Is mobile broadband access the killer 3G app?

In the hype that preceded and followed the launch of 3G cellular services much of the focus was on its ability to support video calling. But it is mobile broadband access that Vodafone is touting as the key benefit of its just announced 3G network expansion.

Vodafone this week announced that it would, like Optus, upgrade most or all of its 2G GSM network to 3G operation giving it coverage of 95 per cent of the population (Optus' stated target is 96 per cent and Telstra claims to cover more than 98 per cent with Next G).

But check the spin that Vodafone put on this. The press release was headed "Vodafone plans to accelerate mobile broadband beyond the city limits, reaching 95 per cent of the Australian population."

And it went on to quote CEO, Russell Hewitt as follows: "We're accelerating plans to upgrade our mobile network, which will provide our customers with faster download and upload speeds, better performance and improved services. Customers want fast, reliable access to mobile Internet content and emails on the go and they'll soon be able to experience a host of exciting, new content destinations." And further on, it added, almost as an afterthought, "The upgrade...will also improve network coverage and capacity for standard 2G and 3G voice calls."
The only conclusion I can draw from this is that, despite the fact that most of us would only rarely want to use mobile broadband outside metro areas, the inability to offer it is a major disadvantage, and this is borne out by the significant price premium Telstra is able to charge for mobile broadband on Next G.

When Optus announced its network expansion in January the spin was very much about bringing competition to Telstra's Next G network, with CEO, Paul O'Sullivan saying: "Optus is taking a bold step to bring competitive third generation mobile communications technology to the vast majority of Australians...The incumbent thought that it could lock up regional Australia under a 3G monopoly. But Optus continues to build its business on bringing competition and improved products and services to customers...Today, competition in rural and regional Australia is weak, with the incumbent having substantial excess market share...History shows that when we focus on a new market, with new offers and real alternatives for customers, we can achieve our natural market share."

I'd have to say that with three mobile networks now set to serve sparsely populated areas of Australia, competition is starting to look somewhat unnatural, and only days ago I suggested that the huge price differentials for HSDPA data services between the offerings of Telstra, Optus, Vodafone and 3 were only sustainable while Telstra enjoyed a huge coverage advantage over its rivals.

A few years ago some sanity seemed to creeping into this overbuild with Telstra and 3 announcing plans to share 3G network radio infrastructure. That gave them a huge cost advantage over Optus and Vodafone who were quick to follow suit.

But the Telstra 3 deal was torn up when new CEO, Sol Trujillo announced plans for Next G and the Vodafone Optus deal was effectively dead when Optus announced its 3G network expansion. Vodafone confirmed this today saying that the joint-venture with Optus would continue for major metropolitan areas, but that Vodafone would go it alone in all other parts of the country.

This leaves 3 somewhat in the p*o, to but it bluntly. It has spectrum only in major metro areas and did have a roaming agreement with Telstra onto Telstra's first 3G network, operating at 2100MHz, for other areas. But with the launch of Next G at 850MHz Telstra ceased to expand that network and is adamant it will not wholesale 3G access to any other operator.

There has for years been speculation that Vodafone would throw in the towel in Australia (generally its parent likes to be number one or two in the markets in which it operates). Today's announcement should put an end to those rumours, or rather redirect them onto Hutchison Telecom, parent of 3.

How all this will pan out is anybody's guess. It seems hard to believe that three separate networks will survive, and Telstra has the huge advantage of being first mover, an established presence and brand in rural Australia and lots of content to offer 3G subscribers via BigPond.

HSDPA now seems to be shaping up as a very viable technology to deliver broadband in rural and regional Australia, but many pundits claim that the carriers simply do not have sufficient bandwidth to sever large numbers of subscribers, and three separate networks is not the most efficient way to sue bandwidth.

I hope this does not turn out to be a re-run of the mid nineties HFC debacle when Telstra and Optus spent billions dolling out duplicate broadband infrastructure in metropolitan areas. Protestations to the government from many industry participants fell on deaf ears and the debacle continued with only one winner: Telstra/Foxtel.

We don't need three separate 3G networks in sparsely populated areas of Australia, we need one that maximises use of spectrum and network resources with competition at the service level. It's the same argument as for FTTN. But whereas it is prohibitively costly and highly impracticable to duplicate FTTN infrastructure it is all to easy to duplicate, or triplicate cellular infrastructure.