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!!

This report evaluates and analyses the 3G market, investigating the financial and
industrial implications surrounding the 3G market.

A SWOT[1] analysis has been prepared by the author to highlight the strengths, weaknesses,
opportunities, and threats associated with the 3G phenomenon.

A PEST[2] analysis has been prepared by the author to highlight the political, economic, social,
and technological issues associated with the 3G phenomenon, with a particular emphasis on
presenting the issues facing this market area as a whole.

Alongside the aforementioned, an independent research study was conducted to

investigate the Nokia TV with the (DVD mobile phone) commercial. The results show
just how much such a mobile phone should be priced at and when best to target the
Customer.

 "

For primary research the Author placed a questionnaire (V
 

on the
Internet and invited the general public to participate. The aim of the primary research
was:

i To see whether the idea of watching a Movie on a mobile phone would generate
interest. The idea was inspired by the Nokia TV commercial in which, a woman is
seen watching a scary movie on her mobile phone whilst on a bus.

The total number of participants was calculated at 203 over a 3 month period. The
findings shall be discussed at a later point in this report under the µResults¶ section on
page 999.




Five companies paid over £22bn ($35bn) between them for licences to operate the
heralded 3G third-generation mobile phone services in the UK.
The four main players in Europe - Deutsche Telekom, Vodafone, Telefonica and France
Telecom, as well as their strategic partners are using their colossal, cross-border
market power to force their suppliers to cut prices.

However large a company may be, handset manufacturers, such as Ericsson, Nokia
and Siemens are left with no alternative but to comply with the wishes of the telecom
giants'. This is because if they do they are earmarked to make a rather tidy sum of
money and not just from the first roll-out of the infrastructure. Even more financial gain
will be made at a later stage as systems require maintenance, and upgrades.

Nokia, based in Cannes, France is the world's top handset maker. They promised in
April 2003 at a press conference to deliver its first, new-generation mobile phones by
July of this year.

Nokia said it had sent 10,000 third-generation handsets to mobile phone operators such
as Vodafone and Orange and equipment manufacturers such as, Ericsson and Nortel
Networks for testing. The Finnish heavyweight has arrived late to the European market
with its 3G technology.

Nokia¶s Arch rivals; Japan's NEC and US-based Motorola have already delivered their
3G phones in Europe.

Nokia and other wireless operators are waiting for evidence suggesting that Customers
would like the new services before investing further in the expensive technology. At
present, Nokia is joining its sources with the computer technology giant IBM and also
the world's largest enterprise software maker; Oracle. Reasons for doing this stem
deeper into attempting to discover the mass market for mobile phone access to e-mail,
calendar and corporate databases.

Despite the fact that some European mobile phone manufacturers have only just begun
to unveil their 3G phones, their overseas counterparts have been responsible for
securing some of the early deals for quite some time now.

In 2001, the Japanese giant; NTT DoCoMo became the world's first ever operator to
begin selling 3G phones in its home market. Such an accomplishment was achieved
through home-grown vendors such as NEC, Matsushita Panasonic and Fujitsu.

Hutchison 3G, is the joint venture controlled by Hong Kong¶s Hutchison Whampoa, who
has plans to promote Europe's first commercial 3G as early as next month. Again, this
has been achieved through the use of non-European manufacturers.

"


#

PEST stands for political, economic, social and technological. PEST factors influence
the development of the 3G market and thus affect the goals for which it strives.
Compiling a PEST analysis provides valuable information with an opportunity to analyse
the 3G market environment. No organisation exists as a unique entity, independent of
its environment. Examples of environmental factors in general include events such as
the 9-11[3] attack on the World Trade Centre; which in its aftermath cased much
economic uncertainty both inAmerica and globally. ³÷


 







V   


  









 


 



V  David Pullman, Wall Street Bond King
http://www.guardian.co.uk/september11 (Ref. 03/04/2003)

A more direct environmental factor affecting the 3G market has been the recent
SARS[4] epidemic. ³
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Market Power The four main players in Europe -
Deutsche Telekom, Vodafone,
Telefonica and France Telecom, as well
as their strategic partners are using their
colossal, cross-border market power to
force their suppliers to cut prices. 
Cellular evolution to high data rates
802.11b has had initial success in the home and the enterprise
Good peer- to- peer communication system
Number of Bluetooth modules shipped now exceeds 802.11b (TDK Systems
Europe information)
10 Mb/ s system will use 1 Mb/ s channel as a fallback
Good integration and coexistence with 5GHz WLANs

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Safety

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Bluetooth operates at 2.4GHz so does a

Microwave! 

Bluetooth operates at 2.4 GHz[6]. 2.4 GHz is a

microwave. A Microwave oven, also operate at this
frequency 2.45 GHz. ÷


  

*
.

Microwaves have very short wavelengths; they are

very easily absorbed by water. This is why they are
used in microwave ovens. Water in your dinner
absorbs the microwaves; the energy of the
microwaves is converted into heat: this makes the
water molecules vibrate faster. Fortunately,
microwaves ovens contain the harmful microwaves
contained inside a Faraday Cage[7].

There are concerns and people are even frightened

that the radio waves coming out of their mobile
phones are short enough to literally µcook¶ their
brains.

There is no scientific proof that base stations[8] for

mobile phones (power level of 20 Watts) have any
damaging effects on living beings, even short
exposures to high-power microwaves (like inside
microwave ovens, in proximity of radar dishes,
military airplanes and military electronic
countermeasure systems, which all have power
levels of about 500 Watts to 1 Giga Watt[9]). These
cause all tissues to heat up, which leads to the
destruction of internal organs, and the whitening of
the eye's lens.

Security As Bluetooth's role expands from small ad-

hoc[10]networks comprised of a few
wireless devices to an important part in
online banking and mobile commerce,
questions arise over its security. Is a
 Bluetooth network secure enough to
transmit credit card numbers?

Not yet, seems to be the consensus. The

Gartner Group, while saying Bluetooth
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questions the technology's

security and is recommending a wait-and-
see policy.

Two researchers from Lucent's Bell Labs,

a member of the Bluetooth Special Interest
Group, recently discovered conversations
could be easily bugged and therefore,
encryption defeated, according to The
New York Times.

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cryptography mailing list upon hearing the
news.

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´ (Jane Wakefield, 2002 BBC News
Online technology staff).

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New Business Opportunities Ericsson has created a separate
Bluetooth business[12], Mads Madsen a
spokes person for Ericsson
in Sweden said that the new company
for which a name has not yet been
decided has already begun operations.
The company is based
in Lund, Sweden. This is where
Ericsson has it major Bluetooth
 research department. "
 
























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Wireless Networking Bluetooth the much-heralded wireless
networking standard is seen as the solution to
cutting the cables whilst increasing the
connections of devices both at home and at
work. 

Bluetooth and 3G extend the personal network into the Internet

High rate services ensure service continuity with WLANs

Market Opportunity Generally speaking, 3G services are
perceived as a market opportunity of
parallel proportions to the Internet itself.
This is fundamentally due to the fact
that mobile phones, unlike PCs, are
easy to use and are just that; mobile.
Therefore, Mobiles tend to become part
of the everyday lives of those who use
them even if the user is not interested in
technology.
Wi-Fi + 3G = Happy Convergence 
Good integration and coexistence with 5GHz WLANs
Every 3G phone will support Bluetooth
Low cost is finally a reality

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Making Money Wireless providers have paid billions for
3G licences, although they have also
invested in a dilemma: how are they to
make their money back?

As Wireless providers strain and come

to terms with the huge burden of dept
looming over their heads as a result of
inflated prices on many paid for
licences, critics have said that ³3G 







   











   

 ´ (Jane
Wakefield, 2002 BBC News Online technology
staff)
 


 

The tale encompassing the sales of radio spectrum, especially for the next generation of
mobile phones has been one of unpredictable results including widely varying fortunes.

In 2000, the UK Government began to accept bids from 13 companies who wanted to
operate a licence to sell next-generation mobile phones. Undeniably, this raised the
hopes of other Governments, diminishing their doubts and making it more believable
that they too could be in line for a windfall. It raised £22.47bn, a tidy sum to anybody.

However, the companies began to balk from paying the rather huge sums of money for
the licences. The only way in which Governments were offered some form of guarantee
to make money was to begin in setting a price in advance and thus award the licences
on merit through that of a beauty contest.

The UK auction was structured so that each rival bid was designed to be a certain
percentage higher than the previous bid. This inevitably resulted in the size of bids
spiralling sky high at a rate of over 150 rounds of bidding. In this way, the politics of the
situation has made the Government billions of pounds.

 !

Table 1 below shows the amount each European county paid to operate a licence to sell
3G mobile phones.

3G Government Licence Top Prices

UK:
£22.4bn
France:
£6.32bn
US:
£11.24bn
Germany:
£30.4bn
Italy:
£7.5bn
Netherlands:
£1.68bn
Poland:
 £1.9bn
Sweden:
£26,000
Switzerland:
£80m
Belgium:
£300m
Australia:
£500m
Spain:
£12m


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." Tim Sheedy IDC 23rd August 2000

V
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Camera Wireless Phones to be Sold World Wide 2003

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The most recent Strategy Analytics Wireless Device, Strategies report, revealed that "_
 

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The report also concluded that 18 million embedded-camera phones were
sold globally during 2002. 13 Million Of those were sold in Japan alone. *


depicts the global phone sales against period. It is interesting to note that the market
has been almost doubling every six months.

Other crucial results from this Strategy Analytics Global Wireless Practice Standpoint
conclude that Nokia accounted for 91 percent of GSM camera phone sales globally in
2002. Samsung accounted for 24 percent of CDMA camera phone sales worldwide in
2002.

 

Around 50 million mobile phones have now been registered in the United
Kingdom according to the latest figures making the mobile the most successful
consumer product ever.

50 million mobile phones is the equivalent of one phone for every person, with the
exception of the very young and the very old. Some people, of course, have more than
one phone.

Mobile phones, whilst serving a great purpose, have also triggered a rise in crime. This
rise is so large now that it has made the national crime figures much worse than they
would otherwise have been.

However, just as every cloud has a silver lining, the good news is that the service
providers have at length managed to implement methods preventing stolen phones from
being used ever again. Ideally, this should lead to a sharp drop in the crime figures
(which the Government will, doubtless, claim credit for).

2002, was the year of camera phones (though they won't develop into a mass market
for a while). 2003 is likely to see serious video games, phones that track your location
accurately and the first of the third generation (3G) phones enabling short video films to
be taken and emailed to friends.

Such a phenomenon can only be followed suit and will thus include; phones with Wi-Fi
(wireless) cards in them. These will enable users to download information at high speed
from Wi-Fi "hotspots" in selected places around the country. More importantly, the user
will be able to make cheap telephone calls using the internet.

 " 

The purpose of the Cellular telephone today are primarily intended for the purposes of
speech and are therefore not particularly renowned for its ability to deliver data.
Enhancements have been made to the existing 2nd generation systems (so called
2.5G), which will enable the data to be carried much more easily at higher rates
(typically between 28.8kbps and 64kbps, though higher rates are possible), and
interestingly where required, as packets rather than circuit switched.
Now, the next generation of cellular telephony (3G) known globally as IMT 2000[13] and
in Europe as UMTS[14], has been uniquely designed to carry packet data. Speech is
simply treated as a particular data application. 3G systems will allow the end user
flexibility in the traffic channel, delivering multiple services with differing bandwidth
requirements, and simultaneously if needed. Data rates of up to several hundred kbps
will be readily available to the terminal (with so much being done, the end user device is
no longer just a mobile phone).

The 2.5G developments are expected to be available in the short term, and certainly
within the same period that Bluetooth will make its entrance. Bluetooth will support
enhanced 2nd generation as well as 3G systems in the delivery of a wide range of
services. With the development of such broad capabilities, it will be rather tempting to
make use of the 2.5 and 3G systems to support every new application and even some
of the old ones too.



The total number of participants was 203 over a 3 month period.


4!'" 

V
c

 : Primary research conducted on the Internet.

Analysing V
c

Figure 3 shows the distribution of gender among the participants to the survey.
V
5

 : Primary research conducted on the Internet.

Analysing V
5

Figure 4 shows the distribution of the age groups. 75% of participants belong to the 18
to 25 age group range. Since the survey was carried out online[15] it could mean that
this age group is online in more numbers than other age groups.

V
6
 : Primary research conducted on the Internet.

Analysing V
6

V
6 shows how out of the 203 participants, 195 of them had a mobile phone and
only 8 did not. This goes to show how saturated the mobile phone market has become.
It¶s not a wonder that mobile phone manufacturers are continually trying to revamp
mobile phones to keep the industry in profit.

V
7

 : Primary research conducted on the Internet.

Analysing V
7

V
7 shows how much participants to the survey paid for their mobile phones. It is
interesting to note that 40% of people asked paid between £200 and £250.
V
8

 : Primary research conducted on the Internet.

Analysing V
8

V
8 shows how much the number of mobile phone handsets participants have
owned. It is particularly important to note that 5% of people are on the 8th handset,
because these are the people that have been found to upgrade their phones regularly.

V
9
 : Primary research conducted on the Internet.

Analysing V
9

Figure 8 shows 9 to 12 months is the most frequent time period for upgrades.

V
:

 : Primary research conducted on the Internet.

Analysing V
:

This shows upgrades, special offers and new features as being the reason for
upgrading. This accommodates Figure 9 which shows that most upgrades occur every
9 to 12 months which is the time most mobile phone operators release their new
contract services and long awaited phones.

; 
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<

V
/=

 : Primary research conducted on the Internet.

Analysing V
/=

Figure 10 shows how the participants responded to indicate their interest towards the
movie industry. 46% were very interested and a further 47% were fairly. This indicates
a positive interest towards the movie industry.

V
//
 : Primary research conducted on the Internet.

Analysing V
//

Figure 11 shows that 70% of the people surveyed are interested. This means that the
Author has successfully archived the aim set out on page 5.

V
/3

 : Primary research conducted on the Internet.

Analysing V
/3

Figure 12 shows the maximum amount people surveyed are willing to pay for a phone
that is described in Q9.
V
/c

 : Primary research conducted on the Internet.

Analysing V
/c

Figure 13 shows the response to the surveyed participant¶s interest toward 3G phones.




4 

The four main telecom players in Europe and their strategic partners are using their
colossal, cross-border market power to force their suppliers to cut prices. As a result the
already hard up mobile phone manufacturers are finding it even harder to make a
profit.


$


c


Everyone wants 3G to work successfully, especially the 3G licence holders. They have
invested a large amount of money into the project and have as yet seen no return to
recuperating seemingly lost investment. Government politics have made the situation
somewhat worse by inflating prices in the initial stages. Despite spending more than
100 billion euros (US$107 billion) on 3G licences in 2000, equipment makers have
delayed commercial 3G launches. They are awaiting evidence to suggest to querying
Customers who want to know exactly what services are available before they further
invest into the costly technology infrastructure.
The Authors primary research questionnaire results provide evidence to suggest that
Customers are indeed looking for new services. Figure 13 shows 40% of the surveyed
participants indicating very strong interest towards 3G phones. A further 33% displayed
a strong interest also.

 
!
 "
V

When the surveyed participants were asked '%
 


 















  









  






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_

 2
V
*

a staggering 70% indicated that they are interested. To
add substance to this idea the next question in the questionnaire asked; 










 







 2
Figure 12
shows 30% of
Customers are willing to pay anything between £150 to £200 and 8% willing to pay
between £250 to £300 and 20% willing to pay between £50 to £100.

This suggests that the mobile phone operators can develop a there-tier system of
phones to cater for all.

The Author recommends a greater quantity of individuals be surveyed as 203

participants are for the purposes of adding further weight to the results.

''


"
V

The majority of the Terrestrial Television channels use the VHF spectrum with licences
that are due to expire in 2015. Digital Interactive TV is already here and can be
accessed via a set-top box opening a whole new world of interactivity.

We must wait and see if history repeats itself once again and if the government resorts
to the same bidding political tactics that has hindered the delivery of 3G technology,
resulting in inflated licence prices.