No winners in the generation game

Click to follow
The Independent Online

The champagne corks were popping last Thursday when NTL pulled out of the bidding for a next-generation UMTS (Universal Mobile Telephony System) licence, leaving the remaining five bidders triumphant despite having to foot the £23bn bill. The hangover the next day couldn't have been that pleasant, though. While the winners may have bought a licence, they will now have to stump up at least £2bn each as a downpayment, and start budgeting to build the network.

The good news was that Vodafone did manage to get one up on BT by securing the biggest spectrum, even if this was at a cost of almost £6bn. And NTL, on the face of it, made the right move by bowing out, saving itself a good £4bn, which can now be put towards a bid with France Telecom for Orange, and thus secure a licence that way.

For the telcos that bid the highest and won, panic surely has to be setting in. No one expected the auction to go as high as it did and although they will all be able to find the cash (even if it means doing deals with those who dropped out at earlier stages) and get the networks up and running, the problems don't stop there. The real problem will come when the UMTS phones hit the market and the operators realise that only a small percentage of the population is actually interested in having one of them, whatever the cost. The problem is going to be exacerbated by GPRS (General Package Radio System - an upgrade to the current GSM network) which rolls out at the end of this year. GPRS, which will enable mobile broadband Internet, is going to be just as good as what UMTS can offer (in consumers minds, anyway) and satisfy most people who want a good Internet phone.

The whole idea of video on phones (which UMTS will allegedly offer) has always been the subject of science fiction movies and has never really taken off, so why should it be any different in two years' time when these newfangled video phones hit the market?

There is only so much you can watch on a small device - remember the craze for small TVs in the early Nineties, which were discarded because they were impossible to watch? It seems pretty clear that people don't like watching small screens for long periods of time, how else can you explain the booming sales of wide-screen televisions?

It's going to take a lot of marketing (more costs) and lots of amazing services to extol the benefits of UMTS over GRPS, and I predict consumers will be confused and stick to what they know best. Maybe I'm wrong and UMTS will be a roaring success, but I can't help feeling that it's all going to be a very expensive damp squib.

The fast show

Meanwhile, pressure is mounting on BT to open up its local loop even earlier than July 2001. The US government has got involved and is threatening to file a complaint at the World Trade Organisation if BT doesn't open up the loop by 15 June. Not that it's any of Washington's business, but you have to admire their chutzpah. The European Commission has also got involved and could end up forcing open the UK loop before the end of this year.

BT, none the less, went ahead with its announcement last week, which gave details of a launch date and price for ADSL (that's Assymetric Digital Subsriber Line), but as always with BT, it failed to cause the sparks it was hoping for. Press coverage was bland, stating the facts that BTOpenworld's broadband service would, as predicted, cost around £40 per month and was ready to take on customers in July, and the details were nothing to write home about.

To make matters worse for BT, its Openworld website was hacked on Thursday and details of people who registered for the service "were accessed by unauthorised persons", according to an e-mail registrants got from Robert Salvoni, the services's general manager. They weren't wrong when they called it Openworld. He promised that BT was undertaking "a full and thorough investigation". Cue the sound of a few heads rolling down at BT.

PR disasters aside, BT now has the chance to steal a march on local loop limpets by having at least a year to run its service unchecked and heavily market it as the ubiquitous broadband Internet service. But come July 2001 (or whenever), it's going to have to tighten up its act, so nothing new there then. Eighteen months from now, we'll all look back and wonder what all this fuss was about; broadband is evolution and, after all, we do still have a choice.

Back to the future

Hands up if you think the pogo-ing of hi-tech stocks is a positive development. Positive because it brought with it a slap in the face for those whose eyes had been glazed over by what was still essentially enigmatic to them. Positive because hi-tech stocks are now meandering at more realistic levels, and by and large, the wheat has been sorted out from the chaff.

But in my mind, the most positive repercussion has been in the culling of completely ridiculous marketing budgets. Dot.coms that were getting carried away with the market momentum and were in the middle of multi-million-pound ad campaigns (for no particular reason other than they were just following the rulebook) have paused to draw breath and take stock.

Suddenly it seems that the rulebook has been rewritten. Venture capitalists realise there's no profits to be had in business-to-consumer sites, the funding has dried up and the stock market is too unstable to float without some reference to profit in your business plans. Since most high-profile marketing activity is a waste of time, it's time to stop shouting and start whispering to the right people. Back to the good old days.

Sadly I don't think this means the death of dear old AOL Connie just yet, but it does mean that we won't be constantly bombarded by ill-thought out advertising at all hours of the day and night. And that, I have to say, has got to be a good thing.