Friday, July 16, 2004

NEWS ANALYSIS: Euro operators FOMAing at mouth

by Mark Mayne on 03 October 2001 17:05:00 GMT

Finally, this week has seen Japanese telco NTT DoCoMo launching its FOMA 3G service. Although the service has been delayed several times, the company stuck to its last deadline, and now claims that it shifted a fifth of all of its 3G handsets, 4000 units, on launch day. Originally scheduled for May 30, but delayed to Oct 1 because of software problems, FOMA seems to have made something of a splash, both locally and internationally.

The UK’s similar effort, BT’s Manx Telecom project, had already prepared the world for delays, as it was supposed to launch back in May 2001. Stephen Griffiths, Wonderwerx founder, said: “NTT DoCoMo has been very careful here – they have scaled back expectations to keep the network usage low. It must also be remembered that NTT owns the whole proposition, from handset distribution to network level – this is not the case elsewhere. Although European operators are looking at this as a test case, the only thing really being tested from our perspective is the technology – the revenue models and markets are completely different.”

He continued: “A huge issue is the migration of users away from I-mode to FOMA – NTT needs compelling new applications, and the video element is not enough on it’s own – it simply augments the other messaging (instant, email, text) available. Also, for NTT to gain a foothold elsewhere, it will need to be so early to market that it can recreate the same market conditions – this is why some are saying that NTT has jumped the gun. Maybe they have, but there’s not really any other option for them!” One of 3Gs greatest attractions was supposed to be the relay of video clips and music downloads – FOMA currently has neither, users have been told to wait until next spring.

Also this week, Vivendi Universal refused to make its last 3G payment, and then subsequently climbed down, finally coughing up. Although the problem is still with 3G, this represents a very different market segment, and once again shows the problems Europe faces. Griffiths: “This is a very intriguing situation – it could be said that Vivendi is in a good bargaining position, as it represents half of France’s 3G operators, but then the government knows that any reduction in price will bring the other two bidders running back. It must be remembered that France Telecom (Orange) has paid for two European licences, but is part owned by the French state, so can hardly complain!”

Several months ago there were rumours in the UK, as BT disclosed the full size of its debt, that the UK government would step in to help. This was categorically denied at the time, but many industry observers pointed out that tax incentives were no doubt being offered backstage. Griffiths agreed: “There must be tax breaks around the corner, if not right now – none of the European governments can accept one of their major telecoms providers going bankrupt! That said, nobody held a gun to the operators heads – they had business cases that would have allowed them to spend more on getting the licences if necessary, and would have gone higher.”

Again, to draw parallels, it seems odd that ‘market leading’ Europe is so far behind Japan here. As we bicker and attempt to extricate our operators from the mire, Japan is up and running. Even the Manx 3G flagship (ironically to be found at http://www.worldsfirst3g.com) has run aground – launch is now scheduled for “later this year” according to a spokesperson. It seems Europe has lost its teeth, or at least its taste, for 3G at the moment.

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