case that says for these firms: 'What's next? If I give up the voice revenue where do I go?'"

Customer connection

Operators could claw back some of this lost revenue by adding in extra services, for instance guarantees of call quality or bandwidth, said Mr Jenn, but it may not offset their losses.

Some, he believes, might be tempted to stop running their own networks and outsource them so they can concentrate on customers.

Nokia 7600 3G phone, Nokia
Some 3G phones look different
Network hardware giant Alcatel has signed up a few operators, such as Telecom New Zealand, and is running its networks on its behalf.

Mr Jenn said that mobile phone firms will have to become more like supermarkets and gain a much greater understanding of their customers.

"We are heading towards these companies realising that they have to become sophisticated about what their customers want and offer it to them," he said.

"They need to look after the people rather than the hardware."

This could mean producing different sorts of bills for the different customers.

Some families may want a single bill every month covering all the phones that the family uses. Others may want it broken down by user or want ways to cap the phone use of their offspring.

Operators must be able to cope with all possible permutations, said Mr Jenn.

Phone firms were also going to have to greatly increase the range of services they offer to match customer needs.

This brought with it the need to install or use more technology to ensure new services, many of which are likely to revolve around entertainment, are properly delivered and charged for.

Competition time

Phone firms will also have to work hard to satisfy the anti-piracy demands of those providing the music, movies and other content.

Vodafone 3G data card, Vodafone
Vodafone is targeting businesses first with 3G
To make matters worse mobile phone firms face increased competition from established fixed line telephony operators and cable TV companies keen to keep consumers to themselves.

Many consumers may decide to try to get everything they need from one firm as opposed to the situation now where people pay different companies to use the phone or net at home or on the move.

The good news, said Mr Jenn, is that 10% of Americans have dropped their fixed phone in favour of their mobile.

Phone firms that do not cope with these changes face a bleak future, he said.

"If they do not do this they go back to where they were 20 years ago when they were utilities because their revenues were flat," he said.

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