Monday, February 20, 2006

The Telegraph on content at 3GSM

It is a recurring theme of 3GSM, the annual get together for the world's mobile telephone industry, that the future is always going to be better than the present. Every year delegates get the same waffle about the benefits of new technologies and the prospects of new sources of revenue just around the corner.

In Barcelona last week (the event has outgrown its original home of Cannes), more than 50,000 3GSM delegates and 2,000 journalists sat through endless seminars, keynote presentations and glitzy product launches from the largest players in the industry.

This year, there was a single word that cropped up in every conference hall: content.

For years now, the mobile industry has been promising whizzy new media services that will transform our humble handsets into entertainment centres. Music downloads, high quality games and live TV are just a few of the services now available on mobile phones.

And the industry needs its customers to start buying these content services. Like the fixed-line telecoms industry, mobile operators are suffering as the price of voice calls falls by about 10 per cent per year.

To compensate, operators are hoping that mobile customers will download other products and boost their data revenues.

Virgin Mobile used 3GSM to unveil a new TV mobile, available this summer in the UK. Vodafone announced a partnership with Google and T-Mobile showed off a new HSDPA device which promises an internet connection faster than many home broadband services.

But fundamental questions remain - do consumers want to pay for media content on their mobile phone and if they do, will the mobile operators get to see the financial benefit?

Arun Sarin, the beleaguered chief executive of Vodafone, said on Tuesday that his company had no intention of becoming a content owner.

"We are a packaging company for content," he said. "We have no intention of becoming a vertically integrated content player. That would require a completely different skill set."

Sarin's counterpart at T-Mobile, Rene Obermann, echoed these comments later that same morning.

For Sarin and Obermann, the value of all this content is in the revenues accrued from the data downloads to the handset.

Unlike Vodafone, which seems to see itself as the shop door to mobile content, T-Mobile has taken the view that its customers should be free to look at whatever content they want without unnecessary direction from the operator.

The group's Web & Walk open internet system allows mobile customers to browse the web on their mobiles in exactly the same way they would use their home PC.

An executive at T-Mobile said: "The walled garden approach to content has failed. Operators will all have to allow customers to freely browse the internet without limiting their options."

But some analysts believe that as voice calling becomes increasingly commoditised, failure to secure content revenues will mean that mobile operators become little more than utility type companies carrying data in their pipes, rather than, for example, gas or water.

New data from M:Metrics, the mobile market research company, shows that advances in technology have led to increases in data usage.

However, despite the adoption of next-generation or 3G networks, which allow higher download speeds, relatively few consumers use their handsets for anything other than making phone calls or sending text (SMS) messages.

According to M:Metrics's data for December, only 7.1 per cent of UK mobile customers used their handsets for purchasing a ring tone in the month. Just 4.1 per cent bought a game using their mobile and only 6.3 per cent used it to send or receive a personal email.

However, the proportion of customers who access content is higher for those on 3G networks than on 2G, indicating that advances in technology do drive content spending to a small extent.

But that does not hide the fact that content is generally still too difficult to access, expensive and of poor quality. Furthermore, no one in the mobile industry has any real idea about whether consumers actually want to access much of this new content or how much they are prepared to pay.

A recent research note from Gartner advised mobile operators to "lower your revenue share expectations for data services as its clear consumers will continue to use voice services more heavily".

Obermann said: "Inevitably, there is a transition between today's world and tomorrow's. Just as the time it takes to deliver the new services and service is underestimated, so is their impact when they are delivered. Mobile broadband will change the way we live, work and communicate even more than mobile voice has done."

There are a few rays of light in the darkness. Wang Jianzhou, the chief executive of China Mobile, told a crowded hall at 3GSM that a popular pop song in the world's most populace country had been downloaded 15m times in a single month.

New HSDPA network technology will bring fast broadband internet speeds to mobile. T-Mobile believes that mobile broadband will remove the need for consumers to pay for a fixed-line broadband connection.

And the global community of 2bn mobile phone users represents an unprecedented new market for advertisers.

One senior industry figure said: "Look at Google and its advertising success story. Mobile operators, if they can capture even a small slice of mobile advertising expenditure, will be onto a winner."

But for now, Western mobile bosses appear to be more concerned about their more immediate prospects.

Ben Wood, the mobile analyst at Gartner said: "Chief executives are more concerned about keeping their jobs and stabilising margins. Its tough out there."

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