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This report evaluates and analyses the 3G market, investigating the financial and industrial implications surrounding
the 3G market.
A SWOT[1] analysis has been prepared by the author to highlight the strengths, weaknesses,
opportunities, and threats associated with the 3G phenomenon.
A PEST[2] analysis has been prepared by the author to highlight the political, economic, social,
and technological issues associated with the 3G phenomenon, with a particular emphasis on
presenting the issues facing this market area as a whole.
Alongside the aforementioned, an independent research study was conducted to investigate the Nokia TV with the
(DVD mobile phone) commercial. The results show just how much such a mobile phone should be priced at and
when best to target the Customer.
Research
For primary research the Author placed a questionnaire (See Appendix 1) on the Internet and invited the general
public to participate. The aim of the primary research was:
The total number of participants was calculated at 203 over a 3 month period. The findings shall be discussed at a
later point in this report under the Results section on page 999.
Current Situation
Five companies paid over 22bn ($35bn) between them for licences to operate the heralded 3G third-generation
mobile phone services in the UK.
The four main players in Europe - Deutsche Telekom, Vodafone, Telefonica and France Telecom, as well as their
strategic partners are using their colossal, cross-border market power to force their suppliers to cut prices.
However large a company may be, handset manufacturers, such as Ericsson, Nokia and Siemens are left with no
alternative but to comply with the wishes of the telecom giants'. This is because if they do they are earmarked to
make a rather tidy sum of money and not just from the first roll-out of the infrastructure. Even more financial gain will
be made at a later stage as systems require maintenance, and upgrades.
Nokia, based in Cannes, France is the world's top handset maker. They promised in April 2003 at a press conference
to deliver its first, new-generation mobile phones by July of this year.
Nokia said it had sent 10,000 third-generation handsets to mobile phone operators such as Vodafone
and Orange and equipment manufacturers such as, Ericsson and Nortel Networks for testing. The Finnish
heavyweight has arrived late to the European market with its 3G technology.
Nokias Arch rivals; Japan's NEC and US-based Motorola have already delivered their 3G phones in Europe.
Nokia and other wireless operators are waiting for evidence suggesting that Customers would like the new services
before investing further in the expensive technology. At present, Nokia is joining its sources with the computer
technology giant IBM and also the world's largest enterprise software maker; Oracle. Reasons for doing this stem
deeper into attempting to discover the mass market for mobile phone access to e-mail, calendar and corporate
databases.
Despite the fact that some European mobile phone manufacturers have only just begun to unveil their 3G phones,
their overseas counterparts have been responsible for securing some of the early deals for quite some time now.
In 2001, the Japanese giant; NTT DoCoMo became the world's first ever operator to begin selling 3G phones in its
home market. Such an accomplishment was achieved through home-grown vendors such as NEC, Matsushita
Panasonic and Fujitsu.
Hutchison 3G, is the joint venture controlled by Hong Kongs Hutchison Whampoa, who has plans to promote
Europe's first commercial 3G as early as next month. Again, this has been achieved through the use of non-European
manufacturers.
SWOT Analysis
Key Words
Infrastructure
Bluetooth
SAFER+, generates 128-bit cipher keys from a 128-bit plain text input.
KEY Strengths
Supporting Evidence
Market Power
KEY WEAKNESSES
Supporting Evidence
Safety
As Bluetooth's role expands from small adhoc[10]networks comprised of a few wireless devices to
an important part in online banking and mobile
commerce, questions arise over its security. Is a
Bluetooth network secure enough to transmit credit card
numbers?
Not yet, seems to be the consensus. The Gartner Group,
while saying Bluetooth "holds the promise of simplifying
the life of the average mobile professional," questions the
technology's security and is recommending a wait-andsee policy.
Two researchers from Lucent's Bell Labs, a member of
the Bluetooth Special Interest Group, recently discovered
conversations could be easily bugged and therefore,
encryption defeated, according to The New York Times.
"I'm sure the NSA and FBI are salivating about building
little Bluetooth receivers disguised as pencils, electrical
outlets and phone cables," wrote a member of a
cryptography mailing list upon hearing the news.
For link encryption and authentication, Bluetooth uses a
strong contemporary cipher algorithm available in the
public domain called SAFER+[11].
Poor Judgment
KEY OPPERTUNITIES
Supporting Evidence
Wireless Networking
KEY THREATS
Supporting Evidence
Making Money
PEST Analysis
Political
The tale encompassing the sales of radio spectrum, especially for the next generation of mobile phones has been
one of unpredictable results including widely varying fortunes.
In 2000, the UK Government began to accept bids from 13 companies who wanted to operate a licence to sell nextgeneration mobile phones. Undeniably, this raised the hopes of other Governments, diminishing their doubts and
making it more believable that they too could be in line for a windfall. It raised 22.47bn, a tidy sum to anybody.
However, the companies began to balk from paying the rather huge sums of money for the licences. The only way in
which Governments were offered some form of guarantee to make money was to begin in setting a price in advance
and thus award the licences on merit through that of a beauty contest.
The UK auction was structured so that each rival bid was designed to be a certain percentage higher than the
previous bid. This inevitably resulted in the size of bids spiralling sky high at a rate of over 150 rounds of bidding. In
this way, the politics of the situation has made the Government billions of pounds.
Economic
Table 1 below shows the amount each European county paid to operate a licence to sell 3G mobile phones.
3G Government Licence Top Prices
UK:
22.4bn
France:
US:
6.32bn
11.24bn
Germany:
Italy:
Netherlands:
Poland:
Sweden:
Switzerland:
30.4bn
7.5bn
1.68bn
1.9bn
26,000
80m
Belgium:
300m
Australia:
500m
Spain:
12m
"The cost of the licences is a bigger issue than people expected," Tim Sheedy, Senior Mobile Analyst with IDC.
"Everyone had an idea what the infrastructure costs would be, because they've already built the GSM infrastructure.
But the licence costs have come as a major shock." Tim Sheedy IDC 23rd August 2000
Technological
The purpose of the Cellular telephone today are primarily intended for the purposes of speech and are therefore not
particularly renowned for its ability to deliver data. Enhancements have been made to the existing 2nd generation
systems (so called 2.5G), which will enable the data to be carried much more easily at higher rates (typically between
28.8kbps and 64kbps, though higher rates are possible), and interestingly where required, as packets rather than
circuit switched.
Now, the next generation of cellular telephony (3G) known globally as IMT 2000 [13] and in Europe as UMTS[14],
has been uniquely designed to carry packet data. Speech is simply treated as a particular data application. 3G
systems will allow the end user flexibility in the traffic channel, delivering multiple services with differing bandwidth
requirements, and simultaneously if needed. Data rates of up to several hundred kbps will be readily available to the
terminal (with so much being done, the end user device is no longer just a mobile phone).
The 2.5G developments are expected to be available in the short term, and certainly within the same period that
Bluetooth will make its entrance. Bluetooth will support enhanced 2nd generation as well as 3G systems in the
delivery of a wide range of services. With the development of such broad capabilities, it will be rather tempting to
make use of the 2.5 and 3G systems to support every new application and even some of the old ones too.
Results
The total number of participants was 203 over a 3 month period.
General Demographics
Figure 3
Figure 4
Figure 5
Analysing Figure 5
Figure 5 shows how out of the 203 participants, 195 of them had a mobile phone and only 8 did not. This goes to
show how saturated the mobile phone market has become. Its not a wonder that mobile phone manufacturers are
continually trying to revamp mobile phones to keep the industry in profit.
Figure 6
Figure 7
Figure 8
Figure 9
Figure 10
Figure 11
Figure 12
Figure 13
Figure 13 shows the response to the surveyed participants interest toward 3G phones.
Evaluation
Market Direction
The four main telecom players in Europe and their strategic partners are using their colossal, cross-border market
power to force their suppliers to cut prices. As a result the already hard up mobile phone manufacturers are finding it
even harder to make a profit.
Everyone wants to see 3G Work
Everyone wants 3G to work successfully, especially the 3G licence holders. They have invested a large amount of
money into the project and have as yet seen no return to recuperating seemingly lost investment. Government
politics have made the situation somewhat worse by inflating prices in the initial stages. Despite spending more than
100 billion euros (US$107 billion) on 3G licences in 2000, equipment makers have delayed commercial 3G launches.
They are awaiting evidence to suggest to querying Customers who want to know exactly what services are available
before they further invest into the costly technology infrastructure.
The Authors primary research questionnaire results provide evidence to suggest that Customers are indeed looking
for new services. Figure 13 shows 40% of the surveyed participants indicating very strong interest towards 3G
phones. A further 33% displayed a strong interest also.
Concluding Primary Research Findings
When the surveyed participants were asked Q9. Would you be interested in a mobile phone that has the ability to
play movies that you might otherwise watch on a Video or a DVD player? See Figure 11, a staggering 70% indicated
that they are interested. To add substance to this idea the next question in the questionnaire asked; What is the
maximum amount you would pay for such a phone?Figure 12 shows 30% of Customers are willing to pay anything
between 150 to 200 and 8% willing to pay between 250 to 300 and 20% willing to pay between 50 to 100.
This suggests that the mobile phone operators can develop a there-tier system of phones to cater for all.
The Author recommends a greater quantity of individuals be surveyed as 203 participants are for the purposes of
adding further weight to the results.
Opportunities Arising in the Future
The majority of the Terrestrial Television channels use the VHF spectrum with licences that are due to expire in 2015.
Digital Interactive TV is already here and can be accessed via a set-top box opening a whole new world of
interactivity.
We must wait and see if history repeats itself once again and if the government resorts to the same bidding political
tactics that has hindered the delivery of 3G technology, resulting in inflated licence prices.
[8] Base Stations are masts that mobile phone operators use to enable coverage of their network.
[9] Giga Watt is equivalent to 1024 Mega Watts.
[10] Ad hoc networks are a new wireless networking paradigm for mobile hosts
http://citeseer.nj.nec.com/zhou99securing.html
[11] SAFER+, generates 128-bit cipher keys from a 128-bit plain text input.
[12] Ericsson creates separate Bluetooth business - News Bulletin by John Evers, Amsterdam
correspondent for the IDG News Service, an InfoWorld affiliate.
http://archive.infoworld.com/articles/hn/xml/00/11/22/001122hneric.xml