A LIST OF THINGS WE THINK WILL BE BIG THIS YEAR

One of the things you get asked all the time, as an editor, apart from, “You seriously think I’m going to sign that off on your expenses?” is, “So, what’s hot at the moment? What are you writing about?” Skirting over the flattering, if not always true, assumption that both questions are a way of asking the same thing here, in no particular order, are Mobile Europe’s hotties for 2004, some of which we have even written about, or at least will be writing about.
First up, machine to machine, or M2M, to employ the obligatory acronym, communications. Why? Well, in a word, Nokia. And in another word, Orange. It’s gone way beyond popular carbonated beverage vending machines texting the supplier to get the delivery boy to heft another crate of liquid tooth rot on to the back of the truck. It’s the world of telemetry, telematics, remote diagnostics and fixes. Nokia, from what we can tell, may well be bending your ear about this very soon, and Orange has been trialling various things with a company called Box Telematics, some of which are to do with beer, which may explain our increased interest.
Another “hot area that we are also writing about” is push-to-talk, or PTT, or P2T, or PoC, if you are talking standards. Except you may not be talking PoC because the first big commercial cellular implementation in Europe has come from Orange using a system from upstart Kodiak Networks. There’s loads more on them on p12 of this issue, but with all the major vendors lined up behind PoC, expect to see an increasing number of handsets including P2T functionality, and a range of premium services coming out of the operators.
Messaging is another. Sounds terribly obvious, but we’re not averse to a few statements of the obvious as you may have noticed by now. There’s a complete overhaul of how messages are managed and delivered going on out there, as the old store/ forward architecture of the SMSC gets increasingly inappropriate. There’s also a big change coming in presence notification and the development and branding of the phone front end for more advanced messaging services.
Mobile entertainment and all it brings with it is another area we have been writing about. This includes digital rights management, billing, content management and delivery, service activation, quality of service, class of service.
Always, and never more so, issues of OSS, billing, managing partner relationships, getting a unified view of a customer across multiple services, pre and post pay convergence, rights management (again).
So that’s quite a few things then, which can either be taken as a sign of a terminal editorial desire not to alienate any of our advertising manager’s favoured clients, or, I would prefer to think, of a general re-awakening in the industry.
And I didn’t even mention 3G. Or indeed a host of other things, from network optimisation to web services. Time for another list? If you want to add your own please mail keith.dyer@nexusmedia.com

The six major UK mobile operators have just signed a code of practice with the aim of protecting children under 18 from accessing adult internet content using their mobiles. What does this mean and what gaps does it leave? Nick Outteridge of content filtering specialist SurfControl, reports.

As new 2.5G and 3G mobile phones become pocket-sized Web browsers, the mobile industry has been quick to address growing concerns about children having access to adult and other inappropriate content from their handsets.

Recently the six major mobile operators in the UK — Orange, O2, T-Mobile, 3, Vodafone and Virgin — have joined forces and signed up to a Code of Practice, which will impose an “18” classification — along the lines of systems used in film and TV— on adult content including images, video, gambling, games, chatrooms and Web access. 

This means Web content with an “18” certificate will only be available when the network operators can verify the age of the user. Identification is expected to be accomplished by managing individual user profiles, accessed by username and password. In addition parents and carers will able to use filters to restrict content delivery to children in their care.

While these measures go some way toward addressing the issues of content filtering and parental controls, there are still a number of key questions which are as yet unanswered:

l How fast can Websites be categorised to conform to the Code?
l How many sites will be categorised when filtering services are launched?
l Will categorisation be able to keep up with the proliferation of new Websites?
l How will the filtering and control solution work?
l How quickly can it be deployed to deliver protection?
l Will there be a performance penalty for using these controls?
 
To address these questions, let’s look first at how the mobile operators’ Code of Practice intends that sites should be identified and categorised, and compare this method with accepted practice in the corporate and home Web access environments.

Labelling a moving target

The Code of Practice states that an independent authority will be established to decide on standards for the website classification system, in a similar way to other parts of the media industry. This authority will in turn be regulated by ICSTIS (Independent Committee for the Supervision of Standards of Telephone Information Services).However, classifying the multi-millions of websites is not a simple or quick task.
 
The authority will require a significant lead-time to develop a list of adult sites that can be used meaningfully to enable filtering. Furthermore, the Internet is not a static medium. Websites are launched, closed down, change names and move IP address at bewildering speed — which means that many sites need to be re-checked and reclassified, further complicating the job of the authority.

Self-labelling options

An often-discussed classification option is self-labelling of Web pages by Webmasters — using the Internet Content Rating Association (ICRA) system. However, only 120,000 websites have chosen to self-label, and many sites with adult or inappropriate content are not interested in being reputable, nor in maintaining a clean public profile. So self-labelling is limited in scope and effectiveness, and should be supported by alternative filtering methods.

Artificial intelligence

Artificial (AI) intelligence technology is a commonly used — and powerful — tool for categorising new websites. Proponents of AI claim that it can analyse a web site with no latency, even under load and can achieve 99.7% accuracy.

However, the reality is different. To assess accurately the category of a website, the site must be analysed in-depth — which does not mean zero latency. The only way to be fast is to look at meta-tags or skim the home page looking for keywords. This improves performance but can produce false positives, producing false positives.
AI has for many years been used to assist in categorisation — typically it is used offline to assist with site analysis by its Internet researchers. It works by ‘spidering’ a site, bringing back a minimum of ten pages and then analysing the data to determine a category — a far more in-depth approach to AI. So AI certainly has a role to play, but demands sufficient data to analyse.

An alternative approach

So what’s the alternative? In the corporate and home computing sectors, the most effective, proven and fastest method of filtering and blocking website access is by reference to an established database of ready-categorised Internet addresses, or URLs.

As an example, SurfControl’s database comprises over six million URLs and more than one billion web pages divided into 40 categories. Over 35,000 new sites are categorised and added to the database each week.

This gives a comprehensive picture of Internet content, and allows rapid decisions on whether to allow access to, or block, a request for a Web page. Database look-ups of this kind offer the highest performance for the user, and the lowest latency.

This approach can be easily migrated to the mobile environment without the need for powerful computing resources on the device itself. In fact, there is no need for any software on the mobile phone. All that is needed is the 2.5G or 3G Internet connection, and a categorising server on the Internet, linked to the mobile operator’s Web authentication infrastructure.

Cascading analysis

Before Web access is granted from the phone, users first log in with their username and password. Their requests for URLs are then intercepted and handled by the categorising server. To speed response and minimise latency, the server has two caches: a custom cache and dedicated URL cache. These hold regularly-requested URLs, suitably categorised, and can also hold other data, such as ICRA labeled sites. If the requested URL is not found in these caches, the request is cascaded to the categorising server for checking against the large URL database.

If the URL is still not found, then it is subjected to AI on-the-fly analysis and categorisation. The point with this “cascading” approach to analysing URLs is that it combines comprehensive filtering and profiling, with maximum and appropriate performance at all levels.

The Code of Practice has gone part of the way to give customers more protection but the journey won’t be smooth due to the complex nature of the Web and mobile access. Increasingly mobile service providers need take up the challenge of responsive content management and those that do, will be far better placed for the future. 

With a whole raft of television programmes now offering an interactive voting element to the mix, the potential revenue from messaging is enormous. There are, however, challenges to overcome says Paul Harvey,  global market development manager, product messaging at Logica CMG Wireless Networks.

SMS voting has, within a very short time, become the ‘norm’ in the world of reality TV with series’ including Big Brother, Blind Date, I’m A Celebrity Get Me Out Of Here and Pop Idol all cashing in on the lucrative revenue-generating application.

And it’s easy to see why.  Last year, Endemol’s Big Brother 3 in the UK received more than 13 million text votes, generating mobile operator O2 approximately £1.3m in revenue.  Interactive TV (iTV) veteran, MTV, introduced Videoclash, a SMS-led music programme, in 2001 which now receives over 40,000 SMS messages every hour from viewers registering play list votes and to post greetings for the real-time message board.

Analysts agree that text messaging will play a major role in fuelling the growth of iTV in the coming years, helping it increase 18 fold in Europe to top £12.3 billion by 2007. 

But according to industry views raised at the Mass Media Messaging Seminar, at The British Academy of Film & Television Arts, there are still barriers to SMS voting, MMS and new 3G services reaching their full potential in the entertainment industry.  Although the market offers plenty of opportunities spanning TV, music, sports and gaming — as well as drawing a diverse age and social group customer base — there are significant challenges facing providers looking to cash in on this new revenue stream.
As Steve Van Zanen, VP market development for messaging at LogicaCMG Wireless Networks points out, “The mobile phone can be a lot of things to a lot of people — a lifestyle device, a location tool or a personal management tool.” But making the mobile phone work as an entertainment device requires the support of handset and software developers to remove product barriers such as compatibility between devices, display quality and so on, as well as support from carriers to buy into the business model on an integrated, pan-European scale.

Furthermore, it requires a close co-operation between network operators, the entertainment channels and content developers to surmount issues of revenue sharing, billing and interoperability.

In terms of impact on take-up of interactive messaging, however, quality of service and revenue assurance are clearly emerging as two of the most prominent concerns facing companies involved in this industry.

Assuring that all votes are polled is essential — as seen with last year’s Pop Idol (UK) vote when BT worked hard to avoid network meltdown from the 8.7 million premium rate fixed line phone votes that flooded in for Will and Gareth. If votes do not get through, media and public outcry over alleged poll rigging could ensue. The negative impact on the reputations of both the broadcast companies and the network operators — fixed and mobile — of this kind of situation can be both significant and enduring, potentially affecting similar polls in the future and fuelling discussion in the media, school yards and pubs across the country.

If problems can emerge for relatively simple voting mechanisms like fixed line voting, then consider the complexities that could arise with SMS voting.

Tony Riley, co-director of Mobile Enterprise magazine, is sceptical that all of the votes cast via SMS for reality TV programmes are actually successfully counted in the final result.  “If you consider how sometimes texts can take hours to arrive when they are sent from a friend, in peak times, how can operators be sure all the SMS votes have arrived if the result is announced just a few hours later?”

Although traffic peaks can occasionally cause problems, it is fair to say that most UK operators now have robust telecoms-class messaging solutions in place to ensure that overloads do not hamper service quality.  The log-jam on SMS networks at the final whistle of this month’s Rugby World Cup final illustrates that there are occasions that potentially challenge service capacities, but these days this is more the exception than the rule.

Lack of understanding

However, issues continue to emerge as a result of a lack of understanding about the applications that run at the edge of the SMS network, how these can effect the reliability of the system and, subsequently, the effect on quality of service that the customer receives.

When a viewer sends a vote they need to enter the short number as well as type the name of the contestant that is voted for e.g. VOTE GARETH. As a result, applications need to receive the vote, acknowledge who was voted for, tally the votes and then communicate back to the Short Message Service Centre (SMSC) that the correct vote has been counted. The SMSC then needs to contact the voter within an acceptable time span to advise that the correct vote has been received successfully.

Understandably, if the networks and applications fail to deliver this integrated, end-to-end process, there is   substantial room for error, poor quality of service and, ultimately, many dissatisfied voters. Fortunately there are solutions which provide capacity for data flow growth, reduced total cost of ownership and, as a result, a greater average revenue per user (ARPU) for network operators. All in addition to building loyalty amongst happy voters who come back time and time again.

Clearly, the relationships currently exisiting between network operators, TV companies and content providers need to be developed before a truly seamless, customer-orientated service can be delivered.  As Daren Siddall, emerging platforms and devices media analyst at Gartner, points out, “…SMS voting, video clips and other technologies are gaining greater customer acceptance. However, we need to be careful and ensure that future technologies are easy to use for the consumer.”

By building relationships and sharing the wealth of data that each party is able to mine on users, providers can move towards ensuring that messaging services strike target markets and that content is provided in a format that will be adopted. Understanding the market, the type and format of entertainment that each audience sector is looking for and what makes customers tick is a key to unlocking the potential revenues of mass messaging for this industry.

John Delaney, principal analyst, Ovum, observed that “TV was originally seen as a passive media, something that you sit back and watch…[iTV works] because people like to get involved.  iTV and SMS TV provides a way for people to get passionate, influence decisions or at least discuss things with a community.”

Another issue

As TV firms and production companies take a cut of the return that network operators generate from TV voting, ring tones and other mCommerce, revenue assurance is another issue for the likes of MTV, Endemol and Flytxt. During the seminar, participants said they still had some reservations about SMS voting due to the potential revenue loss that can emerge from prepay mobile phones used predominately amongst the youth audience.

Many prepay users have realised that they are billed on return of message, so if the inbox is full, the phone is switched off or the credit limit over run then the customer will not be charged. A proportion of zero is nothing, so this is not an attractive proposition to TV firms, especially with higher cost items like ring tones.

According to Alan Coad, senior VP EMEA & South America, LogicaCMG Wireless Networks, this is an unnecessary leakage of revenue.  Technology to combat this fraudulent behaviour is widely available from companies that have introduced revenue assurance solutions to close these mobile operator billing loopholes. This removes one of the obstacles that are preventing messaging from reaching its full potential in the entertainment industry.

Clarity of charges

Other billing issues continue to hamper the mobile messaging industry with clarity of charges across domestic, as well as pan-European networks, required to stimulate mass adoption. Industry commentators often say that mobile operators take too much of a profit cut, forcing up the end charge to users, whilst content providers highlight issues that exist within the industry and call for distribution of revenues generated by SMS voting to be accelerated.

Finally, with the growth of MMS and 3G, the issue of digital rights management (DRM) needs to be addressed before it can become a compelling offering for both consumers and content providers.  Matthew Kershaw, head of Interactive at MTV, summarised, “The DRM technology isn’t there, which is a hindrance to the usage of MMS and 3G technologies by TV and content firms.”

There is great brand awareness to be achieved if a TV or music firm’s video-clip is texted to hundreds of people but there is a clear need for some form of forward-locking technology to encrypt messages that are sent on.  Without a DRM solution to protect the content, little revenue can be recouped from the activity and content providers will find themselves in the same situation music firms did with Napster.

In summary, mass media messaging and mCommerce have the potential to become lucrative areas for the entertainment industry and operators alike. However, operators, TV producers and media channel owners need to forge closer relationships to ensure that the systems truly work. Without greater arbitration, the entertainment industry will be slow in its adoption of mass media messaging and all those involved will miss out on the significant branding and revenue opportunities available.

With the death of the traditional, monolithic SMSC looking likely, operators will need to react quickly in order to offer new services, says Patrick Flynn, sales and marketing director for OpenMIND Networks

SMS messaging is profitable for mobile operators and can contribute up to 15% of the total operator revenue.  SMS Application-to-Person traffic is growing, but the vast majority of SMS is still Person-to-Person traffic — up to 90% of SMS revenue falls into this category and it will continue to be an important part of mobile operators’ P&L for years to come. Traditionally there is very little value added by the operator to this important and key business mainly because, technically, SMS traffic goes through a closed and monolithic SMSC. If we could “open up” the SMSC and make it distributed, we can more easily introduce new services to Person-to-Person SMS messaging.

Pressures for change

The business as we know it will undergo a change in the next few years due to the pressures of price competition, increasing churn and the increasing age of the users.  These market pressures for change are already apparent to operators:

l Competitive pressure has driven down the average revenue per SMS over the last few years from about
â‚-0.12 to about â‚-0.08, depending on the market.
l Churn is increasing, mainly due to young customers who are notoriously fickle and are not concerned by changing their mobile number in order to take advantage of competing deals from other mobile operators. The regulatory-driven development of Mobile Number Portability will further increase churn, but probably not as much as expected.
l The aging profile of SMS users gives an opportunity to develop new lifestyle services for older (30 plus) SMS savvy customers who are well aware of SMS but are less inclined to chat, as they become more drawn into a family driven lifestyle. However, it begs the question: can we not develop more family-centred services?

These pressures bring a new level of competition and change to this profitable business segment.  Operators will need to react by anticipating the change and bringing new and exciting services to their customers. Infrastructure providers will no longer be able to supply the traditional SMSC product as this market segment is already in decline.
Specifically, what can we do to provide new and innovative services to the Person-to-Person segment?

Mobile operators need the ability to generate new services for Person-to-Person SMS services. This is not easily done, technically because of the standards driven and monolithic development of the SMSC. 

SMS infrastructure providers would service the mobile operator market better by opening up the SMSC or offering a “distributed” open SMSC or SMS-D. This would allow the easy and quick development of new Person-to-Person SMS services at a lower cost than traditionally expected in the mobile messaging industry. If the industry, overall, takes a longer-term view of what it takes to maintain customer interest in SMS services, then both mobile operators and SMS infrastructure providers will benefit in time. Simply put, if we don’t react to the importance of Person-to-Person SMS messaging, we will witness, and we are witnessing, the decline of the traditional SMSC market.

In particular, the development of a PARLAY service development approach (that of open technology-independent application programming interfaces) to messaging (both SMS and MMS) would be timely and opportune.  A PARLAY approach to messaging will allow mobile operators to stay aheadof the game by having a consistent way to bring services to market.

Indeed, mobile operators need to ensure that they maintain the “value added” within their networks or lose out to the handset vendors who are adding value at a much faster rate to their products. In particular, standards such as Session Initiation Protocol (SIP) might drive the commoditisation of the networks to pure transport systems with the intelligence at the edge of the network. This is a concern that faces many mobile operators.  Clever development of the mobile networks will counteract these concerns.

Innovative services

So, where’s the beef? What sort of innovative new Person-to-Person services can be provided?

Some examples of these new services are:

SMS Person-to-Person Sponsored Messaging

lue Chip FMCG companies, such as Coca Cola and Nestle, are very interested in targeting segments of the mobile operators’ customer base. For example, suppose customers sign up for a Coca Cola summer promotion, which gives them 50 free SMS messages. Instead of giving them credit for 50 SMS messages in a lump sum, it would be much more effective if the customer experienced the campaign as follows:

l  Every tenth message sent by the customer to their friends is delivered for free.
l Their friends see the message arrive in the normal manner and are not aware that it is sponsored.
l  When the customer sends this tenth SMS message they receive a message back from the Mobile Operator that says “Your last message was sent free — sponsored by Coca Cola”.
l All the billing issues are automatically taken care of by the PEPS system for pre-paid or post-paid customers.

The advantage to the sponsor is that the benefit — free messaging — is closely associated with the use of the service. Also the benefit is spread out, in this case over a number of weeks or months and is re-enforced by usage.

Other campaigns or combinations are obviously also possible. The mobile operator themselves could sponsor a “free message day” over the Christmas period for example.  In this case the first (and only the first) message sent on “free message day” will result in an SMS back from the network saying “All SMS messages free today — sponsored by your mobile operator”.

Other combinations and sponsorship strategies are possible and, obviously, the sponsorship of MMS Person-to-Person messaging is a natural development of this service.

SMS Loyalty and Lifestyle Services (LALS)

Another example of new Person-to-Person services involves customer segmentation and associated loyalty benefits. Most operators separate their base into lifestyle segments such as:

l  “Teenage social user”
l  “Business user”
l  “Sports orientated user”
l   and many other segments…

Each of these segments is normally marketed to in a different manner and they, themselves, have different expectations of what they want from their mobile service. It would be a very powerful marketing tool if we could identify, in real time, from the pattern of messaging usage (SMS and MMS) what type of customer they are — in other words, which lifestyle segment they belong to. We can then automatically market to these customers by SMS or MMS, suggesting particular services that will appeal to that type of customer.

Furthermore we can reward loyalty among these customers by, for example, providing them with bonus messages or credit when they send 50 messages in one month. This happens in real time with an SMS from the mobile operator saying: “Congratulations, you have sent 50 messages; your next five messages are free. This loyalty reward is provided by your Mobile Operator”.

This is a much more powerful customer experience than getting a loyalty bonus on their monthly bill or a credit in their pre-paid balance. Again, the benefit is closely associated with the action.

Increased ROI with reduced Capex and Opex

reduced Capex and Opex
Whereas two years ago service providers were looking for return on investment (ROI) in their operational systems within 12-18 months, today the typical expected payback time is around 9-12 months. In the late 1990s we saw capital expenditure rise from an historic norm of around 15% of revenue p.a. to a record 35% as operators convinced themselves that growth was unlimited and they needed to expand fixed and mobile capacity to cater for that growth.

Today, operators are being forced to examine ways in which they can protect and grow existing revenue in a much more challenging marketplace.  Flexibility, agility and simplicity are critical. The ability to add value in-flight to Person-to-Person services enables operators to tap into a previously unexploited revenue stream by sweating existing capital assets. 

By introducing new Person-to-Person services it is possible to unblock business intelligence — to unblock and access vital customer information buried in today’s fragmented systems.

Unless operators choose a platform that is flexible and open to expansion they are in jeopardy of missing out on market opportunities. There is no doubt that operators must provide varied value-added services to their subscribers or risk continuous erosion of loyalty, loss of new customer recruitment and diminished ARPU. 

Conclusion

There are many other SMS and MMS Person-to-Person services that mobile operators might want to introduce into their own markets. Mobile operators have a much deeper understanding of what will or will not work with their own customers based on the cultural, economic and social forces in their market. Up until now services such as PEPS and LALS were difficult services to implement with traditional networks but new technology today enables such services to be launched.

The most important service that infrastructure providers need to supply operators is a paradigm shift in the service development environment. We need to be able to provide these flexible and innovative new services in a fast and value-added manner with an ultimate aim of maximising the lifetime value of mobile subscribers.

The challenge is on for UMTS handset manufacturers to keep the IC count down, as Howard Curtis, vice president global services at Portelligent, explains

Analysts have paid considerable attention to the financial commitments that carriers made in spectrum auctions, and to the costs of introducing UMTS-capable base stations and networks, in forecasting the near- and middle-term prospects of 3G technology. Two further key components of the overall business equation that will determine when 3G becomes economically viable are the cost and complexity of UMTS handsets.

Recent product teardown analyses conducted by Portelligent on three UMTS handsets designed for the European market — the NEC e-606, Motorola A830, and Nokia 6650 — reveal extremely high average values on several system-level metrics that are good indicators of relative complexity, and also good predictors of overall manufacturing cost. For example, on the dimensions of IC count, total silicon die area, and total component count, the UMTS averages are:

IC Count: 68 devices
Silicon Die Area: 9.86 cm2
Total Component Count: 995 devices

Comparable values for a representative EDGE-capable 2.5G handset of 2003 vintage are dramatically lower:

IC Count: 13 devices
Silicon Die Area: 1.93 cm2
Total Component Count: 381 devices

When estimated product manufacturing costs are calculated according to Portelligent’s cost models, the average total manufacturing cost of the UMTS handsets exceeds that of the EDGE example by more than 3x, while the average cost of IC devices in the 3G products is a whopping 5.3 times the EDGE case.

UMTS versus FOMA

A comparison of the UMTS handsets along these system metrics with the first generation of W-CDMA “FOMA” handsets that were introduced in Japan in 2001-2002 is also instructive. The first three FOMA handsets analyzed by Portelligent had an average IC count of 32, silicon die area of 10.45 cm2 (with a range from 7.07 to 14.64 cm2), and total component count of 727.

It is worth noting that, in contrast to UMTS phones, which must implement both the W-CDMA and GSM protocols, the first generation of 3G handsets that NTT DoCoMo introduced in the Japanese market supported only W-CDMA (and the inability to communicate with pervasive 2G infrastructure hurt FOMA badly in the marketplace for the first year after its introduction).

The average silicon die area is lower in the first-generation UMTS phones than it was in the early FOMA handsets in Japan, while both IC count and total component count are significantly higher. This can be attributed to achievements in feature-size shrinkage in the semiconductor industry over the intervening two years.

Range in UMTS design

Although an analysis of the average level of complexity and average manufacturing costs of the three UMTS handsets paints a grim picture for the near-term business prospects of 3G networks, these averages do hide considerable variation.

On many of the cost and complexity metrics we assess, the Nokia 6650 falls far below the UMTS average as outlined above. IC count, for example, is 29, versus an average value of 68 (and by comparison with a whopping 108 ICs in the NEC e-606). Silicon die area measures 4.54 cm2 in the Nokia 6650, versus a UMTS average of 9.86 cm2.

How did Nokia achieve this efficiency in designing the 6650? The Nokia handset shows much higher levels of IC integration that are specifically designed to meet the requirements of UMTS communications than either the NEC e606 or the Motorola A830, as well as an overall system design that is more efficient and better integrates the GSM and W-CDMA requirements.

For example, the TI digital signal processor employed in the 6650 handles the baseband processing requirements for both protocols, as well as integrating an ARM core for applications support (these functions remain separate in the NEC handset). An analog ASIC produced by ST Micro handles the analog baseband requirements for both protocols, as well as providing multiple support functions including system power management, audio I/O, and the SIM card interface.

Challenge for the future

While the data transfer rates and potential feature sets offered by UMTS technology may exceed what EDGE can offer, Portelligent’s analysis of these three early UMTS phones indicates that the price is still steep in increased complexity and higher cost. The challenge to designers of 3G UMTS handsets is to achieve products that provide the consumer with the benefits of full 3G communications, but at substantially reduced levels of system complexity and cost. It will be very interesting to see how much progress the second generation of UMTS handsets reveal on these dimensions.

Tony Dennis looks at the impact of chipsets on handset supplies in Europe, and examines what kind of influence they might have on future handset development

With the increasingly more complex nature of today’s mobile handsets — especially those being sold in Europe — the supply of chips and chipsets is playing an ever-more important role for handset vendors and their network operator customers. In many cases, poor consumer acceptance of specific handsets — due to low battery life and heavy, bulky casings — can frequently be blamed on the chipsets they are utilising. Furthermore, delays in shipping certain smartphone and high-end feature phones have been blamed directly on component chip shortages.

A classic instance of chip shortages occurred back in December 2003 when Tom Lynch, president for  Motorola’s PCS division was forced to admit that:  “[Shipping] unit volumes are lower than our customers are asking for due to supply constraints for the integrated-camera components.” His colleague, Bob Perez, general manager for supply chain operations with Motorola PCS, claimed his company was not alone in its suffering.  “The supply constraint for integrated-camera components is an industry-wide problem,” Perez maintained. “Motorola is feeling a larger impact because of the extremely limited supply of the smaller camera technology that we use for our handsets, which enables a compelling clamshell form factor and stylish design.” 

Some observers casts doubt on whether the problem was genuinely industry-wide, though. Paolo Pescatore, a senior research analyst for EMEA wireless with IDC, claimed that it was, in fact, quite rare for handset manufacturers to be hit by chip shortages.  “It’s more a question of [the handset vendor] underestimating its own resources and capabilities plus poor management,” Pescatore told Mobile Europe. “Vendors know when there is going to be a blip in user demand — around Christmas — and they can easily plan ahead for it.”

The general consensus, however, is that a shortage of camera lenses and associated digital optical components is an unusual experience for the handset industry in general. By contrast, low battery life and larger physical dimensions for handsets are blamed directly on component choice and this applies in particular to 3G handsets.

The solution, according to Michael Civiello, vp for marketing and business development with specialist chip supplier, Zyray Wireless, is to employ a separate, dedicated 3G chip. Civiello estimates that in 2004 there will be a market for around 10-13 million W-CDMA handsets in Europe and that 95 per cent of the problems with 3G will have been ironed out. “Motorola and NEC’s 3G software and hardware was set in stone something like two and a half years ago,” Civiello claimed. “We’ve learnt from their pains and experiences. Our 3G chips are up-to-the minute and include all the latest advances. This enables handset vendors to snap on a reliable, low cost 3G solution to an existing design.” Describing Zyray’s chips as “Velcro-like”, Civiello was forced to admit that presently its products only bolt onto Infineon based handsets but claimed that still meant he was targeting 15 per cent of the total handset market.

Overwhelmed with demand

An area where Zyray may well enjoy an advantage concerns EDGE [Enhanced Data rates for Global Evolution]. He claims that a quick straw poll of Zyray’s potential clients showed that they are currently overwhelmed with demand for a handset which supports both W-CDMA and EDGE. “I’ve yet to see a handset shipping which offers both UMTS and EDGE. However, I fully expect to show a reference design for such a handset at 3GSM 2004 which is aimed at potential customers in both Korea and Europe,” Civiello commented.

Despite EDGE’s original public profile as purely an American technology, to date eight European network operators have announced their intention to offer EDGE over their networks including Bouygues Telecom in France. A strong appeal for operators is the possibility of a tri-mode handset which can drop down from 3G to EDGE’s enhanced data speeds rather than falling immediately back to GPRS.

Another very vocal advocate of EDGE is handset reference supplier, TTPCom. The company has established strong relationships over EDGE technology with Intel and ADI for baseband chips and with Renesas for the necessary radio chips. The company argues that the real costs for operators lie not with infrastructure roll out but with proving that such handsets work over their own networks. For that reason TTPCom has been co-operating closely with Rohde & Schwarz and has successfully completed 70 test cases already. Consequently TTPCom confidently predicts that by mid 2004, handsets utilising its EDGE designs and technology will be shipping.

Many of TTPCom’s customers are Asian based manufacturers and TTPCom argues that this is one clear case where technology provides a market advantage. Presently there is only one EDGE handset shipping — Nokia’s 6200 — and no sign that the other Tier One handset vendors are ready to compete. So, just as NEC has exploited the fact that out of the top vendors only Motorola currently offers a competitive 3G handset, so other Asian manufacturers will seize the opportunity offered by EDGE, TTPCom believes.

Mainly thanks to its long established relationship with Nokia, Texas Instruments and its OMAP chips in particular have long dominated the handset market. Sales figures for 2003 have been very encouraging. According to the latest report from Forward Concepts — which monitors sales of DSP chips in particular: “After reviewing the Q4 market guidance of market leader, Texas Instruments, and increased projections of cellular phone shipments by the financial community, we have increased our earlier 15 per cent (DSP chip) shipment growth to 20 per cent for 2003. Also, after earlier cutting back our 2004 forecast, we are also raising it from 20 per cent to 25 per cent. [That’s impressive] when you compare this with the 2.3 per cent increase of the [total chip] market over the same period – DSP is a clear winner.”

However, efforts by the world’s leading chipset vendor, Intel, to crack this market are still failing. “While many of the leading handheld vendors (H-P, Dell, Toshiba, etc) use Intel processors, the company has not yet made any impact on the smartphone segment, ” said Mike Welch, an analyst with  market watchers, Canalys. “The majority of even the small percentage of smartphones that are running a Microsoft OS [Operating System] are currently using TI chips.”

Nevertheless, as the importance of high-end feature phones and smartphones grow, so does the importance of processing power. “We’ve already seen the effects that the demand for more processing power can have in handsets. We’ve seen handsets that crash as a result. The demand for greater processing power is only going to get stronger,” argued Paolo Pescatore. “Handsets now need MMS capabilities; they need built-in cameras; they need to support Java and to run games. That’s obviously going to create a demand for faster processors and handsets that can truly multi-task  — like PCs can. Users are impatient and they aren’t going to want a handset which forces you to wait before you can make a call.”

Which is perhaps why Intel thinks it might have an edge with its forthcoming chip, code-named Bulverde. It’s capable of running a game originally written for the Microsoft X-box; plus it features ‘QuickCapture’ technology enables the user to take 4 Megapixel photos and capture video at 40 frames per second. Additionally the Bulverde will offer ‘Wireless Speedstep’ technology which dynamically adjusts the power and performance of the processor depending on the applications running. Intel expects to deliver the Bulverde chip to customers this year (2004).

Another major challenge to Texas Instruments is expected to come from StarCore, LLC, a new company focused on DSP technologies formed out of the StarCore joint venture between Agere Systems and Motorola and joined by Infineon Technologies. According to Thomas Lantzsch, CEO with StarCore: “We aim to fundamentally change the competitive playing field through licensing and wide availability of DSP cores. That will help manufacturers…deliver higher levels of performance and miniaturization while accelerating time to market and lowering overall production costs.” According to Will Strauss, Forward Concepts’ president: “Backed by three leaders in DSP and communications, the new company has a great opportunity to proliferate the StarCore architectures to a broad cross section of semiconductor manufacturers, OEMs [Original Equipment Manufacturers] and ODMs [Original Design Manufacturers].”

Popular development

A very popular development with consumers would be the introduction of a dual mode handset which works with both GSM and CDMA (cdmaOne) based networks. Indeed, both Samsung and Kyocera (with the KZ850) have shown handsets offering such a capability. Both handsets are based on Qualcomm’s GSM1x technology. They will be aimed initially at the Korean market but crucially China Unicom has also announced its intention to supply dual mode handsets to its own customers — sourced from Samsung and Motorola. Clearly such handsets should soon find their way over to Europe. It’s a good example of how Qualcomm is trying to throw off its ‘CDMA only’ image as a chipset supplier. It recently announced, for example, that 14 leading manufacturers in China, Europe, Japan, South Korea, Taiwan and the United States are busy developing W-CDMA/UMTS products using its chips for scheduled 3G network launches in 2004.
In terms of new developments in mobile handset design, despite the great media hype, handsets which actually support Wi-Fi in addition to, or instead of, Bluetooth are extremely thin on the ground. Motorola is planning to offer a Wi-Fi enabled handset for use on iDEN networks, for example. “We haven’t heard a lot about it really but since (Wi-Fi) is currently such a cut-throat business, I’m not sure we’d want to play in that market,” commented Richard Traherne, a consultant with the wireless business unit of Cambridge Consultants. His company previously spun-off Bluetooth chip specialists CSR (Cambridge Silicon Radio). What Traherne did predict was that software defined radio could play an important part in future mobile handset designs. “To date, it’s not been massively popular [with handset manufacturers] since it has the disadvantage of an overhead in terms of requiring extra resources,” Traherne said. “Although take-up is presently uncertain it can pay dividends for manufacturers since it would allow them to produce more handset variants per year from the same core engine design.”

‘Guts’ of a handset

A similar approach has been taken by TTPCom with its Cellular Baseband Engine (CBE). The CBE is basically the entire ‘guts’ of a GSM/GPRS handset which runs on a single DSP. Other applications — like running an MPEG4 video clip; downloading an MP3 sound file; or running email client software – can then be run on a separate processor. Pascal Herczog, chief system architect with TTPCom, claims that separating the handset functions in this manner means that handset manufacturers won’t need to re-test a handset for type approval every time they make a slight modification to a handset’s design. Crucially this enables a handset manufacturer to produce a customised handset for one particular network operator, such as Vodafone Live!,  from a single, proven handset design. Better still, StarCore with its SC1400 chip, can physically put a DSP and an ARM processor onto a single piece of silicon — achieving a significant reduction in die size, costs and power consumption.

While some observers might argue that chip development only relates to a small sector of the handset market, the latest figures for shipments in Europe for 2003 from Canalys prove otherwise. Between them, Nokia, Sony Ericsson, Motorola and Orange managed to ship two million units. So it would appear that chipset developments are bound to become more — not less — important in the coming year.