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Slow adoption of wireless data services troubles service providers

23 October 2002 News

As the wireless services market matures, there is growing concern regarding the industry's future. Worldwide trends show slowing subscriber growth and declining ARPUs (average revenue per user) for voice services, while the availability of new data services is causing further uncertainty.

As the wireless services market matures, there is growing concern regarding the industry's future. Worldwide trends show slowing subscriber growth and declining ARPUs (average revenue per user) for voice services, while the availability of new data services is causing further uncertainty. Many carriers are heralding wireless data as the saviour of this market, given the declining cost of voice services. Apparently, vendors are hoping that new high-speed content and applications will generate added revenue.

Service providers are investing considerable time, money, and resources into developing extensive, pan-regional high-speed wireless networks. These new networks promise to quickly transport not only e-mail, but also multimedia data services such as streaming video and high-quality music. Service providers are banking on the fact that consumers will be eager to purchase these new services and content. They are hoping that the swift adoption of these products will stem the decline in voice revenue.

The road to high-speed wireless data services has not been smooth. Much time has been spent debating competing standards and technologies. Furthermore, once service providers decide on a technology, they still encounter many obstacles - a major one being the delay in the manufacture of next-generation handsets. There has been much hype over new handsets that offer larger colour video screens, more memory and better graphics, but vendors have not been able to produce the goods as quickly as originally anticipated.

However, the major caveat to these high-speed wireless data services is whether consumers will be receptive. Service providers are keen to identify the factors that have made wireless data services such a success in Japan and Korea. The vendors want to compare these factors to the conditions that led to WAP's failure, particularly in Europe and the US, in order to ensure the success of 3G in those regions.

The much-hyped next big thing in telecommunications was supposed to be the successful launch of wireless Internet services, and many service providers participated in expensive licensing auctions to secure their slice of this pie. However, investors are asking if vendors overpaid for these licences.

To compensate for this negative sentiment, wireless carriers are looking to establish parameters that will enable them to be more successful in the new wireless 3G data market. In Europe, they are trying to improve the terms of the 3G licences, including lengthening the duration of the licence to make up for the delay in implementation of 3G services, or changing requirements to allow service providers to share certain network components, thereby reducing infrastructure costs.

Large service providers, such as KPN and AT&T, are hoping to benefit from NTT DoCoMo's success in Japan. They are working directly with the company to roll out its thriving i-mode service, or a version of i-mode (such as m-mode), in their own markets. Others, such as Vodafone, are also eager to tap into the data-receptive Japanese wireless market, but are doing so by investing in NTT DoCoMo's competitors.

Additionally, service providers are keen to create a worldwide presence by forging alliances and investing overseas, to facilitate global roaming across key markets. For example, Deutsche Telekom purchased VoiceStream, the only GSM carrier in the US - a move that it hopes will facilitate roaming between Europe and the US. With increased globalisation, this move may improve future growth potential.

In addition to focusing on the key markets of Europe, the US and Japan, service providers are seeking to tap into the huge Chinese mobile market. Given China's large population and low fixed-line penetration, it is believed that the wireless market will explode in that region.

For more information see www.bmi-t.co.za or contact Mark Rotter, BMI-TechKnowledge, 011 540 8000, markr@bmi-t.co.za





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