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Saturday, 10 August, 2002, 07:47 GMT 08:47 UK
Shaky outlook for 3G mobiles
NTT DoCoMo's 3G phones
Super-fast 3G phones will be able to show video clips

Third-generation phones promise faster internet services, video clips and colour photos but a growing number of experts are questioning whether the data revolution will ever happen and whether users want it in the first place.

For some, 3G will stand for girls, gambling and games - the only content that will prove popular on the phones.

Mobile expert and Managing Director of TDK Systems Nick Hunn said users of a trial 3G network in the Isle of Man have been underwhelmed by their experience.

"The cynical view is that the phones are useful only as hand-warmers because they are big and run hot," he said.

3G videophone
3G phones will be able to play video clips
Third generation mobile services were conceived as a huge leap forward in the way we use our phones. An enormous range of data-based services such as video clips and faster internet services can in theory be offered on the 3G mobile network.

As telecom firms struggle to come to terms with the albatross of debt due to the inflated prices many paid for licenses, critics have suggested that 3G will do more to stifle the development of mobile services than it will to revolutionise it.

It may even result in a two-tiered pricing system with UK consumers losing out.

Higher prices

Mr Hunn is representative of many who think telecoms firms were too quick to believe their own hype and blind to the real consequences of their purchase.

"In effect by buying 3G networks at absurd prices, operators have mortgaged the future of mobile telephony. It was little more than vanity purchasing," he said.

UK users could end up paying twice as much as someone in Scandinavia

Nick Hunn, TDK Systems
There are vast inequalities in the prices paid for 3G licenses across Europe. In Scandinavia, operators paid relatively little up-front, opting instead to give the government a share of profits once services were up and running.

In other countries, including the UK, operators paid billions for the 3G networks.

As many of the big players have interests in a variety of countries, consumers could pay the real price, predicted Mr Hunn.

"It could be that a two-tier mobile infrastructure develops where consumers in countries that paid the higher license fee subsidising the others. UK users could end up paying twice as much as someone in Scandinavia," he said.

This autumn will see the 3G ball set in motion in the UK as Hutchison becomes the first of the five British operators to roll out a full network.

The rest have delayed their plans, saying it is too early for 3G services.

Developments in the rest of Europe suggest that not all operators are as brave as Hutchison. In July Spanish telecoms firm Telefonica decided to cut its losses and ditch its 3G mobile operations in all but the Spanish-speaking world.

Despite wiping 4.49bn euros off its value for the closure of 3G operations in Germany, Italy, Switzerland and Austria, shares immediately rose on the news suggesting share-holders at least were relieved to be free of the burden of 3G.

Voice only

Mr Hunn thinks others will follow Telefonica's lead and abandon 3G. For those that stick with it, he is far from convinced they will persuade people to pay the extra price for data services promised.

Nick Hunn, Managing Director TDK Systems
Hunn: Sceptical that users will want 3G
"I have immense difficulty understanding the business case that says lets spend hundreds of pounds per user in the hope that people will want to spend their days downloading content," he said.

"Voice will remain the killer application of mobile and I have no faith that something else will replace it," he said.

A recent survey in the Financial Times found that significant number of consumers were unexcited by 3G.

Nearly half said they were unlikely to use the handsets for anything other than voice.

Greedy governments

It is estimated that users will have to spend up to 10 times more than they currently do on mobile services to make 3G profitable.

Increasingly critics are calling on the governments that set such high prices for the network to allow mobile firms off the hook as the only way of stopping mobile technology from being stifled.

"The lack of understanding government showed when it auctioned the spectrum cannot be underestimated. It seemed to be based on the idea that abject greed was a good policy," said Mr Hunn.

"If the government wants to see mobile technology develop it will have to renege on the license fees," he said.

Getting it right

Some analysts suggest that telecom companies could learn from the experience of offering GPRS services, which allow much faster internet access on the go.

Round video phone
New phones could come in all shapes and sizes
"Operators need to market GPRS first and get that right. Then they can begin to migrate users slowly to 3G," said IDC analyst Paulo Pescatore.

"What services to offer and what price to offer them at will be crucial," he added.

Even the optimists recognise that a developing 3G market will claim victims. It will also require a "quantum leap" in the way operators market and sell services, suggested Gartner analyst Nigel Deighton.

"There will be hundreds of micro-markets and it will be far more about lifestyle than technology. Operators have to share their clients with others who will understand these new markets," he said.

GPRS will be a good test of how much demand there is for innovative data services.

But rather than providing a stepping stone to 3G, GPRS could be as far as consumers want to go, suggested mobile expert Justin Pearse of New Media Age.

"As GPRS matures and multimedia handset functionality, such as colour screens, becomes standard, much of this content may well provide a compelling enough experience to negate the need for consumer to make the expensive upgrade to 3G," he said.

Moral dilemma

The one thing that all commentators do agree on is that the content most likely to drive 3G will be the same that drove the burgeoning technologies of the world wide web.

"It will be the three g's - girls, gambling and gaming," said Mr Hunn.

Bringing pornography to our phones could come with its own problems as mobile firms have to balance questions about morals and decency with the need to make money.

"It will be interesting to see how the government and operators react to the first 3G mobile paedophile ring," pointed out Mr Hunn.

Key stories

Consumer choice?



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