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FROM EDN EUROPE: The shape of rings to come

As this edition of EDN Europe
enters production, the cellular-communications industry's annual party in the
south of France—3GSM—is approaching. This event, you will recall, performed one of the most seamless standards upgrades in the history of the electronics industry, simply by adding a "3" to "GSM" (Global System for Mobile communications) when "3G" (third-generation) cellular technology came along (assuming you accept that 3G has, in fact, come along,
that is). In 2004, the sector is once again the leading engine driving the
worldwide electronics sector, the PC business having (so far) failed to deliver
the long-promised upswing as a generation of long-serving business PCs is
pensioned off. It is a lead position that the cellular sector carries uneasily.

By press time, 3GSM 2004 will be over, and some directions may be clearer, but there are some inherent conflicts in the business as it gears up in 2004. Much of the technology focuses on adding and upgrading features and services and on realising delivery of the wideband channels that 3G and, to a lesser extent, GPRS/EDGE (General Packet Radio Service/Enhanced Data for GSM Evolution) promise. Meanwhile, it is an open secret that even in the most saturated western markets, service-revenue growth is still coming mainly from the organic growth of basic telephone and SMS (short-message-service) products. Despite the television advertisements depicting celebrities and sundry other beautiful people exchanging images of themselves with, no doubt, grateful recipients, most of today's camera phones quickly default to voice (and SMS) mode. When such (relative) trivia as ring-tone and wallpaper downloads claim some of the fastest-growing revenue streams in the sector, you have to wonder what is going on.

One industry viewpoint holds that the camera phones' user experience is not yet good enough, and, for example, more pixels and better performance will unlock pent-up demand for images and video. Time will tell, but stand by for a flood of very capable megapixel sensors and high-resolution displays appearing this year in a phone near you. On the "nontechnology" side, you might also wonder whether some eye-wateringly high tariffs for data and media messaging might not be acting as deterrents to market lift-off.

The camera-phone market is just one symptom of a generic problem that the sector faces: Technology has given it many avenues for product development, but the market is providing scant guidance on which paths to explore first (or at all). The video market will soon follow suit. First, there is the smart-phone/feature-phone mix to resolve: How many features can we meaningfully load onto a phone? Other questions ask what we can do about the user interface, what mix of air interfaces is the best bet for development, and whether wireless-enabled PDA should aim for full interoperability between cellular and WLAN services. Finally, who is going to sort out the infinite web of tariff and roaming agreements that would be necessary if such advancements occur? This last point is not trivial. Consider GPRS, touted as "just
a technology upgrade." It still lacks seamless operation across Europe, even though the basic service is almost ubiquitous. How much longer would it take to resolve the complexities of cross-technology service offers.

From a technology perspective, the downside is somewhat limited. Thus far, consumers do not seem to be too upset about their involuntary function as evaluators of speculative technology and services. If there is any backlash among consumers at being sold phones as fashion items and paying premium rates for embryonic service concepts, it's hard to detect; long may it continue! But some solid directions and pointers for product formats and service mixes that will sell on a sound and sustainable basis will have to emerge from 2004, or the market will be left struggling for direction. After all, it won't be long until some of the GSM licences start to run out, which will force the industry to make some choices about the mix of technologies it will base its service offerings on.

As always, don't neglect the social context, either. The "mobile-phones-fry-your-brain" lobby has not gone away. Now, there is concern over the effects on privacy of proliferating high-performance cameras that can capture and load high-quality images to the Internet in less time than it takes to read this sentence. And a lobby is already expressing the same concerns about privacy in the context of GPS-equipped feature phones, even though they are barely yet on the market. As experience shows, it would be foolish to dismiss any of those concerns out of hand; they may all play their parts in shaping mobile-communications offerings. There's one sure bet: The mobile business is unlikely to turn boring any time soon.

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Contact me at gprophet@reedbusiness.com.

 

 

 

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