When the UK’s mobile operators all but bankrupted themselves in 2000 in a
wildly over-the-top auction for 3G licences, the technology was supposed to be
no more than a year away. The justification for five operators paying more than
£4bn each to the UK government, at a time when this figure was a huge percentage
of their respective turnovers, required some strange maths.
Operators told themselves during the bid process that it was okay to factor
in the supposed wallet share each was going to enjoy from the millions of
punters who were expected to demand Dick Tracy video-conferencing wrist watches
and instant video clips of football highlights. The operators also gambled that
business revenues would be huge. At the time, operators were said to be
estimating revenues of £80 a month on average per user, to justify the scale of
their bids. That now seems like madness.
Five years on, the operator 3 claims an average monthly revenue of “almost
The five operators collectively spent £22.5bn on the 3G licences (see box). But,
according to Andrew Moffatt, finance director of 3, the operator that was born
out of Hutchison Whampoa’s successful licence bid, the four incumbent operators
didn’t have much of a choice.
“People talk a lot about how the bidders overvalued the wallet share they
could expect from future 3G users,” says Moffat. “But that was not the real
issue for the four incumbent operators. For them, it was very much a defensive
play. If they didn’t bid for 3G, then more new operators would have come into
the market. They had to bid and win.”
Despite the huge outlay and obvious need to recoup it by establishing 3G
networks as soon as possible, it took far longer than was first envisaged to
offer services to market. Instead of a rapid transition to 3G we got stuck with
GPRS for five years, with mobile wireless data operating at around standard
dial-up internet speeds. Corporates, by and large, found it difficult to see be
yond voice services on such low bandwidth and data services were stuck in
endless pilots and trials until the operators finally started rolling out their
3G services in mid- to late-2004.
“I used to say that there were more trials of mobile email and data than one
got at the Old Bailey, and more pilots than you’d find at BA,” says Jason
Langridge, UK mobility business manager at Microsoft. “But those days are gone
and we are now seeing roll out in very significant numbers.”
What saved the mobile operators from falling into the black hole that the 3G
auction might otherwise have opened in their finances, was robust growth in
normal wireless voice traffic. They were also assisted by the miracle of
relatively low-tech SMS text messaging, which grew exponentially through the
period and brought in a massive unexpected revenue stream.
One of the main reasons why 3G services were delayed so long was an absence
of suitable 3G handsets. “Manufacturers knew that people would want to have at
least all the benefits they were enjoying with GPRS as well as the additional
speed of 3G, and this proved much tougher to deliver than was anticipated,” says
Klaus Czerwinski, a spokesperson for T-Mobile International.
The handset manufacturers couldn’t release something that was faster for data
downloads, but had an appallingly short battery life, for example. The faster
download speeds also meant people would want a richer experience, which meant
bigger, sharper, colour screens, which again adversely impacted battery life.
These problems have now been solved. There is a rich plethora of devices on
the market, from voice-enabled PDAs to smart phones, and access speeds are now
reasonable. By mid-2006, when a new technology called high-speed digital packet
access (HSDPA) arrives, the “average” speed is likely to be around 1Mbit/sec, or
twice as fast as a basic broadband connection to the internet.
However, we need not get too hung up on data speeds; 3G is more than fast
enough for emails and even for fairly bulky attachments. As Derek Austin, head
of business marketing and Jean-Marc Lafond, head of data at Orange, observe, the
big decisions for companies today are not whether to deploy mobile email
that’s a “no brainer” for most businesses but how pervasively to deploy it,
and on what devices.
Far and away the most popular device for corporate executives over the past
year or so has been the Blackberry. For a Blackberry solution, the corporate
needs an enterprise Blackberry server, which then integrates with the
enterprise’s email platform. With this infrastructure, and with a contract from
any of the five mobile operators, emails can be pushed to the
out-of-office-executive by the corporate.
However, this is a relatively expensive option, with Blackberry handhelds
costing a few hundred pounds or more per unit. Operators will provide them for a
heavily discounted £20 or so to individual subscribers who sign up on a
per-month basis, but as a corporate purchase they are generally too expensive to
deploy to employees outside of senior management.
From the operator’s standpoint, the name of the game is to provide low-cost
devices that have much the same email functionality at a far lower price point.
That way they maximise their monthly revenue from the corporate customer.
Moffatt explains that he eventually wants 3 to tap into the lucrative corporate
market as well as the consumer sector, where the company currently sits.
“We’ve been 100% 3G from the beginning and we’ve been focused on being a
mobile multimedia company, focused on mobile communications, entertainment and,
increasingly, on information,” he says. “This is the bit that will take us to
the corporate business market, but we will take our time getting there.”
There are several phones on the market now, including the Nokia 6822, that
have Blackberry email and personal management functionality (and a full ke
yboard) at low cost. According to Orange’s Austin and Lafond, the roll-out of
mobile email is now starting to happen for the large population of lower order
staff in many enterprises. “What we want to see in three years from now is
everyone having email on the device. The early adopter corporates have proved
the value of mobile email with Blackberry devices. Now large multinationals want
to take this further,” Austin says.
Head of data services at Vodafone, John Lillistone, argues that, while
corporates are now starting to deploy mobile solutions that are generating very
good return on investment, things are moving so fast, both at the device level
and with respect to mobile bandwidth, that there is no limit to what can be
Using HSDPA, which Vodafone plans to deploy some time in late 2006,
Lillistone claims the focus will be on “value added connectivity”, which is
about enabling secure remote access for enterprise customers over mobile
networks. This includes Virtual Private Network (VPN) services that allow users
to open up a secure connection to the corporate’s own network. From there, they
can get into line-of-business applications.
The next stage is horizontal or universal applications, of which email is the
prime example. In November 2005, Vodafone launched its “push” email service
(Vodafone business email) that allows emails to pop up on the mobile device in
real time (instead of being batched and sent periodically by the corporate
server). This costs £28 per month per user (in addition to the cost of a voice
subscription) plus £2,500 for the enterprise server. The ROI on this, he points
out, looks simple to achieve many times over.
According to Vodafone’s research, about 75% of all UK businesses have
indicated that they are going to move to mobile email. So what’s next? Video
conferencing to the device is not merely a possibility, it’s already here and
reasonably good quality images can be achieved on 3G. With HSDPA, the images
will be good rather than reasonable.
“I think we are going to see more person-to-person video calls,” Lillistone
says. Does this have business benefit? Yes, for engineers in the field. For
business generally, the jury is still out and the case is much harder to make.
But since it comes ‘free’ with mobile email, it will probably be a case of ‘try
it and see’ for most corporates. Good presenters will love it; others will
choose to block video and stick to voice, where they know what they are doing.
The fact that corporates are discussing whether mobile video conferencing can
add value to their organisations, is indicative of how far 3G has come. It also
goes some way to
suggest that the most expensive auction of all time and one of the biggest
business gambles ever could well be about to pay off.
Box: Application Providers
Microsoft has made a very substantial investment in mobile data. Jason
Langridge, UK mobility business manager at Microsoft, believes that business use
of mobile data querying tools and data exchange is now very much a reality. For
Langridge, one of the main ROI cases, beyond mobile email, is business
intelligence. “Getting the executive dashboard with KPIs on your mobile device
out of office over a cellular network is very powerful – especially when you can
drill into the numbers. We are going to see a lot more of this,” he says.
David Russell, director of telecom solutions for SAP, says that a number of
corporates are already taking advantage of mobile solutions. “We’ve focused on
business intelligence, on management information and “anywhere, anytime”
reporting. Customer relationship management (CRM) is also an important mobile
application for the enterprise.
“What we have is a mobile server at the enterprise office that takes the SAP
screens and renders them for a multitude of devices. The challenge is all about
what is practical and pragmatic for the device. Basically, this is all available
now. People do not have to wait for more bandwidth, they can equip their mobile