3G: Getting into third

Source: Exec Digital USA

Date :8/22/2008 12:38:36 AM

After a slow start, 3G looks to be finally getting up to speed. So what’s behind the sudden surge in popularity?

Written by Sam Wright

Until recently, 3G technology would have had every right to feel a little unloved. After all, it did take six of the seven years since its birth to reach 200 million - a mere four percent of the market at the time.

In this last year, however, 3G has upped its game. Now there are over 614 million handsets in use worldwide and this shows no sign of slowing. Analysts Research and Markets have predicted a rate of growth of 34 percent for the near future, and new product launches (well, one in particular) are making waves outside the technology press.

On July 11, Apple launched the iPhone 3G in 22 countries, with almost 50 more set to follow in the coming months. The pent-up demand was unprecedented. Sales have been phenomenal, with over one million leaving the stores in the first three days alone – enough for some to already name it as the fastest selling piece of consumer electronics of all time.

Not to be outdone, BlackBerry maker Research in Motion is set to unveil its 9000 (or ‘Bold’) model next month. It is also the company’s first foray into 3G and for many in the business world, these products mark a coming of age for the technology.

Teething problems

3G had a difficult birth. Working on a completely different frequency to its 2G predecessor, it demanded that mobile operators build new networks from scratch. This was, of course, costly and longwinded, and early adopters were rewarded for their enthusiasm with an expensive and patchy service.

So what’s changed? One vast improvement has been in coverage. Japan and Korea, the countries that first rolled out 3G, and two of its largest users, have near complete coverage, while in the west, T-Mobile and 3 signed a deal to combine their 3G networks in the UK, a move that is expected to offer near complete coverage in 2009.

The US has also seen massive investment in its networks recently, with AT&T rapidly catching up on leader Verizon, and T-Mobile due to complete its US$2.7 billion rollout later this year.

Then there is cost. Much of 3G’s new found success has not been solely placed on improved handsets like the iPhone and Blackberry, but on changes providers have made to their pricing structures.

On its arrival, data over 3G (such as internet, email and video calling) was charged by the size used, typically per MB. It was an unpopular method, largely because of its unpredictable nature. And if there is one thing that consumers like to be predictable, it is their billing.

By offering data over the original iPhone at a fixed rate (part of £35 or £45 packages), Apple became the latest firm to see the value of offering data to its customers in a transparent and affordable form. It has kept this up with the 3G model, joining nearly every provider on the market.

All you can eat

“3G had a slow takeup, and that was one of the features of 3G that worried the market for several years,” says Tim Lunn of analysts PA Consulting.

Lunn has over 20 years of experience in the industry, having worked on the initial rollouts of GSM technology, as well as 2G and 3G. He has seen technologies come and go, but Lunn is now of the opinion that the 3G market has well and truly established itself, thanks largely to this shift in approach.

“A few years ago,” he says, “even companies like PA were saying ‘Why do we need 3G, given that we’ve got more than enough capacity on 2G?’

“However, what we’re seeing now are very significant increases in the amount of data traffic.

“I’ve heard a figure of around a 600 percent rise over the last six months for the UK, which is massive. Now, this is big news stuff. It really means data is taking off properly and I think the fundamental cause is the introduction of the fixed price packages.”

Unsurprisingly, the business world has been a key adopter. In a recent interview with silicon.com, Ben Dowd, O2 UK’s head of business sales, said ‘what we’re seeing with the iPhone is the level of data usage is nearly on a par with laptops.’

O2 is not the only firm to have seen a similar trend. According to Ben Messore, head of strategy, T-Mobile UK, usage for the company’s 3G mobile and mobile broadband services has rocketed.

“Such has been the success of these products that we now carry as much data traffic on our network as voice traffic,” he says.

Friendly fire

For the consumer, he continues, this is good news. As manufacturers and operators focus on this boom area, Messore predicts a spate of network improvements and new services that will lead to a ‘usability and content war.’

What the outcome of this will be is uncertain, but the commercial debut of e-money, the rise of navigation and mapping on phones, and a host of new social network applications have all been mentioned as possible upshots.

And further over the horizon, explains Lunn, 3G’s successor is also beginning to gather attention.

“In a broad sense,” he says, “4G is a follow-on from 3G, offering higher speed data. It’s tailored for IT-type services. The classic application is much better web browsing, but it also allows things like gaming and complex protocols such as Outlook to run over it much more efficiently than 3G.”

It is early days for 4G yet, and as with 3G, says Lunn, a lot of its success depends on spectrum availability and rollout plans.

“My view is that 4G will actually run in parallel with 3G for quite some time. 3G has improved dramatically in terms of its latency and its bandwidth, and so on, and will continue to evolve, I expect, at least for the next few years.”

By that time, 3G will be almost a decade old - not bad going for something that looked to have stalled from the start. Yet the mobile market is nothing if not unpredictable, so there’s every chance that it could still enjoy a lengthy Indian summer. ¬