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Monday, September 25, 2006

Assumptions around the availability of 3G

Last week, I watched a number of mobile equipment and application vendors present at a conference. I also had briefings with a number of others doing Mobile VoIP, push-to-talk and assorted video-type applications and handset clients. Some had what initially appeared to be really compelling pitches, until I realised that there was an "underlying but unstated" set of assumptions.

....most relied on 3G, and assumed they'd be easily able to exploit it on an (almost) ubiquitous basis.

I don't think that assumption bears closer scrutiny:

  • 3G outdoor coverage is getting better, but is still hardly ubiquitous. Many operators' rollout schedules are determined by the strict terms of their spectrum licence - and some are complying with the letter, but not the spirit of the law. So yes, notionally, there is "coverage"... but whether it will support real-world applications is another matter. How much capacity is actually available, either at the air interface, or the backhaul to the rest of the network?
  • Backhaul, more generally, is an issue. Even in the well-engineered & genuinely aggresive bits of operator 3G-land, it's not uncommon to have a total backhaul availability of 4-6Mbit/s - not great if you've got lots of concurrent users in a confined area.
  • Indoor 3G coverage is somewhere between patchy and non-existent. Until other operators start copying DoCoMo's great idea & citing in-building systems in their financial reports & KPIs, don't expect to sell applications people mostly tend to use at home, in the office, or in many retail or transportation environments. (Amusing side-note - one of the mobile TV trials found that the most popular place to watch was in the loo.... which is fine, until you realise it's at least 2 walls away from outdoor coverage)
  • Just because someone has a 3G phone, don't assume they actually connect to a 3G network. I've written before about the (proactive on my part) struggle I had to get a 3G SIM to replace my 2G one. And recently, I switched off 3G on my main phone because of a network glitch, locking it to 2G. After 2 days, I realised I'd forgotten to switch back - I remembered when I saw the power meter hadn't moved. So I've left it on 2G most of the time, and my battery now lasts 3x longer between charges. On balance, losing always-on 3G services seems a small price to pay.
  • Much of the world relies on prepay billing (between 50-80% of subscribers in most European countries, for example). This % rises among key target groups like teenagers. There are not many 3G prepay deals around, nor many 3G MVNOs. (Generally 3G phones are expensive & hence subsidised - but not many operators like to subsidise prepay phones as they risk them being "unlocked" and used with competitors' services). I certainly don't think I've seen 3G SIMs being sold separately anywhere - imagine the confusion that would ensue in those markets where people routinely buy phone+SIM separately, often from non-mobile specialist shops.
  • Because most 3G phones are sold through operator-controlled channels, many have customised software stacks. As a 3rd-party application vendor, you cannot assume all Nokia XXXX or Motorola YYYY handsets have the same capabilities & functions. Some may be locked to 3rd-party applications, others may have custom music / video / security software. Sure, some high-end devices are sold "vanilla", but these are rare.
  • Roaming. A separate set of nightmares I'm not going to expand on here - but I'm sure you get the idea.

None of the above will be fixed quickly. Indoor coverage, in particular, will still be lousy 5 years hence, in most countries.

Consequently, most 3G services will also need to work in 2.5G coverage. And in order to give a good user experience, you really ought to warn the customer to expect slower service, more latency and so on - especially if it flips to 2.5G in the middle of doing something. When my mobile video suddenly drops in quality, or my download slows (assuming handover works OK) - what did I get charged? Did something pop up on screen to keep me posted on what happened? Did the application recognise the shift and change streaming speed or codec?

Bottom line - do lots of testing, in lots of real-world places, and see if you'd be happy with the overall user experience working across both 3G and 2.5G....


Anonymous said...

Re the need of a 3G SIM - yes this is potentially confusing. From GSM, one expects to be able to just change your SIM into a new phone.... but with 3G, you need a new SIM. I had heard of this before I got a new 3G phone with Cingular, so proactively went into my local Cingular store to get a new SIM. I was pleasantly surprised to find out how easy it was. I was in the store for < 10mins, and had a new SIM (helpfully with 3G stamped on it). Complete non event.

As for your other comments on coverage I am in the Bay area, and 3G coverage is OK, but can definitely drop indoors and leave one with base GSm coverage.

macaia said...

Re: coverage, even in Madrid, 3G coverage from Movistar is not ubiquitous, and it´s not rare to loose the signal (and incoming calls) when indoor.

Re: 3G and prepaid, well I think this is an issue when we think in capturing customers from competitors, but not in retention. Operators can easily pick out the highest ARPU client among its prepaid base, and offer to them below-the-line one-to-one promotions for handset renewal. This allows to selectively moving the best prepaid customers to 3G.

Re: roaming, the Bay Area 3G coverage could be good for residents, but not for roamers. I stayed there two weeks in August and the service from Cingular was just awful. I desperately tried to use it with my Spanish phone but no way.

sipster said...

good analysis.

bottom line - MNO should get real about customer service and make life easy for the customer if they want more data services revenue

asertion - they either can't do this or don't want to - probably the former today.

Rajiv said...

I am taken aback by the prepay numbers you mention. I was under the impression that in most countries (except the emerging economies one's) postpaid is the most popular scheme.

What is the churn rate in European Prepay subscribers? I guess that in those places where number portability is in place, the rates would be higher. Is that the case?