Category: 3G

IDC forecasts smartphone growth approaching 70% in 2005 in Western European market, increasing smartphones’ total proportion of the market beyond 6%. 3G service launches by Vodafone and Orange and the subsequent increase in 3G handset development saw explosive YTY growth of almost 850% in Q4 2004, driving the proportion of WCDMA handsets to 6% in 2004 compared to 1% in 2003. IDC forecasts WCDMA handsets to increase to around 13% of total mobile phone shipments in 2005, particularly in light of service launches from T-Mobile and O2 in Q1 2005 and new 3G handsets such as the 6680 from Nokia and Sony Ericsson K600i. However, GPRS is forecast to remain the dominant standard for the total mobile phone market, in contrast to GSM, which is expected to continue its decline in competition with a growing selection of low-cost GPRS-based, and increasingly EDGE-based, handsets.

The subscriber numbers for UMTS (3G) technology are growing in leaps and bounds worldwide. With growth rates of more than 1,200% year-to-year at the end of 2003 and around 500% year-to-year in 2004 some telecoms associations are already waxing ecstatic about 3G’s “rapid breakthrough” and sweeping success. Their announcements are reminiscent of the headlines back in the days of the dotcom bubble. At the time, modern information and communication technologies, especially mobile telephony, were being hailed as stimuli for the entire economy. But not long after the hype died down at the turn of the millennium, the mood changed radically. Because high expectations had been dashed, innovations of every type were then eyed with great reservations. This lack of differentiation was a handicap that still afflicts the widely discussed 3G technology in some countries today.

It seems like a good idea to scrutinise the positive notes on 3G now coming from the telecommunications industry on the basis of the statistics. It should be generally borne in mind that optimistic reports on the growth of subscriber numbers do not necessarily go hand in hand with the commercial success of a technology. Despite an increase in the penetration rate the average revenue per user can easily decline so much that earnings will fall. This phenomenon was observed when the second generation of mobile telephony was launched in the market.

Disregarding the commercial aspect, though, the statistics undisputedly show that 3G is gaining market share from 2G. However, the impressive growth rates cited above are based on the absolute number of subscribers, which – as is common when new products are launched – is initially low. This statistical effect sometimes leads people to misinterpet the importance of the market. Currently, 16 mln people use 3G-enabled phones worldwide – a mere 1% of all mobile subscribers.

Turning away from the global view, the 3G situation in Germany is very sobering to date. The acceptance of the innovative broadband mobile technology differs considerably from country to country. 3G is particularly popular in Japan, Italy and the UK thanks to the clear strategies pursued by the telecoms companies and content providers there. Fifty percent of all 3G subscribers live in Japan, nearly one in five lives in Italy, and almost one in six in the UK, but only one in 80 lives in Germany. However, even in the countries leading globally, 3G subscribers remain a small proportion of the total number of mobile users. The reading for Japan is not quite 9%, for Italy just over 5% and for the UK just under 5%; Germany trails far behind also in this ranking with a share of 0.5%.

The current statistics on 3G mobile telephony document that UMTS technology – already declared dead by some – is gaining ground around the globe. As is so often the case, the innovations have needed more time to take root than the market players originally forecast. From a global standpoint, the numbers give reason for hope; from a German standpoint, they are more a reason for worry. Germany risks failing to connect also in the area of innovative mobile telephony. Here especially, the telecommunications companies and content providers have an urgent economic task on their hands: they have to generate customer enthusiasm for a switch to 3G by offering value-added services. Germany cannot afford not to enter the broadband mobile data telephony age.

Nokia forecasts that more than 70 mln people will own a 3G mobile phone by the end of 2005. It also forecasts that the number of mobile users in the world will pass 2 bln by the end of 2005 as usage mushrooms across Africa and other developing economies.

Demand for 3G mobile phone services in Asia outside of Japan will grow by half this year to more than 17 mln users, driven by the established South Korean market, according to IDC. The wider availability of 3G phones that allow high-speed Internet access and video-conferencing will support the increase in subscribers as operators launch new services and discounts. IDC estimates Asia Pacific (excluding Japan) mobile revenues will rise by an average 16% in 2005 to $81.2 bln, driven by India, South Korea and the Philippines. Mobile revenues are expected to rise 64% in India, 27% in South Korea and 25% in the Philippines.

Over the past two and half years, the 2.5/3G mobile data services market in the US has grown from nothing to a market worth an estimated $1.5 bln by the end of 2006, according to Forrester Research.

Andrew Seybold is quoted in New York Times estimating there are 113 3G deployments globally today. In the US just 70,000 of Verizon’s 42 million subscribers have signed up for its high-speed data service.

WiMAX and other emerging high-speed wireless technologies will capture more than 40% of the wireless broadband business over the next few years, leaving 3G with less than 60% of the market in 2009, according to TelecomView. WiMAX will pick up 70% of this high-speed wireless segment by 2009 due to its higher performance and flexibility compared to the alternatives. 3G will be important for its mobility, but WiMAX will directly compete with DSL.

IDC’s 2004 mobile devices end-user survey demonstrates that handhelds still dominate company mobility strategies, with over 50% of respondents indicating the PDA as the preferred mobile device as opposed to a voice-centric smart phone or a PDA with telephony capability. Only 11% of respondents indicated their company had a WLAN, suggesting few businesses can justify the cost of implementing a new wireless network. This also indicates that security fears and the vast array of 802.11x standards remain inhibitors to the establishment of a complete mobility strategy. IDC’s survey also demonstrated low levels of awareness regarding the services offered by 3G, with over 70% indicating little knowledge of its advantages.

ARC Group revealed that 3G mobile handsets will form only 4% of total worldwide mobile handset sales in 2004. Sales are not expected to pick up before 2006, despite the rollout of 3G networks and services which started to appear in key metropolitan and urban areas in late 2003. 2004 sales of 3G handsets in Japan will grow by 150% year on year to reach 17.6 mln units. This represents 17% of total sales, and by 2009, total 3G handset sales will constitute 90% in Japan.

3G mobiles currently form the bulk of South Korea’s handset sales with 117% year-on-year growth, thanks to the wide coverage of CDMA 1x EV-DO networks and services. Penetration of 3G handsets is estimated at 55% in 2004 and will rise to 91% by 2009. The global mobile handset market will expand by 16% with consumers buying 561 mln new mobiles this year, up from 482.5 mln in 2003. Growth rates will gradually slow down over the next five years as the market saturates, with expected growth of 10% in 2005 and single-digit growth rates from 2006 to 2009 – 7.7% in 2006, 6.4% in 2007, and 4.8% in 2008. By 2009, the global market is projected to grow at a mere 2.6% with 767 mln handsets being shipped.

The user experience for mobile workers improves considerably as wireless wide-area data speeds exceed 144 Kbps, allowing greater access to mission-critical applications. This has positive implications on mobile application infrastructure requirements, ease of deployment, and total solution costs.

Global 3G subscribers will grow from an estimated 45 mln at the end of 2004 to 85 mln in 2005, according to Wireless World Forum. Although 2004 has been a year of false 3G expectations outside of Japan and Korea, 2005 could potentially be a good year for 3G in the rest of the world. This, however, will not be the case if operators in Europe and America fail to adopt the 3G policies of seamless migration successfully implemented in both Korea and Japan. Using seamless migration, Japanese operators have managed to subscribe 1 in every 6 of the population, compared to 1.3% in Europe. European uptake has been led by Hutchison 3G whose strategies have failed to vindicate the business model associated with 3G.

While 2003 was a transition year for cellular base stations, 2004 is the one where reality will catch up with the vision, according to In-Stat/MDR. The carriers worldwide have started to execute aggressively on plans that had been delayed for years, and customers have even started to show some sign of excitement. In 2004, In-Stat/MDR forecasts that worldwide cellular base station revenue will be down 14.4% from 2003 due partly to price pressures and an increase in spectrum efficiency. However, during this period, the actual number of base stations is forecasted to increase slightly, from 329,483 in 2003, to 333,876 in 2004.

Overall, the trend in new base station deployments from 2003 to 2008 is generally down, although In-Stat/MDR believes that there will be a small upswing in 2008, as more demand for data services starts to emerge. By 2008, W-CDMA will represent 23.1% of deployed base stations, worldwide. And while GSM will represent 61.5%, this is a very impressive showing for W-CDMA, which will have gained wide-scale acceptance in a relatively short period of time. While there are over 15 mln 3G subscribers worldwide, this still only represents 1 subscriber in 100. However this is a good start. In the US, Sprint, Verizon and AT&T Wireless have all started to deploy their 3G services, although, in somewhat limited locations, to start.

Of the largest companies (500+ employees) in the IDC survey, 24% are planning to implement WLAN, but investment growth is only 3%, showing that companies are choosing relatively simple, low-priced solutions instead of taking the next step into a more sophisticated solution with, for instance, integration to other access technologies such as GSM and 3G-based mobile solutions.

Radicati Group indicates the worldwide Unified Communications market will generate over $1.5 billion in revenue in 2004. The analysts predict that substantial growth in the 3G and other service provider segments, as well as the corporate segment, will lift UC revenue to nearly $10.5 billion by 2008, an increase of 600 percent.

The global cellular infrastructure market declined by 12% last year, mainly due to delays in deploying third-generation networks. But there was an upturn in the fourth quarter, according to Gartner. Mobile network operators spent even less in 2003 than in 2002, and investments in radio access, switching, applications and core infrastructure for mobile networks totalled $40 billion, down from $45 billion in 2002.

A report has concluded that a full 49% of mobile phone users in Great Britain, France, Germany, Spain, Italy and Belgium are not interested in 3G services. The Harris Interactive survey – the results of which were published in the Wall Street Journal on Tuesday – noted that this figure was highest in the UK, where although mobile operator 3 has been running a 3G service for months, 60% of punters are indifferent.

If Western Europe replicates the Japanese adoption timeline, there will be more than 8 mln W-CDMA users in the region by mid-2005 (2.4% of 340 mln). There’s no doubt the two markets are very different; the main difference is the attitude of consumers toward mobile data. However, there are strong reasons to believe the pace of European 3G adoption will equal or exceed Japan’s.

First, most carriers are conducting pre-commercial trials and will launch commercial services in 2004. Carrier pressure on vendors and greater economies of scale will mean better and cheaper equipment, while the lessons of DoCoMo and 3 should help other providers avoid early technical problems.

In addition, there is the lack of competing technologies. Where CDMA and 1X upgrades will compete with W-CDMA in Japan, there is no comparable cellular broadband technology being deployed in Western Europe. Interim or parallel technologies such as EDGE and Wi-Fi have similar characteristics but cannot match the attributes and benefits of W-CDMA.