The difference between walking the walk and talking the talk was painfully clear at last week’s 3G Mobile Forum 2004 conference held but a home run away from Tokyo Disneyland’s Magic Mountain. The four-day event hit the airwaves running with a keynote from NTT DoCoMo’s Keji Tachikawa, who was able to reconfirm DoCoMo’s solid plans for FOMA through the year. But given the surplus of inertia that’s dragging 3G launches– actual and putative– the conference swayed on the tides of optimism and not a little understated recrimination between carriers, contents providers, business platform providers and engineers about the potential if not the reality of 3G outside of Japan, Korea and (possibly?) the UK.
This viewpoint hoists the petard on our exclusive video interviews with mobile phone inventor and 4G actualist Martin Cooper, who tells us about the potential and pratfalls of the wireless world as he sees them 30 years after he made that first call. We also have Playboy.com’s Markus Grindel telling us about the potential for adult content in the wireless environment, and last but definitely not least a high-paced program with prolific author and analyst Tomi Ahonen, a man who single-handedly lends a new meaning to ubiquity; he seems to be just about everywhere in the wireless space, and boy, is he always switched on. We’ll have this terrific triptych of programs up in the coming weeks, but first, let’s take a look at some interesting points at last week’s conference.
As intimated, DoCoMo is walking the walk, while others are talking the talk and it looks in fact that mainly voice ARPU is going to be the bread and butter of the wireless space until carriers get their acts together. There are signs that they are, but the crack and static of recrimination was also a constant feature of this conference, with a good half of the presentations we saw not actually talking about 3G at all!
Straight off, Tachikawa confirmed that ALL of DoCoMo’s phones, both PDC and FOMA, will from the second half of the year, be loaded with the FeliCa mobile chip. With KDDI following, as we have said before, we believe that mobile proximity payments might be slow to get into the pockets this year, but with the alliances forming and the work being put it, it will be unstoppable bandwagon that will roll in 2005, replacing chump change in our pockets and providing much more than that for the carriers. Secondly, music to our ears, but possibly embarrassing for the likes of Hutchinson, is the commitment Tachikawa made to cement, finally, the FOMA revolution. Tachikawa has committed DoCoMo to bi-annual flagship launches of great phones from here to wireless eternity, or until 4G, about which he was vaguer than the ether. But two flagship launches each year is the only way forward, providing visibility to all concerned. The major hiccup is whether Japan’s mobile makers can keep up with the pace, burning the midnight candles copying and pasting all that software, assembling those camera modules, begging Samsung for a pound or two flash memory and whipping up enthusiasm in God knows whatever wherever sweatshop OEMs in Asia. There are already indications that Toshiba for one is slipping and another, Sony Ericcson, which has just delayed its latest European model is pushing out more deadlines than handsets. Good luck, guys’n'galls.
Notable by their absences, however, were KDDI and Vodafone KK. KDDI’s no-show was a disappointment. They seem to let their handsets and services do the downloading for them, and when they do show, they generally pull out Qualcomm-written presentations anyway. Vodafone wasn’t there probably because, we suspect, they are in stealth mode about how Japan is going to input into the 3G lineup this year ahead of their big rollout in 2H. We know that NEC, Fujitsu and Sharp are all making moves, but Vodafone is keeping quiet-for now at least.
One thing we’d like to say to Vodafone is that if they are really serious about roaming, they ought to stop ripping 100 yen (a dollar, give or take a sneeze) out of their Japanese subscribers. A good friend was incensed to find that a 55-character SMS cost this and would think twice about using the service in the future-although he was fine about it as long as his company was footing the bill.
[Update and Editor Note: Vodafone wrote in with this comment on the above paragraph:
The company?s International SMS capability with Vodafone Global Standard (VGS) means that whether you are in Japan or roaming, it costs 100 yen to send an international SMS (to any operator in the world that has an interworking agreement with us) and they are free to receive. It is not actually a roaming service, per se.
?While 100 yen is a lot more than the 5 yen charged for a domestic SMS, they are cheaper than making a short international call (under 1 min.).As for voice roaming rates, the charges are higher than in Japan (naturally because two networks are involved), but it might be an idea to compare our rates to Global Passport (KDDI au) and World Wing (NTT DoCoMo). There are some exceptions but I think you'll agree that Vodafone K.K.'s rates are the most reasonable.? Editor Response: Thanks for the input.]
As to the 50/50 cost model for V-Live in Europe, we’ll refrain from comment, but it seems more like putting the golden goose’s neck through the mechanical wringer than plumping it up for a killing.
Outside of Japan, the conference did point to quite a few success stories, but not, unfortunately or otherwise, for W-CDMA. In an operator case study lecture entitled Maximizing CDMA2000 1X Technology for Advanced Mobile Multimedia Services, SK Telecom’s VP Network Engineering Jae W. Byun managed to fly the Qualcomm flag and predicted that data ARPU from the company’s EV-DO service grew from 10% of total ARPU in 3Q02 to 16% in 3Q03 and is expected to have hit 16-20% by now. “The data market is the market with new growth potential and 3G is the technology that provides us with this growth engine,” he told delegates.
Jae W. Bynun said SK’s recent surveys on packet occupation rates have shown that users are now opting for music downloads, TV and adult content and away from wallpapers and games.
SK Packet Occupation Rates (3Q03)
Phone Decoration/ Wallpaper: 12.9%
Traffic/ Commuter Information: 0.2%
In other words, if we hear this right, SK is already moving people into the sorts of areas that all 3G carriers are salivating about. Ringtones? Who gives a flip of a clamshell about ringtones?
“Thirty years ago we had the typewriter, then we had the wordprocessor, then the PC and now we have mobile. Our music videos and mobile movies and broadcasting clips are on small screens but they are fully enjoyed. When people ask about Killer Apps, the Killer Apps are already here,” he said.
So while most carriers are focusing on wallpaper and melody downloads for the bulk of their initial income, SK claims its already sailed into the dawn of the 3G data era with a bunch of genuine media ARPU.
And FORGET video telephony. One of the most interesting points about his talk was the fact that the video telephony market DoCoMo has been trying to promote just hasn’t taken off. First of all, SK doesn’t have the spectrum so it hasn’t slashed rates to promote the service. But, we note that SK just isn’t hot on the idea because it believes that video is just seen as too expensive by the Korean customer and difficult to figure. If a customer is downloading a video or a newsclip, says SK, the subscriber feels in control of the transaction because the cost is visible. Video calls are seen as costly and less controllable.
So what’s the secret of SK’s success? Well, unfortunately for Europe, it’s a carrier-vendor structure that echoes what’s been happening in Japan with DoCoMo and Japanese handset makers. After nearly 20 years in the business together, SK has formed close cooperative R&D alliances with Korea’s two key makers, Samsung and LG, so they are able to work together to get about sixty new models on the market in 2004.
“We work with Samsung and LG to get the best handsets out there, and they are great partners. We’ve been working together for 20 years and we know how to minimize technical glitches,” he said.
Why Bother with 3G if you can EDGE ahead?
Another Asian success story has also come at the expense of W-CDMA 3G, with Hong Kong CSL basically telling delegates the company decided why bother with a full 3G upgrade when the company could get a souped up service at a bargain basement price with EDGE.
Mike Robey, CSL’s COO started off with a shot across the bows. “3G terminals are going to be disappointing this year, and they are going to be relatively expensive,” he said. So CSL didn’t bother. Facing the “hyper-competitive” HK mobile environment the company had to get bandwidth at rock-bottom prices and layering EDGE on the carrier’s extant 2.5G service was the answer, he said.
In fact, his presentation sent a shiver through the spine, as if you strip down the presentation to its bare bones, ASIA IS NOT READY FOR 3G and 3G IS NOT READY FOR ASIA, carved monumentally, if you will in the huge stone block letters used in the opening titles of The Life of Brian.
Of course, we knew this, but the comments were quite damning nonetheless. Here are a few choice examples:
–> “3G will remain a niche in 2005.”
–> “You need to push the prepackages, don’t expect people to pull content off a website.”
–> “Services, not technologies, are the drivers.”
–> “European pricing is outrageous.”
–> “Flat rates are usually too expensive to start with and finally they are always too cheap.”
We quite expected half the audience to throw rotten tomatoes and the other half to rush to offer the man a drink, but half the delegates seemed to be loading up on the pastry buffet next door or fighting loosing battles with their jet lag. Pity, really.
Handsets cost no premium to GPRS, consumers couldn’t give a fig about the technology as long as they are able to get the video clips of news and weather, music, comic clips, girls, entertainment, sports, astrology and fashion…which at about 90kbps, they can.
If that sounds a bit slow, the Nokia upgrade still works at about 3.5X GPRS speeds and, claims Robey, is piling on the SMS revenues for the company.
That’s it for now with our Viewpoint coverage until the weekend, but there’s plenty more to come.
– Paul Kallender.