Better services, lower prices key to 3G growth

Mobile-service providers must offer attractive rates and low-priced handsets in launching high-speed third-generation (3G) service -- otherwise their break-even points for their huge investments will be delayed, analysts said yesterday.

Banking on the high bandwidth in service transmission, the data-oriented 3G service allows users to download music or streaming video clips from the Internet onto a handset. Users can also make video phone calls and book film tickets.

"Telecommunication operators have not yet presented, and do not necessarily have to devise, `killer applications' for 3G subscribers because offering appealing packages will be the key to success," said Peggy Chang (張意珮), an analyst with Topology Research Institute (拓墣產業研究所).

Far EasTone Telecommunications Co (遠傳電信), the nation's No. 2 mobile carrier, yesterday launched its 3G operations with four types of 3G-compatible handsets to provide multimedia services.

Each 3G-capable mobile phone, grouped with one of five monthly fee programs, is priced between NT$9,900 (US$310) and NT$18,700.

Video phone call rates are set at NT$9.6 per minute with same operator numbers and NT$19.2 per minute with others.

The high cost might deter interested users from subscribing, especially since most consumers don't yet fully understand the so-called 3G operations and have no imperative to make the switch, Chang said.

Citing Taiwan Mobile Co (台灣大哥大) as an example, she said the company had expected to attract 1,000 3G users within one month of soft-launching its services in May. But it only signed up about 300 subscribers because its 3G handsets were going for NT$15,000 apiece.

Even state-run Chunghwa Telecom Co (中華電信), the nation's largest phone company, has to carefully do the math and hit the market with promotional gimmicks. Chunghwa said on Monday that it is offering Motorola V975 handsets for just NT$1 -- but consumers have to sign up for the NT$1,683-a-month program.

"Operators should work together to jointly purchase mobile phones in order to sharply reduce prices. In addition, voice services in the 3G system should be charged at a lower rate than those in the 2G or 2.5G networks in order to get the original customers to transfer to the new technology," she said.

Feng Lin (林育烽), a senior analyst with the Market Intelligence Center (MIC, 市場情報中心), agreed that cheaper prices for handsets and service rates play a major role in enhancing consumers' willingness to change phones.

Japan's telecom leader NTT DoCoMo spent nearly four years after it inaugurated its 3G FOMA service in 2001 slowly transforming its operation focus to 3G, Lin said, and last year its coverage rate surpassed 90 percent.

Therefore, even though Far EasTone's video call services are restricted to major cities -- between Taipei and Hsinchu, as well as between Taichung and Kaohsiung -- he said this will not impede 3G development but companies must offer more discounts to secure their subscriber bases.

Hong Kong's Hutchison Whampoa Ltd (和記黃埔), which has the most 3G users in the world except for in Japan, employed market segmentation to boost its subscriber numbers, by first lowering voice rates to lure customers, who would gradually spend money on multimedia services, Lin said.

"Whether they [Taiwan's 3G companies] can quickly find a successful business model will depend on how they devise their market segmentation," Lin said.