3g Leap For Euro Cell Biz

The time has come for Europe to experience third-generation mobile phone technology, from improved audio and video quality to full-song downloads.

Vodafone Group, the global wireless phone operator, hopes to do for the mobile-music sector what Apple Computer's iPod and iTunes Music Store have done for portable digital music players.

On Nov. 10, the London-based cell-phone carrier unveiled its plan for 3G handsets and services that enable subscribers to access from their phones a range of multimedia and interactive content, including music and music videos.

Vodafone has spent £14.7 billion ($27.3 billion) worldwide to secure 3G licenses and undisclosed amounts to develop 3G infrastructure.

The initiative, which covers 12 major European markets and Japan, will offer entertainment options, such as full-length music tracks and videos for streaming and downloading. Consumers can access these services and more through the network's dedicated multimedia portal, Vodafone Live.

"We're going from voice technology to multimedia technology. It's here now; it's real; it's palpable, and you can use it today," Vodafone CEO Arun Sarin said to an audience of investors, analysts and journalists on launch day in London. "With services such as CD-quality, iPod-like music experience, we want to be terminal-centric, so that no matter which handset you are using, you'll be having the Vodafone experience."

He predicted that Vodafone will have 10 million 3G customers by 2006 but added that application of the technology will be evolutionary, not revolutionary.

Most of today's mobile phones use either 2G or 2.5G technology and are dedicated mostly to voice telephony, text messaging, basic photography, monophonic or polyphonic ringtones and some master ringtones.

The 3G system offers customers a broader bandwidth, enabling high-speed wireless transmission and better quality audio and video. Vodafone's announcement represents Europe's biggest 3G push to date and comes with the blessing of the four major music companies.

London-based new-media research firm and consultancy ARC Group forecasts that 3G handsets will represent one-third of the global market by 2009, compared with 4% in 2004.

FOUR-YEAR WAIT FOR 3G

This new generation of phones finally appears poised to make its mark in Europe, four years behind schedule. Plagued with technical problems, 3G operators have delayed the introduction of the technology in that region.

However, 3G is established in Japan, where telephone operator NTT DoCoMo's iMode Internet telephony revolutionized local mobile entertainment, and in South Korea.

In the United States, 3G networks are in an embryonic stage. In July, AT&T Wireless launched its first commercial 3G high-speed wireless data services in Detroit, San Francisco, Phoenix and Seattle.

Ed Kershaw, head of music at Vodafone Global Content Services in London, tells Billboard: "Last year, we were not ready, because the network's speed was not fast enough. We needed to know whether we would have the right content and whether the labels were with us. All those problems have been solved."

He adds that the new 3G music service comes with a broader portfolio of ringtones and master ringtones from three of the majors, apart from Warner Music International.

The biggest innovation is an offering of 3,000 full downloadable tracks through direct licensing deals with WMI, Universal and Sony BMG Music Entertainment. Additional tracks from EMI are also available through Musiwave, the Paris-based mobile-music distributor that provides content for Music On Demand Service, the full-track download platform Vodafone Live uses.

Other music content includes videoclips of live events, supplied by MTV Networks.

Content is encrypted using the ACC+ technology based on the Open Mobile Alliance standard and is stored on a removable memory card that can carry 20 full tracks. The service will launch with 10 new 3G handsets for the Christmas season from Sharp, Motorola, Sony Ericsson, NEC, Nokia and Samsung.

Kershaw emphasizes that the carrier is working directly with the labels, which helped select the first 3,000 downloadable songs for 3G. He says they are starting with only 3,000 full tracks because "we're not trying to compete with iTunes in the number of tracks. It is about what makes the experience work. It will take too long a time to browse through 800,000 songs on a mobile."

MAJORS CLIMB ABOARD

The major-label partners are enthusiastic.

"The operators are among the retailers of the future. We're trying to get as much of our content available to them as possible," says London-based John Reid, WMI executive VP of international marketing. "When you have space like 3G, there is more you can do compared with standard mobile phones, and we have more stuff lined up for the first and second quarter of next year."

Sony BMG has licensing agreements in place to provide music content for Vodafone and such rival international carriers as T-Mobile, a subsidiary of German telecom group Deutsche Telekom AG; France Telecom's mobile division, Orange; and the U.K. group mmO2.

"We're already offering music-related content through different partners in more than 25 different countries. And we feel music and music video content will be very attractive to users as they get more bandwidth on their mobile phones," says Thomas Gewecke, senior VP of the digital business group at Sony BMG in New York. "We try to make our content as widely available as possible, and we view Vodafone as an important strategic partner."

Vodafone's 3G pricing will vary from country to country. Significantly, subscribers will no longer pay for airtime just to browse Vodafone Live before selecting a paid service. With 3G, the browsing is free, and services are paid for either per item or bundled as packages.

In the United Kingdom, until February 2005, users will be able to download three full tracks per month for free as part of the standard subscription packages, costing £40 ($74.30) or £60 ($111.40) per month. Beyond the free download allowance, each track costs £1.50 ($2.78). Most videoclips will cost £1 ($1.85), compared with £2 ($3.70) for ringtones and £3 ($5.50) for master ringtones. In the rest of Europe, prices will be slightly cheaper, with an average rate of 1.50 euros ($1.90) per download.

Cedric Ponsot, Paris-based CEO/president of Universal Mobile, believes content owners should be aggressive in addressing 3G, instead of letting operators and handset manufacturers dictate the pace.

Universal Mobile has signed a global agreement with French communications group Alcatel to develop 3G mobile multimedia services. These include personalized video mail greetings called Video Mail Boxes, video ringback tones and a Video Delivery Portal, where a hit act will be the voice that instructs users which numbers to dial for information.

"We have to start thinking of these new services well in advance. That is why we signed the worldwide alliance with Alcatel," Ponsot tells Billboard. "We have more than 1,000 video tones produced, and they're ready for operators in Europe and Japan to start selling at the end of this year. And we have 500 Video Mail Boxes, which will be ready by the second half of 2005."

THE 3G ADVANTAGE

Musiwave CEO Gilles Babinet says 3G technology offers several advantages over such digital portable music players as Apple Computer's iPod.

"It is ubiquitous, because phones are carried everywhere for several other uses; it is viral, because it can communicate and personalize the experience in several other ways through the different types of ring tones," Babinet observes. "You don't need a credit card, as payment can be done through billing, and the profile of users is more efficient, as we know there is one mobile phone per user as opposed to one PC per 3.2 users in the personal computer market."

Patrick Parodi, London-based chairman of Mobile Entertainment Forum Global, cautions that interoperability is going to be important to developing the 3G market.

For example, a Vodafone user should be able to send and share the same paid-for content with subscribers of rival networks. This is not the case for music downloads from Vodafone, because of the digital rights management software used to protect the copyrighted content.

Forrester Research principal analyst Michelle Lussanet, based in Amsterdam, adds that users of 3G downloads will be tempted to compare the service with existing digital music options.

"The user experience will be better than on the iPod," she notes. "But they are charging 150% of the price people are paying for iTunes tracks, while the mobile services don't have access to a huge catalog of music. [Customers] might then think it's not as great an experience as on the iPod."