What’s Cellular For?

21 years ago, Cambridge Consultants (CCL) were saying that 3G is for cost reduction and not for multimedia data transmissions such as streaming video and video-telephony.

“The theoretical cost per minute is eight times lower on UMTS, so what 3G is all about is increasing capacity at low cost,” CCL’s Jim Schoenenberger told the 2003 Nepcon Design Conference, “it’s not about multimedia services, it’s about reducing cost.”

“Voice is still the killer application,” explained Schoenenberger, “and the operators’ problem is that they’ve seen a 20 per cent decline in ARPU [average revenue per user] in the last two years. MMS [multi-media messaging] will not increase ARPU in my view, and GPRS will be sufficient for 90 per cent of new MMS services, while demand for video is very uncertain.”

Schoenenberger reckons the power in the wireless telecommunications industry has shifted to the operators away from the hardware manufacturers, putting increased pressure on silicon pricing, and greater emphasis on network operating cost reduction.

“The focus of the operators is not to have full UMTS coverage, but to reduce the 2G network glut at reasonable cost,” said Schoenenberger.

CCL takes a sceptical view of wireless LANs (802.11). “WLAN is power-hungry and is no good where there are a lot of users in the same place,” said Schoenenberger. “Hot spots [WLAN access points] continue to expand but, according to a Newsweek survey, only two per cent of hot spots are paid for and, though they only cost about $200 to set up, the costs of connections to the network become painful.”