May 18, 2007 / 6:15 AM / 10 years ago

3G operators scrabble for killer apps

<p>Mobile phones are seen at the 3GSM World Congress in Barcelona, Spain February 16, 2006. Mobile operators around the globe are busy rolling out 3G services and upgrades, dreaming of a day when users casually make video calls and download movies, allowing companies to reap several times more revenue per phone.Albert Gea</p>

SEOUL (Reuters) - Mobile operators around the globe are busy rolling out 3G services and upgrades, dreaming of a day when users casually make video calls and download movies, allowing companies to reap several times more revenue per phone.

But that rosy future remains elusive. Despite the billions of dollars spent on new networks and marketing, operators are still struggling to find the new features customers cannot live without that will finally make 3G pay.

"I've got a 3G phone but I don't use '3G features'," said Kang Hatan, a research fellow in a lab in Seoul. "Video calls are too expensive and it's hard to find time to watch mobile TV."

Analysts say many operators have neglected the development of content and services that their customers want in their headlong pursuit of new technology. Meanwhile users are still mostly just using their phones to make voice calls and send text messages.

"As of now, it's difficult to pinpoint the killer service for 3G networks," said Lee Bang-hyung, Chief Operating Officer at SK Telecom Co Ltd. (017670.KS).

Peter Erskine, the chief executive and chairman of Telefonica (TEF.MC) O2 Europe, agreed: "Text is the big standout."

As well as the video and music downloads they hope will attract younger users, operators are looking at new features such as video conferencing and localised mobile search services that work with the GPS navigators now fitted in many high-end phones.

"I think that's going to change things, location services," said Barry Diller, chief executive and chairman of IAC/InteractiveCorp IACI.O.

"The idea you can do this is going to make the arc of adoption of people using (mobile phones) for multiple things and particularly for search."

SK's Lee cited financial settlements and upgraded roaming services among candidates for must-have applications.

Next Generation

Operators in developed Asian markets have been quicker to roll out 3G than their counterparts in Europe and the United States.

More than 74 percent of Japan's 97 million-plus subscribers were signed up for 3G services at the end of April. South Korea also expects a boost in 3G users as the leading operators launch upgraded 3G networks this year.

And operators everywhere are shifting from voice-centric 2G services to 3G at a growing pace.

According to the Global mobile Suppliers Association, the number of subscribers to W-CDMA networks, the 3G upgrade of the most popular GSM standard, is nearly 100 million worldwide after growing by more than 4 million a month on average in 2006.

Top handset makers are in a race to offer low-priced 3G phones equipped with a range of functions such as high-speed connectivity and video calls.

LG Electronics Inc.'s (066570.KS) low-cost 3G phones and latest devices Hewlett-Packard Co. (HPQ.N) unveiled in China are among the examples.

Todd Bradley, executive vice president at HP's PC division, said rather than focusing on pricey marketing to spur 3G uptake, firms should concentrate on migrating bread-and-butter office applications onto next-generation devices.

"There are lots of things you can solve with tech, but the usage model is challenging -- as we sit here today, the killer app for these products is email," he said on the sidelines of a recent product launch event.

Rivals Emerge

Operators saw margins squeezed and profits hurt as they spent heavily to build new 3G networks and market new services. Now they face a looming threat from rival technologies.

Mobile WiMAX, in which U.S. operator Sprint Nextel (S.N) will invest $3 billion by 2008, claims to provide cheaper and faster services than 3G by blanketing entire cities with broadband-speed wireless connections.

China, which has yet to approve 3G services, has invested in trials for high-speed WiMax technology, according to China Business News. South Korea's KT Corp. (030200.KS) launched a commercial mobile WiMAX service in the capital Seoul last month.

"Wibro has strength in upstreaming," said Yoon Jong-lok, KT's senior executive vice president, referring to its mobile WiMAX service. "Every day we get more than 150 new subscribers ... for Seoul area, Wibro is a cheaper option."

Operators are also holding talks to set a common standard for even faster "fourth-generation" technology, which will enable two-way mobile communications in voice, video and data at a speed and scale only possible over broadband lines today.

But analysts warn customers want more than faster networks alone.

"It's not like we have a new application to make the best of new networks. Simply increasing the speed won't change the picture much," said Suran Seong, a senior analyst at research firm Ovum.

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