Mobile News, 24-03-2003
By Stuart McWilliam
BT's former chief research scientist should know a thing or two about technology, and Peter Cochrane has very clear views on 3G. The cost is crippling, operators don't know what to do with it, and the public won't want it. By Stuart McWilliam
To say that new 3G network '3' has hardly taken the market by storm with its soft launch strategy is something of an understatement.
On the upside, 3 claims 70,000 Italians and Britons have pre-ordered handsets - but now a possible shareholder revolt must be cause for concern.
Royal KPN, the Dutch telecoms group which owns a 15 per cent stake in 3, is unenthusiastic at the prospect of handing over its £150 million share of a planned £1 billion cash call.
3's consortium of bankers, including JP Morgan and HSBC, is reportedly concerned that delays to the launch may mean that 3 is unable to meet conditions attached to its £2.2 billion overdraft facility.
The fact that many services originally only scheduled to be available on 3G are now here on 2.5G has not helped. But there's another technology that could steal 3G's glory - digital radio.
A digital radio signal can broadcast data at speeds of over 200kbs. 3G offers, under optimal conditions, speeds of half that.
Digital radio technology could be adapted to carry streaming video content and remove a fundamental unique selling proposition of 3G. And as licences to broadcast digital radio signals were cheap, their owners don't have huge investment to recoup.
Digital radio technology could complement that of 3G - a digital radio chipset could be included in a 3G handset, for example. But digital radio could also compete directly with 3G when it comes to broadcasting information to the masses.
3G phones can host person-to-person video calls and 'on-demand' services. Digital radio broadcasting can't do this, but it may well prove to be a far better vehicle for transmitting video-rich content to a large audience than 3G.
Peter Cochrane is a man who knows of such things. He ran BT Research from 1993 to 1999 and was BT's chief technologist.
He has also held positions in academia and is a fellow of the IEE, IEEE and Royal Academy of Engineering, and is a member of the New York Academy of Sciences.
Just over two years ago Cochrane set up his own start-up company, ConceptLabs, with a group of ex-Apple Computer people.
Cochrane says 3G has a mountain to climb, and claims that the time has come to bury the idea of a 'killer application' for 3G.
"Killer applications don't exist", he says. "It's no use dictating to people. You can't tell them the products they will be using. Subscribers won't pay high tariffs to access a sophisticated service just because it is technologically possible to do so. The best thing developers and network providers can do is put in the building blocks as raw technologies and service ideas, then light the blue touch paper and stand back".
Cochrane says that network operators need to have a quick response team standing by to exploit any services that do strike a chord with subscribers.
"Where we are now with the next generation of mobile phones reminds me of the footpath argument. An architect can either design an estate with all the footpaths in place from day one. Or he can wait a year, see where people actually walk to and from and then build the footpaths".
According to Cochrane, 3G, and everything to do with it, has been ill-conceived. "Things went wrong when the Government relieved operators of billions. It crippled the telecoms industry, which has since been trying desperately trying to find ways of recouping its licence money".
He argues that many 3G service offerings have been tried on fixed-line and failed.
"Some have been tried many times. They have failed many times. This month a Government minister was on national TV at the launch of 3 making a fuss about the eventual arrival of 3G and the ability to hold face-to-face meetings remotely. One of the legislators was filmed with an extended arm participating in a video conference. Will he actually be doing that in real life? I don't think so".
Cochrane points out that video conferencing on a small scale has never worked.
"At BT we tried it in the '60s and '70s. We tried it again in the '80s and '90s. The technology doesn't matter. The concept was not attractive then - why should it be now? Poor sales of pocket TVs don't auger well for 3G either. Palm-sized TVs have been around for years for under £100. How many people do you see watching TV in the street or on the bus? Are people going to watch TV on a 3G phone? No. Are they going to watch movies? No. Will people take still pictures and send them via their phones? Possibly. But only if the resolution is good enough and they are cheap to transmit. But GPRS has shown that you don't need 3G to do that. The fact is that 3G operators are scratching around to find any application for 3G, let alone a killer application.
"There's another problem. We're being promised data at 2Mb per second over 3G. That will only happen is if there's only one caller on the cell site at a time. That's pretty unlikely. The reality is that data speeds will be in the order of 64kbs. Successful 3G services are more likely to come from independent players rather than the big providers. Anything the household names have dreamed up and submitted to focus groups is bound to fail. Some things will fly. But nobody's going to look at delivering music over 3G. If there's one industry more stupid than the mobile phone industry, it's the music industry".
Cochrane reckons putting an MP3 player into a 3G device is an obvious thing to do and could be massive.
"So, what is the music industry doing? Launching subscription services that are more expensive than buying a traditional CD. Meanwhile, 3G devices are being built that can't cope with MP3".
Cochrane says another threat to the 3G operators is wireless Internet in the form of Wi-fi.
"Wi-fi versus 3G is not about technology. It is about the business model. It took 100 years to roll out 28 million phone lines in the UK. It took just 12 years for the UK population to buy 90 million mobile phones, of which 45 million are operational in a 60 million population.
"That happened because of pre-pay. People bought the technology like cornflakes. They installed it, and they learned to use it all on their own because it appealed to them and they could afford it.
Cochrane believes there's no way to guess or dictate the success of a given service. SMS is a prime example.
"Everything, barring speech, that the telecoms industry has invested in, researched and focus-grouped has failed. Everything the public has discovered and been creative with has taken off.
"The telcos are spending vast sums of money to enable us to sit on a bus and watch a movie. Not a chance. If there are more than two people watching on the same base station, the picture is going to be too slow. There are also severe battery life problems."
So why did clever people allow this to happen and pin their hopes on technology the public doesn't necessarily want?
"The madness of the public auction made the networks pay more than they should have", says Cochrane.
"The networks were carried away on a wave of euphoria. There was a feeling they had to be in the game at all costs".
And, he points out, the licence auction happened in a bull market expected to last forever. The bidding network executives felt invulnerable. The dotcom boom saw half of the value of the US market generated in nine months. But during this time nothing fundamentally changed.
Cochrane says corporate culture must take some of the blame.
"Managers ran the companies, not technologists or deep thinkers. Then there were the accountants. Throughout the 1990s there were conferences on creative accounting. Accountants are anything but creative. So, for creative accounting, read 'cooking the books'", he says.
"Misinformation was everywhere. People wanted to believe Worldcom's predictions that the Internet would grow exponentially. People were talking things up. Rational thinking was nowhere to be found. How else can you explain telcos signing up to a business model with economics that demanded the entire population of Europe bought a 3G phone simultaneously and spent e1,000 a year on it from day one? And this was just to break even.
"It's not surprising that I haven't noted enthusiasm for 3G from any network operator other than 3. And if all 3 can offer is compressed video of football goals that can already be delivered by digital radio, I'm not impressed. It would be smarter to take a little more time, say 20 seconds, to download and decompress the video before screening it on a 3G device.
"I'm not saying there isn't a thirst for information. I don't deny there's money to be made from wirelessly providing information. I envisage a world in which you walk up to a plasma screen, and ask it to 'get me, show me, or find me'. Every screen would show a phone number to dial. Your mobile phone would then deliver the information you requested. You'd get a text telling you your team had scored. You'd go to the nearest screen and ask it to show you the goal. The technology to do that is easy.
"We are at an impasse. Bandwidth, processing power and storage is no longer an issue. Battery power and screen size are the limiting factors. Until we get reasonable size screens, or a display you wear like spectacles, anything that relies on sending video for revenue will struggle".
Cochrane points to one bright spot, however. DoCoMo in Japan is making money on multi-media ring tones and games. Trivia on 3G may well also be a profitable application, but only if the price is right.
"SMS works because it is cheap. The industry hopes that MMS will follow SMS because that's what focus groups have told it. But MMS will not really fly unless it comes down in price.
"At BT I saw that everything that was researched failed. Everything that went out the back door with no investment backing or marketing took off. Everything we engineered, planned and set targets for never made it".