Mobile market looks to its 3G future

The 3G network technology is based on the Wideband Code Division Multiple Access (WCDMA) technology which differs from the current GSM standard based on Time Division Multiple Access (TDMA) of the 2G and 2.5G networks and implies that a new investment in network infrastructure and services is required.

The major problem the mobile operators are set to face in the immediate future will be how to migrate customers from the 2G and 2.5G networks and onto the 3G networks and to entice them to take up the advanced services on offer.

In Western Europe the mobile phone market was able to maintain a healthy double digit growth at the end of 2005 as shipments reached 16% year-on year, according to International Data Corporation, despite the fact that the region is set to experience a slow down in subscriber growth as the market nears saturation.

The driving force has been the increasing commitment from the vendors such as Nokia, Samsung, Siemens and Motorola to developing 3G handsets that dovetail with network operator market segment needs allowing the 3G handsets to comprise roughly 13% of the total mobile handset market. However, at the end of 2005 roughly 4% of mobile subscribers in Western Europe were using 3G services.

In South Africa the 3G market is slightly different but seems to be mimicking that of Europe, as at the end of 2005 a mere 0.4% of the estimated 27 million active mobile subscribers were using the 3G.

The reluctance to change appears to emanate from both the networks and the users with the networks hesitant to move since the 3G pricing has the potential to erode any profitable pricing on the 2.5G networks, while users appear to be happy to use the existing voice and limited data services in the form of SMS.

The major benefit of 3G networks, however, is the access to greater bandwidth which should drive down the costs of voice and SMS services if based on bandwidth or data usage. Indeed this is the crux of the cost and pricing model of 3G as data and its use becomes the yardstick to measure, manage and is instrumental in billing.

3G services have been available in South Africa for just over a year and in that time we have witnessed some innovative billing models emerging from the operators, most notably the bundled tariff scheme. The bundled tariff scheme incorporates a large amount of voice minutes at lower than GSM bundled with data use.

It is also worth noting that the 3G bundles available from the local mobile operators have been available to pre-paid and post paid users making it accessible to a wider range of users.

Flat rate

But perhaps for 3G to gain traction in the market an approach similar to that of the internet in its early days should be adopted whereby operators shift to the concept of flat rate billing. This could allow the network to promote wider voice usage and become an effective tool in the fixed line substitution game as the battle for broadband access heats up.

The flat rate scheme would offer users limited or unlimited MB of data combined with a fixed monthly fee. However, this scheme could be seen as the easiest way to retain and gain customers in the short term but could be risky in the longer terms as operators could find it difficult to regain production costs per mobile MB.

Online content

A structure or service that appears to be gaining attention from the operators is the provisioning of content where customers are not charged for the connection fee but according to the content downloaded.

This makes the access to desirable content a strategic concern. Vodacom has leveraged its relationship with Vodafone to gain access to content on the Vodafone Live platform. The fear is that the operators could become a simple pipeline to the current online services such as Google, Ebay and Microsoft.

Consumer 3G

The driving force for the consumer uptake of 3G is expected to be the ability to personalise 3G content and services with consumer portal offerings such as gaming, video calling and music/video downloads bundled with voice minutes.

Business 3G

Business users are likely to seek a cost effective yet convenient way to include mobile collaboration services, mobile office solutions with integration to vertical applications such as fleet management and sales support.

Mobile content is also facing something of a challenge from the traditional players as digital broadcasting of television to mobile handset trails are underway around the world and in South Africa.