Will 2005 be the year for 3G?

Mobile network operators have invested billions in building, launching and marketing 3G services in recent years.

But the industry still faces many challenges before the technology can start to deliver on its potential, according to experts at last month's 3GSM World Congress.

Rob Conway, chief executive of trade body the GSM Association (GSMA), says 2005 is the year that doubts about 3G will be dispelled. But some observers believe that growth in mature markets may be harder to generate.

Research by analyst Informa Telecoms & Media suggests that average revenue per user (ARPU) across existing mobile networks and new 3G services grew by only two per cent in established markets such as western Europe, North America and Asia in 2003/4.

And Informa's report, Mobile Industry Outlook 2005/6, predicts a slowdown in new customers in these regions as the subscriber base reaches saturation.

'The number of countries with 100 per cent penetration has gone into double figures,' says Informa chief research officer Mark Newman. 'Can there be any growth left?'

The main opportunity that 3G presents is through faster connection speeds than the 40-60kbit/s possible with 2.5G.

The ability to transmit voice, data and multimedia at rates of up to 2Mbit/s promises richer content services for mobile, computer and phone users, wherever they are in the world.

But Newman says that in Europe, SMS text messaging accounts for 80 per cent of ARPU, and that existing 2.5G services, such as MMS, GPRS and Wap, have failed to capture significant extra growth.

He blames 'high prices, a lack of compelling services, interoperability difficulties and poor marketing and customer education'.

The failure of 2.5G to stimulate the mobile data market demonstrates why vendors, operators and service providers are so keen to ensure growth by driving new revenue from 3G.

Bob Fuller, chief executive of 3, says the average person spends two hours a day driving, one hour at a PC and three hours in front of the TV - but only six minutes talking on a mobile phone. 'That's half the amount of time we spend on a fixed line,' he says.

But Fuller, as chief of the first 3G operator to launch in the UK, is predictably optimistic that the technology offers the industry its best chance of increasing that time.

'Why is there so little usage for something we all want?' he says. 'The mobile industry failed to live up to its potential or create incremental ARPU. Only 3G technology goes way beyond voice and can deliver on mobile potential.'

As an example of the importance of the new technology to the sector, Vodafone invested £8bn readying its 3G infrastructure and £100m on advertising last year, on top of the billions it spent acquiring spectrum licences.

Nearly 20 million users in 31 countries across five continents now subscribe to one of the 61 service operators that launched 3G services in 2004.

Globally, 3G growth has achieved four million more subscribers than the equivalent point in the evolution of GSM networks. Conway believes that as more people switch to 3G, the more attractive it will become. But this will depend on the introduction of services and access terminals that compel subscribers to upgrade.

Rene Obermann, chief executive of T-Mobile International, told 3GSM delegates that a lack of available, compatible hardware has been a problem.

'Our key market is Germany, but we also launched in Austria and the UK with relatively low take-up of good devices,' he says. 'There could have been faster take-up if we'd had better terminals.'

The 3GSM show was full of companies exhibiting new 3G-based technology, and no fewer than 115 new access terminals, including datacards, were launched. Samsung alone unveiled 10 new 3G-compatible handsets, out of a total of 40 models it displayed.

Sanjiv Ahuja, chief executive of Orange Group, says operators must provide a service that the user wants.

'The customer wants a seamless experience that is technology agnostic, taking them from home, while mobile, and to work,' he says.

Software vendors such as Microsoft, Sun Microsystems and BEA are offering middleware products aimed at integrating a new layer of richer content and data applications with operators' existing technology infrastructure.

For example, LG Electronics used the conference to launch Push-To-View, a service offering a similar experience to chatrooms or instant messaging, but combined with video calling, to provide multimedia communication and networking.

Andrew Stevens, Microsoft telecoms sales manager, says integrating the complexity of functions such as billing with services based on this new layer of technology is critical.

'Most middleware focuses downwards into the platform,' he says. 'But what is important is getting the new service to the customer.'

Global standards will play a key role in harnessing the business and consumer opportunities of 3G, as demonstrated by the GSMA's strategic growth plan.

GSMA chief Conway has called on the industry to simplify messaging, access and global roaming. He says interoperability of messaging will be an area of focus in 2005.

The association aims to facilitate the creation of a messaging 'hub' for passing data traffic such as MMS between carriers and operators.

But Obermann warns that the industry must learn from past efforts to become established.

'Some early adopters of mobile technology in the early 1980s struggled to realise the same consumer success in the business space, and we shouldn't forget that,' he says.

Case study: Bonusprint

Photographic development chain Bonusprint is using the higher data transmission speeds offered by the latest mobile technology to provide new services to users of 2.5G or 3G cameraphones.

Customers can now create an online photo album they can manage, share with friends or request as prints for a small fee.

'With our service, a user of a supported smartphone can install the Bonusprint client software,' says chief executive Anthony Ward.

'This allows them to upload their pictures to a personal album online as soon as they take them, using the phone's GPRS internet connection.

'From here, prints can be ordered, and there is a monthly subscription charge. 'As well as photos, the service caters for videos, and allows users to synchronise their phone address books.'

The Bonusprint Mobile service has become popular because it gives customers an alternative to SMS or email for uploading pictures, and is cheaper than home printing, he adds.

The service uses technology provided by supplier Cognima.