Diversity of Asian 3G Marketplace Demands Segmented Yet Cohesive Strategies

Terry Chang...... President Asia.... TexasInstruments
Diversity of Asian 3G Marketplace Demands Segmented Yet Cohesive Strategies
The Asian wireless marketplace is vast and certainly one of the most diverse in the world. Any understanding of 3G wireless in this multifarious marketplace requires a close look at both the demand and the supply side of the equation, as well as the availability of new technology solutions to meet the needs of the growing market for 3G in Asia. An analysis of the demand for 3G requires an examination of the unique characteristics of each country overlaid with the preferences and motivating factors among consumer segments .
On the supply side, that means examining today‘s wireless technologies as well as the status of the current infrastructure in Asia while formulating a cohesive strategy that will hasten the full emergence of 3G in the most cost-effective manner
Diverse Marketplace Segments
At one end of the Asian cellular adoption curve are countries like India , Vietnam and others that have only recently emerged as wireless markets. In these marketplaces, the focus for operators and handset suppliers is cost-effective, voice-centric services. Most consumers are quite value-conscious. In fact, a significant portion of them are just now acquiring their first wireless handset. In these countries, the challenge is to acquaint consumers with cellular communications, demystify it and give consumers a comfort level with the service.
At the other end of the adoption curve are mature markets like Japan , Korea , Taiwan , and Singapore . In these countries, the 3G infrastructure is in place and subscriber demand for multimedia services such as mobile entertainment, handset-based music, video in the form of news clips, video games and others is growing rapidly. In fact, these countries rank first in 3G adoption not only in Asia , but worldwide. In these marketplaces, 3G usage is more a function of demographics than anything else. It is more common to see a high concentration of 3G applications among younger subscribers than older consumers.
Straddling both ends of the curve is China . The Chinese market is so large and so critically important to the region that it is a special case of its own. All eyes are on China as the largest single wireless marketplace in the world, with more than 330 million subscribers (excluding those on PHS networks), begins migrating to 3G. Recently, the Chinese government has made several moves intended to position the marketplace for a smooth transition to 3G. The major Chinese operators, including China Mobile, China Unicom , China Telecom and China Netcom, are expected to be restructured soon into three operators with each one concentrating on a specific 3G wireless technology -- UMTS, CDMA2000 or the Chinese 3G technology, TD-SCDMA. At the same time, TDSCDMA has been undergoing field tests in preparation for deployment.
Many experts expect that China ‘s 3G licenses will be issued in 2006 so that a 3G network will be available in time for the 2008 Olympics in Beijing . Projections by IDC and other analyst firms show 2.5G and 3G handsets sales in China growing significantly through 2008.
3G Opportunities
There are several motivating factors behind Asia ‘s march toward 3G. First, 3G is a much more cost-effective use of the wireless spectrum for operators. The increased bandwidth and higher speeds of 3G mean that services are provided faster and they are more responsive to consumers, creating a more compelling experience. In addition, an infrastructure with greater capacity will support a more diverse array of services. Many of the new services, such as multimedia and entertainment applications, consume significant bandwidth.
3G‘s more cost-effective spectrum utilization leads to the second reason for Asia ‘s migration to the newer high-capacity technology. Although many service providers in the region are growing in terms of gross revenues because they continue to add new subscribers, they face declining average revenues per user (ARPU) as competitive forces reduce the price of providing basic voice service. Wireless voice service must be priced competitively to fuel an operator‘s overall growth in subscribers. 3G provides hope for operators who want to increase ARPU by moving subscribers upscale from basic voice communication services to the 3G multimedia services that would bring additional ARPU.
Many service providers in Asia have turned to segmentation strategies that allow them to serve a diverse range of consumers while providing a framework for moving their subscriber base to new 3G services. Operators in many emerging marketplaces realize that voice-centric user applications represent the bulk of their current growth. As a result, relatively inexpensive “value” handsets and “feature” phones are important to their marketing strategies because the cost of a handset is often the most formidable barrier to entry for a potential new subscriber. At the same time, operators want to quickly move users up to new 3G services as a way of increasing ARPU and generating additional revenue streams. High-end services will require smartphones and multimedia mobile devices that have capabilities well beyond basic voice communications.
New 3G Technology Solutions for Asia
It will be incumbent on handset manufacturers that wish to serve these different segments of the Asian market to offer operators a cohesive product platform strategy that can cost-effectively serve all segments. Software re-use and software portability across handset platforms will be critical for operators striving to offer subscribers the handsets that will best serve the economic and functional needs of every segment. Moreover, software compatibility across handsets targeted at a range of market segments will efficiently facilitate the operators‘ strategy of quickly moving new subscribers up-market from the entry-level services available on value and feature phones to the higher revenue 3G entertainment and multimedia services on smartphones and multimedia mobile devices.
Whether operators are targeting the low end segment, the high end segment, or searching for the mid-market, it is clear that the complexities of Asia ‘s diverse 3G market require flexible, adaptable technology solutions that deliver on the specific requirements of each unique market. At the low end, integration of electronics on the handset into single chip devices will be the single most important driver of low cost phones. In fact, the GSM Association has singled out handset cost as the last remaining barrier to attracting the next billion subscribers from developing markets. Of course, many of those markets are in Asia , so the correlation between the Asia market for 3G and the importance of single chip designs is obvious.
At the high end, the increasing number of applications on 3G handsets will test processing power like never before. Phones will be required to process multiple application requests simultaneously without degrading the user experience and without excessive battery drain. Because of these requirements, high end 3G phones rely on multimedia applications processors capable of operating at low power.
Compelling 3G Applications
The 3G marketplace in Asia is searching for the killer application or applications that will motivate consumers to move up-market from basic voice communication to new revenue-generating services. There are several likely candidates, including console-quality interactive games, digital television, video conferencing, high-fidelity mobile music players, still and video cameras and others. All of these new 3G services revolve around entertainment content and will require high-performance, low-power application processors.
One of the most exciting new 3G apps is mobile digital television (mDTV). Several wireless operators in the region have been pioneers in developing DTV services. SK Telecom in South Korea , for example, launched a video-on-demand services and attracted approximately one million subscribers in just nine months. The Asian countries that are leading the way into 3G have already settled on a DTV standard and are preparing to launch services. Korea has chosen the Digital Multimedia Broadcasting (DMB) standard while Japan will deploy services based on the Integrated Services Digital Broadcasting (ISDB) standard. Singapore ‘s DTV service will use the most widely accepted standard, Digital Video Broadcast-Handheld (DVB-H).
New Connectivity
To take full advantage of high-bandwidth 3G applications, several non-cellular connectivity options are emerging in Asia . Already, Bluetooth, wireless local area networking or Wi-Fi (802.11) and global positioning systems (GPS) are being merged into mobile handsets to provide a wider array of connectivity options. Wi-Fi, in particular, is able to supplement the application bandwidth available in the 3G cellular network. Other 3G applications such as digital television and commercial broadcast radio reception may necessitate their own distinct radio technologies, depending on the technologies that are deployed to implement these applications.
In addition, some countries in Asia are already looking ahead, planning for their next-generation connectivity technologies. Korea , for instance, has committed to Wi-Bro, a variant of the Wi-Max wide-area wireless networking technology, as a way of achieving even greater bandwidth for new services.
3G in Asia
The expansiveness and great diversity of Asia certainly ensures that the 3G marketplace will be just as diverse – and just as exciting and full of growth – as Asia itself.