July 13, 2009

Why Jordan will (unintentionally) be the needle that will deflate the 3G bubble

Perhaps I made some clunky predictions in the past that proved premature to a certain extent, but the fact of the matter is that whether 3rd generation mobile services are being offered or not, consumer behavior haven’t changed, and thus them benefiting from the advanced features entailed under the umbrella of 3G is and will continue to be limited into certain niches.

Mobile network operators paid and will continue to pay mad sums on acquiring 3G mobile service licenses, frequency spectrum and infrastructure, because they benefit on three different fronts:

Technically, the WCDMA which is the underlying technology adopted in our region and most of the world to offer UMTS services (aka 3rd generation services); WCDMA technology is far more spectrally efficient and with an arguable superior voice quality and data-session fidelity.

It also inherent the advantages from 2nd generation technologies at the switching level, but I wouldn’t want to annoy the two or three readers with the techie details. The bottom line of it is that the biggest beneficiary of adopting 3G are the operators in their black-box that concerns no one but themselves by being able to handle far more calls and traffic than they used to at a much lower cost than in traditional 2G networks such as GSM.

From a commercial perspective, the network operator deploying 3G services will in fact be able to offer new services and value-added services (VAS) that is otherwise unavailable or not feasible to offer over legacy 2G, 2.5G or 2.75G networks, such as video calling, mobile TV streaming and mobile broadband internet connectivity.

And from a marketing and positioning perspective, a 3G network operator can brag about its cutting-edge or state-of-the-art network technology, the operator can position itself as a market leader as opposed to lousy 2G and co operators, and on that particular front, I think Jordan will prove to be an interesting arena because of the very unique composition of our “telecom industry”

To start with, we’re late to the 3G party, in fact too late that some operators around the world already started field testing of even newer technologies in the field of mobile communication that nicely fits into the G series as being labeled 4G technology (something Zain claims to offer through its e-go service, but that’s a totally different story); chiefly a technology called LTE (Long Term Evolution) and LTE+.

Being late to the party have its disadvantages of course (mostly the loss of the assumed image of being a mature and dynamic telecom market), but as with everything, there are advantages, because we have the chance (as a telecom industry) to take a deep breath and contemplate the necessity of following the madness over 3G, unfortunately, I doubt any telecom executive or investor have it what it takes to and come up with something other than what the mainstream opinion dictate!

Add to the mix the early introduction of WiMax service in Jordan compared to neighboring markets before 3G services, though limited to fixed-wireless or nomadic deployments, yet WiMax is still considered as a 3G service, heck… some (including myself) finds it fit to be considered as a 4th generation mobile technology...

Add to the mix the reality of 3G services in neighboring countries such as Egypt and the Gulf. People are still talking the same talk and walking the same walk, with the exception of the unprecedented adoption of USB dongles and modems offering mobile broadband that took the whole industry by surprise. But will we as Jordanian consumers change our behavior and live up to the expectations of 3G patrons who envisage us watching TV on 2 inch screens and video-calling each other while simultaneously checking our email? I think not, we’re too lame to change habits.

Mix the above together and what have you? An intriguing telecom market landscape. What is the novelty of any of the operators being the first to offer 3G services while Zain already proclaim itself as offering 4G services? Isn’t that backwardness? How would any of the operators that will be the first to delve into the 3G waters proclaim leadership if already 4G services is claimed to be offered?

I honestly believe that Jordan with all the issues that hindered the deployment of 3G services will be the arena at which the reality of 3G will be uncovered. I can imagine the operators who will not get the 3G license at start (eventually everyone will have access to 3G license); they will not even bother with the whole fiasco, they will continue offering the services that is and will continue to be the king of communication; voice and SMS, the undisputed bread and butter of the telecom industry.

Though I expect the latter will need to work on keeping their image sharp since they will practically lag behind as a 2G operator, but still, it isn’t a game over, it is far from it. At the end, all the 2G 3G or 4G are all marketing BS, what matters is voice and SMS, even if delivered by pigeons!

From a consumer perspective, acceptance of 3G services wouldn’t be a problem; a recent statistic I read once said that the penetration of 3G-ready handsets in Jordan is almost 35% of the total mobile users, that’s too high for a country that does not run a 3G network yet. But there will be a hurdle which is the compatibility of the old SIM cards with the new 3G networks, depending on the operators of course. Something that hindered the adoption of 3G services with operators such as Saudi’s STC-Jawwal, who had millions of customers who have 3G-ready phones but with old SIMs, yet most can’t be bothered having their SIM changed to benefit from the new services!

Even Mobily (STC's compitator) who had all their SIM supporting 3G networks from day one had an issue of getting their users to setup their 3G handsets and motivate them to start using the new 3G services, given that there was a 6 month separation between launching of their 2G and 3G services.

The usage of services such as video calling will also be limited, even in a country such as Saudi were one would expect a thriving video calling usage because of the nature of the gender-segregated of its society, yet the numbers aren’t impressive, because there are very limited real-world and practical usage of video calling, throughout my limited observations I had; I only came across these:

The first was when I saw a mute person holding the phone against his face and using sign language to talk to the other party. The other was when a colleague of mine called his parents back in France over a video call, international video calling is very that was interesting. And the third is a service that I think will do will which is remote monitoring of kids through customized handsets. Where one can dial into his home mobile phone or fixed handset that is overlooking the kids or his house while away.

As for mobile TV, I still have mixed feelings about it, on the one hand, I can see myself watching a news bulletin or a sports clip and what have you if I was waiting somewhere or stuck in transit. But otherwise I don’t think it will have wider audience, beside the technical hurdles of setting up mobile TV on the handset or the probably confused pricing structure of the service, because it’s not as quiet quantifiable as legacy pay-tv such as Orbit and Showtime.

And I wouldn’t understand why I will even bother paying for mobile TV while I can watch video on demand through a mobile broadband connection and stream content from sites such as Youtube? It will be free (beside the monthly internet charge) and it will be on demand, it can’t be any better.

Finally, and this is where I think I was premature in my predictions earlier, mobile broadband internet is a killer app for sure. If the operators manage to pull it off in terms of network infrastructure readiness, backhaul capacity and coverage along with solid ADSL-like flat-rate known-cap/uncapped offering while making it as vanilla service as possible, meaning no unreasonable restrictions of bandwidth and the applications that will run through it, even if it was things like Skype that can be argued to eat from the operator’s voice revenue.

It will be far more interesting to see the WiMax operators of Jordan lobbying the TRC to deregulate the restrictions over their licenses in terms offering “mobile” broadband access as opposed to the currently allowed “fixed” wireless broadband access, which limits the capability of the customer’s modem or CPE to be used while the person is moving. Despite the fact that Zain (technically Mada Telecom) seems to have violated its FWBA license by offering a USB-dongle that is capable (or advertised as such) of seamless handover from one tower to the other at least that was the experience I had.

To close it with a positive note, the TRC can take a very courageous step by tackling the whole 3G affair from a totally different angle, by actually allowing the operators; all the operators to acquire technology-agnostic frequency spectrum that will allow them to deploy 3G technology while deferring the decision on how to license the unique 3G services itself to a later period.

This way the REAL benefits of deploying 3G networks will be accessible while differentiating it from the 3G services it enables, which the TRC might want to captilize over it through new licensing.

On the other hand, the TRC should deregulate the FWBA license and convert it into a regular mobile license and open up competition to its fullest! Allowing them to offer mobile broadband, and even voice… why not? The market will work its magic and reach equilibrium and will iron out the anomalies while serving the government objectives of increasing ICT penetration and decreasing the “digital divide”.

An interesting take on the same subject by the Telecominteralist can be found here.

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