The Future of Mobile Communications: Awaiting the Third Generation

Citation

Forge, S. (2003), "The Future of Mobile Communications: Awaiting the Third Generation", info, Vol. 5 No. 1, pp. 75-75. https://doi.org/10.1108/info.2003.5.1.75.1

In 1992 the World Radiocommunications Conference laid the foundation for a third generation of mobile, the Universal Mobile Telecommunications System (UMTS). And with a 50 percent compound annual growth rate in mobile subscribers world‐wide since 1996, Awaiting the Third Generation seems more appropriate as the lead title for this book. Because converting from POTS to PANS in mobile (Plain Old Telephony Systems to Pretty Amazing New Stuff) with the timeslots for 2.5G GPRS already full in central London will demand increased bandwidth by some form of spectrum efficiency algorithm that is more than 2.5G. Such a major upgrade is the basis of any sort of value added service, be it a photos/text news bulletin or simply high speed data connectivity (i.e. far more than GSM’s 9.6kbps).

Peter Curwen’s new book provides a background analysis of this next stage of mobile technology. The book’s coverage is from the point of view of the licence awards, the auctions’ histories and certain of the underlying network technology that will provide an IP‐based “always on” communications channel.

As far as it goes, the book is excellent in giving a detailed analysis of the West European auctions and the 3G story so far in the rest of the world, including the USA as well as Asia. Through a country‐by‐country analysis of awards and players, a history of 3G licensing is recounted up to about the first quarter of 2002. A wide range of statistics in a heavily factual approach provides a useful snapshot of an era for research purposes.

What is most useful is the comparison of auction mechanisms and their successes that stems from comparing these histories. Whether beauty contests, Dutch auctions or the interesting mechanisms devised for the UK, and those used in Germany are best, it seems that a mechanism having a balanced mix of such systems is optimal. The mix ensures commercially based exploitation of spectrum is combined with access for new players, while restricting the amount of capital involved to less than industry‐ and market‐numbing levels. Consequently, licences are not almost always won by the incumbents, as has too often been the case so far (Telecoms Policy, 1996) and capital is left to invest in the network and the technology.

Although it is way too early to really write the opening chapter of the history of 3G, the book covers many predecessors and comparable technologies in engaging fashion – Satellite LEOs and their demise due to failed business models, WAP, GPRS, CDMA 2000 1xRTT (Code division multiple access 2000‐1x‐radio transmission technology) as used in Korea and Thailand, i‐mode and the DoCoMo success story, MVNOs such as Virgin Mobile, issues of roaming and health, as well as the UMTS standards and the third generation partnership project (3GPP).

One aspect not explicitly examined but reflected in the content is that the transition to a new mobile technology may imply transition to a new centre for nascent market activity. While early analogue cellular lasted for a long time in the USA (starting off in the 1970s), digital GSM operation had to move continent, to Europe, to take off by finding a market base in the vacuum of adequate provision for demand. The focus of much attention in the book for the markets and technology is in the new areas of mobile take‐up – Asia – with China now being the focus for mobile equipment sales (some US$14 billion capex spend on networks this year for the current 190 million subscribers growing at 5 million/month) and soon India, but with only US$1 billion capex network spend this year with an 8 million subscriber base growing monthly at 0.5 million (Business Week, 2002). Moreover, current mobile prices in India as low as 2 US cents per minute are harbingers of the “near‐zero” prices and global business models to come.

Such a transition is particularly reflected in terminal technology. New entrants with colour video and IP technology based on more sophisticated browsers are appearing not from Europe or the USA or Japan but from handset suppliers set up in China, Korea and Taiwan. Furthermore, most established handset manufacturers are moving either some portion or the majority of handset manufacture to China from Japan, or Europe.

In the final chapter, a casebook history of Vodafone (considered to be a major player in the 3G market) tracks the acquisitions and merger activity over the last few years in building up a global operation. The analysis does not really examine the 3G strategy or the structuring of a 3G operation, but rather the aggregation of a series of properties in 2G markets, especially across the fragmented landscape of US mobile communications and the sorties into Germany with Mannesman/Orange. Whether the M&A trail has bolstered or torpedoed the Vodafone share price is an interesting point to surmise but a more germane aspect is whether or how this affects a 3G play. Whether such a strategy of a series of enormous acquisitions has relevance to a 3G operation going forward is briefly examined here but perhaps more could be said on the costs basis.

Essentially we have a report on the actual state of the industry, rather than deducing strategies, although the book does touch briefly on the elements of the financials that underpin the next mobile generation. The latter analysis is particularly hard to do from outside the industry as the real costs and technology drivers are still being worked out, as the game is completely new. Application of previous business models from 2G is of limited use for insights into the real costs and long‐term forward cash‐flow as well as for valuation.