GlobalOffice Business Report
Editor-In-Chief Juhani Viherlahti
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Mobile markets in 2002 and beyond

Text messaging (SMS) continues to be a lucrative business despite GPRS network and handset availability. Reasonable SMS pricing and availability of phones help to keep text messaging on the top of the favourites lists. Mobile data will also increase over the next three years.

Mobile markets are getting no refunds from the European Commission (EC). On June 12, 2002 the EC recommended that member states should not relax the rules governing 3G licenses. Handset availability will be blamed when the 2003 deadline approaches. At this stage industry consolidation is going to get more speed. Swedish Telia and Finnish Sonera has come to an agreement already.

Text messaging (SMS) continues to be a lucrative business despite GPRS network and handset availability. Reasonable SMS pricing and availability of phones help to keep text messaging on the top of the favorites lists. In a sample of operators across nine European countries, SMS contributed between 84 and 97% of total data Average revenue per user (ARPU) in 2001. SMS still accounts for the bulk of mobile data revenues. Average revenue per user (ARPU) is set to decline slightly over the next three years, according to a new report from ARC Group. Tariffs for WAP and GPRS transport have also fallen noticeably during 2002, while SMS pricing has remained stable.

Mobile data will also increase over the next three years, rising from under 10% of operators' revenues in 2002 to over 20% in 2005, with further growth in prospect. To achieve more compelling content that will drive the mobile market in the years to come, network operators, content providers and service providers will need to partner with each other.

3G roots are in the mobile history

The first-phase technology, analog mobile networks (1G), was overtaken by more advanced digital networks such as GSM (2G). GSM has been the world’s most successful mobile technology standard to date. Some 400 mobile operators currently provide GSM service to over 730 million customers in almost 180 countries. GSM is expected to pass the one-billion-subscriber milestone sometime in 2003.

GSM data-transmission speeds are limited to 14.4 kbps or up to 43.2 kbps with High Speed Circuit Switched Data. Today’s 2.5G systems, such as GPRS (General Packet Radio Service) technology, have boosted this speed higher, in practice up to 40 to 60 kbps, making possible the first true 3G services like MMS. To accommodate even more advanced services in the future, 3G communication standards and technologies have been designed to provide data speeds above 384 kbps, even up to theoretical speeds of several Mbps.

Two families of standards have emerged to make possible data speeds over 384 kbps: WCDMA (Wideband Code Division Multiple Access) is based on GSM/GPRS/EDGE evolution, and CDMA2000 1xEV-DV is based on the IS-95 narrowband standard also called cdmaOne. 3G network operators have overwhelmingly adopted WCDMA as the preferred standard. WCDMA technology using the 2.1 GHz band is also often referred to in Europe as UMTS (Universal Mobile Telecommunications System). The GSM family of technologies, which includes EDGE (Enhanced Data-rate for Global Evolution) and WCDMA, accounts for 70% of mobile subscriptions worldwide today.

Nokia is a leading supplier of 3G WCDMA technology with a market share in 3G exceeding 30 per cent. Nokia dual-mode WCDMA/GSM terminal introduced September 2002. In USA, major TDMA operators such as AT&T Wireless, Cingular Wireless and VoiceStream have chosen EDGE for 3G services in the US. In Europe and Asia, more than 10 operators are currently testing EDGE hardware. Nokia started shipping EDGE capable hardware to the US frequencies in January 2002 and in Europe in April 2002. Nokia delivers EDGE capable hardware to all frequencies (800/900/1800/1900).

The PDA or tablet PC market does not challenge the mobile phones as devices. PDA battery life is much shorter than what is expected for a usable phone. The Microsoft-based tablet PC is the first tablet PC to use PDA like handwriting recognition software. This positions the tablet device as a note-taking instrument rather than a phone, and tablet PCs continue to be positioned as PC replacement.

Leading Finnish research institute VTT has predicted that within 10 years third-generation (3G) mobile phone networks could be rendered obsolete by a new fifth-generation network.

Towards 5G

By 2010 the 5G operators will offer services such as high-resolution real-time video. The fourth-generation mobile networks, 4G, is now being reserved for new roaming technology that will allow a single mobile handset to access the growing array of mobile networks. Revenues from the type of multimedia application currently referred to as "3G services" would be shared across the various types of operators. Those which have paid heavily for 3G licenses will suffer from this development. One possibility is that 5G will take the form of a high-frequency Samba network promoted by the European Commission initiative. Samba is a mobile wireless extension to today's fixed-line broadband internet networks.

While waiting for the 5G, in a report evaluating the 26 most influential 3G business models, Datacomm contends that 3G will provide flexible high-speed communications to ordinary users. This can be done at affordable prices, which is hard to believe, if the current pricing policies of the telecom providers continue in 2003. Overpricing seems to be one of the threats to 3G. If Datacomm is right then traditional telecom business models will be replaced by those stressing enhanced services and content over basic access and transport.


Juhani Viherlahti