Two telecom senior consultants believe the lack of 3G and 2.5G mobile data uptake could be due to operators selling data services like they did with voice, when what’s needed is a paradigm shift towards helping users understand their phones’ functions  and the data services available.

Charles F. Moreira

(On left is Orbitage Sdn Bhd senior consultant Paul Mather and senior consultant Dr.Jeffrey Bannister)

Worldwide adoption of 3G mobile communications is encouraging but relatively slow with over 100million 3G subscribers out of two billion overall in 2005.  Malaysia had about 120,000 3G subscribers at the end of March among 20.6 million overall this first quarter.

Data services utilisation worldwide remains primarily on the low end of the data spectrum. The NPD Group recently reported that text messaging was the most widely used data service. The humble SMS was used by 67% of teenagers and 31% of adults, followed closely by playing games on the phone by 60%/23% of teens/adults, ringtone downloads (33%/23%), graphics and screensavers downloads (3%/11%). Higher end data services usage still remains on the low side with Internet browsing (19%/11%), mobile e-mail (14%/11%), picture messaging (16%/9%), listening to digital music (8%/3%), video messaging (5%/3%) and watching TV or streaming videos on their phones (4%/2%) all below 20% uptake.

Comparable figures are hard to determine locally. 3G operators are advertising video call rates on par with voice calls, and Maxis is giving its 3G subscribers up to RM99 worth of video calls between 1 April and 30 June, but there’s hardly any information on how many are making video calls and how many video calls each makes.

While everyone in the mobile industry chain; from network equipment and handset suppliers to telcos would love to see more users adopt these services, they may need to go beyond awareness raising, advertising and promotions to see this happen.

Paradigm shift
Dr. Jeffrey Bannister and Paul Mather, directors of telecommunications consultancy and telco industry training company Orbitage Sdn Bhd (www.orbitage.com) believe selling data services requires a paradigm shift from selling voice services.

“Everybody knows they buy a mobile phone to make voice calls, or in places like the Philippines, to send SMS, but data services besides SMS, require a different approach, generally requiring more coaxing of potential customers,” said Mather.
“Operators must focus more on selling applications and services for new high end mobile devices” according to Mather.

“Why is it that when you go for an RM30 haircut in MegaMall, you not only get a hairstyle which suits you but a cup of tea as well, but when you buy a RM1,000+ mobile device, you don’t get any real customisation nor a cup of tea?” said Mather.

Both Mather and Bannister believe operators should take more advantage of relaxing customers by showing them what’s available on their phones. “There’s too much clutter on current mobile devices which are beginning to look like PCs. While many people are familiar with PCs, the same is not true for high end mobile devices. Many buyers find the user interface confusing. We believe when the market is ready there will be radical changes in how local mobile operators promote 3G applications, services and even phone features,” they said.

“The selling points will not only be the phone’s features but also the applications running on them and we are just beginning to see this happen with ‘try before you buy’ promotions.”
Bannister believes cost and limited availability of handsets initially contributed to slow uptake of 3G services here and abroad, while other significant issues are patchy coverage mainly in major populated areas in countries like Malaysia which don’t have full nationwide 3G coverage.
Relatively high Internet penetration is a factor too, since people here access the Internet on their PCs, while those in places like India, Japan and China, where Internet penetration is relatively low, tend to access the Internet on their phones. Also, a lot of content on the Internet is in English and most people in Japan and China aren’t very familiar with that language, but phones support their native language, so are suitable for accessing content in their language.

“3G is still in its infancy and while people can make video calls and watch CNN, each of them consumes a lot of network resources, which ends up being quite expensive for them,” said Bannister. “3.5G enhancements like HSDPA and MBMS (multimedia broadcast multicast service) will allow operators to broadcast a single channel received by certain subscribers, using fewer resources, so the savings can be passed onto the user.”

Until then, prepaid users especially will find accessing data services to be a costly affair. Even worse are data rates which are totally confusing. “Everyone understands what paying 20sen per minute for a call means, but what does 1sen per kilobyte (KB) mean? How does this translate into the cost of a service users will understand?” said Bannister.

“For example, an MP3 song downloaded at this rate will cost around RM20 in data charges alone and should a user who downloads a 4 minute song pay more than one downloading a 3 minute song?” Bannister and Mather thus see billing trends shifting towards a services orientation (like flat unlimited data packages), which they expect will grow rapidly.

As for content, they believe that since 3G technology is still immature, content developers must work closely with operators to produce content which works properly with their network. In theory, content aggregators could help developers deliver content to many operators worldwide but they tend to demand high sales volumes. Since applications like games have very short sales cycles, so aggregators aren’t that much help.

While it’s still an uncharted territory, Mather and Bannister see mobile advertising as a largely untapped market which could be a huge revenue earner for operators, and especially service providers. However, advertising companies need to see whether there’re enough potential customers for mobile advertising and understand the legal implications of mobile advertising under each subscribers’ contract.

For example, they must see whether the contract forbids them from disclosing customer details to advertisers and they could also offer differently priced contacts based on the amount of advertising.

“So, an adult could pay more for a package with little or no advertising, while a student or children’s package could be really cheap but they would have to bear with much advertising,” they said.

Not all of what Mather and Bannister predict might turn out to be accurate but there is one certainty. The entire data services sector will have to undergo radical change before uptake becomes as widely enjoyed as voice services are currently.