Killer business case more important then killer app
"The killer business case has nothing to do with real time transmission of high bandwidth," said Dr. Herschel Shosteck, president of Herschel Shosteck Associates, Ltd. "This means that the relentlessly cited 3G future—'full motion video' and 'multimedia'—is irrelevant. Indeed, the concept of the killer application is flawed and its pursuit is detrimental to the industry."
The 300-page study posits that over the near term, profits will come from providing immediate, open, and low-cost access to the Internet—and the plethora of low bandwidth information, applications, features and services available from it.
"By distracting attention from the ultimate end-goal, the attention paid to full-motion video and multimedia becomes pernicious. Recognizing this is crucial," Shosteck said. "The infrastructure costs needed to provide ubiquitous high bandwidth will prove too great for wireless operators to shoulder, at least into the near future."
The study concludes that even if operators would shoulder such costs, the tariffs they would have to charge for transmitting high bandwidth would prove too onerous for end-users to accept. This means that, at least initially, providing high bandwidth cannot be profitable to wireless operators.
The study points out that disconnects—differences and incongruities in the perceptions and expectations of different industry participants—among different points of the value chain, contribute to the chaos.
"The hopes for 3G originate from the convergence of wireless radio (RF) and the Internet (IP). This convergence promises to extend the content of the Internet, together with the low cost of IP, to the wireless radio environment. To do so requires close cooperation between the two industries, but neither industry fully understands the other nor appreciates its limitations," said Jane Zweig, executive vice president. "Because of the disconnects between the RF and IP worlds, the IP world is developing advanced RF applications and services which cannot succeed on early 3G systems. The potential for economic loss is obvious."
The study examines the confusions that the disconnects have produced. The confusions have been compounded by at least three external factors—manipulations of 3G spectrum value by governments, pandering to network operators by infrastructure manufacturers, and "competitive paranoia" on the part of network operators.
"These three external factors, combined with additional 'disconnects' have contributed to industry-wide confusion and hysteria," Zweig said. "This confusion and hysteria have virtually precluded a dispassionate and rational analysis of the 3G transition."
The purpose of the new study is to bring order out of the confusion by:
- Proposing definitions
- Analyzing incongruities
- Questioning assumptions
- Examining barriers
- Developing economic and market measurements
- Constructing timelines for adoptions
- Posing competitive alternatives
- Analyzing profitable options
"Given the scope of investment that will be required, this five year time frame underscores the importance of operators having access to substantial financial resources."
To enable operators to profit, the study analyzes and underscores the importance of operators considering alternatives to shouldering the full costs of 3G investments by themselves—becoming a Mobile Virtual Network Operator (MVNO) on the network of another operator and/or sharing common 3G infrastructure.
For more information regarding the newly published Herschel Shosteck Associates Ltd., study, contact Jane Zweig, executive vice president, Herschel Shosteck Associates, Ltd., Tel: 301 589 2259, email: jzweig@shosteck.com.
Source: Herschel Shosteck Associates
With contributions by Ellen Jensen, Managing Editor