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The €300 billion euro gamble on 3G
17th June 2002

Today's dominant visible mobile paradigm -- focused on person-to-person communication among very visible human beings -- is too limited, saturated, and expensive for profitable growth, and it will take a new approach -- Invisible Mobile -- to renew opportunity and growth for telecom vendors and operators, according to a groundbreaking report by Forrester Research.

"The telecom industry's future depends on selling more gear, subscriptions, and network services -- but visible mobile only has a set number of humans to sell to," said Forrester Senior Analyst Lars Godell. "Most Europeans already have a mobile subscription, and mobile penetration will not exceed 80 percent of the population. Today, the European telecom industry aims to combat saturation with a €300 billion euro gamble on 3G -- hoping to raise average revenue per user through yet-to-be-invented 3G services. This strategy simply won't reignite growth because it will only yield diminishing returns at sharply higher costs for infrastructure and marketing, and will result in massive operator consolidation."

But Forrester argues that a new paradigm -- Invisible Mobile, which will link hundreds of billions of network endpoints -- will restore growth to the mobile telecom industry over the next five to 20 years. Forrester defines Invisible Mobile as mobile communication without human intervention. Enterprises, as well as chip makers, equipment makers, solution providers, and telcos, will all benefit. Invisible mobile will allow seamless, cost-effective communication across network boundaries -- from body area to wide area networks -- and it will tap into machine-to-machine communication by exploiting diverse network technologies. For instance, immature visible mobile technologies like 3G and 4G depend on more and more radio spectrum, but invisible mobile can draw on a large number of more mature radio technologies like GPRS, Bluetooth, W-LAN, and RFID that depend on little spectrum.

Significantly for the telecom industry, invisible mobile will restore opportunities because it has no major growth constraints and costs far less. While visible mobile is constrained by people, invisible mobile's real constraint is imagination, as trillions of physical objects remain unconnected. With the support of some of the world's largest companies -- Coca-Cola, Procter & Gamble, Unilever, and Wal-Mart, to name a few -- researchers at MIT's Auto-ID Center aim to develop an Electronic Product Code system using RFID technology that can track 1 trillion unique physical objects per year. Invisible mobile exploits good-enough wireless technologies like GPRS, RFID, and Bluetooth that use cheap or free radio spectrum. Not only is the spectrum cheaper, but the network costs are much lower -- a 3G base station costs €200,000 to €500,000 while a W-LAN access point costs €150 to €200. The network endpoint costs are much lower, too -- compare today's RFID chip cost of $0.20 with $500 for a 3G phone.

"Over time, invisible mobile will create new pools of value for telecom manufacturers and operators to exploit by connecting billions of new endpoints and driving an explosion in network traffic," Godell added. "In contrast to today's 8 million regular mobile Internet users, invisible mobile allows for unassisted wireless communication among Western Europe's 200 million passenger and commercial vehicles and the approximately 500 billion unique physical objects that pass through European supply chains every year. Forrester expects more invisibly connected machines and physical objects than visible humans from 2005 onward as invisible mobile sessions outnumber visible mobile sessions by a factor of more than 30 to one in 2020.

"Corporations with deep pockets will fund invisible mobile because it will deliver real business benefits -- driving growth and profit for the telecom industry. For example, by applying smart RFID tags to every bottle it produces, Coca-Cola could cut down the average 7 percent of consumer product sales that get lost when goods are out of stock. By tracking the 200 billion unique objects in its annual supply chain, Coca-Cola could reduce losses that typically represent 3 percent to 5 percent of total supply chain costs. Equally, it could diminish theft, fraud, and errors that amount to approximately 2 percent of US sales per year. Also, outfitting billions of new devices with radio capabilities will bring new business to communication chip makers and telecom equipment vendors."

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