Gartner defeated by 3G cellphone market

Technology analyst Gartner Group acknowledges it cannot reliably estimate the extent of the so-called 'wireless revolution.'

Technology analyst Gartner Group acknowledges it cannot reliably estimate the extent of the so-called "wireless revolution."

Prediction of the growth in use of internet-enabled mobile devices like WAP cellphones is riddled with uncertainties, says the organisation's Asia-Pacific telecommunications director, Bertrand Bidaud.

"A number of components have to come together" to create success, he says; these include the development of a network, the availability of handsets, the rise of wireless LANs, applications availability and the standard of portable displays. One missing component may mean the difference between a boom market and a non-event.

Pricing will obviously also affect acceptance and that is largely dependent on input costs like spectrum charges, which vary widely. In Germany, for example, the cost of spectrum has been set so high that no network providers are likely to make a profit for several years. In Japan "the most successful country in advanced wireless data technology" spectrum is free.

In New Zealand, spectrum looks like being relatively cheap, but potential revenue is also disappointing, given current mobile penetration and the charges the provider is able to make to consumers. New Zealand, he says, may be the only country in the world where the incumbent (Telecom) is reputedly making a loss on its cellphone business.

He gives a wide range of estimates of the size of the market. If everything goes right the "third-generation" mobile business could be worth more than $US1.8 trillion worldwide, with $US600m of that in New Zealand. If a significant number of factors fail to eventuate, the market could be less than $US250b ($US70m in New Zealand).

The question of who will make money is as difficult to answer, Bidaud says. Network operators, portal operators, merchants and the offerers of applications and other value-added services will all be paying one another fees for various services from bandwidth to advertising (the latter involving even bricks-and-mortar merchants), and it is hard to see which way the equations will balance out.

He forsees the rise of the "virtual network operator", which will buy network time from a telco and set up a value-added network. The feasibility of this market depends on telecomms regulation or lack of it. For example, "in Japan it is mandatory that telcos open their network to virtual operators."

He sees micropayment support as one significant application. Payments of a few dollars or less are uneconomical for customer and merchant via credit card because of transaction charges. "Micropayment aggregators" will collect such payments and bill the consumer for the total at the end of a period; likewise aggregating payments to particular merchants.

But such third parties and virtual operators could skim some of the potential profit that, under the second generation accrued purely to the telcos, he says. This could postpone the growth of the market, leaving a "chasm" between the decline of 2G and the real rise of 3G.

New Zealand shows up well in penetration of mobile phones, Bidaud says - Gartner predicts 60% by 2004. But the New Zealand market will flatten earlier than others, since more users will not mean more profit under present economics; providers will seek to grow market with increased usage rather than more users.

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