3g-g
30th May 2005, 12:08 AM
Taken from signonsandiego. (http://www.signonsandiego.com/news/computing/20050527-0917-tech-summit-3g.html)
PARIS Europe's wireless operators have sunk hundreds of billions of euros (dollars) into third-generation mobile systems, but despite a slow start, carriers are firm in their belief they are doing the right thing.
Many analysts estimate that third-generation (3G) services, which would allow video phone calls, online gaming and high-speed Internet connections, will not generate profits for operators this decade, and that the networks will have huge overcapacity for years to come.
The carriers shrug this off, arguing that 3G is a necessary step that would be required anyway.
"We're out of capacity in a number of markets. 3G will substantially increase capacity," said Thomas Geitner, chief technology officer of Vodafone, at the Reuters Telecoms, Media and Technlogy Summit in Paris.
But he acknowledged that Europe's biggest wireless operator, with 155 million customers, would need to continue growing significantly on both the data side and the voice side to justify its investment.
Has it paid off?
"No, it has not. But we are on the way such that we feel confident," Geitner said.
Didier Quillot, head of Orange, a unit of France Telecom, has said he expected 3G to be profitable within a few years, but has given no details.
TOO EXPENSIVE
Operators are spending 15 percent of their sales on network building, but that figure could be less than 10 percent were it not for the roll-out of 3G, which most major carriers have started offering commercially during the last 12 months.
They spend further undisclosed sums on creating data services such as news, weather forecasts, video and ringtones and on their mobile portals. Yet even the best services, such as Vodafone's, get just 16 percent of their total sales from data services, while voice still takes the lion's share.
ABN AMRO analyst Matthieu Cordier said 3G services would not be profitable over the next two to three years.
Market research analyst Sara Harris at Strategy Analytics is even more bearish. She estimates that, for 3G to become profitable, data services will have to generate at least one-third of total revenue.
"That will take another five to six years. Is that too long? I think so. The timeline in which 3G starts yielding decent revenues is just too long."
Nokia's multimedia devices chief said a few weeks ago that demand for 3G phones and services was not growing as fast as initially forecast, due to the high prices charged by operators.
Monthly price plans in Europe for a 3G service with 500 minutes of voice calls, some video calls and Web browsing range from 40 to 125 euros ($50-160).
Despite the high tariffs, Frank Esser, chief executive of French mobile operator SFR, said he saw good customer response in initial tests of video and television services.
SFR is majority-owned by French media group Vivendi Universal, while Vodafone holds a 44 percent stake.
Vodafone's Geitner added that, among new customers, his company signs up more to 3G than to standard 2G voice and text services.
BEYOND 3G
Even if 3G makes losses for the next few years, many of the investments will be useful long beyond the lifespan of 3G.
The data services created over the next few years will not go away: They will still be used when the next, even faster mobile network technology, 4G, is installed.
The fourth generation of mobile technology and it is still unclear what it will be is not expected to be as expensive to roll out as 3G.
If operators can persevere, they may actually start generating decent returns on their investments in the next decade.
"It's just that the 'hanging-in-there' process is going to be very painful," Strategy Analytics' Harris said.
Geitner conceded the move to 3G had been tough.
"The 3G complexity is in the whole system. The pain of 3G was not in the handset only. It was in the browsers, the handset, the network. The whole thing we had to do. It constituted a three-year journey," he said.
But several relatively easy upgrades will improve 3G networks over the coming years, and when Vodafone needs to make the next leap to 4G some time after 2010, it will be able to employ much of the old equipment, services and technology.
"Our step to 4G needs to be a natural evolution, where we want to re-use the infrastructure," Geitner said.
PARIS Europe's wireless operators have sunk hundreds of billions of euros (dollars) into third-generation mobile systems, but despite a slow start, carriers are firm in their belief they are doing the right thing.
Many analysts estimate that third-generation (3G) services, which would allow video phone calls, online gaming and high-speed Internet connections, will not generate profits for operators this decade, and that the networks will have huge overcapacity for years to come.
The carriers shrug this off, arguing that 3G is a necessary step that would be required anyway.
"We're out of capacity in a number of markets. 3G will substantially increase capacity," said Thomas Geitner, chief technology officer of Vodafone, at the Reuters Telecoms, Media and Technlogy Summit in Paris.
But he acknowledged that Europe's biggest wireless operator, with 155 million customers, would need to continue growing significantly on both the data side and the voice side to justify its investment.
Has it paid off?
"No, it has not. But we are on the way such that we feel confident," Geitner said.
Didier Quillot, head of Orange, a unit of France Telecom, has said he expected 3G to be profitable within a few years, but has given no details.
TOO EXPENSIVE
Operators are spending 15 percent of their sales on network building, but that figure could be less than 10 percent were it not for the roll-out of 3G, which most major carriers have started offering commercially during the last 12 months.
They spend further undisclosed sums on creating data services such as news, weather forecasts, video and ringtones and on their mobile portals. Yet even the best services, such as Vodafone's, get just 16 percent of their total sales from data services, while voice still takes the lion's share.
ABN AMRO analyst Matthieu Cordier said 3G services would not be profitable over the next two to three years.
Market research analyst Sara Harris at Strategy Analytics is even more bearish. She estimates that, for 3G to become profitable, data services will have to generate at least one-third of total revenue.
"That will take another five to six years. Is that too long? I think so. The timeline in which 3G starts yielding decent revenues is just too long."
Nokia's multimedia devices chief said a few weeks ago that demand for 3G phones and services was not growing as fast as initially forecast, due to the high prices charged by operators.
Monthly price plans in Europe for a 3G service with 500 minutes of voice calls, some video calls and Web browsing range from 40 to 125 euros ($50-160).
Despite the high tariffs, Frank Esser, chief executive of French mobile operator SFR, said he saw good customer response in initial tests of video and television services.
SFR is majority-owned by French media group Vivendi Universal, while Vodafone holds a 44 percent stake.
Vodafone's Geitner added that, among new customers, his company signs up more to 3G than to standard 2G voice and text services.
BEYOND 3G
Even if 3G makes losses for the next few years, many of the investments will be useful long beyond the lifespan of 3G.
The data services created over the next few years will not go away: They will still be used when the next, even faster mobile network technology, 4G, is installed.
The fourth generation of mobile technology and it is still unclear what it will be is not expected to be as expensive to roll out as 3G.
If operators can persevere, they may actually start generating decent returns on their investments in the next decade.
"It's just that the 'hanging-in-there' process is going to be very painful," Strategy Analytics' Harris said.
Geitner conceded the move to 3G had been tough.
"The 3G complexity is in the whole system. The pain of 3G was not in the handset only. It was in the browsers, the handset, the network. The whole thing we had to do. It constituted a three-year journey," he said.
But several relatively easy upgrades will improve 3G networks over the coming years, and when Vodafone needs to make the next leap to 4G some time after 2010, it will be able to employ much of the old equipment, services and technology.
"Our step to 4G needs to be a natural evolution, where we want to re-use the infrastructure," Geitner said.