June 20, 2001. Copyright 2001. Graphic News. All rights reserved.

Telecom giants will make Òinternet freeÓ into Òinternet feeÓ

LONDON, June 20, Graphic News: When JapanÕs largest cellular phone company, NTT DoCoMo, launched the trial of its 3G mobile phone sytem in May, more than 147,000 people applied to test the 3,330 available handsets.

Operators hope that this enthusiasm for Òsurfing on the goÓ among JapanÕs 58 million mobile users will spread to the other 500-million-plus users around the world. If that doesnÕt happen then telecomÕs largest companies -- who have paid some US$150 billion for slices of the radio spectrum -- will be facing a hard time and more heavy debts.

The next generation of mobile phones, known as 3G (third generation) or UMTS (Universal Mobile Telecommunications Services) uses technology that enables fast access to the internet on a mobile phone, allowing users to access e-mail, video clips, play games online, bet online, receive news, weather reports or travel directions, book restaurants or reserve airline and concert tickets. 

Some operators are looking at turning your phone into a device which can buy things online, be used as a remote control, or even track the whereabouts of a lost child.

The downside of this new technology is not just the massive cost of buying the licences but the extra $150 billion required to build the networks: 3G requires between four and 16 times as many base stations to achieve the same coverage as existing services. The total cost -- more than $600 for every mobile phone user on the planet -- will be passed onto the consumer in high mobile phone charges. The concept of the Òinternet for freeÓ is likely to turn into Òinternet for a fee.Ó

Matthew Nordan, research director at Forrester Research, projects that the total costs of deploying third generation licences will cause average operating profit for mobile operators in Europe to decrease in 2003, turn negative in 2007, and not recover until 2013.

Telecom companies are counting on a huge interest in 3G phones, but so far the take-up of existing Wap (Wireless Application Protocol) mobile phones with internet access has been a flop in Europe. In Japan, however, DoCoMoÕs i-Mode phones which offer always-on wireless internet access have been a runaway success.

In just two years, i-Mode has gained 23 million subscribers, and its usability has beaten rival Wap services hands-down. 

As take-up increases, prices are expected to fall to near the cost of current mobile charges, or users may only be charged for the services they download. Some may cost more than others, for example downloading music and video-clips or watching live sports events.

But new location tracking technology -- which enables an operator to pin-point a 3G mobile userÕs position -- is expected to unleash a torrent of junk mail advertisements, for instance suggesting they stop at a fast food outlet for a special promotion.

While many 3G licences are valid from 2002, the companies still have to build the networks, so the new services -- which will be limited to major metropolitan areas -- are not expected to be available until 2004 at the earliest.

Meanwhile the trial of DoCoMoÕs 3G service, which is based on W-CDMA (Wideband Code Division Multiple Access), is up and running, and the company plans to launch fourth generation cellular phone services as early as 2006.
/ENDS
Sources: International Data Corp, Gartner Dataquest, Reuters