Mobile Phone Industry in a Spot

Tens of billions of dollars are riding on the future of fast, mobile Internet services, but industry leaders leaving the world’s top wireless trade show still struggle to justify the investment. At the 3GSM World Congress in Cannes, the 28,000 visitors as usual overloaded the local mobile phone network, underlining that the industry still faces basic problems as it seeks to rekindle sales with advanced data services.

EXTRACT: Japan’s leading mobile operator NTT DoCoMo admitted that had it not splashed US$332.7 million in subsidies on handset makers to develop 10 other 3G models, the phones would not have arrived. It is not up to operators to decide if 3G is worth it. Businesses also need to decide if they want to invest the millions needed to let employees access e-mail and business applications on expensive mobile devices. CONTINUE

COMMENTARY: Is there a market anywhere in which even a group of carriers - much less a single player - would drop a cool 300 million bucks on the likes of Nokia or Ericsson to underwrite the creation of 3G handsets? I think not.

One other point that may be haunting Big D: will they also have to subsidize the content providers? To date, under the low-bandwidth 3G environment, there was no direct investment from NTT DoCoMo or the other carriers into content, application, and service providers. Sure, the carriers did pay for content & services which they adapted onto the wireless Internet portals as carrier-owned and carrier-branded data services (like J-Phone’s J-Navi map database system), or for vital onboard software (DoCoMo has also invested in Access - maker of the i-mode microbrowser). But as far as “pure,” third-party content providers, there’s been nothing. Yet FOMA, as the name - “Freedom Of Mobile Multimedia” suggests - will require multimedia content that is much more sophisticated than the ring tones and images now widely available on 2G i-mode. DoCoMo has created several 3G-bandwidth-optimized services (i-motion, V-Live), but the outside provider community is still rather small. Will 2003 see DoCoMo become a content owner to boost 3G on the data side? USD$300 million can buy an awful lot of 3G video and audio clips…