Delivering high-speed mobile Internet/intranet services: the role for 3G and public WLAN

SUMMARY

Product overview

The low data speeds of 2.5G technology, along with cost and capacity constraints, have limited its ability to support Internet/intranet services, allowing public WLAN to establish a strong foothold. This report considers how the introduction of 3G now enables mobile operators to offer wide-area high-speed services. Given the lack of attractive small-screen GSM/GPRS/W-CDMA handsets, many European operators have launched 3G with high-speed Internet/intranet services for PC datacards, targeted primarily at business customers. However, they must proceed with extreme caution, as many pitfalls exist.

Mobile operators need to decide whether to pursue services built on 3G alone, or to develop integrated 3G/WLAN offerings. The report studies how mobile operators are adopting different technology approaches, and identifies the best strategies for them to follow. It identifies the most effective implementation and marketing strategies for the different technology approaches, to build on their inherent strengths help to overcome weaknesses. Pricing will be key to achieving profitable levels of revenue per Mbyte and avoiding capacity issues. Through a pricing model and case study analysis, the report identifies optimum pricing approaches. It shows that integrated pricing across WLAN and 3G services can lead to a dramatic reduction in 3G revenue per Mbyte, or in services that are uncompetitive with independent WLAN hotspots.

High speed 3G Internet/intranet access ·displacing WLAN? Answers your key questions:

• What technology and service approaches are currently being followed? What can be learnt from existing services?
• What are the fundamental differences between wide-area cellular and WLAN, and how do these define their optimum role?
• Will 3G displace WLAN hotspot services? Should mobile operators pursue 3G-only services?
• Should mobile operators focus on integrated 3G/WLAN services? If so, should they build their own WLAN hotspot network, or rely on third parties?
• What are the most effective implementation and marketing approaches for the different technology options?
• How should 3G Internet/intranet services be priced to stimulate usage while maintaining revenue per Mbyte? Should usage be charged per minute, per Mbyte or per session? Can WLAN pricing models be applied to 3G?

Who should read this report?

• Mobile operators: identify the best technology solutions and the most effective service implementation and marketing approaches
• Public WLAN service providers: understand the threats and opportunities from 3G Internet access
• Equipment vendors: understand the drivers for investment in 3G to support growth of 3G Internet/intranet access
• Investors: understand the importance of Internet/intranet access in the 3G service portfolio

TABLE OF CONTENTS

0 Summary vii

1 Operators must take care as they launch 3G Internet/intranet services 1

2 3G extends the opportunity to satisfy demand for wireless Internet/intranet access 3

• 2.1 Demand for Internet/intranet access services encompasses a mix of customer requirements 3
• 2.2 2.5G technology constraints limit its potential for Internet/intranet access 5
• 2.3 PWLAN services have proliferated to address the market for high-speed Internet/intranet access in hotspot locations 6
• 2.4 3G can support wide-area high-speed services but mobile operators need to position this proposition carefully 7

3 Characteristics of 3G and PWLAN suit them to different service requirements 11

• 3.1 Different technology approaches by 3G operators show that the choice is not clear cut 11
• 3.2 3G and WLAN technologies have very different characteristics 16
• 3.3 In the future, 3G microcells could mitigate the limitations of wide-area cellular technology 26
• 3.4 Technology strategy must exploit the benefits of 3G while recognising the importance of hotspot locations 28

4 Among the implementation issues for mobile operators, pricing is a particular challenge 32

• 4.1 Operators face challenging implementation issues if they are to achieve success 32
• 4.2 The complexity of wireless Internet/intranet pricing must be modelled to reveal the implications for operators and users 36
• 4.3 Volume-based charging has important benefits, but operators need to ensure control and affordability for end users 39
• 4.4 Time-based and unlimited usage tariffs jeopardise revenue per Mbyte 43
• 4.5 Integrated 3G/PWLAN services may benefit from simple, common pricing but major pitfalls exist 44
• 4.6 Internet/intranet services have an important role in the 3G service mix, if handled with care 47

Actions 48

• Analysys Research: related reports and services 51
• Custom Research: meeting your information needs 53
• Analysys Consulting: strategies for increasing mobile ARPU 54

List of Figures and Tables

• Figure 0.1: Comparison of wide-area revenue per Mbyte and hotspot cost per hour for a variety of customer usage profiles and tariff structures viii
• Figure 2.1: Characteristics of mobile Internet/intranet service usage 4
• Figure 2.2: 3G service decision framework 8
• Figure 2.3: Uncertain revenue per Mbyte and stringent performance requirements for Internet/intranet access delivered by 3G technology 9
• Figure 3.1: Critical questions and challenges in the delivery of a successful, profitable Internet/intranet service 12
• Table 3.1: Examples of 2.5G/3G/PWLAN positioning by mobile operators 13
• Figure 3.2: Examples of PWLAN hotspot pricing for 24-hour vouchers, July 2004 19
• Figure 3.3: Examples of PWLAN hotspot pricing for unlimited monthly usage, July 2004 20
• Figure 3.4: Customer cost per month and operator revenue per Mbyte for 10Mbyte of GPRS data per month from selected Western European operators, July 2004 21
• Figure 3.5: Customer cost per month and operator revenue per Mbyte for 50Mbyte of GPRS data per month from selected Western European operators, July 2004 22
• Figure 3.6: Comparison of GPRS and 3G costs: customer cost per month and operator revenue per Mbyte for provision of 50Mbyte of data per month from selected Western European operators, July 2004 23
• Figure 3.7: Comparison of GPRS and 3G costs: customer cost per month and operator revenue per Mbyte for provision of 100Mbyte of data per month from selected Western European operators, July 2004 23
• Table 3.2: Examples of PWLAN players and their strategies 25
• Figure 3.8: Possible deployment strategy for 3G operators to squeeze PWLAN hotspot competitors 27
• Table 3.3: Comparison of technology strategy options 28
• Figure 4.1: Structure of pricing model for analysis of Internet/intranet tariffs 37
• Figure 4.2: Example service mixes for 50Mbyte and 100Mbyte monthly consumption 40
• Figure 4.3: Revenue per Mbyte of 3G Internet/intranet service tariffs, July 2004 41
• Figure 4.4: Comparison of 3G and PWLAN costs for customers consuming 100Mbyte per month with different usage profiles 42
• Figure 4.5: Comparison of costs per month for Vodafone Germany's 3G and PWLAN customers consuming 10, 50 and 100Mbyte per month with different usage profiles 43
• Table 4.1: Volume- and time-based 3G tariffs from T-Mobile (Germany), July 2004 44
• Figure 4.6: Comparison of wide-area 3G operator revenue per Mbyte and PWLAN hotspot customer cost per hour for existing integrated pricing plans, for a variety of customer usage profiles 46
• Figure 4.7: Comparison of wide-area 3G operator revenue per Mbyte and PWLAN hotspot customer cost per hour for potential integrated pricing plans, for a variety of customer usage profiles 47