Bad news for UK 3G

UK telecommunications companies were optimistic about 3G and its ability to turn handsets into always-on, broadband-enabled mobile terminals. So what happened?

UK telecommunications companies were optimistic about 3G and its ability to turn handsets into always-on, broadband-enabled mobile terminals capable of tasks including video streaming and fast internet access.

But earlier this month Japan’s NTT DoCoMo, the world’s first operator to introduce 3G, announced it had reduced its subscription target for the end of March 2003 from 1.38 million users to just 320,000. Much of the blame for this has been attributed to limited coverage for services, the price of handsets and their poor battery life.

This is bad news for operators in the UK. Unlike in Scandinavia, where companies bought licences to run the service for a relatively small amount upfront, opting instead to share profits with the government, in the UK a fierce bidding process cost the five successful operators a total of £22.47bn.

Following the Japanese experience, clawing back licensing fees in the form of high tariffs may be all but impossible. Disappointment with the reality of much-hyped WAP has shaken confidence among UK customers, and users are becoming wary of signing up to new services. Faced with such caution providers will need to lower call charges as an incentive to upgrade, but this will be hard with licensing debts still to pay.

Already technical problems have hit the launch of the first commercial UK 3G launch.

Hutchinson Whampoa, which owns a majority share in a soon-to-be-launched operator company called 3, is planning to sell 3G phones on the UK’s high streets through 300 Superdrug stores, starting with two in London and one in Birmingham. However, though the stores will showcase the technology from this month, the launch of the service has been delayed owing to minor problems uncovered by test groups.