3G Handset Promises: Fact Or Fantasy?
By Deborah Méndez-Wilson
It won't be easy squeezing a rich array of multimedia functionality from a small, streamlined, lightweight
device that consumers also find aesthetically pleasing. Manufacturers are getting ready for the
challenge.
Streaming audio and video. Rich, color graphics. A wireless Web that goes beyond the walled garden.
Videoconferencing. Data speeds that match or supersede current landline connections. Position
location for enhanced 911 applications. By now everyone's familiar with the promises of third-generation
wireless.
The question is: Will 3G handsets live up to their heralded potential, or are they doomed to become
stage props in the next Steven Spielberg space fantasy?
Naturally, the answer depends on whom one asks.
Some industry insiders believe mobile devices, no matter how feature rich, will never replicate or even
approach the desktop computer experience. Others argue: Why bother comparing two different
animals? Consumers who want wireless Web access from mobile phones will work around any
perceived limitations.
While most agree 3G platforms promise a broad array of voice and data capabilities, many wonder how
handset manufacturers will load all those goodies into portable, lightweight phones that consumers will
find aesthetically pleasing. Size, weight and limited screen real estate are but a few of the physical
considerations handset makers face as they design 3G devices. Increased costs, high-tech add-ons,
chipset availability, carrier marketing strategies and the timeliness of platform rollouts are critical factors,
too.
Handset manufacturers seem to believe that wireless carriers–and how they package and market 3G
services–will determine the outcome. Carriers seem to believe consumers will have the final say, in
effect personalizing devices by choosing from a smorgasbord of services. While one consumer might
want a personal digital assistant, phone and MP3 player in one handheld, another might want voice, the
wireless Web and a digital camera.
"We very much see this as a lesson in segmentation," agrees Nokia spokeswoman Megan Matthews.
"There will be no one phone that suits everyone."
While most industry analysts remain optimistic about marketing prospects for 3G products and
services, they–like everyone else–are curious about the cost, design, functionality and availability of
next-generation devices.
It's widely thought that two considerations will make or break how consumers perceive the first wave of
3G handsets and services set to roll out over the next two years. One is the overall appearance and
functionality of the devices, and the second is how quickly and seamlessly wireless carriers deploy the
underlying technology and front-end services that go along with them. "The execution and timely rollout
of these platforms is going to be critical," says Lehman Brothers analyst Tim Luke.
Wireless carriers must ensure that they really have the infrastructure in place and that there will, in fact,
be handsets to meet initial demand, Luke adds.
In any case, no matter how they wind up looking or performing at their commercial debut, 3G handsets
won't be cheap, given all the bells and whistles they'll have. Most will be multimode phones with greater
processing power and advanced radio-frequency technology. And they may have complementary
hardware and software such as Bluetooth, MP3, the Palm operating system, lithium-polymer batteries,
Java programs and GPS chipsets. Given such considerations, it's easy to see how cost becomes a
major factor in designing and manufacturing 3G devices.
In fact, 3G handsets could cost up to 35 percent more than current digital handsets, according to
Dataquest. "Three is the magic number here. They'll be three times more complex than the phone you
have today, and obviously you can't do that without some increased costs," says Dataquest analyst
Bryan Prohm.
Prohm and others believe that even after consumers realize the potential of 3G products and services,
operators and manufacturers still may be hard-pressed to justify significant price hikes. At first,
consumers are likely to want handsets similar to those they use now. Aside from early adopters, they
may not accept drastic changes in size and weight, two features that tend to differentiate devices and
give them life or death at point of sale.
For their part, manufacturers appear optimistic that the cost of 3G devices will drop as technology
improves and consumers embrace them, much as PCs have become more affordable and popular.
And, like anxious fathers at debutante balls, they are coyly starting to present their 3G visions in some
wireless circles.
For instance, Samsung's 3G cdma2000 1x handset, commercially available overseas, and Qualcomm's
CDMA 1x trial handset recently starred in a 3G field trial conducted by Sprint PCS and partners. Testing
is expected to speed up over the next year as more field trials unfold.
Kyocera Wireless Corp., which bought Qualcomm's CDMA business in February, expects to conduct
U.S. field trials of its 3G CDMA product in the middle of next year. The phones are expected to become
commercially available by the end of 2001. Further field trials and ultimate deployment, however, depend
on the business plans of major North American CDMA carriers, including Sprint PCS, Verizon Wireless
and Canada's Bell Mobility, a Kyocera spokesman notes.
In fact, U.S. wireless carriers haven't even begun the physical process of upgrading their networks for
3G capabilities. Sprint PCS doesn't plan to start rolling out its 3G upgrades until the second half of next
year.
While manufacturers are bound to introduce some interesting 3G handset models, some analysts
remain skeptical about the prospect of the devices ever replacing laptops as the mobile data device of
choice. Others worry about product availability as carriers begin rolling out 3G networks. "So far we
haven't seen anything specific other than trial models," says Strategis Group analyst Sylvia Panayi.
Dataquest predicts that multimode 3G phones will become widely available in late 2002. But the
research firm doesn't believe the wireless industry will see a hockey stick growth curve for another two
to three years after that, as consumers gradually absorb the notions of the wireless Web, mobile
commerce and convergence.
As for who is likely to find success in selling 3G handsets, analysts believe there will be room for old
players and newcomers alike.
Nokia, for example, likely will be able to capitalize on the popularity of its current line of digital handsets.
But nontraditional entrants that can design handsets that resemble Game Boys and other entertainment
devices that the digital generation is familiar with will be successful, too. Asian manufacturers are
expected to leverage the success they've had with CDMA handsets and transfer that to the
wideband-CDMA arena.
Still others believe an array of secondary devices will link users to the 'Net with mobile phones becoming
mere wireless gateways to those connections. Analyst Jane Zweig believes that all-in-one devices are
unlikely and that the wireless Web will create new opportunities for other manufacturers with experience
in consumer electronics. "Creating a satisfactory wireless Internet experience will require flexibility in
devices," she says. "In other words, a spectrum of devices with specialized needs."
Nokia, whose main handset design center is in Los Angeles, currently has seven handset categories. As
the manufacturer evolves to 3G even more will become available but, "you're not going to see a major
redirection of our product," Matthews admits.
Manufacturers agree that user interfaces and form factors such as screen display are among the top
physical challenges they face in designing 3G handsets. People want phones to be portable and
easy-to-use but large enough to talk on.
"Deciding what types of add-ons or technology enablers are included is a practical part of the process
we are going through now in looking at the market," Matthews says.
One product that hints at things to come is the Samsung Uproar, a "four-in-one" phone with built-in MP3
player and Web browser. "It's a good example of trying to take lots of different capabilities and bringing
them into a single device," says Peter Skarzynski, vice president of sales and marketing for wireless
terminals for Samsung Telecommunications of America.
Then again, another major consideration for handset manufacturers is what their customers–wireless
carriers–want. In the end, carriers might determine what 3G handsets will look and feel like and when
they are deployed based on the carrier's corporate image and the services it wants to sell to
subscribers, industry insiders say.
John Thode, vice president and general manager of 3G products for Motorola, says a "family of
appliances" will emerge that will look a lot like the mobile devices of today but with a lot more utility. For
instance, there will be Palm-like devices with voice and video capabilities and two-way pagers with
real-time Web access.
The new devices will cost more coming out of the gate. "But we as manufacturers understand the
market realities and that volume makes our case," he adds.
In other words, most consumers will buy what they can afford. Wireless carriers understand this, too,
and will offer devices that appeal to all tastes and pocketbooks.
Most handset makers are working closely with wireless carriers for insights into how the industry will
market 3G products and services.
Bottom line, Matthews says, "there will be a lot of shared learning."
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