The Success of 2.5G Underpins 3G Growth

date: September 20, 2001

With the widespread commercial availability of GPRS triggered by the arrival of GPRS-enabled handsets during the last quarter of 2001, the mobile data market will be at the forefront of sustained growth.

2.5G technologies are crucial to the development of the market, and to overcome the current high-risk image of 3G. A service suite and pricing policies that stimulate adoption and usage will be key success factors. Revenue derived from 2.5G value-added services alone, will account for over 24% of total revenues by 2006, according to ARC Group's report "3G Technology, Market and Business Strategies".

In the Western European context, mobile data services delivered via GPRS will become the main revenue source for operators. The provision of packet-switched data services will curb current ARPU decline by 2002-2003.

A variety of technical, commercial and business factors, however, underpin this success. Operators' ability to deliver and sustain end-to-end QoS as well as to provide global availability of mobile data services, are fundamental service enablers. The attractiveness of the service concept along with operators' pricing policies will stimulate both adoption and usage.

Partnerships and strategic alliances will be increasingly important to operators' aims for service differentiation. The industry's competitive balance, traditionally determined by operators' telecom assets, is shifting towards a combined telecom and content portfolio. This will sustain the growth of mobile data subscribers, which according to ARC Group (http://www.arcgroup.com), will reach 203 million worldwide by the end of 2003 -- 12% of which will be 3G subscribers, and 68% GPRS subscribers.

The high licence fees paid in some countries and the large capital investment required to deploy the networks, set against a largely unproven market, have driven the industry in general to question the commercial viability of 3G.

"It is crucial to look at the commercial opportunity of 3G on a market-by-market basis and even on an operator-by-operator basis. Some players will find it increasingly difficult to undertake the network rollout, but this does not mean that 3G is not a viable business proposition. Operators' strategies with regard to network deployment and network capabilities will be fundamental drivers of profitability" says Antonella Esteves, lead author of "3G Technology, Markets and Business Strategies".

3G Technology, Market and Business Strategies provides an in-depth analysis of the industry's underlying growth trends, and the challenges and opportunities presented by the new technologies which are supporting the provision of packet-switched data services. The commercial opportunity of 3G is explored, operators' business cases are studied on the basis of the economic market they enable. External factors, such as regulatory intervention, increased competition, and competing technologies are also considered in an all-inclusive analysis. The new context for strategy execution is thus assessed, and a strategic framework for 3G presented.

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