It's All In the Cards
By Eric Lin, Wed Sep 29 01:00:00 GMT 2004

3G data cards are a growing market, especially in Western Europe. However a successful 3G launch will require more than a few corporate subscribers.

mmO2 has launched a PC card that will combine access to new 3G data networks with Wi-Fi and GPRS. The 3G card will initially be rolled out in five UK cities, but 3G coverage should expand to 20 areas by Christmas. It used the launch to outline a cautious approach to 3G. Although Vodafone is launching a full frontal 3G assault on the mass market, mmO2 CEO Peter Erskine doesn't think that 3G will be a mass market technology until late next year. O2 executives are worried about over-hyping 3G without a customer experience that will make the new technology irresistible to subscribers.

mmO2 is not the only carrier to play it safe. Orange and T-Mobile have not announced any 3G plans beyond their data card offerings either. Research from The Yankee Group backs up this cautious approach, not by supporting O2's claims that 3G isn't consumer friendly yet, but by pointing out that there is still room for growth in the data card sector. Analyst Farid Yunus believes that the 3G data card market will grow steadily for the next two years, at least until 3G handsets become the more common, or preferred data device. He also points out that data card customers are typically corporate workers, who are more loyal and have guaranteed income, reducing churn. Carriers have good reason to continue adding data-only 3G customers, but is that reason enough not to roll out handsets?

Yunus also points out that data card users in Western Europe make up less than one percent of the total subscribers. While this is an important sector, it is not composed of enough subscribers, even loyal ones with steady fees, to make back investments in 3G networks. The cautious carriers will eventually add the subscribers they need to begin paying for the costly new networks, but they may not add as many subscribers as they could have had they decided to launch this year. Vodafone's 3G launch will create a "first mover advantage" -- it will not only add mass market 3G subscribers before any other top-tier carrier, it will also become associated with 3G services in the mass market's collective brand-focused mind. Customers will switch to 3G, and if the services prove as popular as Vodafone's current Live! offerings, they will convince their acquaintances to join as well. By the time other carriers compete with Vodafone, it will have serious momentum they will need to overcome. This is not an impossible task but it is much more difficult and requires time and resources.