3G Cellular Services in Asia/Pacific: First Tentative Steps

Transcription

1 Research Publication Date: 25 October 2002 ID Number: AV G Cellular Services in Asia/Pacific: First Tentative Steps King-Yew Foong As third-generation cellular services progress and evolve, patience and perseverance will be needed to overcome initial challenges, as well as a new business paradigm and smart migration strategies. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 ANALYSIS Nearly one year ago, the world's first third-generation (3G) cellular service was launched in Japan. Today, after billions of dollars in expenditure on research and development, that first entrée into next-generation cellular services is about to be repeated on a global scale. It has also been a testing time. In the words of Hutchison 3G's Canning Fok, hardly a day goes by without a "heart attack" in the form of technical or commercial hitches threatening his wideband code division multiple access (W-CDMA) rollouts in the United Kingdom, Italy, Australia, Hong Kong and elsewhere. In Japan, NTT DoCoMo's pioneering rollout has been repeatedly (and prematurely) dismissed as a failure. What then have we learned in the year since the first foray into 3G? What strategies might we expect from the next wave of 3G operators? Is the wireless world really ready for 3G? Despite the pall of negativity within the telecommunications industry over 3G prospects, there is no doubt that the cellular world is moving inexorably toward improved performance levels with quantum improvements quietly taking place in terminal functionality and data access speeds. However, it will be an organic development from current services. The unbridled optimism that vendors had a few years ago has now been replaced by a realization that 3G is not a quick and easy ride to profitability. This newfound rationality will provide a sustainable basis for healthy growth, and nowhere is this more true than in the Asia/Pacific markets. In Asia/Pacific, cellular operators obtained 3G licenses inexpensively in comparison with their counterparts in the United Kingdom and Germany (see Table 1). 3G licenses cost US$4.22 per megahertz per population in the United Kingdom and US$3.84 per megahertz per population in Germany. The lighter financial burden in Asia/Pacific aids 3G prospects somewhat, but there are issues to be addressed. Publication Date: 25 October 2002/ID Number: AV Page 2 of 5

3 Table 1. Status of 3G in Asia/Pacific License Cost 3G Licensee Award Date (US$/MHz/Population) Selection Japan NTT DoCoMo June W-CDMA KDDI June 2000 cdma2000 J-Phone June 2000 W-CDMA New Zealand Telecom New Zealand January cdma2000 Vodafone New Zealand January 2001 W-CDMA Telstra Saturn January 2001 Not announced Clear Communications January 2001 Not announced Maori Spectrum Trust January 2001 Not announced Australia Telstra March W-CDMA SingTel Optus March 2001 W-CDMA Vodafone Australia March 2001 W-CDMA Hutchison 3G Australia March 2001 W-CDMA 3G Investments March 2001 cdma2000 CKW Wireless March 2001 i-burst Singapore Singapore Telecom April W-CDMA MobileOne April 2001 W-CDMA StarHub April 2001 W-CDMA South Korea SK IMT December W-CDMA KT ICOM December 2000 W-CDMA LG Telecom December 2000 cdma2000 Hong Kong Hutchison 3G HK September W-CDMA CSL September 2001 W-CDMA SmarTone 3G September 2001 W-CDMA Sunday 3G HK September 2001 W-CDMA Taiwan Chunghwa Telecom February W-CDMA Taiwan Cellular February 2002 W-CDMA Far EasTone February 2002 W-CDMA Taiwan PCS Network February 2002 W-CDMA Eastern Broadband February 2002 cdma2000 Malaysia Telekom Malaysia July W-CDMA Maxis July 2002 W-CDMA India Licenses not yet awarded but there are likely to be four. Bharti, Hutchison, BSNL and Reliance are likely candidates. Philippines Licenses not yet awarded but no more than three will be awarded. Smart and Globe Telecom are likely candidates. Thailand Licenses not awarded but there are likely to be at least three. China Licenses not awarded but there are likely to be four. China Mobile, China Unicom and China Telecom are candidates Time Notes: Assumptions for the cost of 3G licenses: In Hong Kong, a minimum revenue sharing rate of 5 percent and a discount rate of 12.5 percent are assumed. In South Korea a discount rate of 12.5 percent is assumed. Source: Gartner Dataquest (October 2002) NTT DoCoMo has been the first cellular operator in the world to launch W-CDMA services (see "Japan's Tough Race for Supremacy in the 3G Market"), but subscriber adoption has not been encouraging. This leads one to wonder if there are any advantages in being the first mover. The success of KDDI au's cdma2000 1x launch in April 2002 has also raised concerns over the and cdma2000 and cdma2000, cdma2000 and TD- SCDMA Publication Date: 25 October 2002/ID Number: AV Page 3 of 5

4 readiness of W-CDMA as a commercial technology. FOMA handsets are not only expensive, but the battery life is also short. At the same time, mobile data services on personal digital communications (PDC) networks are serving Japanese consumers well for now. As such, the Japanese road to 3G is evolutionary rather than revolutionary. In South Korea, cellular operators are also grappling with similar concerns because there is not much difference in terms of network performance between cdma2000 1x EV-DO and W-CDMA (see "3G in South Korea: W-CDMA Is in a Maze"). This issue is particularly vexing because operators SKT and KTF are using CDMA-based technology (cdma2000 1x and cdma2000 1x EV- DO), and they are required to launch W-CDMA services within a predesignated time frame. There's no doubt that 3G technology could be used to alleviate spectrum shortages, but it is difficult to justify investments in more-expensive networks if the anticipated incremental revenue does not quickly materialize. Early movers must confront the following: Technology-related issues W-CDMA technology is immature, and interoperability between different vendors' networks and handsets is needed, as well as availability of multimode handsets in large volumes. Financing-related issues Raising capital for 3G network buildup during tough economic times Business-related issues Economic value could ultimately be captured by content and application providers, thus reducing the role of cellular operators to that of a "dumb pipe" provider. Revenue impact from low-cost alternative technologies such as b and i- BURST must be considered. Service-related issues Coverage will initially be limited, as will internetwork roaming and applications roaming. Compelling applications have yet to emerge, and service pricing must be affordable and understandable. There are also doubts over significant increases in perceived end-user value over 2.5G technology (for example, GPRS and cdma2000 1x). The last point underscores the fact that consumer expectations must be carefully managed. Negative perceptions and attitudes caused by overhyped marketing and expectations could prove to be damaging and difficult to reverse. Such issues notwithstanding, Hutchison 3G has boldly stepped forward to be the global pioneer of 3G services (see "Hutchison 3G: The Asia/Pacific Dimension"). Hutchison hopes to reap economies of scale in its purchasing activities. However, its global sourcing approach to content/application must be balanced by the need to adapt them to local conditions. In contrast to Hutchison's early mover strategy, Australian cellular operators are adopting a follower strategy (see "Australian Carriers Will Be 'Early Followers' of 3G Wireless"). Their caution reflects the general sentiment in much of Asia/Pacific. Australian incumbent Telstra, as with its South Korean counterparts, must crystallize its 3G technology strategy, as it is operating GSM/GPRS and cdmaone networks concurrently. While there is certainly no great rush to launch 3G services, cellular operators still must keep an eye out for alternative technologies that are capable of 3G-like data transmission speeds. Prolonged delays in 3G launches or insufficient investments could unwittingly create an opening for these alternative technologies. ArrayComm's i-burst is one such technology (see "ArrayComm's i-burst to Test Australia's Broadband Appetite"). CKW Wireless is positioning i- BURST as a fixed broadband service in Australia, but the technology is also suited for mobile Publication Date: 25 October 2002/ID Number: AV Page 4 of 5

5 data applications. ArrayComm also has plans to deploy i-burst in South Korea and the United States. In a nutshell, the road to 3G success in Asia/Pacific is not straightforward. The launch of multimedia-messaging services and camera-embedded handsets are now pivotal developments that can raise the fortune of 3G services. Rapid uptake of multimedia-messaging services could convince operators of the need to have advanced networks optimized for data, and this will certainly bode well for 3G. Otherwise, it could be difficult for 3G to shake off its tag as "a technology solution in search of a problem." Over time, 3G technology will mature and subsequent waves of investors will move in to drive the growth of profitable services. For now, managing the smooth evolution of existing customers to the next generation of service offerings will be crucial, and the cellular industry will also need to adopt a different business paradigm. Cellular operators must cement new relationships with content/application service providers, and the cellular operators' role within the new 3G ecosystem needs to be redefined. Patience and perseverance are needed to ensure success. Features "Japan's Tough Race for Supremacy in the 3G Market" NTT DoCoMO is the first cellular operator in the world to launch W-CDMA services, but adoption has not been encouraging. By Nahoko Mitsuyama "3G in South Korea: W-CDMA Is in a Maze" There is not much difference in terms of network performance between cdma2000 1x EV-DO and W-CDMA in South Korea. By Sauk-Hun Song "Hutchison 3G: The Asia/Pacific Dimension" Hutchison boldly steps forward to be the global pioneer of 3G services. By Andrew Chetham, Nick Ingelbrecht, Ben Wood, Jason Chapman and King-Yew Foong "Australian Carriers Will Be 'Early Followers' of 3G Wireless" In contrast to Hutchison's earlymover strategy, Australian cellular operators are adopting a follower strategy. By Geoff Johnson "ArrayComm's i-burst to Test Australia's Broadband Appetite" CKW Wireless is positioning i- BURST as a fixed broadband service in Australia, but the technology is also suited for mobile data applications. By Robin Simpson This research is part of a set of related research pieces. See "Growing Pains of 3G Cellular Services in Asia/Pacific" for an overview. REGIONAL HEADQUARTERS Corporate Headquarters 56 Top Gallant Road Stamford, CT U.S.A European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM Asia/Pacific Headquarters Level 7, 40 Miller Street North Sydney New South Wales 2060 AUSTRALIA Latin America Headquarters Av. das Nações Unidas andar WTC São Paulo SP BRAZIL Publication Date: 25 October 2002/ID Number: AV Page 5 of 5