Internet for a Mobile Generation

A new major ITU Report*

Challenges to the industry: Build the network

“Internet for a Mobile Generation” is the title of a new report released by the International Telecommunication Union at the beginning of September 2002. This year’s edition is the fourth in the series “ITU Internet Reports”, previously known as “Challenges to the Network”. The report was written by a team of authors from the ITU Strategy and Policy Unit (SPU), who state that “this edition could equally have been entitled ‘Challenges to the industry: Build the network’, because the reality is that the network which will be needed to sustain the mobile Internet is still being built”.

Summary of the Report

In its introductory chapter, the 240-page Report defines the mobile Internet in the larger context of technological convergence and market demand. Chapter two focuses on technologies and applications, provides a technical overview of high-speed mobile networks and available services and applications for the mobile Internet, and goes on to examine the competition or co-existence of various network technologies. Chapter three discusses market trends, and puts the spotlight on the changing landscape and the commercial challenges involved in creating a mass market for mobile Internet services. Regulatory and policy aspects are covered in chapter four, which also examines the hurdles faced by regulators and policy-makers in a converging market environment. Chapter five contains the latest data on the licensing and deployment of third-generation (3G) mobile systems. It draws on country case studies carried out by ITU to highlight a number of lessons from the diverse experiences these cases present. Chapter six, entitled “Towards a mobile information society”, looks ahead to the broader societal implications of the mobile Internet. Finally, the Report contains an 80-page statistical annex with data on over 200 economies. The tables include a specially prepared Mobile/Internet Index that attempts to gauge the likelihood of adoption of the mobile Internet in different economies.

The mobile revolution

Internet for a Mobile Generation looks at ways in which the mobile revolution — past, present and future — is changing the way people around the world live and work. From analogue cellular networks, commercialized in the early 1980s, to digital cellular ones, launched in the early 1990s, and now 3G to kick off the new millennium, the revolution rages on. In 1991, only one per cent of the world’s inhabitants had a mobile phone. Ten years later at year-end 2001, almost one in every six, or 948 million, of the world’s inhabitants had a mobile phone. The phenomenal growth of mobile has surpassed even the most optimistic projections and many economies now have more mobile phones than fixed lines. This is true not only in developed economies, but also in developing ones (see the charts and figures). By the end of 2002, it is predicted that there will be more mobile phones than fixed lines in the entire world.

Another reason mobile penetration has increased so quickly is the advent of prepaid calling cards. Many users in developing countries do not have easy access to credit, which they would need to sign up for a fixed-line telephone. Operators in many countries have done away with the need for credit by adopting prepaid calling plans, thus attracting large numbers of new users. This has been a boon for mobile operators who previously could not provide access to those they considered to present credit risks. This results in a huge increase in the number of mobile users in developing and least developed countries that can now afford to have telephone service.

Developed countries have also been quick to adopt mobile technologies, but with different underlying user incentives. Users in developed countries adopt mobile phones primarily for mobility and convenience, rather than necessity, as most users also have fixed lines at work or home. The latest trend in developed countries is that users are choosing to drop their fixed connection altogether, rather than paying for both a mobile and fixed line.

Handsets

The advent of the mobile Internet could serve to revitalize the mobile handset market. Handset manufacturers enjoyed a period of strong growth up until 2001 when, for the first time, mobile handset sales actually fell from one year to the next. This followed a 60 per cent compound annual growth rate from 1996 to 2000. The drop in sales is certainly not due to lack of demand for mobile communications: on the contrary, people are using mobile services more than ever. Rather, the problem for handset manufacturers lies in the fact that certain markets, namely Western Europe and parts of Asia, are nearing saturation levels. This leaves manufacturers and operators with the conundrum of how to stimulate demand for new handsets when most users already have a mobile phone. The answer is two-fold. First, they must find ways to increase revenues from existing users. Second, they need to offer new services that require phones with enhanced functionality and colour screens.

While the solution may sound simple, it has been much more difficult to implement in practice. Operators have been able to raise revenues by offering newer services such as SMS to existing users. However, equipment manufacturers have found it a difficult task to convince users to upgrade to newer phones with additional features. Even with the promise of Internet services over general packet radio service (GPRS) networks in Europe, manufacturers have not been able to produce large numbers of phones to capture the initial demand. In addition, as with personal computers, many users wait until the very last moment to purchase handsets in order to obtain the most features and value for their money.

Handset manufacturers are also feeling pressure from personal digital assistant (PDA) manufacturers that have built wireless connections into their devices. While the PDAs are not yet in wide circulation, they may serve to stimulate take-up of high-speed services such as GPRS and 3G, because their larger colour screens are better suited for multimedia viewing and delivery. Also, in the mobile market as a whole, enhanced data services are fast becoming a lucrative source of revenue.

Security issues

The issue of security is a very important one, as concerns in recent years about viruses, cyberterrorism, hackers, and so forth, have shown. Data protection for mobile transactions is also an important security issue. Data in digital form are particularly vulnerable to being copied or modified by a third party, and there is the added complication that such data can be produced anonymously, making it difficult to identify malicious intruders or “spoofers”.

In addition, with wireless becoming the network of choice, issues such as access to emergency services and the role of location-based services are being examined. The main vulnerabilities occur at the translation point between the wireless protocols and the wireline (fixed) protocols. Others exist once the transmission arrives at the wired Internet and becomes subject to the vulnerabilities of that network.

ITU’s Internet Reports are a contribution to the development of the Internet and to extending the benefits of new information and communication technologies, such as mobile technology, to all the world’s inhabitants. This is in line with Resolution 101 of the Plenipotentiary Conference (Minneapolis, 1998), which calls upon ITU to “fully embrace the opportunities for telecommunication development that arise from the growth of IP-based services”.