After all the hype and promise, will 3G cross the chasm and lure the average man in the street into watching his favourite football team score on the screen of his mobile phone? Will commuters ditch their newspapers and download the latest news headlines to their mobile phone or PDA on their way to and from the office?
The reality today is that with a few notable exceptions — such as ring-tone downloads and the popularity of the BlackBerry device for instant emailing — the success of mobile data has, to date, been patchy to say the least. One
of Europe’s leading operators, for example, claims that 61% of their user base currently have phones that can support their infotainment portal. The harsh reality, however, is that just 3% of them are regular users of the system.
This prompts the question: if the devices are ready and the networks are set up for 3G, why are users taking so long to embrace mobile data services? Mobile operators have run out of excuses for the low uptake of mobile data. They used to point to the lack of coverage or the shortage of applications and/or mobile devices capable of supporting mobile data. Yet these excuses are no longer valid.
Optimised usage
The key to unlocking mobile data usage lies in improving the user experience. It’s simply too difficult and too time consuming today for users to navigate through the portal and download the information they need. This point was graphically illustrated by the experience of a leading Italian operator. Last year they were confronted with a disappointing ARPU for the rollout of their GPRS service. The reasons for this, they discovered, were twofold. Essentially, it boiled down to the fact that users perceived the service to be slow and expensive.
To tackle these two issues head on, the operator implemented an optimization solution and changed to a flat rate price for the service. These combined actions had a dramatic impact. The optimisation
solution dramatically improved the perceived speed and performance of the GPRS network and the flat rate — on a charging basis — simplified the buying process for the user and meant that they didn’t have to weigh up the cost of
the transaction each time they used it. The net result over an eight month period between December 2002 and August 2003 was a three-fold increase in the number of users and a fifteen-fold increase in mobile data traffic on the network.
Lessons learnt
3G service providers would also do well to take note of lessons learnt from the adoption process of SMS messaging. A watershed for this service was the introduction of the T9 dictionary for predictive texting, which took the
pain out of texting. If 3G is to capture the public’s imagination in the same way that SMS texting has done, the experience has to be rewarding — one that is easy, fast and cost-effective.
The common belief is that 3G will overcome the issue of speed — or to be more specific the perceived speed — of the service. Telecom research group Analysys confidently predicts that there will be 5.3 million 3G subscribers
in Western Europe by the end of this year, escalating to a staggering 240 million by 2009. So does 3G offer the answer to the mobile data conundrum?
In isolation it doesn’t — unless a number of factors change. There is a common misconception that bandwidth is the key issue preventing a better user experience, when in fact this is a myth. An experiment conducted by one operator concluded that WAP1 over 2.5G networks performed as well as WAP2 over 3G.
Bandwidth not the answer
The key impediment to a speedier user experience is not raw bandwidth. The solution lies in filling the bandwidth pipe efficiently and, to do that requires a high degree of content manipulation to adapt protocols such as WAP and messaging protocols to work well over a wireless network (GPRS, EDGE, UMTS etc.). Different types of content present different challenges.
Downloading a small page over on an established network should take only two or three seconds. With UMTS it still takes the same amount of time because it’s a chatty protocol, which needs to constantly re-authenticate and
redirect traffic resulting in long delays between packet exchanges. Without an intermediary, the server frequently misinterprets the delay for a loss of connection, so resends the information. To manipulate the data effectively
you need to have insight into what’s happening to the content — and the type of content being presented — in order to utilise the bandwidth effectively.
WiFi convergence problem
Failure to optimise the use of the available bandwidth will simply result in the same poor user experience of lost packets, patchy performance and long delays which — when applied to a streaming type application — result in an
unacceptable user experience.
Another user frustration that represents both an opportunity and a threat to operators lies in the convergence between cellular and WiFi networks. There has been much industry speculation that these two technologies are competitive and there has been a lukewarm reaction from the operator community to the whole concept of Wi-Fi hotspots. However the two technologies are highly complementary.
At the end of the day, the user just wants to get access to the applications, whether that’s a videotext, an MPEG file, or just a simple email, irrespective of the technology that underpins it. The main concern is the best possible service at the optimum price. Currently a user could be downloading an MPEG file as he walks into the StarBucks coffee shop over his GPRS connection. When he gets into the coffee shop he has to interrupt the download, find the appropriate access point (make 2-3 mistakes), type in
a new authorisation code or, even worse, get a scratch card with a one-time-password, before he can resume the process, which will probably involve starting again from stratch.
We now possess the technology that can turn that whole process into a seamless experience for the user and offer the mobile operator the chance to gain incremental revenue and the customer the convenience of receiving a
single bill for both services from a single service provider. These are the kinds of enhancements that will need to happen before 3G becomes widely adopted.
Operator’s standpoint
We should now turn our attention to the operator’s standpoint. You could be forgiven for thinking that the majority are less than keen to actively promote 3G services. Why? It’s a simple question of economics. The first barrier to entry is the punitive cost of entry in the form of infrastructure investments. This point is graphically illustrated by the experience of 3, who spent around EUR10 billion to comply with the government directive for 75% coverage. That’s only the beginning. If 3G services take off in the way companies such as Analysys predicts, then they will need to invest an additional EUR10 billion by 2010 to maintain the network capacity to fulfil the demand.
Given the simple economics of 3G from the operator’s standpoint, it’s hardly surprising that — with the exception of 3 who’ve bet the bank on its success
— they have been somewhat reticent in blazing a trail forward. The harsh reality is that, in order to make money from 3G, they have a few stark choices:
1) Increase the already prohibitively high user price
2) Reduce costs by squeezing the infrastructure vendor’s prices
3) Improve the efficiency of the service to reduce costs and increase usage
And even if all this were to change, the operators would need to be confident that they were gaining new revenues and not simply cannibalising other services, such as 2.5G. For many medium sized operators it’s hard to see how the sums could add up without pricing the service out of the market. Very few people would be prepared to pay EUR20 to download the video headlines. The current expert’s view is that, in order to have a sustainable business, you need a 10 million subscriber base, in a relatively small geography, for the capital and operating expenditure to show a return on investment.
Prognosis
So what’s the prognosis for 3G? It’s something of a chicken and egg situation. If 3G can be made to work efficiently to make it a rewarding, user friendly experience — at an affordable price — then it has the potential to revolutionise the adoption of mobile data. But whether the underlying technology is 3G, 4G or HSDPA, the fundamental issues of user experience and cost need to be addressed.
Trailblazers such as 3 have already laid down the gauntlet to other mobile operators who are taking tentative steps to defend their user base. There are opportunities in any new emerging market and the successful
operators will need to combine sound technological innovation with business strategies. But, above all, they will need to demonstrate an understanding of user needs, which relate to easy, affordable access to the applications themselves and not the underlying technologies. If these fundamental principles are applied, then there could be a very well be a bright outlook for 3G and mobile data adoption in the future.