After the billions of dollars telecommunications companies spent in Europe to win licenses to offer next-generation cellular-phone service, the question now is: Will they make money? For most networks, that answer lies a few years down the road, but BT Manx, the Isle of Man telecommunications subsidiary of British Telecom, hopes to have an answer this spring.
That's when BT Manx goes live with Europe's first -- and, it hopes, the world's first -- UMTS network. UMTS, or universal mobile telecommunications system, is the third generation of mobile telecom services and promises high-speed data-transmission capabilities to enable users to have full Internet access, view full-motion video, and download music onto a handset or a personal digital assistant -- as well as simply make a phone call. The infrastructure, being provided by a joint venture of Germany's Siemens and Japan's NEC, is largely in place.
The project will make the tiny Isle of Man (population 75,000) an important test case in world telecommunications. "BT hopes to make real money in the large markets, and the island will give an indication of what people will use," says BT Manx Project Director Mark Briers. "We're taking the lab to the field and serving real customers. And anything we give them that takes a day off their launch time is money in the pocket."
SIMPLE, SIMPLE, SIMPLE. BT hopes that what it learns in the Isle of Man project will help it get its money's worth out of the many other UMTS projects it has around the world. The company has UTMS licenses or holdings in licenses in Britain, The Netherlands, Germany, Japan, and Spain. The stakes involved are huge: Its British license alone cost $6 billion.
The BT Manx project could make islanders leaders in using new mobile-phone-based e-commerce services. BT Manx has a monopoly on the Isle of Man, and based on mobile-phone penetration so far of 38% and Internet penetration of over 50%, Briers figures UMTS penetration could grow to more than 50%. To avoid customer confusion, BT Manx is trying to make its service as easy to understand as possible. The mantra, says Briers, is simplicity: "Simple to use, simple to buy, and simple to pay for. The consumer shouldn't have to think about how complex these services are and how convoluted the billing could be."
The key now is coming up with enough good uses to lure consumers. Several application vendors on the project are testing their services in Japan, Germany, and Britain at NEC and Siemens labs this month. "Since we are the first," Briers says, "we want to showcase what UMTS can do." BT Manx is concentrating on developing applications for business and youth, with the general private market a distant third in terms of importance. The focus on youth should be no surprise, Briers says. "Mobile and youth go hand in hand."
SPACE-AGE DEVICE. The NEC mobile phones BT Manx plans to use will have optional image-viewer terminals to make advanced video services possible. The viewer is a very slim space-age-like device with a camera and a 2.5-inch video screen that plugs into the handset.
A wide array of services are under development. For instance, one company involved, Image.com, is an expert in real-time video. "An important application is something that image.com already does, but which is very expensive: They connect ambulances and hospitals with a satellite communication link. With UMTS, it is simpler and far cheaper to transmit patient data," Briers says.
UTMS also allows for quick videoconferencing without the hassle and expense of a specially equipped room. GamePlay.com, an online games specialist, is writing exclusive games for the BT Manx project. Siemens is developing a product called "Ilse of Man on Air" for which many local companies are creating services. "We've started projects with financial institutions, hotels [and others] -- to develop applications for that," says Briers. "Banks are working out secure ways to sell mortgages and insurance online. A hotelier is developing services that allow you to use your handset to look at a room, check in, and book a table for dinner."
FINDING VENDORS. Some of the software companies were "willing to absorb a significant amount of the development costs," says Tom Meageen, who is responsible for putting the info-tech infrastructure for the project in place. Meageen says he looked at some 15 vendors for flexibility, scalability, and cost before selecting Xacct Technologies to develop software to collate the data on usage, type of content, and rate of transmission. He also signed on Cerillion Technologies to develop the billing software.
Services will probably be sold in some sort of package, such as the ones pay-TV companies offer. The customer will get only one bill, but it will cover many services, such as fees for downloading a song, a video, or a game. To keep things simple, BT Manx is considering charging a flat fee for a given package of services, Briers says. The company also hopes to keep handset prices low so users will accept UMTS more quickly, he says. "Clearly, the desire is to roll out to a mass market, and the devices must be priced according to what people can afford, like a PDA," Briers admits. "That could imply subsidization."
BT Manx wants to be profitable "as soon as possible," Briers says. No surprise there. But regardless of what happens on the Isle of Man, the company will learn a lot about what works -- and what makes money -- with UMTS. BT Manx paid nothing for its Isle of Man license, which was awarded by the local government. But the information it gathers on the island could be worth a fortune in other UMTS projects around the world. By Karen Nickel Anhalt in Berlin