On Your Marks, Get Set……… Hang on A Minute

Tuesday’s announcement by Vodaphone that they will launch their new 3G mobile service in Germany and Portugal is another topic which rattles some skeletons which have recently been kept well locked-away and out of reach.

As the Times is only too willing to remind us: “the auction of 3G licences conducted in the UK was the largest process of its kind ever conducted, earning for the Government some ?22 billion in 2000”. And then suddenly everything went strangely quiet!

Really 3G has been plagued with problems, and I have the feeling that it is a hot potatoe that nobody really knows where to put down. Clearly it is a visionary, future-oriented technology: but is there a market for it, will it be profitable, and if so, when?

Well the race is now well and truly on with Hutchison Whampoa, Orange (which launched its first 3G services in “Pilot City” Toulouse on Monday) and T-Mobile ( which has reacted to the Vodafone move by saying it will start selling 3G handsets immediately and by bringing forward its planned launch by a week).

Vodafone?s chief marketing officer, Peter Bamford, puts it like this:

Consumer trials have indicated that early adopters are keen to try this technology and so we are giving them a taste of it prior to the full launch of enhanced services later in the year.?

My own feeling is that there is a market, but not a sufficient one given the existing cost structure. In plain terms: if they make it too expensive virtually no-one will use it, and if it is too cheap there will be users but no profits. Either way it seems like it could be losing proposition in the short run.

Among the other details of interest are the choice of the Samsung Z105 for the launch (ouch Nokia!). And of course underlying it all the history of the alleged superiority of the EU planned standards-based roll-out over the anarchic and disruptive US ‘deregulated’ model. You certainly don’t seem to hear too much about this here in Europe these days. As I said, haven’t they gone quiet!

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

13 thoughts on “On Your Marks, Get Set……… Hang on A Minute

  1. “Among the other details of interest are the choice of the Samsung Z105 for the launch (ouch Nokia!)”

    As I recall, the two handsets chosen for Vodafone Live were Nokia and Sharp. Of those, the latter was reportedly the more stable and the one with better performance. Equally, Samsung have been making some rather impressive inroads for quite a while now and I would expect them to continue to gain market share.

  2. “Quaylism on 3”.

    I take it you mean this:

    “My own feeling is that there is a market, but not a sufficient one given the existing cost structure. In plain terms: if they make it too expensive virtually no-one will use it, and if it is too cheap there will be users but no profits.”

    Maybe, but it’s one with a lot of money riding on it, and I’m glad it’s not my money.

    Maybe it’s another Quaylism to say that having the technology is one thing, making money from it another (Concorde?).

    I guess it is one thing to have mobile 3G as a connector for a laptop, quite another to use the mobile itself as a platform.

    And if bandwidth costs, as some suggest, tend to zero, what happens then?

  3. “Samsung have been making some rather impressive inroads for quite a while now”

    You bet. I think the big question mark has to be hanging over Nokia, and this of course brings us back to that ‘European model’ of R&D.

  4. “The race is now well and truly on..” – except it’s rather like that 100m sprint on Monty Pythons, where the athletes are starting off in all directions except forward. Although in our case, they really don’t want to go forward (invest), but they are forced to move by the regulator – at least in Austria, where technically there are now four “live” 3G networks. Hutchison is the only operator trying in earnest to sell handset-based 3G services (they are giving handsets and intra-network calls away for free at this time), the others are restricting themselves to datacards for notebooks if anything.

    As far as I know, most operators view 3G now as a Eurotunnel-like venture: the cost will never be justified, yet once the network is in place, somebody will be able to do some business with it.

    There probably is a market for high-speed data cards that work in places where there is no WLAN hotspot, although this market looks quite small. Handset-based services are the real sore spot. Only Hutchison seriously believes in video-telephony, the others are hoping at least for streaming of entertainment content. The rest of the once so promising landscape of 3G services is still speculative or at the research stage.

    Is the European approach with its emphasis on standardisation mistaken? I don’t think so. GSM was a huge success, the problem seems to be that because of this success the prophets got overexcited about their own gospel. But of course, while existence of a set of standards may be benificial, it is no sufficient condition for economic success.

  5. “Is the European approach with its emphasis on standardisation mistaken?……… because of this success the prophets got overexcited about their own gospel.”

    But isn’t this second part exactly the problem. Obviously you need some sort of framework or other.Obviously with GSM they had the luck to be in the right place with the right plan at the right time. I say luck since I don’t think anyone was actually able to see when the mobile was finally going to take off with any kind of scientific precision. (What, for example, is the future for the European market in high speed train tickets?). This success then went so much to their heads that in the case of UMTS they seemed to think that they could milk the cow before she had even eaten the grass.

    These new technologies are not called disruptive for nothing. The emphasis on initiative and creativity is greater in the US. The evidence is there in the Googles of this world. We need more emphasis in Europe on allowing the people at the bottom to go to and get on with it. I see this as being profoundly democratic, rather than facilitating bail-outs of the old state monopolies when they have tried to buy-in but had no idea what they were really doing.

    Nokia can also suffer from this top-down ‘heavy handed’ model. They’re losing out, now lets see if they can generate the vision and creativity to get back in. It’s an open question, but a profoundly interesting one, and one which our European social model needs to address much more.

  6. Edward, I agree with your taste for grassroots innovation, but we’re talking about public telecommunications here, and that is a completely different world from the internet with its Google and friends. In the internet, intelligence is at the edges, millions of them. In telecommunications, there are these big fat telecom operators holding on to the network who want to control (and charge for) everything. Also, traditionally phones are more stable than your average PC – this also requires greater central control. Central control, top-down innovation. There are some who want telecommunications to become more like the internet, but they have a lot of industry interest against them 🙂

    Nokia still has enormous brand power, I think they’ll stay more or less where they are.

  7. Hi Georg,

    This is a genuine, not a loaded, question :). What about wcdma (UMTS) and cdma 2000. Didn’t we get it wrong here? The latter seems to have been a much cheaper version to do something similar, and many third world countries seem to be getting the benefit, but we seem to have gotten ‘locked-in to the former’. This is the impression I have reading around, but I readily agree I could be mistaken.

    In fact I hesitated about posting this, since there must be plenty of people out there who know much more about the technology than I do. It’s the economics of it I don’t see, and if I understand you aright neither do you.

  8. CDMA2000 is marginally simpler than wCDMA, but not by a very big margin. More importantly, wCDMA is backwards-compatible with GSM – so wCDMA phones work on GSM networks, and wCDMA networks also support GSM phones.

    wCDMA has been working fairly successfully in the UK and elsewhere for around two years; the main problem at launch was managing the integration with GSM (so that if you’re on a 3G call, and you move to an area with GSM-only coverage, you don’t get cut off) to ensure the phones worked at least as well as normal ones.

    Idiots like Steven Den Beste spout a lot of nonsense about the superiority of the American technology and the inferiority of the European one; ultimately, they’re very, very wrong. In America, you can’t go to a shop and buy a working 3G phone [1]; in Europe, you can.

    The economics is another issue altogether… Here, you can nlame market boom psychology, and blame staid bureaucrats ru(i/n)ning national telecom operators who felt that they needed to invest billions in sexy new technology to justify their existence.

  9. Damn, forgot my [1] – you can buy a CDMA2000x1 phone, which is about as fast as GSM/GPRS (if technologically neater). You can’t buy a CDMA2000x3 phone, which is the real 3G equivalent.

  10. Thanks for clearing that up John, it was the difference between cdma2000x1 and cdma2000x3 that I hadn’t really got.

    The problem of cover really does seem to be the key one. If you can’t get the data transfer rates when you are out of the urban centres (which is when you might really want to be able to) apart from the fad value I really don’t see the pull.

  11. “Quaylism on 3” might also refer to the typo in the third paragraph.

    But yeah, way to extrapolate all that other stuff.

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