Research Notes

Mobile Operators and Mobile Phone Suppliers Have Invested Big-time in 3G

– Why Should Service Providers and End Users Do The Same?

The joy of expectation is often the greatest and there really have been great expectations for a long time for 3G telephony. So now that 3G have become a reality in a number of European countries, one can occasionally miss that feeling of the joy of expectation. Because the real 3G is rather lame compared to what the end-users originally were promised with regard to the fantastic possibilities of 3G. So it is no wonder that end-users quite rightly can allow themselves to be a little critical and asked the question: “How many new services are being offered over 3G that I did not already know from 2.5G?”

The mobile operators have purchased 3G licenses – and they were expensive. The mobile operators have built 3G networks – and they were even more expensive. On top of this the handset manufacturers have invested in developing new 3G handsets, which was not exactly cheap either. In other words it has been very expensive for the mobile operators and handset manufacturers to reach a point where they now have an actual 3G end-user product that they can offer their customers. The problem is that we here at Strand Consult are having a little difficulty in defining exactly what new unique services that the mobile operators are actually offering their end-users with 3G!

The mobile operators that have launched their new 3G networks have in their marketing especially focused on cheap prices for voice minutes and SMS messages – both services that are the most traditional and elementary mobile services. But where are the innovative new services in their product offering to the end users, services that the rollout of 3G was going to bring with it? Apart from streaming and heavy data download, what are the mobile services that the mobile operators are offering over 3G that are not already available on 2.5G? These questions help establish why it is relevant to ask oneself what is in reality a 3G service – because the mobile operators cannot base their business case on the ability to deliver video telephony, streaming, mobile e-mail and a little faster mobile data download via data cards, than was already possible with traditional 2.5G.

To start with, we do not expect that video telephony will become a service that users will use on a daily basis and secondly mobile operators will not be able to price video telephony significantly higher than traditional voice telephony even if it did. On top of this, heavy download of mobile data will primarily be used by the corporate segment and even though the corporate segment is a financially strong segment, it will never be a specific “driver” in the mobile market (if it was not for the private users, the P2P and Premium SMS market would never have become a source of income for mobile operators).

If 3G cannot offer unique mobile services that appeal to the private users, then all hope is lost. Without unique 3G services, mobile users will have no reason to switch from their present 2G/2.5G handsets to new 3G handsets. Thereby both the mobile operators and the handset manufacturers will have no 3G markets. In other words the mobile market has an acute need for unique and attractive 3G services. We are certain that the value-creating 3G services will arrive sooner or later – our concern is more about how long time will pass before these unique 3G services will actually begin to emerge.

Neither the mobile operators nor the handset manufacturers have the necessary competencies to create this type of 3G services. But the content providers have! But they are not going to move over to the 3G challenge unless they have sufficiently good technological and financial working conditions. The technological working conditions are not least related to the possibility of the mobile operators offering the content providers a close integration between the 3G mobile services and a well-developed Service Delivery Platform Environment. And the financial working conditions are especially related to the content providers being offered new flexible revenue sharing agreements, which make it financially attractive for them to develop 3G services. Without new revenue sharing models the content providers will simply continue to develop 2G services.

Strand Consult has just completed a new report that analyses in-depth the central interaction between the service platform environments, the revenue sharing models and the next generation of mobile services.

The report ”How to get success in the 3. generation VAS market”, is directly focus on a number of the most essential challenges that the mobile market is facing in relation to the service platforms significance for the continued expansion of the mobile services market. The report contains an extensive analysis of 10 different existing service platform environments and each is evaluated on both their advantages and disadvantages.

The mobile operators’ service platform environments must be so flexible that they do not exclude any players in the mobile value chain. Therefore the service platform environment has to be both mobile handset-, mobile network-, mobile operating system- and mobile service independent. This will ensure that the service platform environment can distribute the most possible types of services out to the most possible mobile customers. However currently there are no platform providers that can offer such a flexible service platform environment, which limits the content providers’ access to the most possible mobile customers. Also currently the mobile operators’ service platform environments do not distinguish between 2.5G and 3G, which makes it even more difficult to develop unique 3G services!

The report also contains an analysis of a many of the parameters that mobile operators have to take into account when developing new revenue models. With regard to sales of Premium mobile services, a content provider and the mobile operator are very dependent on each other, which of course should be very obvious in the revenue sharing deals that the two parties agree to. Currently the revenue sharing models do not give the content providers any special reason at all to develop 3G services, so it is difficult to blame them for still only focusing on developing 2G./2.5G services – services that are being demanded by the mass markets.

We hope that it will not be too long before the mobile industry finds out how to define and develop the future unique 3G services – because before they do, the message about 3G telephony will be difficult to sell to the end-users. This problem will have to be solved if we want the industry to continue to develop.

the 3. Generation Value Added Service Market

Contact us to get a copy of the report

Request the report