DoCoMo sounds alarm on 3G

date: 23 November 2000

Third-generation mobile networks may not provide the revenue growth many European telecoms companies are counting on, according to NTT DoCoMo, the Japanese phone operator that pioneered mobile internet access. Keiichi Enoki, who runs DoCoMo's successful i-mode internet service, says operators will struggle to justify the more than E100bn ($85bn) they have spent on 3G licences in Europe.

"I don't think the business model will fundamentally change from 2G to 3G. The essence of the cellular phone business will be the same," said Mr Enoki in an interview. DoCoMo, which is testing 3G technology, is finding that it is unsuitable for carrying large video or sound clips, one of the services that could provide new revenue streams for mobile operators. The new technology provides faster data speeds than 2G, allowing colour video and high-quality music to be sent to mobile handsets. Sustained bursts of multimedia data consume large amounts of the radio spectrum and DoCoMo says it will be too costly to download large files, such as pop videos, to handsets. Mr Enoki said: "The conclusion is that we will perhaps offer short video clips of 10 to 15 seconds and previews of music that people can purchase to download at home through their PCs or TVs."

Mr Enoki said operators could best hope to increase revenue by charging commission on these transactions as well as from advertising.

Japan will be the first country to offer 3G services next year. Its experience contrasts with the approach of operators such as Vodafone in the UK, which plans to download songs over mobile networks. DoCoMo says phones will be used to order multimedia content, which will be delivered over other, more cost-effective, telecoms networks.

DoCoMo's pessimism about the potential of 3G technology could damage confidence in Europe just as investors are questioning the huge levels of debt generated by set-up costs.

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