Status of 3G - As Seen in September 2002

Japan's J-Phone (Bullish)
Despite DoCoMo's rocky 3G launch last year, Japan's J-Phone today said it is on track to launch its 3G service in December. J-Phone's Sha-Mail, a photo messaging service, has met with amazing success in the last year, making J-Phone optimistic that it can also attract 3G subscribers

Also on the optimist's front, Hong Kong-based conglomerate Hutchison Whompoa said it plans to launch its 3G service in the U.K. and Italy in October. The company recently said it plans to sign up one million subscribers in both of those markets by the end of 2003 -- a target lower than the 1.5 million goal it had previously cited. The rollout of 3G services has been plagued by delays in Europe with cash-strapped carriers choosing to focus on repairing their battered balance sheets after spending billions on 3G licenses.

DoCoMo The Japanese Leader and Europeans - Lanuishing
Despite J-Phone's and Hutchison's optimism, NTT DoCoMo's 3G service, FOMA -- the world's first commercial 3G service -- is still languishing. The carrier recently said it would probably lower its subscriber target to 1.38 million by next March due to slow subscriber growth. Japanese carriers continue to hope that 3G services will become the new profit driver as the conventional mobile phone market reaches saturation. Most insiders blame FOMA's lack of success on the network's limited service areas and its relatively expensive handsets, which are hampered by a short battery life.

Europe's investment in 3G has been expensive, with the casualties pilling up every month (the number of 3G license holders who have backed away from offering 3G data service has been staggering). On Aug. 20, Royal KPN added the gloomy atmosphere by writing down $8.25 billion in non-Dutch assets and 3G licenses, further proof that such investments won't provide their expected returns. Despite all the worry, though, the some numbers look promising. The first 3G handset from Nokia is set to be announced Sept. 26, though large volumes won't be available until 2003. According to WestLB Panmure, Europe's carriers will order almost $1.5 billion in 3G equipment this year and $5.5 billion in 2003.

For more information: www.businessweek.com

MobileInfo Comments and Advisory:  As these reports show, 3G investment in Europe and Japan is a disappointment to those who projected quick adoption and short payback period. While DoCoMo's i-mode was an instant success in comparison, 3G will happen - slowly, gradually, albeit with twists and turns but surely. Meanwhile, carriers and their suppliers (Nokia, Motorola, Ericsson and others) should find ways to live wireless LANs and create hybrid 3G networks. 

We must also remind ourselves that major changes in infrastructure based on emerging technology never provide instant returns. You do these investments for the long haul. Every balloon must burst when there is too much air in it or if the air outside is too thin.