The Economist on 3G: Vision, meet reality (4 Sep 2004, pp. 75-77).
History: In 2000, operators paid €109 billion (US$125b) for 3G licenses in order to gain higher performance and capacity and for the promise of new services, such as video. The same again is expected to be spent in building the networks between 2001 and 2007. "Why? Because with their 2G networks filling up, and with no additional 2G capacity on offer from regulators, operators felt compelled to buy 3G licenses to ensure scope for future growth" (p. 75).
Launch: Japan and South Korea launched 3G networks in 2001, and they were "plagued by teething troubles". Today there are 16 commercial 3G network; 60 by the end of 2004 (Deutsche Bank estimates). "Having swung too far towards pessimism, the industry is now becoming cautiously optimistic about 3G".
"But while video-telephony sounds cool, the evidence from early 3G launches [...] is that hardly anybody uses it" (p 76). "Such services [music, news, games, picture messaging] 'are still embryonic, but are going to be very important,' insists Mr Cole [of A. T. Kearney]". The phone is touching many industries simultaneously and the changes will take years to play out.
Data: accounts for 16.3% of Vodafone revenue. Expected to be 15% in one year. Music downloads expected to be popular (see, e.g., The Apple iTunes Music Store deal with Motorola).
Voice: 3G provides more voice capacity, and can offer voice more cheaply than 2G. Operators will therefore look to move customers off their fixed lines onto 3G networks. Three already offer voice calls at a fifth of the price of competitors.
Segmentation: "'Unlike traditional voice services, the adoption of 3G services is very much customer-segment specific,' says Su-Yen Wong of Mercer" (p. 77). The generic brands that currently exist are designed to appeal to many. Sub-brands or partnerships with media brands, via "mobile virtual network operators" (e.g., Virgin), will allow services to be targeted at particular market segments.
"In Europe, 3G's main impact may simply be cheaper calls; in America, 3G may have most appeal to road warriors who want broadband [...]; in the developing world, 3G could help to extend telephony and internet access in rural areas; and in South Korea and Japan 3G might even – shock, horror – live up to the original lofty vision for the technology" (p. 77).