Mobile startups dismiss 3G – for now

More money from voice than games, gambling and girls

Relying on 3G is a recipe for trouble for wireless developers. The way to mobile start-up heaven is through exploiting today's technologies.

This is the main message we took away last night from a seminar on the wireless market, organised by VC house 3i.

Based on a survey of mobile telecoms entrepreneurs and other market intelligence, the VC house has published Wireless Untangled, a report which highlights the expected delays in 3G rollouts. On the bright side, the hold-ups will not cause irreparable damage to the industry.

Four in five of the entrepreneurs quizzed by the Economist Intelligence Unit on behalf of 3i said that the rollout of 3G services (expected in 18 months) was not a prerequisite to success within the next three to five years. Conflicting standards (CDMA and UMTS) for mobiles were seen as a problem by many of the companies quizzed during the survey, with 64 per cent of entrepreneurs reporting that this had negatively affected their business.

The key to reaching profitability is finding and reaching a customer base with immediate revenue potential, leaders of startup firms believe. Many mobile startups are targeting the enterprise sector rather than consumers.

Revenues from advertising and mobile commerce were not seen to be significant over the medium term, but 87 per cent of entrepreneurs quizzed were far more positive about the prospect of consumers paying for entertainment services (such as music or video).

Games, gambling and girls

3i invited along senior representatives from a number of wireless startups (tools vendors, payment firms and the like) to the launch of the white paper. It was noticeable how conservative their approach was after a difficult year for the mobile industry.

Carriers, particularly in the UK, have paid colossal amounts for 3G licences but there is a marked lack of enthusiasm for the 'games, gambling and girls (or guys)' types of content which 3G promises.

Voice is seen as a major revenue earner for carriers even after the introduction of 3G, and there is uncertainty about how to ramp up data traffic.

"The industry is scratching its head about how to introduce content," said Chris Wade of CPS, a firm which develops mobile location technology.

"This isn't a problem that will be solved easily or quickly," he added.

There was talk of providing less obvious content, such as horoscopes, and location-aware content that helped people plan their leisure time, but no firm conclusions on how to drive more revenues from consumers were reached.

For businesses high-speed access to corporate Intranets was seen as a huge potential market, particularly in the US where the business market is seen as stronger. In Europe, carriers tend to be more focused on the consumer market.

The fragmentation of devices, with different user interfaces specific to different countries is seen as an emerging trend - based on different usage patterns in, for example, the US (where pens and keyboards are popular) and Japan (where devices that can be used with a thumb are all the rage).

This has important implication for the development of smartphones. One wag at the meeting observed that however smartphones develop they need to be reliable and the last thing we needed was ctrl, Alt, Delete buttons on every phone. reg;

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