US vs Rest of the World

CodPeace wrote:In the UK at least, the sell off of the licenses by the government to the networks was a major news story when it happened and raised a lot of cash for the exchequer.

Yes, but does that mean that the average person understands what 3G is and what its benefits are, or just that the government sold all those licenses for astronomical prices, and yet years later they are still using phones primarily for SMS and voice just like back in the 2G days, except now the batteries don't last as long?

CodPeace wrote:
That's unfortunate for a lot of people trying to use cellphones in the USA then.

Indeed the biggest complaint about the iPhone in the US is that it is tied to the notoriously unreliable AT&T network. I hear a lot of people saying they'd have an iPhone if only it were available on Verizon (regarded as the best of the 4 major carriers). Verizon starts deploying LTE next year, so perhaps we're just 2 years away from that happening.

CodPeace wrote:
Basically, the iPhone born of an entertainment device is the lightweight end of the market in europe, compared to the RIM devices, more widely accepted by business, and RIM have been outselling iPhone in the UK so far this year. Everybody else buys Nokia, which is why worldwide (worldwide does not mean the USA despite what a lot of Americans believe) Nokia is still kicking ass big time.

True, but if we accept Tomi's argument, that may have more to do with the iPhone's lack of a physical keyboard than anything else. Plus, Nokia sells a lot of cheap phones in emerging markets to get its market share. Neither Apple nor RIM compete in those markets, and I don't see either of them entering them soon since they don't have the economies of scale. In the long run, I don't think it hurts them too much, particularly Apple, which is rarely first-to-market.

The trend I see emerging here in the US from would-be iPhone competitors is the inclusion of both touchscreens and keyboards. It's an attempt at the "best of both worlds," and one I think will continue. That said, I don't see Apple releasing an iPhone with a keypad any time soon, but I wouldn't rule it out entirely, particularly if other companies start eating Apple's lunch at home, which hasn't happened yet. In the US, the Pre seems to have the best shot of doing that (unless Google pulls some tricks out of Android's hat really quickly).

What I don't like are all the bold claims of superiority with little to back them. Yes, complain about our coverage (though your text messages should still come through without much of a problem except maybe out in the sticks), but don't act as if the average European is so sophisticated when it comes to mobile telephony.

Let's face it, SMS isn't particularly sophisticated technology, and had your carriers known 10 years ago what they do now about actual network usage, I doubt they'd have rushed to buy those licenses and build those underutilized 3G networks. If we measure mobile sophistication in term of SMS adoption, yes, the US is a laggard, but if we measure actual usage of data and Internet usage stats, since the release of the iPhone US adoption of mobile Internet has skyrocketed.

http://www.tellabs.com/news/2009/index.cfm/nr/53.cfm

http://dirtyaura.org/blog/2009/01/05/worldwide-mobile-internet-usage-stats-nokia-biggest-but-iphone-growing-fast/

Apple makes up a disproportionately large percentage of mobile internet usage while Nokia is disproportionately small. I would not be surprised one bit to see similar trends in terms of media downloads and, with Apple's new partnership with Tom-Tom, GPS usage as well. Again, they are not first to market by any stretch, but they are striving for ease-of-use, and it seems to me they are one of the few companies who are selling smartphones that are actually being used as such by most of their buyers. It reminds me of the Apple commercials from the early 1990s where they said the most powerful computers were the ones people actually used. I see the same thing happening with phones. It's easy to ship phones with lots of technology, but it is harder to get people to actually use that technology.

If this blog is accurate, iPhone's sales woes outside the US may have more to do with carrier ties and contract requirement than with the device itself.

http://www.iphonefootprint.com/2009/02/countries-where-iphone-sales-failed-to-hit-the-expected-mark/

Japan is a tough nut to crack. Even Nokia has pulled out. In the UK, I was surprised when Apple partnered with O2. When I was there it always seemed Vodafone and Orange had the best networks and T-Mobile UK and O2 were the laggards, though perhaps that has changed.

Anyway, I am an Apple fan, but don't actually have an iPhone except for an unlocked original model I picked up 2 years ago. I am a fan of the N95 and am looking forward to the N97. However, I don't see Nokia getting much traction in the US since, despite lip service to the contrary, they just don't seem that serious about the US market. Most importantly, apart from the e71x, no Nokia smartphone has gotten carrier backing. Like it or not, it's important to the US market to have the blessing of a carrier or two. Even Apple went with a carrier when it released the iPhone (in spite of its loyal fan base). RIM has been hugely successful at getting carrier deals despite its small size. Considering that T-Mobile has been floundering in the US market, they ought to be open to deal for a decent product. AT&T has iPhone and BB Bold, Sprint has the Pre. Verizon has its network (not to mention the BB Storm). T-Mobile has only the lackluster G1 and its lower prices (and smaller network). C'mon Nokia, strike a deal already.

Secondly, Nokia has been caught off guard by the rise of the touchscreen. True, their "base" is in non-touch phones, but HTC, LG, Samsung, and many others got decent capacitive touch screens to the US market in relatively short order. N97 should have been a grand slam given the 2-year period Nokia had to develop it. Instead, it looks like a solid single or double. Not bad, but I can't see very many people other than technology fans shelling out $700 for it (it isn't like we get lower monthly rate because we bring our own phones). Maemo might have have been a better platform for getting a good product out more quickly, but apart from the bungled attempt to bundle WiMAX (Sprint was nowhere near ready with their rollout when the N800 came out), and the still-rumored N900, I haven't heard much on this front. S60 is a bit long in the tooth, and as Apple has shown, with a decent SDK and App Store, it is possible to build a smartphone app market from scratch.

Finally, Nokia tends to orphan its products here. How hard would it be to release firmware updates for those of us who do shell out hundreds for unlocked phones in the US? Latin America gets these updates on a timely basis and uses the same hardware/frequencies, so it shouldn't be that difficult. Yet we wait weeks or months, if we get the updates at all. Also, why doesn't Nokia Maps have traffic data for the US? Google Maps can give me traffic data. Nokia owns Navteq, which is based in the US. Exactly why should I pay $120/year to use Nokia Maps when I can get better service through a carrier or a standalone application like Garmin XT or Tom-Tom?

Excellent article. I must say that as a Canadian, I agree that the carrier is the greatest bottle-neck. Carriers here charge for services that the rest of te world gets for free and their prohibitively high prices are holding back subscription rates. What is even worse is their incessant need to "cripple" phones to remove features that would greatly enhance the consumer experience. They do things like locking the onbaord GPS unit, blocking mp3s and forcing you to use their music store for ringtones and songs, they block certain applications and generally hinder the entire phone experience which makes people desire only simple phones because the more advanced ones would add too many dollars to their monthyly bills. This is where the iPhone is truly a game changer, Apple does not allow any customizations (crippling) to their phones and as a consumer it is the onyl real choice for an excellent smartphone subsidized by the carrier.

Hi all,

Very good, insigtful and wide-reaching discussion here at All About Symbian. A delight to read the back-and-forth. I wanted to touch on the idea by someone over there on Page 2, about free phones in Europe. Yes, in some markets you get free phones and they can be very high-end phones too (for free, if you qualify, ie if your phone bill is large enough). Note that even in those markets, the trend in Europe is to prepaid accounts (pay-as-you-go) and for prepaid there are no free phones, or certainly, no free smartphones. Even if daddy has a big phone bill and gets a Nokia N96, his kids won't qualify for it..

But please note, the world is roughly speaking split into two, about half of the countries (less than half today) offer meaningful subsidies (ie some phones at half price or less) and the US falls into this group, as does the UK. But a little more than half of the world has no subsidies. Most developing world subscribers do not get subsidies, but also many countries that once had them, have moved beyond subsidies and today have outlawed subsidies such as Israel and South Korea. Some countries have been totally against subsidies like Italy and Belgium and Finland weirdly was the rare country where subsidies were illegal in 2G, but they introduced them for 3G.

My point - Europe is not all free phones for all. That is not the reason why smartphones have taken off in Europe before the US, and why consumers have them. If you didn't know this, and only visited the UK and saw nice N-series and SonyEricsson Cybershot and Walkman phones and Samsung, LG top-end phones (and Blackberries) offered for "zero" cost (with 2 year contract and typically something like a 50 UK pound monthly contract) - its easy to think that is how all of Europe is, and therefore Europeans have "an unfair advantage" to getting smartphones. It would totally not explain countries like Italy and Belgium where there are, and never have been, subsidies..

Tomi Ahonen 😊

About those 3G arguments and SMS

A few years ago practically all 3G phones were smartphones (but not all smartphones were 3G, ie iPhone, Blackberry..) There is a lot of argument that can therefore be attributed to one, which perhaps belongs to the other (or perhaps to both).

SMS use and 3G use, there is no link. 3G data use grew strongly in the US even as SMS was severely lagging the rest of the industrialized world. Similarly South Korea had a rapid spike of "mobile internet" content on 3G, as SMS was taking off. There also are many countries that have had very high usage of SMS that did not then translate into leadership in 3G, take Norway for example, has had for years the highest European rates of SMS use. They now do have also highest MMS use, but are not in the lead for 3G, which is Italy and Austria.

The two (SMS and 3G) are complementary service platforms and their national adoption is most dependent on pricing, interconnectivity, availability on all networks; and killer apps. TV-voting is a killer app for SMS, and countries where this was launched early have been big leaders in SMS. Consider American Idol and how much it has taught Americans to send texts. Similarly 3G has its first killer app now, mobile social networking (consider Mobage Town out of Japan, Flirtomatic out of the UK, Istmy out of Germany, Cyworld out of South Korea and Habbo Hotel out of Finland). The video services consumed on 3G are not "videocalls" is one-person-to-one-person communciations; it is one-to-many video, ie user-generated video, ie social networking on mobile, from SeeMeTV in the UK to MeTV in Singapore to Qik in the USA.

About 3G licenses. That was a total fallacy, sorry all who brought it up. Most 3G licences around the world were given out for free (Finland and Japan the first 2 countries to award 3G licenses did it this way). Yes its true that a total of about 100 billion dollars was spent on 3G licenses, and that is an enormous number, but note, over half of that sum was spent in only 2 countries, the UK and Germany. France, Italy, Spain, Poland - European countries of similar geographic size, similar population size and similar economic size - did not award anything near those amounts in the biggest 3G licenses, the next biggest 3G license fees after the UK and Germany were in the Netherlands.

So, if 3G licensin was "devastating" to mobile telecoms, then the operators/carriers in the UK and Germany should have gone bankrupt and returned those 3G licenses to their governments. 11 licenses were awarded in total in those two countries, 10 of the carriers launched 3G and none have complained and none have returned their license.

The most difficult business case, so said all analysts in 2000, was that of the "greenfield operator" ie the carrier/operator who started from scratch, with nothing, to fight against 4 established incumbent carriers/operators in those two markets where the national penetration rate was already about 80% at the start of the decade (US level of today). So if anyone went bankrupt, it would be these "greenfield" operators. Just a few weeks ago Li Ka-Shing, the chairman of the Hong Kong based Hutchison Whampoa group, which owns the Three licenses for 3G in the UK, Italy, Austria, Sweden etc, said their goup 3G operations were going to be cash-flow positive this year.

So even the MOST DIFFICULT business position in 3G, in a country (UK) where 3G licenses were largest, is now saying they will see profits.

I understand that many who do not understand the 3G business case, have been repeating that notion that 3G licenses somehow hurt this industry. The reality is, and I wrote so in my second book M-Profits and no real experts disputed my analysis and now all the facts prove me to have been right - that 3G licenses did not damage this industry. Even in the two countries, where the licenses were far bigger than any others, UK and Germany, the 3G industry is very healthy and making profits.

For comparison, Austria - Europe's most competitive market for 3G - the incumbents said they'd be profitable in less than two years from launch. And they too awarded their 3G licenses by auction.

Someone else said that smartphones (whether 3G or not) are primarily used for SMS in Europe. This is also very true. But please note, that is not a fault of 3G business success. SMS was an integral part of the 3G business case. MMS picture messaging (also does not need 3G) was a critical component of 3G business cases. Mobile advertising was a major part of the 3G business case, and over 80% of all mobile advertising today is based on messaging (SMS or MMS). VOICE calls were a critical part of the 3G business case. So if someone says to you that 3G is failing because we don't do videocalls, that is revisional history. Go back to the UMTS Forum Report number 9 from 2000, and see, the most referenced 3G business case had videcalls at a couple of percent of total revenue, but messaging and advertising delivering much more; and voice delivering over half of all revenues - exaclty like we have today.

I am not saying, it is not true, that 3G today is not video calls. Sorry, that was clumsy. I agree, videocalls are not a meaningful part of videocalls on 3G, and this holds true for all networks, all technologies, all countries including Japan and South Korea where 3G is more than 80% of all subscrptions. But the point is, that videocalls were never supposed to be a major part. I can show you studies from Ericsson, Motorola, Nortel, Nokia, Siemens, UMTS Forum, Orange, Vodafone, T-Mobile, etc from 2001 - none had videocalls as a major revenue or traffic component for 3G, not one of them offering a number of 5% or more for videocalls by 2001. This was before any 3G network had launched commercially.

The number that we DID suggest back then, was video services (not video calls). The video services include now services like YouTube. Video services like Qik. Video services like SeeMeTV. And video blogs etc. South Korea's Cyworld gets more video uploads (in a country of 48 million people only) than YouTube gets worldwide. Orange (France Telecom and its mobile arm on 3G) says that more than half of their mobile data traffic on their 3G network, is video content, French users video blogging and sharing videos.

Just a few details and facts here to add to your great discussion. Can't wait to read more..

Tomi Ahonen 😊

Tomi,

What was the point of 3G, then, if the main use was expected to be SMS, which works perfectly fine on 2G? It uses almost zero bandwidth and is a pure profit center for the carrier, unlike voice which is more expensive to operate. Given that, I'd suggest that the American consumer was perhaps unwittingly savvier (if that makes sense) in resisting SMS for so long. Why pay 10-20 cents per message or pay for a large messaging allowance if I get 5000 weekend/night voice minutes with even a basic plan? I think the carriers lack of a coherent business model is much to blame here, since they encouraged more voice use (Nextel built an entire network around push-to-talk).

Anyway, the switch to 3G brought modestly improved voice quality, but really no improvement to SMS. It also brought reduced battery life as a major cost. In the case of GSM, it got rid of the annoying buzz that most Americans were oblivious to (since CDMA isn't affected by it). Beyond that, what were the benefits? My guess is video services had to be a part of it. But even here, most 3G phones aren't that great at providing such content. Again, in some respects it took Apple to prod the market along, and Americans perhaps got the benefit of "last mover advantage" in this respect, as even the 2G iPhone had a well-designed built-in application for accessing video.

On a side note, if anything, Qualcomm and US companies were among the first (with the Koreans and Japanese) to realize the future lay in CDMA and not TDMA. I find it interesting that W-CDMA started out as an attempt to work around Qualcomm's patents (unsuccessfully). Perhaps had the EU bitten the bullet and acknowledged Qualcomm got their first, they could have worked to ensure interoperability between CDMA2000 and GSM. By going it alone, they probably stifled 3G take-up in Europe.

Regarding iPhone 1.0's slow pickup in Europe, I'd point to the lack of EDGE in most mobile networks. Most EU carriers skipped EDGE and went straight to UMTS. However, EDGE and UMTS pre-HSDPA offer fairly similar download speeds, and my personal experiences in Europe in 2007 were that HSDPA was just starting to become more widespread. In any case, given that iPhone 1.0 was more of a technical exercise (and a precursor to the better-equipped iPhone 3G and now 3G S), I think Apple was primarily interested in capturing American "mind share" with that model, knowing that they'd soon have a more capable model ready.

This article remminds me a very good another one wrotted by Michael Mace at 2006/09!!

Michael Mace was an older guy from Palm (Chief Competitive Office and VP of Production Planning at Palm, VP of Strategic Marketing at PalmSource) and Apple (Director of Mac Platform Marketing)

http://mobileopportunity.blogspot.com/2006/09/european-vs-american-mobile-phone-use.html

He also marks other points of view about American/European culture when we are talking about telecomunications in general!!

Hi KPO'M (I hope I remembered your name correctly..)

Good question on why 3G if we can do it all, voice calls and SMS on 2G. Very good point. The big reason is congestion. The 2G networks were originally designed for a total national penetration rate ceiling of 20% mobile phones per capita. The 2G networks were then expanded in capacity due to added density of cells (splitting cells) ie placing base stations and antenna towers more close to each other - and through capacity-increasing technologies, 2.5G, 2.8G etc.

The 3G networks were vitally needed for this decade into the main congested cities of the industrialized world, ie Frankfurt, Paris, London, Tokyo, Singapore, Hong Kong.

The second reason was a growth expectation in service evolution (expansion of the capabilities of phones) assuming we would consume more "services" on our phones than just communcation of voice and SMS. Remember when first networks launched 3G in 2001, we did not have MMS picture messaging, we did not have any MP3-playing musicphones and most networks did not even offer WAP based very basic "mobile internet" services. It may seem "obvious" to us today that we can download a game or a song or watch a video on YouTube or click onto the CNN page or Weather Channel etc, or do a Google search on our phone today - none of those were commercially launched in the time before 3G networks.

While the industry did not know exactly what it would be, that we would consume and pay for in 3G, it was very strongly believed, that very soon in this decade, we would start to consume music, gaming, news, advertising etc on our phones - and share more than SMS, we'd do "real email" and picture messages and share videos etc.

All these assumptions have proven reasonably correct. The total usage is "small" only in the context of mobile telecoms. Note that compared to the internet, the mobile data is a giant. Apple's iTunes for iPods delivers under 2 billion dollars worth of music sales worldwide. Its considered a huge success. On mobile just the basic ringing tone business (also digital music sold on a per-song basis) is worth 5 billion dollars annually, worldwide. And thats only about half of all formats of music we have on the phone including full track MP3 downloads, ringback tones, mobile karaoke, welcoming tones, background tunes, mood music etc etc etc. Ten billion dollars worth of music content sold annually to phones.

But as the total size of mobile telecoms services (voice and data) is about 800 billion dollars, that music contribution is obviuously only worth 1.2 percent. On the internet it would be a huge service category, but on mobile the industry itself is such a giant, that it hides this kind of success. SMS text messaging at 100 billion dollars alone is bigger than all internet content and all internet advertising, put together.

Last point - we expected that there would emerge "killer applications" for 3G, just like voice calls were the killer app for the first 1G networks and SMS was the killer app for 2G. We just could not guess what those would be (back in 2000). Now we do have the first killer app for 3G, and it is mobile social networking. The industry thought-leaders who specialize in mobile data services, are coming to a near-consensus on this, that social networking for mobile is a true killer app and will help fuel the bigger new content and services opportunities into the 3G space.

These 3G networks are designed to run approx half data and half voice. So if the current assumptions hold true, that our communication needs will remain about at the levels they are, but shift to mostly mobile (increasing voice telecoms traffic) and SMS usage levels increase; but then during the next decade close to half of the traffic on the networks will be data, then 3G will not be enough and we will need those 4G networks that are now on the drawing boards (and I'm talking obviously of real 4G ie the fourth generation of cellular telecoms systems, as ratified by the ITU, not the propaganda by the WiMax lobby that they have 4G now..)

I hope this helped a bit about background to why 3G. Note it also helps explain why in relatively high mobile data usage markets like China and Russia, there had not been a pressing need for 3G yet, because the overall adoption rate of mobile had been modest early in this decade when the first countries launched 3G. Today obviously Russia and China (and India etc) are also rolling out 3G.

Tomi Ahonen 😊