Mobile networks to double per user revenue with 3G – Nokia

Read on to find why they don't think your bills will double, then further on to find why they will

Despite the stratospheric cost of third generation (3G) licence auctions in Europe, operators will achieve payback within five years of kicking off the services, says Nokia. Unsurprisingly Nokia is coy when asked what the payback period would have been if the auctions hadn't wound up raising $30 billion-plus a pop (Two weeks? Three weeks?), but the company has some interesting things to say on the subject of why 3G licences should be profitable, even after hyper inflation of the prices.

For starters, operator revenues per user are expected to double. Nokia estimates current revenue per user per month at 40-50 Euros, which for simplicity we'll just call dollars, and this will climb to $90-100 per month when we hit 3G. Superficially that sounds like you are going to get in the neck because the operators paid through the nose for their licences, but that's not how they're currently making their calculations. The trouble is, maybe their calculations are screwed.

As scripted, 3G has a couple of features that make it a potential goldmine; it's broadband, and it allows a permanent connection, so at last we achieve the mobile wireless Internet. That means you'll be doing a lot more with your phone than is currently the case. Most people today use their phone for voice, maybe a little (but growing) amount of short messaging, and data comes along well to the rear.

Cannibalise fixed revenues?
But the higher speed and the permanent connection makes it possible to use wireless equipment for voice, email and Internet, so you could reasonably expect some revenues to shift from fixed to wireless operators. In that case you will be paying more for wireless, but presumably this will be compensated by you paying less for fixed, and in any event you'll quite likely find the added convenience of mobile Internet worth any extra money you pay.

The operators' spreadsheets however have entries for far larger shifts of, and increases in, revenue - and this is where it gets tricky. Continuous, broadband wireless is being viewed as a great enabler that will spark a revolution in usage and application development. Nokia Mobile Phones chief technology officer Yrjo Neuvo sees personalised and location-specific applications as being vastly important when 3G hits, while Janne Jormalainen, Nokia Mobile Phones VP, marketing, envisages a host of horizontal developers popping up. Nokia at the moment pitches the number of applications available on mobile phones increasing from about 50 to over 5,000.

But it gets murky here - what are those 5,000 applications? Taking a leaf out of the history books, Nokia isn't saying. It figures that there will be plenty of opportunities, and it knows that killer apps have always come out of left field - obvious once someone has done them, but prior to that not predictable. Nevertheless the features of 3G give us a couple of category pointers. Broadband and the permanent connection allow a vastly increased level of personalisation, and vastly increased quantities of personalised information to be sent to the user.

The ability of the phone to know where it is meanwhile is a great enabler for location-specific services. We'll skip the fact that GSM phones already know where they are, and as yet nobody seems to be building profitable applications they can make money out of on this basis; as we understand it American phones don't necessarily know where they are, which presumably means Americans are waiting to be enabled, and after that it'll all be different.

Holy PointCast*, Batman!
Once it's all live people will be paying for information services pushed to them, and getting geographically based information as they move around. Both of these will provide opportunities for the operators to advertise services to the users, so it'll be possible to use ad revenues to subsidise these rich new services being offered to users, right?

Maybe - but rewind. If a service is personalised, and/or geographically based, it is in essence context-sensitive. It's delivered according to who you are, what you want, and where you are. You are the context, that's all. But as we all know, although context sensitive help is a good idea, it doesn't work - so if we can't write a context sensitive help system that works now, surely it requires a very high level of optimism/folly to think it can be done in 2002.

The context is dependent partially on how much the users are willing to define in terms of the services they want, and partially on how good the network systems are at predicting what users are likely to want; the omens aren't good in either case. Users might do a bit of personalisation of their systems, but it's generally superficial bells, whistles and wallpapers, not carefully thought out systems for running their lives and businesses. And as we've already noted, context sensitive systems are complete duds when it comes to figuring out what the problem is.

This leads on to a related problem; as we've learned over the past few years, people expect everything on the Internet to be free. Nokia suggests that some services on the mobile Internet will be free, but that more detailed information will cost money, one example used being detailed weather forecasts. These however are already available for free on the Internet, and will still be available on the wireless Internet. Other examples of possible paid-for services crumble similarly - sure, you could pay for hotel, taxi and restaurant information specific to the area you're in, but that information is already available for free, so what would you be doing? It's akin to paying somebody to turn the yellow pages for you, and are you going to do that?

We at The Register have an awful sinking feeling that wireless personalised and geographically sensitive applications will turn out to be hopelessly inaccurate, PointCast writ large, and a vast revenue deficit the operators are going to have to figure out how to claw back. From the customers, if nothing else turns up.

*For our younger readers, PointCast was a tailored, push technology information system that was bundled with the first versions of Windows 95. PointCast and push technology then rapidly ceased to be the Next Big Thing, and after several sad, twilight years PointCast itself was slid into the back of history's filing cabinet just a few months ago. ®

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