The 3G Debt Hole

[Dave Farber <dave () farber net>]

http://www.cnn.com/2003/TECH/04/24/europe.3G/index.html


 
      
Powered by     
 
     
 SAVE THIS | EMAIL THIS | Close 
 
Will operators recover cost of 3G?

By CNN's Jill Martin


LONDON, England (CNN) --It is the product of billions of dollars of
investment and years of hype. Finally third generation mobile phone services
are trickling into Europe.

3G promises to turn your phone into a multimedia device with video, music,
e-mail and photos. European telecom operators spent more than $100 billion
on 3G licenses during the telecom boom. Now they want to see a return.

But that means millions of customers signing up for new handsets and
services.

Hutchison 3G's "3" service is now available in the UK and Italy, allowing
callers to download selected TV broadcasts, play music, create and e-mail
video clips, and make video calls from mobile phones.

Other services are planned across the continent later this year.

The rollout started in Asia but has been slow to take off, while it is yet
to reach North America.

"The only real (3G) markets in Asia are South Korea, Japan and Australia.
It's not available in Singapore, Hong Kong, or Taiwan yet. Everywhere else,
3G is very far from reality," says Ross O'Brien, Asia Director of Pyramid
Research.

In Europe, as in Asia, operators need to persuade consumers the service is
worth upgrading their phones.

But with handsets costing about $400-$600 and video calls that can cost
about 75 cents per minute, 3G is out of many people's reach.

Hutchison is cutting handset prices in half until the end of May in an
effort to bring 3 into the mainstream.

"It is really targeted at trend setters and the fashion conscious who want
to be ahead of the wave," says Jake Saunders of consultants Concise Insight.

Imad Handi decided to get 3G for his job as a London bodyguard. He says he
can prove that his clients are safe by showing pictures of them to relatives
on a video phone.

He says he is "quite happy" with the service but complains that video calls
often drop and carry a delay of about one second between the image and the
voice of the caller. News and sports clips can take a minute or more to
download.

Matt Peacock from Hutchison 3G admits the service has kinks but says the
technology is still in its early stages, adding: "This has been the most
complicated project in the history of the mobile communications industry."

Meanwhile it is unclear when, if ever, companies will recoup their
investment.

"Nobody will make any money until 2010 at the earliest," says Philip
Townsend, analyst with Arnhold and S. Bleichroeder. "There's not a hope."

He says that once "the techies" have finished buying 3G phones, demand will
sink because the phones have a short battery life, high call charges and a
technology that is incompatible with current mobile phone services.

But Joe Garner of the Link mobile phone chain in the UK is confident 3G is
more than a trend. "It's going to take months and years before they get out
to everybody, but in five years' time, everyone will have a 3G phone."

Even if he is right, Europeans will have to make a lot of video calls to
help telecom companies dig out of the 3G debt.

CNN's Kristie Lu Stout contributed to this report


-------------------------------------
You are subscribed as interesting-people () lists elistx com
To manage your subscription, go to
  http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/