Alcatel warning on 3G migration

Jimmy Lukito, the marketing manager at Alcatel's Asia-Pacific 3G division, has warned that 3G mobile operators face more than...

Jimmy Lukito, the marketing manager at Alcatel's Asia-Pacific 3G division, has warned that 3G mobile operators face more than just high spectrum licence fees and under-performing handsets.

Speaking at the IDC Asia-Pacific Telecoms forum, Lukito said: "Operators must migrate to 3G in a way that fits the business model they have adopted. 3G is a much more complex environment to design for than 2G, as there are many different types of traffic."

The second generation (2G) of mobile phone services, of which the most widely used is Global System for Mobile Communications (GSM), mainly carry voice traffic. This makes the 2G business model simple: the value chain consists of network operators and handsets.

With 3G's ability to deliver a wide range of services, there are many more elements in the value chain, including content providers, value-added aggregators and service providers.

"Users want continuity of coverage and services, while operators want to preserve their existing investment, optimise operating costs and have maximum flexibility in applications development." Lukito said, adding that migration strategies needed to depend on where an operator is currently positioned.

With an existing network, the incumbent operator can afford to be aggressive in rolling out 3G. Their existing infrastructure and 2G user base can help them roll out a viable 3G service faster and at a lower capital cost than newcomers. According to Lukito, such companies can build 3G networks for between 400 euros (£252) and 1,100 euros (£694) per subscriber.

Newcomers who have bought 3G spectrum must expect to pay between 1,200 euros and 1,500 euros per subscriber to build infrastructure, but they are free from the constraints of managing 2G legacy systems and can therefore introduce advanced services widely, said Lukito.

A third group of operators - those who do not have 3G licences - are better off sticking with General Packet Radio Service (GPRS) and Enhanced Data for GSM Evolution (EDGE) technology, which can match 3G's first-phase speed of 384Kbps. These operators will suffer very little network disruption and can pick up subscribers for between 50 euros and 160 euros each, but risk losing out on high-end subscribers who want the advanced services promised for 3G.

3G subscribers will make up 9% of the total number of mobile subscribers by 2005 and 27% by 2008, Lukito predicted. That will still be considerably lower than the market penetration for GSM, which will still be used by 50% of subscribers.

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