3G must be deployed as a complement of 2G

The mobile industry needs to refocus its early 3G efforts, says Ovum, the analyst and consulting company. Mobile operators rolling out 3G networks need to forget about bandwidth-hungry applications for the few, and instead concentrate on narrowband applications – including voice – for the many.

Rolling out a 3G network to provide multi-media applications to a large number of people over a wide coverage area requires huge investment and, as things stand, this looks to offer a fairly poor return. Ovum estimates that 3G will account for 14.3 percent of the world’s mobile connections by 2007 compared to 0.3 percent today.

“Handing back the licences and pretending 3G was just a bad dream is not the answer, says Julian Hewett, Chief Analyst with Ovum. “Instead, operators must roll out 3G gradually in traffic hotspots, such as capital cities, where many 2G networks are already feeling the strain.”

Such a strategy will result in much lower levels of CapEx – which should mitigate some of the financial pressure operators are currently under. And once it’s in place, 3G technology will provide a much more cost-efficient network. Voice transmission could cost 30% less than 2G, and data transmission 80% less than 2.5G technologies like GPRS. Hence, an OpEx saving.

“It comes down to deploying 3G as a critical complement to the 2G network, not as a replacement nor as a standalone premium service platform”, says Hewett. He adds: “Handset manufacturers must also develop some simple, low cost 3G phones to seed the new technology in the market. Users will naturally embrace multimedia services when the devices enabling them are widespread. This is how the most successful telecoms applications develop – the Internet, Minitel, fax and SMS”.

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This strategy marks a radical change of direction for 3G. In the current market, operators are committed by their licence conditions to deliver 3G coverage far beyond the traffic hotspots in urban areas and, as far as we are aware, no vendor has plans for simple 3G phones which are primarily designed for voice.

“Implementing this strategy will require a big change of heart across the whole industry – regulators, operators, infrastructure vendors, and handset manufacturers”, says Hewett. “In our view, it’s the right way. Unfortunately, we doubt the industry has the courage to change direction quickly enough. But it would be nice if there was at least the option”.

Regardless of whether 3G limps along with a full-on multimedia strategy, or whether it refocuses on ‘broad-based but narrow-band services’, user adoption will be low in the early years.

In 1999, Ovum wrote “3G is not necessarily mobile multi-media. Mobile multi-media is not necessarily 3G. There is no such thing as a 3G application … new revenues available, because it’s 3G, will be very small … a capacity-relief strategy is the least risky and has the shortest payback.” [1]

This is coming to pass, as operators realise that multi-media applications will not generate additional revenues in the short term.