For an informed view on connected entertainment in the UK & Ireland, visit Cue Entertainment
When
every shopper has a mobile phone at hand, there are clearly business
opportunities for the taking and eBay claims that an early introduction of 4G
networks will be good for UK plc.
The
November release by eBay of a “mobile manifesto” that called for Ofcom to speed
up the introduction of 4G data networks in the UK in order to help retailing
came as something of a surprise. In the years since its 1995 launch, eBay has
played a significant role in moving shoppers from high street to couch.
The more
cynical observer might think that this submission to the government is a plea
simply on the company’s behalf. The case for improved mobile broadband does not
depend on helping consumers to search for online deals as they browse in
bricks-and-mortar stores.
Online
shopping is not data-intensive; it does not suck up mobile bandwidth in the
same way as streaming long-form music and movies from the cloud. No one
receives a “buffering” message when checking the price of baked beans at the
local Asda supermarket although at peak times a 4G network can be just as
congested as a 2G or 3G connection. The “contention ratio”, or number of other
people trying to go online at the same time, is just as likely to slow down a
fast broadband connection as a slow one, as many subscribers know only too
well.
Certainly,
eBay UK Retail Director Angus McCarey has a point when he says that today’s
consumers have a store in their pocket with “the ability to perform all sorts
of functions on a single device: everything from shopping, store location,
shopping lists, in-store price comparison, self-scanning and self-checkout (to)
earning loyalty points and redeeming vouchers and coupons.”
None of
these functions requires a high-speed data connection. Miss a few bytes of
streaming video while watching a feature film and the impact on enjoyment is
significant. To wait for a moment before viewing a 30-second advertising
message is not a disaster. Shopping apps do not bring the network to a
standstill: video does. If video becomes a key component in mobile retail,
stand by for the first insurance claim to involve a shopper who steps in front
of a cyclist while watching a commercial for new sneakers on a smartphone.
It is a
mistake to conflate bandwidth, speed and capacity and an even greater error to
assume that faster broadband is the cure for all ills. As the cost per megabyte
falls and network speeds increase, 4G as currently conceived is a way for
network operators to lose money faster. Its time might well come but the undue
haste that eBay urges makes little sense in the present financial climate.
A survey
by retail market analyst Verdict Research, quoted by eBay, says that more UK
citizens use a smartphone when they shop than anywhere else in Europe. A joint
Ovum/Verdict report published in June 2010 said that only 2.1% of UK adults
used their mobile phone to shop online. In 2009, a year in which the total
value of all e-commerce transactions in the UK was £21.2 billion, mobile
commerce (m-commerce) was worth just £122 million. The report predicted that
m-commerce would be worth £275 million annually by 2013, which clearly is
insufficient to fund a new network.
McCarey
draws attention to research commissioned by eBay that shows consumers place a
reduction in the cost of mobile broadband at the top of their priorities. The
solution, though they may not know it, is not to build an expensive
fourth-generation wireless network that becomes rapidly congested, leads to the
imposition of data caps and makes it difficult to log-on.
He comes
closer to the solution when he says in the eBay manifesto, “We believe that it
will increasingly be in retailers’ interests to offer better in-store wi-fi
coverage to enable consumers to access the internet to perform a variety of
functions via their smartphones.” This is true as far as it goes but a
piecemeal approach that differs from store to store might not be an appropriate
solution. The attraction of a carrier-operated network is the consistency of
service across large public spaces. Separate Asda, Sainsbury, Tesco and John
Lewis networks are not the answer: “freedom to roam” with a consistent level of
service must be at the heart of any alternative proposal to 4G.
A
separate report, released in October by the self-styled Open Digital Policy
Organisation, offers an estimate that the time lost waiting for a broadband
connection costs UK businesses £732 million each year. “Over 37 million
business hours per year could be saved from faster mobile data downloads, if 4G
mobile technology was to be deployed sooner than is currently planned,” the
authors claim. They also point out that most of the mobile devices in use today
are incompatible with the proposed 4G technology, which could mean that higher
data charges and the cost of new handsets will swallow up any potential
savings.
This is
hardly a sound basis for network operators to invest the £5 billion or so that
the Ofcom licence auction could fetch, not to mention the infrastructure costs
required to provide 4G coverage across the country. Ofcom has mandated 95%
coverage for 4G, compared with the current 87% for 3G networks, but it is
likely to be 2017 before we reach that target. In the short to medium term, the
shiny new 4G network will face competition from other technologies including
conventional wi-fi, which is available on the majority of present-day devices.
Then
there is the “digital dividend” from the closure of analogue terrestrial
broadcasting, which releases the bandwidth known as white space, referred to as
“super wi-fi” in North America. This could undermine the economic case for 4G
and delay its arrival even further, although in some circles the technology
comes under the 4G umbrella. If white space delivers all that is promised for
it, mobile networks in the UK could overtake the services available in other
world markets. As Britain has learned to its cost often, to be first does not
always mean best.
Much as
rural dwellers might look forward to 4G network access in the fields, the
profits (if any) will come from busy locations where users of the latest
generation smartphone are plentiful. The eBay manifesto claims that the high
cost of data puts consumers off mobile shopping but this can only be true if
they watch a lengthy product video prior before every purchase. It also is
unrealistic to believe that the eventual arrival of 4G will mean lower data
charges: telecom companies have to pay for the infrastructure and the Ofcom
licence somehow.
In
shopping centres and high streets, wi-fi hotspots make much more economic
sense. They really do offer higher speeds and lower charges, particularly
because they connect directly into the broadband infrastructure.
Investors
should take note of what has happened in Canada, where Shaw Communications has
parked the 4G licence it purchased 2008. Rather than venture into new and
unknown territory, the company announced in September that it would concentrate
on a network of wi-fi hotspots in shopping malls, coffee shops and other retail
centres. Shaw CEO Brad Shaw says, “We do not feel that the economic benefits
related to an entry into wireless are sufficient to justify the capital
investment that is required. The Canadian wireless industry has changed
dramatically.”
He
estimates that the 4G infrastructure could cost up to CAN$1 billion with no
prospect of payback for many years. The hotspots, which can deliver up to 1Gbps
spread among multiple users, will link directly into the company’s existing
fibre network and should generate revenue from Day 1.
In a
model similar to the BT Fon network in the UK, Shaw broadband subscribers will
be able to access the planned “Wi-Fi Mesh” on almost any mobile device they
currently own. It also will provide an incremental revenue opportunity from
both non-subscribers who pay for occasional access and from media asset owners
that distribute subscription content over wi-fi.
BT Fon
has been available for years, so perhaps it is a question of better consumer
education rather than more expensive infrastructure. No worries about European
roaming, data caps or high charges: it is all part of a single broadband
subscription. Shoppers can download data, watch a video and maybe take in a
little m-commerce or locate the nearest branch of their favourite store while
they enjoy a soya latte and a chocolate muffin.
Somehow,
it seems a lot more relaxing than the constant search for next generation data
delivery.
No comments:
Post a Comment