Proof that existing 3G services failed to live up to early billing in Hong Kong Six months after the last media frenzy surrounding industry consolidation, Hong Kong's mobile operators are back in the limelight thanks to two developments which, depending on who is talking, mark either the next great evolution or the latest in a series of false dawns in a sector marred by over-competition and faltering share prices. At least one thing is clear. Both Hutchison Telecom's decision to license NTT DoCoMo's i-mode data platform and the launch of Hong Kong's first 'super 3G' service by SmarTone-Vodafone illustrate the extent to which existing 3G services had failed to live up to their billing. 'I-mode will give customers a better avenue through which to access the internet,' said Hutchison Telecom Hong Kong chief executive Peter Wong King-fai. I-mode's strength derives from its ease of use for users and developers. Its open platform is based on regular internet standards and therefore makes it easy for content developers to create mobile applications at relatively little cost. It also represents a point of departure for operators such as Hutchison who have previously adopted a walled-garden approach to their content, reaching bilateral partnerships in which they control the revenue-sharing agreements and make it more difficult for users to reach third-party content on the wider internet. 'Hutchison is conceding that its existing strategy has not been working,' said Baljinder Lal, a director at Jenesis Consulting. 'I-mode has the potential to bring them a considerable amount of new content that is relevant to local users. Its transparent revenue-sharing model is attractive to developers and can stimulate a cottage industry among small Chinese-language developers in Hong Kong or on the mainland.' I-mode therefore takes operators back to their traditional role as a billing platform, in contrast to their recent 3G-driven forays as content providers, with operators typically taking a 10- to 15 per cent cut of all transactions made by subscribers on third-party i-Mode sites. An analyst at CLSA said Hutchison is expecting that increased data traffic to third-party i-mode sites will more than offset the licence fee to NTT DoCoMo and the smaller portion of revenue share compared with content on its own platform. 'We haven't really seen compelling data content on 3G so far - outside [text-messaging] there are not really many users but there are signs mobile music and mobile television will take off,' the analyst said. But according to SmarTone-Vodafone executive director Patrick Chan, whose firm last week became the first in Hong Kong to launch so-called 'super 3G' services thanks to high speed downlink packet access (HSDPA) technology, more choice is not always good for consumers. 'More sometimes means less if you give the customer so much choice that they become confused,' he said. 'Winning customers to data services is more about how you package the content than about how much of it you offer.' Hong Kong's remaining 3G operators - including Hutchison - will launch HSDPA services before the end of the year to address the sluggish download speeds that have plagued 3G since its launch. Upgrading to HSDPA is seen as a logical step for operators because the speed boost to 1.8 megabits per second from 384 kilobits per second costs little compared to the overall investment in 3G. HSDPA cost SmarTone an additional $150 million above the $700 million it paid for its initial 3G network. 'HSDPA may improve the user experience of existing services,' Mr Lal said. 'But there are still question marks over whether the content exists that will make data services compelling enough to offset the amount of investment.' He also said that just as in the first round of investment in 3G, the only sure-fire winners from HSDPA would again be the vendors. 'When you look at the biggest winners from 3G, it was clearly the vendors as operators are still struggling to generate returns on their 3G investments,' he said. 'When it comes to HSDPA the situation could be the same.' It may be too early to assess the ultimate success or failure of either i-mode or HSDPA for the operators in Hong Kong. However, both will require customers to upgrade their handsets again from 3G models and any incremental rise in data revenue resulting from investments in i-mode or HSDPA will be hit by another round of expensive handset subsidies.