Profit from 3G to come from mobile Internet access

date: 30th January 2001, source: Reuters

The allure of next generation wireless networks lies in the open access to Internet content via mobile devices, not complex, high-bandwidth applications such as full-motion video, a study said.

Although the industry is focused on the development of high-bandwidth applications as the best way to generate revenues on 3G or third generation networks, providing consumers with access to the Internet will be more profitable, said a new study by wireless consulting firm Herschel Shosteck & Associates.

Third generation networks are wireless mobile communication networks that promise greater bandwidth and always-on Internet access.

``The Internet will be the enabler -- the connector -- which ties together networks, supporting infrastructure, devices and end-users. The business case for manufacturers and operators becomes facilitating and enabling Internet access at lowest possible cost. Those that do so will profit,'' the study said.

As recent auctions for 3G licenses in major European countries have demonstrated, costs to provide the underlying infrastructure for 3G are massive. Herschel Shosteck's data showed that licenses in Britain, valued at $84 per point-of-presence, or cell site, reached $600 in the bidding process.

High bandwidth services such as multimedia and full-motion video require even more investments because operators need extra base stations and other infrastructure to support it.

Because the total costs are so high, Herschel Shosteck argued that operators will only succeed financially by delivering applications that require relatively limited bandwidth instead of trying to offer high-bandwidth services.

Herschel Shosteck pointed to Japanese wireless service provider NTT DoCoMo Inc. as a successful example of how operators can profit from transmitting applications, features and services.

According to the firm, DoCoMo doubled its monthly revenues per subscriber from i-Mode, a 2.5 generation service that offers Internet access, in just six months.

The study also noted consumers will be attracted to 3G services because of the life-style changes it can bring, not because of the high bandwidth and technology.

Wireless operators should leave the development of such applications to other firms that can focus on it, Herschel Shosteck said.

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