3G auction: the end of the beginning

The greatest activity, in both the market and the press, in the immediate future will be the acquisition of Orange. Those to the forefront of suitors include France Telecom, Telefonica SA, KPN Qwest and MCI Worldcom. But companies such as Virgin and Japan's NTT Mobile Communications should not be discounted either.

NTT DoCoMo, as it's better known, already operates the world's largest wireless internet service called i-mode and vies with Vodafone for the title of world's largest mobile company. Speculation that it might bid as much as 35bn for Orange came as early ago as February. Another dark horse may be Swedish telco Telia, which has been shopping for networks in Europe for some months now.

One thing which is certain is that the 3G UMTS networks won't be with us for sometime yet. Vodafone has already issued a statement saying commercial services will not be rolled out until September 2002, “subject to the availability of 3G network infrastructure and handsets.”

This last point is a salient one. John Matthews, principal telecoms consultant with research company Ovum, says while the operators will certainly put in a great deal of effort to roll out quickly, the practicalities are unlikely to allow anything significant before 2003.

“The operators have to procure and install new equipment, and do this nationally. There's always a risk of launching with limited coverage.” Matthews cites the experience One2One had of launching early with partial coverage only to lose market share to Orange, which launched a year later on a national basis.

Also, the current operators are still upgrading existing networks with GPRS - Vodafone's won't go fully live until the end of this year. As such, unless TIW, the new market entrant, is able to roll out its own network any faster and put pressure on the others, another round of upgrading is unlikely to happen before time.

What is less clear is exactly what shape services are likely to take. The thing about these next-generation technologies is that they provide ‘always-on' connectivity, but this means pricing models change dramatically. The most likely scenario is that operators will charge a subscription fee based on the kinds of services available, but will this be for data services only or data and voice?

As Chris Solbe, of the UMTS Forum, explains, no one knows what will be offered. “How do you start and end a voice call in an always-on network? These points I suspect have yet to be thrashed out by all companies involved,” he says.

There's no reason why normal circuit-switched voice calls can't be offered alongside the packet-switched data streams, but again no one knows if this will be the case. For example, while Matthews feels operators are likely to encourage voice services over data, since these are most likely to continue to be time-charged, Solbe feels packages are likely to be charged for data services with the “minimal bandwidth overhead” of voice services added in on top.

Whatever the case, the scramble for Orange is not going to be the only free-for-all over the coming months and years. What all these licencees are going to need now is content, lots of lovely content, with which to woo users and drive the necessary take-up of their services.

As Matthews has it: “It's going to be fascinating now. These companies have paid around 4bn each for what is essentially a gamble that we'll be prepared to pay a premium for high-speed mobile internet access. Not only are they going to have to get access to valuable content, but they're also going to have to try and ensure exclusivity.”

This is, as they say, only the beginning.