(follow-up from a discussion in the DTT forum)


In other words, for a given definition of "success".

Brown got his windfall, but four years on, of the five lucky "winners", only one - Hutchison - has actually launched a voice service, and one - TIW - appears to have gone silent altogether. The rest all appear to be in various stages of beta. Given that the licences cost their operators several billion each, they've got one Hell of a lot of territory to claw back in order to break even by the time the licences are up for renewal in 2014. Their potential customer base consists largely of cannibalising existing mobile telephone customers (if you don't have a mobile phone by now, where have you been), and there's scant evidence to suggest potential converts to 3G - such as there are - are likely to want to generate large amounts of revenue that would justify the billions spent on the licences.


Given the telecoms bust that was already clearly visible on the horizon in early 2000, it might not have been such a bad idea. In all seriousness, though, "millions" might have been a more realistic sum than "billions".

(I'll now stand back and watch the flames, as all you folks probably know a great deal more about 3G and will tell me I've got it all wrong. Please, don't be too hard on me....!)

I think you're absolutley right. We pay enough for our mobiles as it is, and since most of their revenue is going to come from existing customers, then that is only going to happen if we pay quite a but more. As for new customers, well as you say, if there are any Luddites out there who don't yet have a mobile, they are hardly likely to dip their first toe in the water by going for a more expensive 3G.

Firstly TIW is Hutchinson Telecom or 3 as its known these days.

Investors dont expect any of the 3G operators to make a profit till their licences are about to expire That means about 9 years of making a loss followed by 1 year of profit if they are lucky then they will have to bid for their 3G licences again or maybe we will be on to 4G by then! At any rate its mad man economics. They paid too much and wont make the money back

I expect they will slowly transfer everyone over to 3G phones during 10 years and maybe close 2G to recoup some money?

Bah. I must have misread whatever article I nicked that from.


Heh... have they actually managed to wind up analogue yet?

Cellnet (O2) and Vodafone Analogue networks were closed in 2000. Orange and One 2 One (T-Mobile) were digital from the start.

would just like to ask gordon,what did he exactly do with the 26 billion pounds he received for these licences? suppose all this has been BURIED news!

Quite a lot of that has been invested in Basra... and the Chinooks that cant fly in cloudy weather.

I know you weren't attacking me but...

Who cares if these companies don't make a profit? WHO cares? So they invested billions, so what? I would certainly prefer Mr Brown to squander it reducing the national debt or investing in the NHS than let multinationsl make take it and spend it on luxury penthouses.

Take 3, shall we: 500 mins a month: £25! £25! I couldn't care less if they are not making money. Check out the deal at www.dialaphone.co.uk that includes 5 months half-price rental on the new phone.

I understand your points: its basic economics. But they did bid that much, because they thought they didn't have a choice. BUT THEY ARE NOT GETTING THEIR MONEY BACK!!!!

Employees, and their families. Subscribers, who would rather see the money spent on investment in future services. Individual shareholders (which may include any number of employees). Any local economy that benefits from the capital generated by having a Vodafone or BT call centre on its doorstep. And anyone with an equity ISA, endowment policy or pension fund that might include or in some way rely on telecoms stock.

It's not just the "big multinationals" who stand to lose out when things go wrong. The effect is far wider.

I see your point and it is well made. Nevertheless, the economy always balances out.

Money to Treasury allows taxation to stay low
Low Taxation increases funds in the pocket
More money in pocket allows people to spend more in the economy

As for your other points: invest in different companies/get a job elsewhere? It's the companies fault, they are not getting their money back. If they default on their payments they will lose the license and perhaps a 'fairer' price will be paid. If they don't default, because they won't, then they could afford it all along.

I don't agree that it's a zero sum, and being of the school of thought that insists that bureaucratic Government institutions are far more wasteful of money and resources than private companies, I don't accept that as justification for what happened. You can't simply write it off as "oh, it doesn't matter, it's just moving money around".


What if there aren't any - as there weren't in the telecoms/dot.com bust immediately following this crazy 3G auction? As for investing in different companies, it's a bit late if your stock has already plummeted, or if you're locked into a company share scheme....


So you've already said - no need to repeat it. But it was also the fault of the bidding system. There were plenty of complaints about it at the time. The companies felt they had no choice; it should not have happened.
Last edited by mithy73 : 08-04-2004 at 12:25

Student then? What do you mean?

Simple economics, once again. There is no such thing as a quick buck. All the companies balls up, ITV Digital did it, boo.com did it, all the venture capitalists threw money at licenses to print money.

The companies did have a choice. Just not what they wanted to take.

The government may not spend money sensibly, but major shareholders of large companies take money out of the economy,

Yeah, yeah, socialist claptrap, big multinationals are evil, shareholders are evil, yawn yawn. (Sorry, but it is a rather tiresome argument.)

I really can't be bothered to argue all this, as it's a total diversion from the topic, and I can't be bothered to post yet another followup. Forgive me but I'm not really interested in debating ideology.

The fact remains that 3G has not, to date, been a success, which I believe was my original point. And among the root causes is the way the spectrum auction was handled.

I have 4 3G networks available where I live. (3, Orange, T-Mobile and Vodafone). so it looks likley that we will be getting bombarded with hype from them all pretty soon as they roll-out. Doubtless 3 will limp along shovling cash at customers and dishing out duff handsets to use on their less than reliable network but one should'nt judge 3G by their pathetic efforts - the other 4 will change the tarnished reputation of this new mobile technology.

I think your originsl point maintained that 3G is not a success. That is correct. But you based it on my quote that the auction was a success and suggested that because 3G was a failure the auction must have been. I disagreed and stated that just because companies overpaid they should not get their money back. The auction was a success for the govt raising funds. It was not a success for companies.

This isn't an argument about ideology. It's business. Those companies bought something for a price that they decided upon. It's their fault and they are not getting their money back.

Is 3G a failure because consummers don't want it? probably. Of those consummers that seem annoyed by the slow roll-out seem to be a minority. The vast majority do not care. It is not an issue for them. However, it might well be an issue if the govt returned the money and raised taxation to compensate.

The auction of 3G was very sucessfull in rasing money for the Govenment (how they waste that money is another matter)

This was bad for the mobile operators who felt they had to have 3G which was an untried technology which they took a massive gamble on. The mobile operators bid more and more ludicrous amounts to obtain these licences basically at any cost.

You can argue that the auction was a bad idea it depends on who you wanted to see get the best deal out of it. The cards in this case were loaded in the Governments favour. Tied together with the mobile operators stupidty it has been bad for investors and good for the Govenment. At the end of the day the investors supported the money that was bid for the licences. So they have no one else to blame but their own foolish selfs!

Will this be bad for the consumer? In the long term if you own a mobile phone prices will contiune to rise as they have been. 3 have offered cut price tarrifs to attract customers to their new network. This wont last forever. I expect 3 will go bust as the economics dont support such a pricing policy. They will have to raise prices when they have enough customers, they are still in the land grab phase at the moment.

Will the revenue rasied from 3G benifit the public? IMHO I find the government to be wastefull. Money seems to go into a blackhole and is never seen from again. Some people may argue this point though?!

What will become of 3G? As pointed out in my previous post the networks will move everyone to 3G and possibly switch off 2G. They wont make a profit on it till the licences expire. Then along comes 4G and we can begin all over again! They may have learned a painfull lesson next time?!

Agreed. That seems to be the point.

I think 3G is going to die a death before it gets established.

Two reasons for this.

Currently no one has come up with a "killer app" for the technology. Video calling! Don't think so. I am walking along talking to my mate then I don't want to be looking at a screen. If video calling was going to work then we would have had it at home years ago.
GSM does the job quite happily and unless we get forced to 3G then I think it will be around for some time to come yet.

The potential big earner that "3" have missed out on is not allowing corporates to use VPN and browse the Internet in general - instead you are stuck in their walled garden. No use to business users. I need to be able to connect back to the office on VPN and I am quite prepared to pay for a decent speed.
To get the bandwidth that £G is capable of on a mobile device is the kind of use would quickly bring in high spending business customers - which is what paid for both analogue and GSM in the early days.

What is going to kill 3G though is the rise of wireless technology and voice over IP (VOIP).

It is rapidly becoming obvious that it will be far easier to bolt voice calls on to a data network than the other way round. There is significant work going on to improve VOIP technology. It is already the primary technology behind new office telephone systems so it is only a matter of time before it leaves the office - in the same way that DECT mobile phones did.

With the cost of 802.11 chips coming down all the time, signified by the recent announcements of WiFi in lamp posts and Intel putting them in to their PC chipsets, it will soon be impossible to move without WiFi coverage. None of the issues over health concerns either as the signal is so weak. (Think how close lamp posts are).

If WiFi is used to provide blanket voice and data coverage then perhaps for once we will be able to have the same telephone technology throughout the world, instead of having to use something different in the USA and Japan!

GSM will survive because the networks are already built. It will be useful to provide the fill in where WiFi cannot work (Welsh hills for example). The GSM range cannot be matched by WiFi without some high tech kit - although perhaps this will come down if they are deployed widely. Already happening in the USA where wireless ISPs are quite common.

The question is how long before the first GSM/WiFi dual band phone?
I bet Nokia, SE, Motorola, Samsung et al are working on them...

Simon.

Ok.


In other words - like I said - for a given definition of "success". And I'm not even sure that, in the long term. it was a success for the Government raising funds. They may have gained £27bn in one year, but how much have they lost due to that much of the telecomms downturn for which the 3G auction was directly or indirectly responsible since 2000? How much will they have lost by 2014?


Well, you did start to wax a bit ideological with your "Who cares?" comment. And your "major shareholders take money out of the economy" comment. By definition, if their money is in shares, they're investing in the economy. It all came across as a "shareholders/companies are evil" rant, at which point it's no longer a discussion about 3G....


I never said otherwise. That doesn't change my opinion that the auction was flawed. If the Government intended to turn the auction into a fundraising bonanza, that was wrong, because it is in the Government's own interests to ensure that whoever ends up with the spectrum is in a position to do something with that spectrum, driving new technology and stimulating new business, increasing productivity, and in the long run (and if you want to look at it that way), generating more money for the Government.
Last edited by mithy73 : 11-04-2004 at 13:00

I don't believe the auction caused a downturn in the telecoms sector. However, I do believe that over investment in technologies led to over exuberance and investoes flawed belief that telecoms/.coms/digital tv were licences to print money. I thought that expenditure by consummers of 2G was still increasing. That said, demand for handsets hass understandably slowed / as has computer hardware etc. Everyone has what they have. Thats why these companies invested so much in 3G in the first place - it was a new market.


I'm not sure I said they were 'evil', if i did i must have been joking. Apologies. I see your point that 'you care' but given the lack of consummer demand for 3G, no-one else does.


Agreed, but what you have just said IS really an ideological issue. But it is really the global economy that will be benefitted by demand for new technology. Fiscal generation for the UK economy can be met with 2G voice calls / technology and VAT income from it. As has been said above, the 3G licences are unlikely to generate the return on investment before 2014. However, consummers will continue to want to be in contact and voice calls will meet that demand. Therefore, the £27bn is free money... (?) which they are not getting back.

I think we fundamentally agree with one another's points.

Indeed, anything 3G or more specifically 3 can do, WiFi can do better. An O2 XDA type device with more power, a camera attachement and wifi adaptor is essentially an unmetered 3G device with full net access. A mobile aol 9 service, face to face calls etc... Don't know the tech side of it but the way that star trek (DS9) always used to suppose was that TV / Phone / Video Calls were always done through the NET circa 2015

Nor do I, though I believe it may have exacerbated the problem.


True, but they do care about the state of the telecoms sector in general, because a cash-starved telecoms sector will invariably result in less spending on services the customer wants - be they 3G or anything else.


Partly because £27bn that could have been spent on investing in 3G, bringing it online earlier and making it worthwhile has disappeared into Govenment coffers, I'd imagine.

I will however accept the point that the telecoms sector could instead have simply wasted all that money on a 3G network in which nobody is interested, even if it was made as robust, fully-featured and attractive to consumers as possible - which lends a fair amount of credence to the proposition that it's all the same at the end of the day, the industry invested in a huge white elephant and more fool them. Maybe it is all much of a muchness.


I expect so.

I think that is the underlying point.

That's it the only example so far of a 3G network is one (3) that doesn't allow the technology to be used as the consummer demands.

So in essence, it's a complete waste of bandwidth?