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Stuart Biggs

For the mobile-telephone industry, 3G has come of age. That was at least the message this week as industry delegates gathered in Hong Kong for the 3G World Congress.

For once, there was enough evidence to suggest that the latest dispatch from the 3G community amounted to more than wishful thinking and hype.

Witness the low profile kept by Hong Kong's four 3G operators - presumably they were off winning customers to networks that, for the most part, have already been running for a considerable time. Just CSL saw fit to send a high-ranking executive to the congress.

Emerging market operators predominated in keynote slots, as newcomers from Russia, Slovenia and Kuwait replaced stalwarts from the likes of Hutchison or Vodafone.

Despite positive signals, the exhibition lacked much of the buzz of previous years, the irony being that just as the technology is mature enough to be truly interesting, the marketing machine runs out of steam.

There is little doubt that 3G - and mobile services generally - have an image problem.

A recent survey of global mobile-phone users by SmartTrust revealed a prevalence of 'mobile fatigue' among consumers, while recent results from Vodafone showed that at the present adoption rate it would take the operator 35 years to migrate existing 2G users to 3G.

What these developments arguably show is the realisation among consumers, operators and vendors that the original promise of 3G - wireless broadband internet access available anywhere and at anytime - is now unlikely to be fulfilled by 3G alone.

Broadband wireless technologies such as WiMAX - essentially WiFi with a longer reach - will become both competing and complementary elements. The role of 3G in this scenario is greatly diminished along with much of the hype surrounding it. Its value will lie in it moving forward as one of a number of complementary networks combining to complete a  bigger picture.

Hong Kong is likely to see further evidence of this next year when broadband wireless licensing begins. Winning bids are expected to be far lower than for the 3G licences, due to the collapse of the dotcom bubble and because the sector has morphed dramatically in the five years since 3G was lauded as the only viable option for mobile broadband.

But the clouds hovering over 3G do not extend to the telecommunications industry as a whole. The scale of recent corporate deals in the sector point to a renewed dynamism that has not been seen since the dotcom boom - the GBP17.7 billion ($234.9 billion) all-cash offer from Spain's Telefonica for British mobile operator O2, and the Euro4 billion ($36.2 billion) overtures by Switzerland's Swisscom  towards Ireland's biggest operator, Eircom, being cases in point.

Meanwhile, Vodafone is buying into India's Bharti Tele-Ventures and increasing its stake in South African operator Vodacom to 50 per cent for a combined cost of $30.6 billion.

Closer to home, PCCW paid about $1.9 billion  to acquire Sunday Communications while China Netcom paid $7.8 billion for a 20 per cent stake in PCCW.

Perhaps the most revealing of changes  in the sector, the up to US$4.1 billion paid for Skype by online auction company eBay, shows that communications services  will no longer be the sole domain of traditional operators.

Each of these deals  shows the extent to which the sector is reinventing itself, with the merging of fixed and mobile networks front and centre.

'The era of fixed-mobile convergence is definitely the future direction,' is how PCCW group managing director Jack So Chak-kwong explained the rationale for acquiring Sunday.

Operators are hard at work building the assets, technology knowledge and scale to compete in a future of shrinking pricing power for voice and broadband services, as the internet is levelling the playing field between traditional operators and young upstarts.

Convergence is turning the sector upside down.

'Nowadays, if you want to buy a television you go to a computer company (Dell), if you want to buy music you go to Apple, if you want to make a voice call you log on to eBay, and if you want to watch television, you go to your telephone company (PCCW),' PCCW executive vice-president for emerging technologies Wu Liang-tai said yesterday.

For fixed-line operators, convergence is the opportunity to let customers make voice calls from inside and outside the home on a single handset. Such services enable operators to win back some of the minutes lost to mobile carriers for calls made from the home or the office.

Vendors are flogging the idea of next-generation networks that enable features common to the mobile world - such as address books and text-messaging - on to fixed-line networks and promote wireless broadband technologies such as WiMAX to bridge the gap between high bandwidth fixed-line networks and low-bandwidth 3G.

Content providers, meanwhile, are looking to boost their ability to reach consumers who are finally able to access music and television on their mobile phones and computers.

However, all of these initiatives will mean nothing  unless the end result is better and cheaper services for consumers.

Put simply, the selling point of convergence is the ability to take the best of what is  available on a single device - be it computer, mobile phone or television - and extending it to all the others.

It means taking free voice calls available on a personal computer through Skype and making the service available on a mobile phone; or making pay-television channels available to customers to watch on their personal digital assistants as they ride the train or wait in the airport; or transferring a customer's mobile-phone number, address book and text-messaging functions to the home or office phone.  It means  the customer receives a single bill containing charges for all of these services.

PCCW offers a clear view of what fulfilling this consumer requirement is likely to entail. The acquisition of Sunday Communications and the firm's early gains with Now Broadband TV  - about 500,000 subscribers as of last month - have  been well-documented.

In addition to investing in 3G through Sunday, the company is  looking at WiMAX technology, and according to Mr Wu is already testing mobile television  using TD-CDMA, the same wireless broadband technology deployed in Britain  by  subsidiary UK Broadband.

Perhaps due to its relationship with Netcom, PCCW is also looking at the mainland-developed mobile broadband standard TD-SCDMA.

'These technologies are already pretty good now, and are viable solutions for offering mobile television,' Mr Wu said.

PCCW is not the only operator  building its future  around multiple technologies.

Japan's KDDI is one of the first firms that  can legitimately claim to have  made a success of 3G, with 95 per cent of its 22 million subscribers using next-generation handsets and services.

Strategic planning vice-president  Hideo Okinaka  yesterday said KDDI would use WiMAX technology to provide extra bandwidth in cities.

'Given that it takes three to four years for new technologies to come online, it is already time to think about technologies beyond 3G even though it is still a major success for us,' Mr Okinaka said.

This represents a sea-change from five years ago when 3G was billed as the do-it-all technology. But one of the questions that has plagued 3G since its launch looks likely to remain even as operators invest in more technologies - namely where the revenue is going to come from. This is because some of the most compelling applications that will drive take-up of 3G and converged services are also free ones, most obviously free voice calls made over the internet.

The early signs are that operators will be forced to substitute traditional revenue stalwarts such as voice calls with new services.

PCCW is looking to television subscriptions, while  Mr Okinaka suggested an eBay-style model, with the operator taking percentages of transactions made from its customers' handsets.

It is still early days for fixed-mobile convergence and just as it took the technology a long time to catch up with the hype surrounding the internet, so 3G and its wireless brethren are only beginning to fulfil the promise of mobile broadband made during the dotcom boom.

But there also seems little doubt that convergence is coming. The only question remains what operators are able to do with it.



We'd better get used to the new world order