|3G Handset Shortage Looms|
By Ray Hegarty, Oct 17 2000
(((Recall Tero's explanation of NOK's low end 2G handset "strategy" while reading. What a comedy! Article is from "The Feature" - NOK's wireless site.)))
With the first UMTS networks due to be launched commercially in late 2001, the dominant handheld terminal manufacturers – Nokia, Motorola and Ericsson – are struggling to meet the deadline with third-generation terminals.
Without 3G terminals - a category that includes wireless devices with functionality ranging from that of phones and PDAs to digital cameras and MP3 players - the majority of future applications and services based on the universal mobile telecommunications system will be meaningless. Japan is expected to become the first country in the world with commercial 3G services at the end of next year.
The head of 3G business consultancy at Nokia's networks division, Tomi Ahonen, speaking at the UMTS Congress in Barcelona, admitted Nokia's networks division had already signed agreements with competing handset manufacturers as part of the process of securing contracts with 3G licensees. Ahonen wouldn't say which companies Nokia has signed arrangements with, but the names Matsushita, Samsung and Sony are just three that immediately come to mind.
The division's actions suggest that even within Nokia there is doubt that the company can provide enough 3G handsets in time. The Nokia networks division normally provides the infrastructure, such as radio base stations and access to the air interface, that will carry 3G-enabled services, while its sister division, Nokia mobile phones, is charged with delivering handheld 3G devices.
The dominant GSM handset manufacturers, Nokia, Ericsson and Motorola, are struggling to assure successful 3G license winners that they are capable of delivering enough 3G-capable handsets to ensure that these operators can get off to a running start with their new services. Meanwhile, companies like Sony, Matsushita and Samsung are busy showing off 3G prototype handsets. The 3G license winners will rely on increased revenues from services based on data to pay for the hefty license fees they've had to shell out across Europe.
However, Miguel Menchen Alumbreros, general director of wireless Internet at Spanish 3G licensee Telefonica Moviles, complained during a keynote presentation in Barcelona that there was still no concrete word from manufacturers on exactly when UMTS terminals will be ready for commercial deployment.
Specialist research firm Strategy Analytics estimates that wireless Web device sales will be worth $73bn by the year 2005. The market for small wireless-capable devices - including handheld computers, basic microbrowser phones, smartphones and next-generation multimedia phones - is currently worth $10bn, according to Strategy Analytics. In Europe, the personal device is already a part of everyday life: Mobile handset penetration rates are over 50% in several countries, with many others approaching 70%. In a market like that, the success of UMTS will hinge on the release of a sufficient volume of terminals at a competitive price.
UMTS devices have the potential to become the trusted personal device spanning both the corporate and consumer markets. But 3G is fundamentally about applications, and getting these applications into customers' hands requires 3G-enabled devices, making their availability even more decisive. The steady regional development of 3G networks will give regional handset suppliers the opportunity to close the gap with today's top makers of GSM phones. Mitsubishi, Matsushita, NEC, Sony, Toshiba, Lucent, Siemens, Kyocera and Alcatel all expect to offer 3G handsets.
Nokia, Ericsson and Motorola have already been heavily criticized for their inability to deliver enough WAP handsets when operators in Europe began to roll out services this year. Forthcoming GPRS network services, due to start rolling out in the summer of next year, are also expected to suffer from a lack of enabled handsets. It is because of the handset shortage, Alumbreros explained, that Telefonica has not yet deployed GPRS networks. The holdup in terminals compromises the operator's strategy to smoothly evolve to UMTS, he said.
Patience with the traditional handset manufacturers is beginning to run out. Stories of prototype handsets overheating, component shortages and the immaturity of 3G standards have added to operators' concerns. A strong position in WAP and GPRS is considered by most observers as an essential stepping-stone to a successful 3G service. The mind-share and experience gained by delivering packet-based services via GPRS today is expected to prove invaluable to the development of future 3G services.
Telefonica's obvious frustration carries weight in the industry. It is the market leader in Spain and has operations in 12 countries, including the nascent Latin American market. To add to its 3G interests in Germany, Alumbreros confirmed, the operator plans to bid in Italy, France, Austria and Switzerland.
Doug Lowther, vice president for wireless Internet strategic marketing at Nortel Networks, said customers had told the company that both Nokia and Ericsson have been talking to other terminal manufacturers about providing 3G devices for commercial rollout of its 3G supplied networks. Nortel has secured 3G terminal deals with Panasonic, Sagem, RIM and Mitsubishi among others. Nortel is the preferred 3G infrastructure supplier for UK-based BT Cellnet and Spain's Airtel.