Analysts say price stalls 3G uptake

Australian 3G providers are offering expensive, "all-you-can-eat" plans to avoid choking network capacity.

Currently 3G network usage accounts for 19 percent of mobile telecomms consumption.

Telecommunications industry analyst Paul Budde said, because of high pricing, it is unlikely usage will increase.

"Through their pricing [telcos] keep usage on the 3G network under control," Budde said. "Under the current pricing, it is highly unlikely that we will see a massive usage, because there won't be that many people that take up the service at those current price levels."

Telsyte telecommunication analyst Warren Chaisatien said bandwidth usage on 3G networks is marginal, noting that it contributes about 5 percent to mobile data consumption.

"By the end of 2006, data consumption will rise to 20 to 21 percent; however the portion 3G contributes is only about 5 percent, whereas data services such as SMS contribute 70 to 75 percent," Chaisatien said.

While "unlimited" or high bandwidth plans are sustainable, providers will need to capitalize on excess bandwidth or face revenue dilution, he said.

"There is no problem from an engineering perspective; however, from a business angle these unlimited plans will heat up competition and cannibalize revenue," he said. "The key to 3G success is business; carriers will have to come up with something more exciting to increase margins - they should ask themselves 'how can we capitalize on this excess [3G bandwidth] capacity'?"

High Speed Downlink Packet Access (HSDPA), or 3.5G, extends 3G similarly to the way in which 2.5G evolved from 2G.

Chaisatien said HSDPA will be used initially by the larger carriers such as Hutchinson and Vodafone through 'all-you-can-eat' packages, and will be adopted industry-wide by mid 2007.

"We will see HSDPA implemented by one or two carriers by end of 2006, while almost all carriers will have it (in major capital cities) by mid-2007," he said. "I think this could easily be the new battleground for Christmas 2006, just like 3G was in [Christmas] 2005."

"These high-bandwidth plans exist for attracting users to 3G and educating them about how 3G works," he said.

However, Vodafone business PR manager Greg Spears disagreed pricing was high claiming the telco's offerings are competitive and commercially sustainable.

"The next step for 3G is HSDPA which has speeds of roughly 1.8Mbps - it can be thought of as a way of future-proofing the network [against reaching full capacity]," he said.

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