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Content Not King

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Europe's 3G disaster could be mitigated by getting phone users to spend a little longer each day on the phone talking. That's the opinion of AT&T Labs researcher says Andrew Odlyzko, author of the justifiably celebrated research paper Content Is Not King.

Odlyzko's proposition is simple: historically more money has been spent on point to point communications and connectivity than on content, which in digital terms means email, instant messaging and chat groups, and peer-to-peer personal file sharing. Networks looking to recoup the data services to recoup the costs of 3G licenses are whistling, he says.

"3G is a wonderful technology - but there's no business case for it," he says bluntly.

Research firm Jupiter MMXI predicted this week that mobile data revenues would race to 8.1 billion euros ($11 billion) by 2005. Odlyzko doesn't dispute the projection, but points out that in the scheme of things it's an insignificant sum:-

"If that's all they're going to get, they're going to face financial ruin," he told us this week. The cost of 3G licenses and infrastructure will top $200 billion, and the E8 billion data business that Jupiter sees will be dwarfed by E124 billion worth of voice calls.

Content Is Not King was updated recently and it looks as fresh as a daisy. It's a very readable fly-through technology hypes of the past century. And it's particularly pertinent in light of the WAP flop, and the parallel explosion of SMS text messaging. SMS flew, despite being tricky to use because of the immediate communication benefits. WAP and mobile data services have a historical antecedent in the form of the Telefon Hirmondo service in Budapest, notes Odlyzko, one of several attempts to use the newly-invented telephone for delivering content. It lasted until after the end of World War One, by which time subscribers were prepared to pay eight times as much for connectivity as for content.

The answer: Talk More?
4G might solve the problem, believes Odlyzko, but in the mean time all is not lost. There's evidence he suggests of data services inducing users to use their phones for more or longer voice calls.

The amount spent by the average British mobile phone user each day might surprise you. It astonished us. A straw poll in the office produced responses ranging from 30 minutes to an hour. In fact, according to OFTEL, it's around 3 minutes and falling.

"Quadrupling the time spent talking would cover the costs of the 3G infrastructure and licenses. It sounds a lot, but 12 minutes on the phone each day isn't that much," he tells us. Networks smart enough to view data as a loss leader will eventually recoup their costs from voice calls.

Anyone listening

However the networks don't appear to be listening, and continue to insist that mobile data services will buck the historical trend and become significant revenue earners in their own right.

Odlyzko was particularly appalled by our suggestion that that the European networks are likely to make consumers pay for data by the packet, while businesses get all-you-can-eat flat rate tariffs:

"This is just backwards - totally backwards! Businesses should pay for more of the infrastructure - two thirds of wireline revenues are from business," he points out. Imaginative calling plans, such as the US model of buying monthly blocks of airtime, can increase usage and the all important ARPU (average revenue per user). However the US cellular business has its own problems: callers pay for each incoming calls -unthinkable in Europe - an indirect result of cellular numbers having the same dialing codes as landline numbers. Other inducements such as US-style 1-800 numbers and call back services, could fuel usage.

That's going to require not only a sudden attack of corporate clear headedness, and even long-term planning, but stranger things have happened...

Andrew's paper is one of several intriguing studies on his webpage, where you can find direct links to the paper in HTML, PDF and Postscript versions there too. ®

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