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ITU Internet Reports 2002:
The
Internet
for a Mobile Generation
Executive
summary
September
2002
INTERNATIONAL TELECOMMUNICATION UNION
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This
Executive Summary gives a brief résumé of the main
conclusions of the ITU Internet Reports 2002: Internet for a
Mobile Generation. It includes a selection of charts, tables
and boxes and a table of contents of the full Report.
The
full Report (240 pages) gives an in-depth technical background to the
history and current development of the mobile Internet including an
analysis of market and regulatory trends. It contains the latest data
on the licensing and deployment of third-generation mobile systems and
services. Individual country case studies serve to illustrate these
various aspects. Finally, the Report contains an 80-page statistical
annex with data on over 200 economies worldwide.
The
ITU Internet Reports 2002: Internet for a Mobile Generation
was written by a team from the ITU Strategy and Policy Unit (SPU)
led by Lara Srivastava, including Joanna Goodrick, Tim
Kelly, Tad Reynolds and Yoshihisa Takada. The statistical
tables were compiled by Tad Reynolds, with the assistance of
Esperanza Magpantay and Nathalie Delmas. The report was edited by
Joanna Goodrick, and formatted by Yolanda Azélart. The
cover design is by Jean-Jacques Mendez.
Most
of the data contained in the report is taken from the ITU World
Telecommunication Indicators Database. The database is available
on CD‑ROM, or via the Internet as a subscription service.
The
Internet Report may be ordered by using the order form included at the
back of this summary, or electronically from the ITU website at www.itu.int/osg/spu/.
The
views expressed in the report are those of the authors and do not
necessarily reflect the opinions of ITU or its membership.
Ó
ITU, Geneva 2002
International
Telecommunication Union (ITU), Geneva
1
The Big Gamble
“It
requires no great leap of the imagination to believe that the convergence
of mobile communications and the Internet will produce something big…
but it may take longer than you think”
Mobile
communications and the Internet were the two major demand drivers for
telecommunication services in the last decade of the twentieth century.
Combine the two—Mobile Internet—and you have one of the major demand
drivers of the first decade of the twenty-first century. That’s the
theory, at least.
As
Figure 1 shows, the two industries have exhibited remarkably similar
growth patterns since the start of the 1990s, but with a lag of about two
years. So, it requires no great leap of the imagination to believe that
the convergence of mobile communications and the Internet will produce
something big, perhaps even the mythical “sum that is bigger than its
parts”. In this view, the convergence of mobile communications and the
Internet would produce innovations, new applications and new services that
would not otherwise be possible. For instance, the service of knowing the
location of a particular mobile user, combined with the service of
targeted advertising, should theoretically make it possible for local
businesses to attract users that are passing by, within a certain radius.
Similarly, multimedia messaging services will open up visual, more
exciting person-to-person communications. Thus, the mobile Internet could
give birth to a whole new family of services.
Exploiting
the new opportunities offered by the mobile Internet will require high
levels of capital investment, possibly higher than ever before in the
telecommunication industry. Investors want to see proof that a market for
mobile Internet services exists. But operators can’t provide that proof
until they build the networks. Because of this “chicken and egg”
conundrum, the mobile Internet is potentially the biggest gamble the
telecommunication industry has ever taken on. The lesson so far is that
the pioneers get burnt fingers: to date, more than US$ 100 billion
has been invested in acquiring 3G licences, even before network
construction and service roll-out costs are taken into account. The timing
of 3G investment could hardly be worse, with venture capitalists running
scared of anything that has the word “telecom” or “Internet” in
it. Consolidation is on their menu, not expansion.
As
previous waves of technological convergence have shown, we should not
necessarily expect to see the commercial fruit of the mobile Internet for
some ten or fifteen years yet. It will not happen straight away, but that
does not mean it will never happen. It is worth remembering that the
“hype” generated by a particular technological development often falls
flat before market development begins to take off. Consequently, the
popular view is that a particular development has “failed”, whereas
the more accurate explanation is that market development has not yet got
going properly. Those who forget their history are condemned to repeat it.
So it is with some caution—and long-term vision—that the pioneers of
this new wave of convergence must prepare their business plans.
Figure 1: Mobile and Internet—identical
twins, born two years apart
Mobile subscribers and
Internet users (millions)
Penetration
rates (per hundred inhabitants), worldwide
Source:
ITU World Telecommunication Indicators Database.
Box 1: Singapore—e-ready, but not
so Internet mobile…
Singapore
has almost 70 per cent mobile phone penetration, over 50 PCs per 100
inhabitants, and over one-third of its inhabitants are Internet users,
making it one of the most ICT-connected and -adept nations worldwide.
Internet use has been actively promoted by the Government, with evident
results: Singapore is considered a world leader in ICT use in education,
with innovative programmes run in schools and universities. Moreover,
the high level of literacy in English means that Internet content can be
easily accessed. The importance of the language factor is also
highlighted by the fact that almost half of Singaporean adults whose
first language is English are online (see chart below). Singapore
is a world leader in e‑government applications. In line with its
vision of becoming an “intelligent island”, the Government has
promoted the creation of a broadband backbone network—Singapore
One—available to all citizens.
Rather
surprisingly though, the take-up of mobile Internet has been lukewarm.
Although all three mobile operators, SingTel (the former incumbent),
MobileOne (M1), and StarHub, obtained 3G mobile licences when these were
auctioned in April 2001, none have yet proceeded to roll out 3G
networks. There has even been pressure on the regulator, the Infocomm
Development Authority of Singapore (IDA) to delay or abolish the 31
December 2004 deadline for national 3G network roll-out. The IDA,
however, held to its position, arguing that European and Scandinavian
regulators have not modified their 3G roll-out requirements, and that
operators in those countries are on schedule to provide services
according to deadline. Notwithstanding the optimistic regulatory stance,
the operators themselves are not yet proceeding with 3G network
roll-out, more cautiously opting to further exploit the possibilities
offered by WAP and GPRS. SingTel Mobile, for example, plans to introduce
MMS services in 2002.
Source:
Adapted from ITU Internet case study on Singapore. See www.itu.int/casestudies.
2
Towards convergence and interoperability
“We
have learned from 2G that person-to-person messaging, simple interfaces
and timely content delivery will be the key to 3G success… On a
technical level, continued efforts towards the interoperability of radio
interfaces and the evolution to an IP-based core network will be
crucial”
Although
mobile data services are already available on 2G platforms through WAP, i‑mode
and short messaging service (SMS), it is through the advent of 2.5 and 3G
that users will begin to fully reap the benefits of the mobile Internet,
through high-speed communications and multimedia applications. Figure 2
shows possible migration paths from 2G to 3G technologies. What we have
learned from the success and failures of 2G technologies is that
person-to-person messaging, simple interfaces and timely content delivery
will be the key to future service development and revenue generation. A
mere simulation of the fixed-line Internet experience will not compel
users to take up mobile data services. The development of an adequate
payment system for mobile devices is also crucial: for “always-on”
applications, per-minute billing may have to give way to volume-based
billing.
The
combination of mobile and Internet technologies—for instance in the form
of SMS messaging—is already transforming the way people interact and the
way business is done. Some 24 billion SMS messages were sent worldwide in
the first quarter of 2002. Messaging services have also brought
information technology closer to groups that have traditionally had
limited access to it, such as children and the deaf community. High-speed
data services combined with additional functionality, such as location
technologies and improved security, will further enhance the user
experience.
On
a technical level, the viability of future 3G services will rely on
continued efforts towards the interoperability of radio interfaces, the
evolution to an IP-based core network and the harmonization of formats for
content delivery. At the service level, convergence between the fixed and
mobile Internet is already happening, through services such as mobile
instant messaging and fixed-line SMS. This interoperability will
eventually encompass complementary and alternative network technologies,
such as wireless LANs, short-range connectivity technologies, fixed
broadband networks, etc. Regulators and industry players alike need to
realize that there are a number of different options for providing mobile
Internet services, and that 3G services must be considered in their global
context. As Figure 2 indicates, 3G technologies are only a part of the
overall picture.
Figure 2: Radio access systems for
mobile data
Possible
migration paths from 2G to 3G
Ranges and data rates
Note:
Bottom chart uses logarithmic
scales.
Source:
ITU. Bottom figure adapted from European
Information Technology Observatory 2002.
3
Market trends
“The
mobile Internet should not be considered as a substitute for the
fixed-line Internet…”
There are a number of factors that will enable the rapid and successful
development of the mobile Internet. First and foremost, the rapid
deployment of high-speed 3G networks will be crucial to the facilitation
of mobile multimedia services. Second, the availability and affordability
of adequate Internet-enabled handsets will be a prerequisite for users.
Third, unrestricted and non-proprietary mobile Internet content needs to
be fostered; players should be discouraged from imposing commercial
restrictions on content providers or establishing “walled gardens” of
content. Finally, simple and transparent billing models are required,
taking into account the difference between voice and data services and the
growing importance of content. In all cases, the mobile Internet should
not be considered as a substitute for the fixed-line Internet.
Nevertheless, valuable insights can be gleaned from the evolution of the
fixed-line Internet, notably relating to its early development.
Initially, users were charged per-minute for browsing the Internet.
In most countries, operators then moved to a subscription model
with call charges for time spent online.
In countries where local calls are unlimited, like the United
States and Canada, flat-rate plans were introduced in December 1997.
Countries in Europe and Asia soon followed suit. It can be said that the
mobile Internet is following a similar trajectory. In
the early days of WAP over GSM, users were billed for every minute they
spent online. Services such as i-mode combine monthly subscription with
volume or packet-based billing. Always-on GPRS billing models have evolved
with the introduction of volume-based charges. With high-bandwidth
applications and increased spectrum efficiency, will flat rates become the
norm for mobile data, as they have done for fixed data? Flat-rate schemes
for data services are already being considered by a number of mobile
operators. But users will have to wait some time before these become
widely available.
Figure 3: Early 3G pioneers
Japan
Republic of
Korea
Note: In
Korea, there are no subscription charges for 3G mobile Internet services
(CDMA2000 1x and 1x-EV-DO). The figures show the number of handsets
theoretically capable of supporting these services.
Source:
ITU.
4
Regulatory and policy aspects
“Regulators’ first mission
is to ensure fair competition throughout all stages of the licensing
process… but the story does not end with licensing”
Fair competition policy
has been what has worked best in the development of both the mobile and
Internet markets. In the mobile Internet era, it will still be
regulators’ first mission to secure fair competition throughout all
stages of the licensing process. During licensing, when selecting the
participants in the mobile Internet market, regulators should ideally
select operators using market-based methods. Table 1 shows the
third-generation licensing methods applied in selected countries
worldwide, illustrating the wide range of fees charged and methods used,
including auctions, “beauty contests” (comparative selection), and
mixed or “hybrid” approaches.
But the story does
not end with licensing. After licences have been awarded, regulators have
a crucial role to play in a number of ways. One of these is the need to
monitor the mobile market structure so as not to allow dominant operators
to abuse their market position over less established operators. The introduction of Internet access into the mobile
market creates potential new bottlenecks such as portals, and new breeds
of billing system. Mobile operators have a strong potential influence on
the market for Internet platforms, and regulators are responsible for
ensuring that platforms are as open to competition as possible.
Regulators also need to
cooperate and harmonize approaches to global roaming and terminal
circulation capabilities internationally. In an increasingly globalized
economy, both these capabilities will be necessary for the mobile Internet
market to flourish. International and regional organizations have a role
to play in guiding regulators in this regard.
Security is also a key
issue, both in terms of network vulnerabilities and of data privacy. As
interconnection between wireless, and wired networks becomes easier, so
hitherto controlled and traceable information becomes more vulnerable to
malicious usage.
With mobile data
services, including future m-commerce services, providers have more
information than the average user, and therefore have greater bargaining
power. Marketing tools, such as spamming, can overstep the line of
acceptability and become a nuisance to users. Assuming that most mobile
users have little knowledge of mobile technology and legal issues, it is
imperative that consumer rights be protected by appropriate measures.
Regulators should therefore establish recognized consumer protection
rules, for example by providing charters or guidelines on protection of
consumers’ legal rights. The Organisation for Economic Co-operation and
Development (OECD) has, for instance, produced a set of Consumer
Protection Guidelines, outlined in Box 2.
Box
2: Consumer protection for m-commerce
There
are a number of differences between e‑commerce using PCs, and
m-commerce using mobile phones. One of these is the relative speed of
terminals. Another is the potentially large number of users with limited
experience and insufficient technical and legal knowledge about
m-commerce. A further difference relates to the limited screen capacity
of mobile terminals to display items, such as forms or contracts, as
well as limited keypad functions for entering data (e.g. the absence of
specific “delete” or “enter” keys). This affects the way in
which personal information might be solicited or captured. For these
reasons, special regulations for mobile Internet consumers may be
required, although established e‑commerce guidelines may provide a
good basis for similar provisions to protect m-commerce consumers.
One
example of such protection in the case of e-commerce is the OECD’s Consumer
Protection Guidelines, issued in December 1999. Its
recommendations, outlined below, are designed for inclusion in possible
legislation. It recommends that governments, business communities and
consumer groups work together nationally and internationally to
implement the guidelines and make companies and the general public more
aware of consumer protection laws. In many countries, various entities
have developed similar guidelines to protect consumers in
e‑commerce.
·
Businesses
should not act, or make any representation or omission that might be
deceptive, misleading, fraudulent or unfair. Information about
companies, products or services should be “clear, conspicuous,
accurate and easily accessible”. Businesses should comply with
policy/practice statements made and be aware of global e-commerce
regulations.
·
Consumer
requests to stop unsolicited commercial e-mail messages (spamming)
should be respected.
·
Information
on transaction terms, conditions, delivery and costs should be
sufficient for the customer to make an “informed choice” about
whether to proceed with a purchase.
·
The consumer should be able to check precisely the
goods/services they are buying before completing the transaction and be
able to cancel if they desire to.
·
Companies
should provide secure payment methods.
·
Consumers with a complaint should have
access to “fair and timely” redress and not face “undue cost or
burdens”. Governments should assess current legal frameworks to verify
that e-commerce consumers are given the same protection as other
consumers.
Source:
OECD Guidelines For E-Consumers,
OECD. See
http://www.oecd.org/EN/home/0,,EN-home-29-nodirectorate-no-no--29,00.html.
Table
1:
Allocation of 3G mobile licences in selected economies worldwide
Country
|
No.
of licences
|
Mobile
incumbents
|
Method
|
Date
awarded
|
Amount
paid, US$ million
|
Australia
|
6
|
3
|
Regional auction
|
March 2001
|
610
|
Austria
|
6
|
4
|
Auction
|
November 2000
|
618
|
Belgium
|
4
|
3
|
Auction
|
March 2001
|
421
|
Czech Republic
|
2
|
2
|
Auction
|
December 2001
|
200
|
Denmark
|
4
|
3
|
Sealed bid auction
|
September 2001
|
472
|
Finland
|
4
|
3
|
Beauty contest
|
March 1999
|
Nominal
|
France
|
4
(2
pending)
|
3
|
Beauty contest + fee
(Revived auction for 2 pending)
|
July 2001
(Results
of revived auction due in September 2002)
|
4’520
(subsequently reduced
to 553 million each, plus 1
per cent of revenue
|
Germany
|
6
|
4
|
Auction
|
August 2000
|
46’140
|
Greece
|
3
|
3
|
Hybrid
|
July 2001
|
414
|
Hong Kong, China
|
4
|
6
|
Hybrid
|
September 2001
|
Minimum 170 each plus royalties
|
Israel
|
3
|
3
|
Beauty contest + fee
|
December 2001
|
157
|
Italy
|
5
|
4
|
Hybrid
|
October 2000
|
10’180
|
Japan
|
3
|
3
|
Beauty contest
|
June 2000
|
Free
|
Korea (Rep.)
|
3
|
2
|
Beauty contest + fee
|
August 2001
|
2’886
|
Malaysia
|
3
|
3
|
Beauty contest
|
December 2001
|
Nominal
|
Netherlands
|
5
|
5
|
Auction
|
July 2000
|
2’500
|
New Zealand
|
4
|
2
|
Auction
|
January 2001
|
60
|
Norway
|
4
|
2
|
Beauty contest + fee
|
November 2000
|
88
|
Singapore
|
3
(+1?)
|
3
|
Cancelled auction
|
April 2001
|
165.8
|
Slovenia
|
1
|
2
|
Cancelled auction
|
December 2001
|
82
|
Spain
|
4
|
3
|
Beauty contest + fee
|
March 2000
|
480
|
Sweden
|
4
|
3
|
Beauty contest
|
December 2000
|
44
|
Switzerland
|
4
|
2
|
Auction
|
December 2000
|
120
|
Taiwan, China
|
5
|
4
|
Auction
|
February 2002
|
1’400
|
United Kingdom
|
5
|
4
|
Auction
|
April 2000
|
35’400
|
Total
(25)
|
99
+
|
79
|
13 auctions,
9 beauty contests,
3 hybrid
|
—
|
105’330
+
|
Source: ITU, European Commission, UMTS Forum and
3GNewsroom.com.
5
Worldwide lessons for a new generation
“Many of the
operators in the countries that have yet to initiate 3G deployment are
taking a more gradual, or cautious approach”
The major Asian
economies are the clear first movers in 3G licensing, with Japan and Korea
being the first to actually deploy 3G services. But Hong Kong, China also
awarded 3G licences early on, in an exemplary licensing process.
Singapore, another ICT-friendly economy, may not make the move to 3G as
rapidly as might be expected (see Box 1 on page 5). Some of the less
developed Asia‑Pacific economies, such as China, the Philippines,
and Thailand, are less ripe for 3G roll-out, and are in no rush to award
3G licences owing to their particular market contexts.
In Europe, many
countries opted for an auction approach to licensing, and sold them off at
prices that might have seemed justified at the height of the mobile boom
during 1999 and 2000, but which have since been crippling to operators
left with huge costs to recoup. In Latin America, a number of countries
have fully embraced mobile telephony (see the examples of Chile and
Venezuela in Figure 4, top chart), experiencing a mobile boom in relation
to fixed-line growth. Africa has also seen high mobile growth rates,
testifying to the capacity of mobile to substitute fixed-line telephones
in developing economies, where fixed-line infrastructure is often lacking
(see Figure 4, bottom chart).
Although the
experience of Japan and Korea would suggest the huge potential of the
mobile Internet, the high hopes for 3G have been somewhat dampened by the
slump of recent years in the telecommunication sector as a whole, as well
as evidence that some mobile markets are reaching saturation. Many
operators in countries that have yet to initiate 3G deployment are taking
a more gradual or cautious approach, concentrating their efforts on new
multimedia-type applications over existing 2G platforms. Many are choosing
to upgrade their systems to support higher data transmission speeds needed
for images. This approach may be a useful way to “test the waters” for
3G, or to exploit more fully the potential of 2.5G technologies without
the need to invest heavily in new 3G networks.
But driving mobile
growth alone is not enough: Internet content also needs to be accessible,
and relevant, and efforts need to be made to lift language barriers.
Thailand is one example of a country where the limited knowledge of
English has been an obstacle to SMS use. This is in contrast on the one
hand with Singapore, where English is widely understood, and on the other
hand with Korea, where efforts to develop Internet content in Hangeul, and the availability of handsets that support the language
characters, have contributed significantly to the success of mobile data
applications.
In a number of
countries, SMS has been the unexpected “killer application” that has
sometimes—ironically—effectively delayed the introduction of 3G
services. Prepaid schemes have also played a part, as exemplified by the
case of the Philippines, but also borne out elsewhere. The “SMS
phenomenon” shows that finding the elusive “killer application”,
along with ensuring affordability of services, will be key factors for the
success of 3G.
Figure 4: Latin American and
African mobile markets
Mobile subscriber growth in Chile
and Venezuela, 1995-2001
Mobile
and fixed telephone penetration in selected African countries, year-end
2001
Source: ITU World
Telecommunication Indicators Database
6
Towards a mobile information society
“In the future, we
may each own dozens of miniaturized mobile communication devices. A new
era of pervasive computing is dawning with huge implications for our
personal lifestyles and values”
The mobile revolution is changing the way we live and
work. Mobile phones are already pervasive in all major developed economies
and in an increasing number of developing ones too. But with the advent of
the mobile Internet, wireless gadgets are set to invade new areas of
personal life and work. The mobile Internet is a powerful enabling
technology that will make possible new services and applications. But it
may also threaten traditional values of privacy, security and courtesy.
The mobile Internet is an intrusive technology.
In the 1980s and
1990s, the microchip spread from the computer into hundreds of other
devices, from computers to washing machines to cars. The average car,
these days, has as much computer power as some of the early Apollo
rockets. Most families in developed nations already own dozens of
microchips embedded in different devices. The next stage in this process
of pervasive computing is for those microchips to gain the ability to
communicate and to report on their location and status. The technology to
make this happen is already available—for instance, nanotechnology,
cellular communications, cheap processing power, location-tracking
systems—but the networks and the billing systems are not yet in place.
The mobile Internet will make that possible.
But are we ready for
a world in which an intelligent fridge sends out the grocery-shopping
list, or a mobile phone tells parents that their children are not yet home
from school? In the mobile information society, the amount of data about
our personal lives that could theoretically be collected, stored and
traded will increase dramatically. We may want to use that data ourselves,
for instance for improved health or security, but who else do we want to
have access to it?
The major uses of the
2.5G mobile Internet are likely to be messaging (see the example of China,
Figure 5, bottom chart), but the extra bandwidth of 3G will allow for
download, video streaming and multiplayer games (as in Korea, Figure 5,
top chart). Initial
experiences with 3G mobile Internet services, in Korea and Japan for
instance, indicate that it is teenagers who are driving the market. In
Korea, for instance, although teenagers have lower disposable incomes than
older age groups, they are spending around three times more per user on
mobile data services. In Japan, video messaging has proved immensely
popular among young people. What this suggests is that the younger the
user, the more likely they are to be comfortable with the intrusive nature
of mobile communications. Youngsters also have more time for playing games
and sending frivolous or flirtatious messages. The key question is whether
they will continue to use the mobile Internet when they are older and have
more spending power. If they do, then the 3G gamble will seem like money
well spent for the operators. If not, then it is time for investors to
start worrying.
Figure
5: How people use the mobile Internet
Republic of
Korea (3G)
China
(2.5G)
Source:
Top: SK Telecom. Bottom: China Mobile.
Statistical Annex: Top 20 Mobile/Internet Index
rankings, worldwide*
Economy
|
Mobile/Internet
score (/100)
|
Ranking
|
Hong Kong, China
|
65.88
|
1
|
Denmark
|
65.61
|
2
|
Sweden
|
65.42
|
3
|
Switzerland
|
65.10
|
4
|
United States
|
65.04
|
5
|
Norway
|
64.67
|
6
|
|
63.42
|
7
|
United Kingdom
|
63.00
|
8
|
Netherlands
|
62.25
|
9
|
Iceland
|
62.03
|
10
|
Canada
|
61.97
|
11
|
Finland
|
61.22
|
12
|
Singapore
|
60.58
|
13
|
Luxembourg
|
58.58
|
14
|
Belgium
|
57.80
|
15
|
Austria
|
57.72
|
16
|
Germany
|
55.53
|
17
|
Australia
|
55.40
|
18
|
Portugal
|
55.13
|
19
|
Japan
|
54.94
|
20
|
*Note:
The above table is an extract from the ITU Mobile/Internet Index
included in the full Internet for a Mobile Generation Report. The
Index measures how each economy is performing in terms of information
and communication technologies (ICTs) while also capturing how poised it
is to take advantage of future ICT advancements. The Index covers 26
variables sorted into three groups: infrastructure, usage, and market
structure. These three components combine for a score between a low of 0
and a high of 100. The table is taken from the Statistical Annex to the
Report, which provides comprehensive data on network and service
development for over 200 economies.
|