ITU news: 3G handsets face saturated market

date: 05 December 2000, source: www.scmp.com

After sinking billions of dollars into the design and licensing of third-generation handsets, mobile phone companies may become victims of their own success.

Analysts with PriceWaterhouseCoopers' Technology, Info-Comms and Entertainment practice say that when the first of the advanced phones become available next year, they will face a saturated market.

"There is going to have to be some innovative thinking to get people to replace their phones right away," said David Hoffman, a Taiwan-based partner with the consulting firm.

"You have to wonder how many people who are buying phones now are going to want to get a new one only a few months later."

Mr Hoffman said North Americans only tended to replace their mobile phones every two years. Even in Hong Kong and mainland China, where the drive to have the latest and trendiest technology is stronger, people hold on to a phone for 12 months.

"We're looking at a two year lag before the phones currently in use are replaced," Mr Hoffman said.

Nearly five million of Hong Kong's 6.7 million residents are already using some sort of wireless device, and other Asian countries where phone companies are hoping 3G phones will take off have similar penetration rates.

But with massive amounts of money already invested in the new products, the pressure will be on both manufacturers and service providers to get people using the new handsets quickly.

Mr Hoffman said consumers could be the big winners, as the need to get phones in use drives down prices.

"They may have to start talking about subsidies, even though that is a forbidden word in the industry," he said.

The 3G phones are being billed as the next great leap forward in wireless technology. Their developers say the handsets will allow universal mobile telecommunications services where customers can surf the Internet, watch live Web-casts, hold video conversations as well as use voice and text message services.

Unlike existing WAP phones, 3G is supposed to be fast and will have a more user-friendly display.

All the major manufacturers plan to unveil new handsets in the coming months as stepping stones to 3G. Some are referred to as 2.5G phones, which are not quite up to the level 3G promises.

Phasing in the new services may be one way around the lag time for replacing phones.

Craig Peddie, general manager of Motorola's Lexicus division, said his company would start with handsets that interact with Web-based instant messaging services and have global positioning systems (GPS) built in. As better 3G technology becomes available, and bandwidth expands, more features will be added.

"We won't see it all come at once," he said.

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