What 3G Terminals Mean for 3G Services

Release Date:2005-06-22 Author:Chen Kai Click:

    Along with the 3G development, mobile services will be undergoing a transition from simple voice-based telephony to Internet browsing, video telephony and information center. Mobile users will then are able to realize data access at anytime and anywhere and the mobile terminals will serve as a platform for online shopping, banking and entertainment.

1 Reasonable Cost Performance of Terminals Boosting Service Popularity
The transition from 2G to 3G requires the terminal replacement that telecom carriers have to face seriously. Therefore, the cost performance of the terminals will be critical in this transition process. NTT DoCoMo (a major Japanese mobile provider) has done exemplary work to provide handsets at the competitive price and performance as compared with 2G handsets. Therefore, it has opened users´ heart to 3G-service enjoyment with these shiny
new-generation gadgets.

    KDDI (a Japanese telecom service provider) came up with another solution. For those users who are reluctant to buy new handsets, they are able to offer 3G chips to replace their 2G chips in the existing handsets. With this solution, KDDI ensures that the users will feel comfortable with the new 3G handsets, as they remain almost the same as their previous 2G counterparts in terms of size, weight and battery standby time. While in Europe, the low cost performance of the terminals has proven an impediment in 3G development.

    A recent report on 3G infrastructure deployment published by In-Stat/MDR (a US market research firm) shows that, the shortage of the 3G handsets that have acceptable cost performance (among many other factors) is to blame for the slow pace of the 3G network deployment. This again underlines the importance of the cost performance of the 3G handsets in the development of 3G network and services.

    The 3G practices in Japan found that brand new functions alone in 3G handsets can hardly convince users to pay a high price. This warns us that user´ eagerness will sooner or later drain away if the 3G services turn out to be nothing but low value and high cost, just as many early 3G services were clearly flops.

    So far the number of 2G mobile users in China has exceeded 0.3 billion. It heavily depends on the cost performance of the 3G terminals to have these users replace their handsets to access 3G services that are to be launched in this huge market. The experience of 3G network deployment of other countries tells us that the cost performance of terminals, once settled down, can pose a bottleneck for the 3G service expansion and popularity.
An optimised cost performance of the terminals again calls for the concerted efforts of the whole handset industrial chain, including carriers, network equipment suppliers and terminal suppliers. To slash the cost of the terminal, they have to work together and cooperate. In order to enhance the terminal performance, the market research, analysis and perspective should show what are the most urgent functions that are expected by the end users in a 3G handset.

2 Soaring Terminal Price Limiting Service Application
Rich or poor, the price matters. Low-priced terminals will always be the best way to attract users. For a terminal supplier, the cheap terminal can translate into poor sustainability due to mean returns from their early investment. However, expensive terminal will eventually block users, especially low-end users, off the 3G services. Therefore, the key to 3G applications is to determine an affordable terminal price for majority users in a specific country.

    Now let´s look at the practice of two Japanese 3G carriers: KDDI and NTT DoCoMo. The 3G handset of KDDI is available at US$300, much lower than what NTT DOCoMo can come up with. KDDI also provides handsets (compact, light-weight with alloy aluminium shell) with camera function at US$180 to the most, making NTT DoCoMo handsets over two times as expensive. The handset with GPS capability from KDDI is US$180, which is also quite acceptable. All these price advantages of KDDI over NTT DoCoMo have put KDDI into a competitive market position and thus a faster marketing pace.

    For a telecom carrier, to maximize service subscribers, it would grant allowance for a terminal that is relatively expensive. This allowance is a high cost of operators, which would be as high as the network cost when the depreciation factor is taken into consideration. But then again, this extra cost will usually be offset with higher service charges on the end users. In the long run, such allowance as a makeshift approach will prove vain as smart users will escape from the high service fee. This will give rise to a stricken terminal sales and frustrate terminal suppliers, carriers and users themselves.

    East or west, money is best, especially in a developing country like China where the market share depends on price. You want the market? Ok, lower your cost first.

    For a terminal supplier, the competitive edge still lies in price. Where does lower price comes from? It comes from lower cost. Where does lower cost comes from then? It comes from every process, from investment to output. If the display accounts for 30%-40% of the total cost of a 3G terminal, then work on a less expensive display solution first.

3 Poor Terminal Usability  Tampering with Service  Popularity
The 2G terminals are characterized by supporting voice, short messages and game services. It´s true that 3G terminals will still be centered on voice capabilities, yet high-speed mobile multimedia services are what everybody expects in a 3G scenario. Those new service applications are somewhat "demanding" on terminals as well as on networks. From Table 1 we know what are the new roles a 3G terminal has to play to fit in a 3G platform[1]. How the 3G terminal fulfills these roles in a convenient, practical and efficient way to avoid standing in the way to service application is on the top of the list of considerations when designing a 3G terminal.

 

    The 3G terminals have started to hit the market in some countries in 2004. However, 3G service application and development were once fettered rather than fueled up due to the mediocre voice quality and model scarcity of 3G terminals. What made it worse was the poor interoperability among vendors in both technical and non-technical terms.

    The disparities between 2G and 3G technology have resulted in differences in their terminals, which in turn gave rise to the problems in terminal compatibility, performance stability and power consumption. During the first days when NTT DoCoMo launched its 3G terminals, the 3G application has experienced quite a setback because:

(1) The handset weighed 150 g, much heavier than a 2G one;
(2) The dimensions  of the handset were 105×56×35 mm, bulky as against a 2G one;
(3) The battery standby time of the handset was too short;
(4) Disconnection to the network happened frequently;
(5) FOMA (DoCoMo brand for its 3G service) handset was too new to have necessary standards prepared.

    NTT DoCoMo soon became conscious of the problems and came up with better terminal models with longer standby time of 300 hours, lighter weight of 109 g and additional functions. Above all, mass data including the movie pictures could be transmitted. The progress in performance of the terminal was then paid back by the development of 3G applications.

    Also in the UK and Italy, users have been let down by the terminals´ battery life while they were enjoying the diversified 3G services.

    The Chinese terminal suppliers and carriers can now draw on all the experiences of other countries. They should, before any 3G services are launched in market, seriously make their own terminal design and plans, e.g., weight, size, standby time, battery life and power consumption, in order to prevent the terminals with weak usability from becoming a bottleneck of the development of 3G.

4 Lagging Terminal R&D Reining in 3G Development
Many Chinese terminal vendors have expressed the readiness to launch 3G terminals at the time when the 3G licenses are issued. ZTE Corporation is one of such vendors. As a telecomm elite, ZTE has been following a way of independent R&D and core technology ownership since the first day it embarked on the mobile phone career. With the 2G and 2.5G technology on hand, ZTE is now making all necessary efforts on the core technology of 3G and ready to launch a range of 3G commercial handsets as well as end-to-end 3G solution at the right time of 3G deployment in China.

    Table 2 shows the plan of domestic 3G terminal suppliers.So far Soutech, Hisense, Samsung, LG, DBTEL, Lenovo, Bird, Amoi, CYIT have joined in the R&D of the TD-SCDMA terminals. By June 2005, at least five TD-SCDMA handset models will present themselves in the market.

 

    However, a survey on the role of Chinese terminal suppliers in the 3G market found that, 58.82% of the informant held that very few Chinese suppliers would succeed, 29.28% held that many will succeed, and 11.2% remained uncertain about the situation. This showed a wide diffidence over the 3G terminal R&D for reasons:

(1) Lack of advantage and influence on Chinese supplier side;
(2) Obscure 3G prospect restrains suppliers from investment;
(3) Lagging R&D status of Chinese suppliers on 3G terminals (same as other suppliers across the world).

    These reasons have joined to account for all the problems in the 3G core chip R&D, the related technology R&D and application, the 3G terminal standardization (in addition to individuation), the 3G terminal power supply (power consumption, batter life), and the handset display R&D as well.

5 Shortage of Terminal Supply Limiting Service  Application
To date, about 150 3G licenses have been granted globally. However, only eight are for commercial use and five deployed for the real application. Why? The reason lies in the shortage of terminal supply and little application.
The practice of Japan and Korea where the 3G services have seen better growth has made it clear that the terminal shortage would definitely get in the way of service application. When the 3G services were first launched by NTT DoCoMo, they could hardly catch on it simply because users didn´t have enough handsets to enjoy the services with. On the very day the 3G services were launched by J-Phone, in the whole country of Japan there were only 150 handsets being able to access the 3G services. The number increased to 800 later on, but the shortage remained the same. And out of 1 929 retailers, only 31 had proper handsets in stock. That was just far from enough.
The 3G practices in Sweden showed that both terminal suppliers and network carriers were concerned with the terminal supply. Carriers never want to see the delay of time-to-market of terminals while on the other hand, terminal suppliers are prone to postponing the launch of terminals due to doubts on sales prospect. To address this problem, some carriers would enter into agreements with terminal suppliers to ensure the necessary terminal supply.

    In Taiwan, the preferred practice of the suppliers for the research and development of 3G terminals is to cooperate with carriers or work on their own brand names. Nevertheless, as the carriers know little more than the terminal suppliers on the requirements of the handset and the way to establish a brand name remains unclear in many aspects, most suppliers in Taiwan are still feeling their way for a mature cooperation mode with carriers.

    In a word, to guarantee 3G development from the perspective of terminals, it is the top priority to attract concerted efforts for an optimal terminal solution[2]. This should become a common sense for any country that wants its 3G dream to come true.

6 Differentiated User Needs  Demanding Personalized  Terminals
As telecommunication is more dependent on information, the success of 3G is understandably a success of terminals, which again counts on the reliability of technology, on the support of new service applications, as well as on the user friendliness.

    A survey on the considerations of Chinese 3G handset buyers shows that, price, function and appearance are among the top list. At the same time, diverse demands on the handset in response to personalized services are also expectable. In other words, carriers and terminal suppliers are supposed to come up with differentiated handsets to cater for varying user groups. The FOMA handset launched by NTT DoCoMo is just one of the examples. This model is able to handle big files while keeping the size just as a 2G handset. It also supports games and e-mail with image attachment. NTT DoCoMo has also a new model supporting Personal Digital Cellular (PDC) and FOMA integration, aiming at easier handset replacement for the customers. In addition, the "900i" series handsets released by NTT DoCoMo again proved a heart-throb of youngsters for their excellent functionalities, light weight of 120 g and a cute look. To date, the handset market has grown to catch up with the development of 3G services.

7 Interoperability Ensuring  Smooth Evolution from 2G  to 3G
What best illustrates the importance of interoperability is the 3G handsets provided by KDDI. As this model also works in the previous CDMAone system, it soon became popular with 90% of Japanese population.
Another instance again comes from a Japanese firm J-phone. To win over service subscribers, J-phone once released the V801SA handset series that boasts vast applicability in most countries of the world.

    Korean firms Samsung and LG have both output several handset models to support 3G services. The dual-mode (CDMA2000 1xEV-DO and WCDMA, automatic switchover among different regions) handset!of Samsung is oriented to SK telecom infrastructure. LG has also released the dual-mode (CDMA2000 1x and WCDMA) handset and had another dual-mode model (CDMA2000 1xEV-DO and WCDMA) on the agenda by the end of 2004.

    Undoubtedly, service application depends heavily on interoperability, which among other factors determines the way from 2G to 3G. This deserves serious calculation of both the carriers and the equipment suppliers.

8 Conclusion
To sum up, it is critical and significant to do research and analysis work on 3G terminals, even against the backdrop of a vague timetable of the 3G licensing in China. All the 3G-related experiences in other countries warn us that, if the 3G terminals are not well prepared, they can pose the bottleneck of 3G service application and thus hold back the 3G developments as a whole. Early research and analysis will be surely beneficial for future development by providing all the necessary references.

References
[1] Christoffer Andersson. The Link Between Terminals, Networks and Applications [EB/Ol]. http://www.wirelessdevnet.com/GPRSand3Gapps/articles/enablers/index2.html.
[2] Kurt Wagenlehner. 3G Strategies for Operators [EB/OL]. http://www.lucent.com/knowledge/archives/0,1981,inDocTypeId+108-inPageNumber+6-inByLocation+0-SORT+S-STID+13,00.html.

Manuscript received: 2005-03-22