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Handset delays could cripple 3G rollout

How will network operators make a success of third-generation services if phone makers don't come up with the goods in time?
Written by Graeme Wearden, Contributor on

Industry experts are warning that the success of forthcoming third-generation (3G) mobile services could be threatened by a lack of handsets.

Writing in the latest issue of his Wireless Outlook, analyst Andrew Seybold said that it is possible that handset manufacturers might not have launched enough handsets by the time that 3G networks are rolled out. This could make it much harder for operators to sign up large numbers of customers quickly -- which could have devastating financial implications for an industry that is already looking towards 3G to save it from its current woes.

Seybold -- who has been analysing the wireless industry for over eight years -- warns that 3G is heading for a Catch 22-style dilemma. "While network operators rush to launch their networks, being first may not matter since the handsets aren't yet available," wrote Seybold. "The handset vendors, on the other hand, want to see the wireless networks widely launched before they spend a lot of money manufacturing handsets," he added.

As an example of the damage that this could cause, Seybold points out that a GPRS service launched in Seattle is being hamstrung by the fact that there is only one compatible phone, which is in short supply.

Seybold's prediction mirrors the problems associated with the launch of WAP. Operators were keen to sign up new users, but were unable to offer a decent range of compatible equipment at launch. Nokia's 7110 handset was the first WAP handset to go on sale in the UK, but for several months it was remarkably hard to track down.

Handset manufacturers have produced a number of exciting prototypes of possible 3G handsets. However, none exist in reality.

There is still confusion as to precisely when consumer 3G networks will be available in the UK. In the past, mobile companies talked about launching 3G in 2002 or 2003, but the current consensus -- as operators pull back their spending on infrastructure as they attempt to survive the tech downturn -- is that they will arrive no earlier than 2004.

The mobile industry is currently experiencing something of a slump. A global drop in demand for mobile phones has hit the manufacturers hard, with Motorola shutting a plant in Scotland and Ericsson trying to sell two UK factories.

The network operators are also suffering. Although they are still signing up new users, the massive investment they have made in 3G licences has made a big hole in their finances and damaged market confidence in the sector. Industry watchers generally believe that the price paid for 3G licences, such as the £22.5bn handed over in the UK auction, was much too great.

In recent speeches, senior executives at some of the UK's mobile companies have insisted that 3G services -- which will allow location-based services, and real-time video streaming -- will give their sector a lift. If the financial markets suspected that 3G would not provide a powerful and immediate boost to the mobile market, mobile phone companies -- whose share prices have already fallen sharply over recent months -- could be in big trouble.

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