Summary of Joint Research on Third and Fourth Generation
Mobile Communications Systems
GLOCOM and Accenture
GLOCOM and Accenture have evaluated that Japan's mobile communications market will be worth 2-10 trillion yen by 2010. The original Japanese version of this summary is available at: http://www.glocom.ac.jp/project/accenture/press/
This research was conducted jointly by Accenture Corporation and the Center for Global Communications (GLOCOM), International University of Japan.
[Purpose and Scope of Research]
The purpose of this research is to understand the present situation and to survey the future of third and fourth generation (3G and 4G, respectively) mobile communications systems. Four diffusion sample scenarios are generated from the point of view on how far 3G or non-3G wireless services will be accepted by the market by the year 2010, when 4G services are expected to materialize. In the basic concept of 4G, which is at present under joint examination by the government and private sectors, seamless cooperation among mobile phones and other wireless services is intended. The practical image of 4G services depends upon how these services are integrated as of 2010. Studies were conducted to present the future prospects for each of four scenarios of the shift of power balance among the key players who are potential leaders of service integration, as well as the kind of service integration patterns that can exist as a result. Also, in order to understand the quantitative difference among the scenarios, trial calculations were made on a market scale (basic fees and traffic fees) of 3G and non-3G charged wireless communication services.
Four months from October, 2001 until January, 2002.
[Characteristics of Research]
This study is characterized by Scenario Planning Method. Several scenarios are described to display the situations of the mobile communication industry as of 2010 when 4G services are expected to be put to practical use.
In the on-going 4G studies, one of the aims is to establish an integral wireless system that would seamlessly connect the developed forms of existing 3G mobile phone systems with other wireless systems that use technology such as wireless LAN*1 and Bluetooth*2. On the other hand, however, it has become possible by technological innovation that non-3G wireless services will develop as competitors against 3G services. These new services are being provided by a variety of new players. Thus, 4G service integration will face various business hurdles in the future.
In addition, individuals and organizations have started providing open and free mobile communication services by opening up, through wireless LAN base stations, surplus band area of fixed broadband communication services such as FTTH*3.
If such a trend of voluntary network-building by the local governments or grass root ISPs (Internet Service Providers) expands by multiplying itself, the mobile communications industry itself will possibly face a crisis for existence by 2010.
Opacity increases the further we look into the future of the mobile communications industry towards 2010. If study of 4G is enhanced while prospects are not good enough, key words will possibly get ahead of the reality. If the complicated reality can be replaced by some understandable stories, we will better understand the essentials of various uncertainties as well as the structure behind the superficial phenomena.
[Methods of Study and Analysis]
Four scenarios were sampled by Scenario Planning Method*4 based on the information gained from interviews with persons knowledgeable of mobile communications/information transmission-related matters, as well as a number of published documents. Also, future market scale was estimated by referencing existing and public data, and by constructing original estimation models for each scenario. The following knowledgeable persons kindly cooperated in the research:
Kenji Kohiyama: Professor, Graduate School of Media and Governance, Keio University
Masataka Ota: Lecturer, Graduate School, Tokyo Institute of Technology
Director and Senior Technologist, Mobile Internet Services, Inc.
Osamu Nakamura: Associate Professor, Environment Information Department, Keio University
Yasukazu Sugiyama: Staff Editor, Nikkei Communications, Nikkei Business Publications, Inc.
Kaoru Takatsuki: Staff Editor, Nikkei Communications, Nikkei Business Publications, Inc.
Kentaro Kawabe: Producer, Yahoo! Everywhere, Yahoo Japan Corporation
Masanori Kusunoki: Researcher, IP Infrastructure Department, IP Operation Development Division, Internet Research Institute, Inc.
Kanetaka Maki: Visiting Researcher, Keio Research Institute at SFC
[Summary of Four Scenarios Forecasting Mobile Communications Industry in 2010]
1. Possibilities of Realizing Seamless 4G Services
In 2010, when 4G is expected to be put to practical use, it is assumed that more than one wireless services that will possibly become elements of 4G will be provided by different competitive players.
Under such circumstances, cooperation toward realization of seamless services becomes difficult, and each player would probably try some kind of service integration for the benefit of its company's business development. Concrete images of 4G systems will be decided depending by service integration conducted by the dominant players who hold the subscriber connections in 2010.
2. Four Scenarios Forecasting 2010
In order to forecast the form of realization of 4G systems, the following four scenarios are posited. These scenarios areimportant to help us know the extent of diffusion of the two axial systems, namely 3G and non-3G charged transmission services, by 2010.
"Charged Transmission" means data transport services in which the serving players bill the users for basic fees (and fees for traffic) as transmission usage. "Free Transmission" means all transmission methods other than those stated above.
To review, some individuals/organizations have started to offer surplus band area in fixed broadband transmission services as open and free mobile transmission services available for anybody.
Free Transmission does not involve billing because it conducts transmissions not through operators' networks but rather through voluntary networks. Direct transmissions between two terminals (P2P, or peer to peer, transmission) using short-distance wireless transmission technology such as Bluetooth are also considered a kind of free transmission.
3. Summary of Each Scenario
"Never-Ending Story" Scenario
Existing carriers*5 acquire mass users by enlarging their 3G areas concurrently with the customers' cycle for switching terminal units thus shifting the basis of customers from 2G to 3G. Mass users utilize 3G services for both voice and data transmissions. On the other hand, non-3G charged transmissions services acquire only a limited number of users because they form metropolitan area networks that are used temporarily at Hot Spots or street corners.
Non-3G charged transmission services gain only niche users and have a limited influence. Therefore, existing carriers attach greater importance to strategies in order to win competition in the market. Mass users utilize 3G services, but existing carriers cannot afford excess in their frequency band, or they will not be willing to let the MVNO*6 participate if no regulations are made.
In the "Never-Ending Story" scenario, existing carriers lead 4G service integration and are responsible for functioning toward aggregation of more than one wireless transmission service. Existing carriers as "Service Aggregators*7" realize 4G seamless service in which one operator provides more than one service as an "All-in-One Type."
"Dawn of the New Age" Scenario
New players expand covering areas lot by lot starting from Hot Spots or street corners to eventually cover nationwide and exhaustively. VoIP (Voice Over IP) technology realizes Mobile IP phone terminals that function equivalent to mobile phones, and mass users utilize non-3G charged transmission services for both voice and data transmission. Demands for 3G services are limited to specific segments such as business users who require quality of conversation or international roaming that haveunique strength compared to 3G.
Existing carriers actively utilize MVNO to regain decreasing users. As a result, MVNO will become the main body for providing highly value-added services, which would also control subscriber connections and therefore existing carriers become only the ‘pipelayers' who merely function to supply the network.
The business model of the emerging wireless LAN service players is to rent out wireless infrastructure to more than one ISP. This form develops into "Agent Type" 4G seamless services where ISPs collectively undertake contracts with users as agents.
"Struggle for Supremacy" Scenario
Both 3G and non-3G charged transmission services gain mass users. They are in a complementary relationship with each other. Mass users would possess both 3G phone terminals and data transmission terminals with non-3G systems, and adapt to use either of them according to the usage scene and need. Most voice calls are executed through 3G services. Need for broadband-corresponding contents and application has been expanding, and users widely utilize non-3G charged transmission services as high-speed and low-cost data transmission means.
If players have comparable power-relationships with each other, existing carriers and ISPs/new players fight against one another for leadership. Their aim is to realize seamless services of either "All-in-One" or "Agent" Type. The winner of this ‘Struggle for the Position of Service Aggregator' would be the one who materializes seamless service.
"The End of Myth" Scenario
Mass users switch over to cost-free transmission services, while 3G and non-3G charged transmission services only gain niche users. Arrival of mobile IP phones utilizing VoIP would enable free transmission services to absorb the need of both voice calls and data transport, while the use of 3G and non-3G charged transmission services is limited only to specific segments such as quality-sensitive business users.
Handset manufacturers and contents providers regard the free transmission market that secures mass users as important, and develop unique products and services that would appeal to users.
Demands for integration of charged transmission services exist only with niche users, while need for seamless usage of free transmission services with different frequencies and variety of transport systems would become stronger if certain frequency bands are released without license in accordance with increased need for free transmission.
In that case, handset makers probably will lead service integration including free transmissions by developing their own multi-mode handsets that would not require reliance upon particular operators. Then a "My Line Type" seamless service would be realized in which users select operators in advance according to their purposes.
4. Market Scales for Each Scenario
For the purpose of quantitative understanding of each scenario's impact on the mobile communication industry, market scales of mobile transmission traffic just before introduction of 4G services were calculated as a test. The subject period for this trial calculation is 2010, and target markets are the basic fees and traffic fees (for both voice calls and data transport) of 3G and non-3G charged transmission services.
Market Scale of Mobile Transmission Traffic—Trial Calculation Method
Unique prediction models corresponding to each scenario based upon the number of users (subscribers) before 2001 and ARPU*8 with fluctuation elements were constructed. Then, for each scenario, the number of users of 3G and non-3G charged transmission services as well as ARPU are estimated and calculated.
For the trial calculation of the market scale, only mobile terminals with users (human) are assumed, excluding income from traffic from terminals attached to objects or animals. Income other than traffic-based billing, such as fees for content, billing of transmission charges to senders, or commission from platform usage is not included in the trial calculation.
"Never Ending Story" Scenario
The number of 3G users would slowly increase, and ARPU stays with the present trend. On top, though small scale, markets of non-3G charged transmission services rise, and as a result, market scale of mobile communications as a whole will expand from the present 6.03 trillion yen*9 to as much as 8.96 trillion yen.
"Dawn of the New Age" Scenario
3G users shift to non-3G services, and the number of 3G users drastically decreases. The number of non-3G charged service users will explode. Unit cost per user, however, is low because of the underlying low-cost and fixed charging system. As a result, the market scale of mobile communication services as a whole reduces to as little as 4.27 trillion yen.
"Struggle for Supremacy" Scenario
Income from data transmission that existing carriers expected to increase is taken away by non-3G charged services. Therefore, added income of existing carriers is only from new subscribers. However, the number of non-3G charged transmission service users explodes resulting in the market scale expanding to as much as 9.71 trillion yen.
"The End of Myth" Scenario
The number of 3G users drastically decreases because of marked spread of free transmission. 3G and non-3G charged transmission service only spread in the niche. Therefore, the mobile transmission market itself would be annihilated and market scale would greatly decrease to 2.17 trillion yen.
5. Main Causes Prescribing the Scenarios—Users' Needs
The extent of diffusion of 3G and non-3G charged transmission depends on the trend of users who are the final selector of services. Practically, Figure 5 shows where the need of mass users towards the characteristics of each service (merits and demerits) would shift, which changes the possibilities of diffusion of each service as well as prescribes the future scenario.
It is possible that in some cases both 3G and non-3G services will see demand, or that in other cases neither 3G nor non-3G will arouse any need. By combining with the time axis until 2010, distribution of users' need could vary greatly. In this sense, it is undeniable that any of the four scenarios may actually come true.
[For further information contact Hajime Yamada]
*1 Technology of constructing wireless communications networks within limited areas. Lately, capability has been dramatically increasing. IEEE802.11B specifications enable high-speed transmission of 11 Mbps maximum at a limitation of about 100 meters.
*2 A short-distance wireless transmission technology for mobile equipments. Transmission of 1 Mbps maximum at a limitation of about 10/100 m is possible.
*3 Fiber To The Home: Upgrading the existing access network by connecting telephone offices and each subscriber's home with optical fibers to provide a high-speed transmission environment.
*4 A management method to better cope with fundamental structural change of business environments in future through systematically describing the future business environment as several stories. This method is widely used by Western companies.
*5 3G Carriers (i.e. NTT DoCoMo, au and J-PHONE)
*6 Mobile Virtual Network Operator. Operators who use a part of other licensed communications operator's facilities to provide services without having their own frequency bands. They develop unique, value-added data transmission services.
*7 Players who sum up more than one service to provide seamless multi-transmission systems (contracts are also unified).
*8 Average Revenue Per User: Average monthly income per subscriber
*9 Market scale of mobile communication traffic in 2001. Figure calculated by Accenture based upon external public information (such as interim report of carriers). PHS and 3G service