Report Paints Not-So-Rosy Picture For Emerging Mobile Market

A Forrester Research report spells doom for the emerging mobile market.

According to the report, which focuses on the European mobile market, all mobile carriers' operating profits will "disappear" by the year 2007. The market will then take six years to build back up, resulting in a "total consolidation" of mobile operators, the report says.

The cause of the disruption will be the exorbitant costs related to acquiring 3G spectrum. Currently, the United States is holding 3G spectrum auctions that have raised $12 billion after the 27th round. Europe has been in the process of building future generation mobile over the past year. Britain collected $33.3 billion in its April auction, and Germany amassed $45.2 billion during its last auction.

Europe has implemented UMTS, a version of the future 3G mobile phone system. Through UMTS, European users can roam globally and can gain access to 3G features such as multimedia through GSM, its current standardized wireless technology.

For the study, Forrester interviewed 26 European mobile companies, all of which pointed to the wireless Web as a potential savior of the mobile marketplace. However, Forrester discounts that theory, predicting that 60 percent of the overall mobile revenue loss will come from content, retail, advertising and location services.

Forrester also says voice revenue streams will suffer a 44 percent loss, and traditional mobile revenue seen today will experience a 36 percent drop between now and 2005.

The report sets the mobile heyday for 2005, when the market saturation will reach 76 percent of the European mobile opportunity.

Numbers from Far Point Group reflect a similar future. According to analyst Craig Matthias, auction costs are reaching $150 billion, an amount being reflected as a tax from consumer to government.

Matthias does not expect significant deployments of 3G until 2003 and does not see wireless generating volume revenue until 2005.

"In wireless, government is addicted like vampires, with their fangs in your wallet," says Matthias. "There is no way to reverse this momentum and it would take serious economic dislocations to rethink this process."

The upside, says Matthias, is that wireless is not completely doomed to failure because there is no substitute technology.

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