NEWS: Bigger and brasher but 3GSM 2006 insulates itself from reality

20 February 2006

How will 3GSM 2006 in Barcelona be remembered? Mobile TV put in a strong performance; the airwaves hummed with mobile broadband; and no one needing a fix of FMC went home disappointed. Adrenalin coursed
through the corridors, hospitality suites and conference floors at the Fira exhibition centre.

At times it felt like 1999 all over again.

Even King Juan Carlos of Spain made an appearance. Industry leaders assumed celebrity status (uh-oh...) and singer Craig David waxed lyrical about 3G. The only thing missing from the GSM Association's award ceremony was a prize for the construction firm that erected a single Motorola advert around the outside of a bull ring like a giant soup tin wrapper. There were a third more visitors and stands than at 3GSM's Cannes swansong.

3GSM has always had its share of mutual back slapping but it's now morphing into an enormous operator-infrastructure vendor love-in that the mobile industry's performance and prospects do not necessarily merit.

There are two faces to the mobile communications business in 2006.

On the one hand we have an industry that has sold more phones and subscriptions than anyone could ever have imagined. A phenomenon that is sweeping across the developing world, connecting towns and villages in
some of the world's poorest economies and making a tangible contribution to their economic development. Economists were wrong to coin the phrase "digital divide". They should have been talking about the "mobile
divide." And the number of people on the wrong side of the mobile divide is shrinking by the day - by the minute - as the mobile industry moves effortlessly towards its three billionth customer and finds ways to make
money from people with mobile phone bills of less than $2 per week.

The other face of the mobile sector in 2006 is an industry steeling itself for the onslaught of wireless VOIP and with it, the onset of Internet - as opposed to mobile - economics.

But this was not the mobile industry on show at Barcelona last week.

The 3GSM event has become a wireless technology and gadget show palace, a field of dreams and one big sweet shop for the mobile operator CTO.  You don't find too many people at 3GSM that want to talk about the
business of mobile communications, shareholder value or the aspirations and frustrations of the world's 2.3 billion mobile consumers.  If you did they would paint a different picture of the mobile industry than the one
that was on display beneath the Palace of Montjuic and in bars and restaurants up and down the Ramblas.

The mobile industry assembled at Barcelona was one that has complete faith in its continued growth and prosperity. Not even Nokia's (very) public announcement of new wi-fi devices, Skype's looming presence,
Vodafone's deal with Google or progress in GSM-wi-fi roaming were enough to challenge this view.

When mobile executives get back to their desks this week will they feel quite so confident?

More than 95% of mobile operator revenues come from voice and text. But at 3GSM the focus was music, television and broadband. The designer gadgets that were on show at 3GSM: all-in-one MP3 players, digital cameras, mobile televisions, GPS devices and Internet browsers, have taken the mobile business into the consumer electronics mainstream but away from mobile operators' core business. And yet it is the mobile
operators with their subsidies and distribution channels that make device manufacturers more profitable than brown goods manufacturers and allow them to compete in the consumer electronics space.

When cameras first appeared in mobile phones operators tried to build a picture messaging business around them. That failed but the incorporation of two, five and even seven mega pixel cameras into mobile phones continues apace. Is music going the same way? The mobile phone could still be an iPOD killer but it doesn't mean that people will buy their music over mobile networks. (as per last week's missive, ~90% of most iPODs' contents are ripped CDs.) The same goes for mobile TV.

Operators will argue that it is still too early to judge 3G and that with HSDPA upgrades and speeds of up to 1mbps mobile broadband is just around the corner. But the problem with such an assertion is that every
3GSM World Congress seems to bring the same promise of jam tomorrow. And there's no getting away from the fact that we are well into the second year of WCDMA and are still waiting for the first successful 3G consumer application.

In the past operators could console themselves with the robustness of their basic voice and text businesses. But wi-fi and VOIP have now made even these businesses vulnerable.

The 3GSM World Congress this year was a marvelous shop window for wireless technology and gadgetry. But it would be naive to view it as a barometer for the wellbeing of the mobile industry. If this is what the 3GSM Congress wants to become then it needs to accept the inevitability of IP, Internet economics and new players and value chains.

Mark Newman is Chief Research Officer of Informa Telecoms and Media