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Vodafone, DoCoMo will not launch 3G ‘until it works’

Which is nice. Or maybe not

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In the debate over the future for 3G, we seemed in mid-2003 to have reached a consensus: 3G was rolling out at last, especially the CDMA2000 variants; it was less attractive to users and operators than had been hoped, and was moving slowly, but it would definitely become a major force within a couple more years.

Now 3 has experienced further setbacks in its deployment and Vodafone says it will not launch 3G "until it works", with the implication that this may be some way off, while DoCoMo is putting a 10-year timeframe on 3G ubiquity.

In the mean time, GPRS and EDGE are taking on roles that were never envisaged for them and IP-based next generation services are creeping up behind. The bets on 3G ever repaying the investment that has been made in it remain firmly off the table.

The European operators are in a particularly difficult situation of course, because of the high prices they paid for their 3G licenses and the stringent obligations that went with them. This week, the heads of Europe's largest telcos urged the European Union once again to soften these obligations and so encourage the roll-out of 3G.

The chief executives of Deutsche Telekom and France Telecom – owners of T-Mobile and Orange respectively – joined equipment makers Philips and Ericsson and BT to call on the EU's information society commissioner, Erkki Liikanen, to "review license conditions, since 3G delays have made the initial conditions in some markets unrealistic".

The CEOs estimate that the cost of 3G licenses in the EU has totalled €110bn and that rollout will cost an extra €105bn, although – disastrously for the base station makers – only €12bn of this has been spent so far because of delays caused by technical hitches and uncertain market demand.

The telcos want greater latitude to share infrastructure and spectrum and acquire each other's assets, since consolidation is the only way that most 3G projects will survive. Such options are currently highly restricted. They did not make much headway – Liikanen's view seems to be that the regulatory framework is sound and the telcos need to invest more money in order to reap their rewards.

The experience of the main 3G operator with a service up and running in Europe, 3, plus the cautiousness of Vodafone, suggest this view is highly over-simplistic. The two operators are at the opposite ends of the 3G spectrum in terms of approach. 3 looked to win by being first to the market, gaining customer share and a headstart with cutting edge services. Vodafone is determined not to venture into 3G until demand is firmly established and in the mean time is seeking to enhance the appeal of its existing GSM and GPRS based offerings.

©Copyright Rethink Research Associates 2003

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