Research Notes

3G – The need for speed

As GPRS slowly starts to find a foothold in the minds of mobile consumers, one question seems to pop up again and again; Why bother with 3G at all – there is hardly any difference! The data speed of 3G, compared to 2.5G, often bares the brunt of the dubious views on 3G, because many seem to think that the speed GPRS can offer will be quite sufficient for 99% of all mobile data applications for many years to come.

Most GPRS users are getting around 30 to 35 Kbps connection speeds. This is not bad and certainly over 3 times the speed that many were used to on a GSM Circuit Switched Data connection – which only offers a mere 9.6 Kbps connection. Indeed, many people have been – or still are – connecting to the Internet on their PC’s using a 56 Kbps modem.

But saying that anything IT related that exists today will be fine for many years to come, is in itself a bold statement that has been proven wrong again and again – although it is a very easy mistake to make – even by people in the business:

In 1943, Thomas Watson, Chairman of IBM said “I think there is a world market for maybe five computers.”
In 1977, Kenneth Olsen Pres. and founder of Digital Equipment said “There is no reason for any individual to have a computer in their home.”
In 1981, Bill Gates said 640Kb (internal memory in a PC) ought to be enough for anybody.

There is a very logical reason why quotes like the above are common in just about any recent trade magazine in any business sector – including the mobile sector. It is usually because people forget that the combination of the never stopping development of new, smaller, faster, cheaper technology – combined with any individual persons need to be informed, save time, be entertained or other benefits, will lead to a market for new products with new features that can often be hard to imagine – even if you are in the inventing business:

“Everything that can be invented has been invented.”
–Charles H. Duell, Commissioner, U.S. Office of Patents, 1899

At the same time as saying the above in 1899, Charles Duell recommended that the Patent Office be closed, as there would be no further need for it!

Getting back to GPRS. Just the difference between the 35 Kbps that GPRS offers, up to the 70 – 80 Kbps that the mobile consumers are getting in South Korea, makes a huge difference in which types of services are possible – and being used by the mobile consumers. South Korea is running a CDMA 1X network and currently has around 16 million mobile subscribers enjoying the 70 – 80 Kbps download speed that we probably will not see in Europe before the introduction of 3G.

GPRS is fine for light and medium data dependant applications. So applications like email and messaging will work fine over GPRS. But once you start looking at heavy applications that need some bandwidth to function reasonably well, GPRS falls short of the mark. Just the attachments on email are enough to make 30 Kbps look very slow – and if you are checking your mail on your portable PC or Pocket PC, using your mobile phone as a modem – it can get very tedious, very quickly.

There is no reason to believe that any applications are going to get less data intensive. The Internet is already full of multimedia content and whether you can get broadband access or not in your next home could effect your decision to purchase!

Our research in South Korea has shown that speed is crucial to the success of new 2.5G and 3G services and the faster speed you can offer – the heavier the applications will get. In South Korea one of the big hits is watching video on your mobile – often movie trailers. This creates enormous data traffic for the mobile operators, who on the other hand have made sure that the price of that traffic is not prohibitive, by offering differentiated pricing on data traffic.

GPRS is perfect to teach mobile users that they can use their mobile phone for more than just talking and sending SMS’s – in other words, GPRS is perfect to get the mobile consumers ready for 3G. The European mobile operators still need to get many more services available over GPRS – and there are very many applications that will work fine on the speed that GPRS can offer today, thereby preparing mobile users for a future where the mobile phone becomes much more of a personal assistant, with a wealth of functions and services, making life easier and saving time for the user. But already for today’s heavy-users, GPRS is too slow and those people find themselves looking for wireless “hotspots” or a hotel offering ADSL in the rooms, to keep up with their workload – both options that will cost you extra anyway and may make you go out of your way to get connected.

If the mobile operators are worried about the success of 3G and mobile services on 3G, they need think no further back to when the first consumers went online over ADSL instead of a dial-up modem. Back then, everyone thought that those consumers would not actually surf more on the Internet, but just spend less time waiting for content to download. In fact, when people get ADSL they surf much more, for much heavier content and for longer periods of time. Exactly the same scenario has happened on mobile phones in South Korea, where ARPU (Average Revenue pr. User) is over 3 times higher on 2.5G mobile phones than it is on 2G.

MMS is a fine example of a light mobile data service that works fine over GPRS and will in 2005, account for around 20% of the total value of the market for mobile data services. Mind you, if I ever see a grizzly bear in my tent, the only MMS you’ll get from me is a photo of me running as fast as I can in the opposite direction!

The latest report from Strand Consult “How to make money on mobile services” a picture of the current & future Market for Mobile Services in Europe shows that in 2005, non-voice ARPU (average revenue pr. user) will account for 32% of the mobile operators earnings and have a total value of Euro 23 billion. Of that, under 2 billion will come SMS based mobile services and the rest from new technologies based on MMS/WAP, Browser based applications and JAVA.

The report takes into account the mobile operators sluggish approach to GPRS and those services that will function much more optimally on a GPRS platform and goes through in detail all the prerequisites from all the players in the mobile marketplace that need to be in place, before the new mobile services market really can take off.
More Information

Contact us to get a copy of the report

Request the report