Low cost access, not bandwidth, key to 3G future

The 300-page study, entitled Third Generation Wireless (3G): The Continuing Saga, claims that 3G profits will only come from improving access to low bandwidth information and services, at low cost.

The news comes as many mobile companies begin to suffer capacity problems. Last November, for example, silicon.com reported on the network problems which UK operator Orange has been experiencing in London.

The growth of WAP services has also been hindered by slow connections and long download times, which will be improved by always-on GPRS and eventually UMTS 3G networks.

Streaming video, the application which has been widely touted as the 'killer app' for mobile commerce, is a damaging distraction for the industry. Herschel Stosteck, president of the firm, said in a statement: "The relentlessly cited 3G future - 'full motion video' and 'multimedia' - is irrelevant. Indeed, the concept of the killer application is flawed and its pursuit is detrimental to the industry."

Providing low-cost access will only be possible if mobile networks restrict 3G roll-outs, but the infrastructure players are making it hard for them to do this by overselling 3G, Herschel Stosteck associate vice president Jane Zweig told silicon.com.

"Ericsson has all these 3G contracts, and aren't they proud of them? But what are they driving the business to? There are all these crazy drivers in place that aren't based on any business case," she said.

Mobile networks can look forward to five years of losses before they manage to make a profit selling 3G services, says the report. This echoes the findings of an earlier report from Forrester Research, predicting legal battles, bankruptcies and chaos on the bond markets after "Europe's UMTS meltdown."

Herschel Shosteck Associates is a Washington-based wireless research and consulting firm based. Clients include major telcos, investment banks, equipment manufacturers and software developers.