Price could boost 3G phone sales

Christmas could be a crucial turning point for 3G (third-generation) high-speed mobile phone services in Europe.

Christmas could be a crucial turning point for 3G high-speed mobile phone services in Europe.

Around this time last year, only a handful of 3G operators offered commercial service. This year, however, many new 3G networks are online, handsets are noticeably smaller and battery life has improved.

Several European 3G operators, including Orange, Vodafone and Hutchison 3G UK, which operates under the 3 brand, are offering highly subsidised handsets and bundled services consisting of cheap voice minutes, text messages and 3G-specific applications, such as video phone calls.

UK subsidiary Orange Personal Communications Services unveiled new 3G handsets and services targeting British consumers.

One of the packages is a £30 12-month contract that offers a range of phones from the Sanyo's S750 for free to the LG Electronic's U8150 for nearly £120. Included in that package are 200 free voice minutes per month during business hours and another 200 minutes in the evening, as well as 60 free video telephony minutes, 50Mbytes of downloaded data and 1,000 evening text messages.

"We offer similarly attractive packages for GSM service but these, of course, are without video telephony and high-speed internet downloads," an Orange spokeswoman said.

A similar package was also launched by Orange's French subsidiary.

Last month, rival Vodafone, Europe's largest mobile phone company, launched its 3G consumer offering.

In the UK,  the company is offering two basic 3G packages. The £40 a month bundle offers 500 minutes of voice calls, 100 text messages, 50 minutes of video calls and 60p for sending each prerecorded video message. The £60-a-month bundle increases those offers, for example, with 1,000 minutes of voice calls.

Vodafone is also offering a prepay option to encourage first-time users to the service. In addition, the company is charging 3G users only for downloaded content and not - as is the case with GPRS users - for the time it takes to find and later download the content.

Hutchison 3G, Europe's first commercial 3G operator,  has been aggressive on the price front from the very start.

"The operator has some very attractive packages for users seeking cheap voice minutes, as well as all the other 3G services," said Neil Mawston, senior analyst with Strategy Analytics. "Handsets are being subsidised dirt cheap, and the prepaid packages offer good value."

New 3G technology allows operators to provide voice service more cost efficiently, according to Mawston. "If the recent 3G announcements are any indication, operators appear willing to pass on savings to consumers," he said.

Voice is - and will remain - the killer application in 3G, as it has been all along in second-generation GSM, according to Mawston.

The big difference between the two voice services is that 3G telephony could become a whole lot cheaper as operators use it to lure consumers to other 3G premium services, he said.

For sure, hurdles still line the way to huge take-up of new 3G services, such as video telephony. "

For a start, you need someone on the other end with a video telephone to take advantage of the new service," said Carrie Pawsey, wireless analyst at Ovum. "More 3G phones in the market will certainly help create demand for this service."

Users can expect 3G phones sizes and batteries similar to those of GSM phones by the second half of 2005, said Mawston.

John Blau writes for IDG News Service

Read more on IT strategy