3g going going gone (nat post editorial)
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or
nationalpost.com!
incidentally look who is headed into multi media news...
nationalpost.ca
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age URL: siliconinvestor.com
March 24, 2001
3G: Going, going, gone
Paul Kedrosky
National Post
Being the Next Big Thing isn't as much fun as it used to be. No, I'm not talking about the magnificently errant adventures of
Netscape founders Jim Clark and Mark Andreessen. (Both have had their clocks cleaned of late, the former with his
disastrous LoudCloud initial public offering; the latter with the ongoing implosion of most of his post-Netscape
investments, like Shutterfly.)
Instead I'm talking about wireless -- in particular, so-called 3G wireless networks. It is the once and future Next Big Thing,
the sine qua non of a brighter, interconnected future. The trouble is, there are ominous rumblings around the planet that 3G
wireless isn't going to happen any time soon. Matter of fact, there is an excellent chance that, in some countries, it is going
to be more like the Last Big Thing.
What went wrong? Neatly enough, speedy-speedy 3G is happening slowly. Third-generation (which is what "3G" stands
for) wireless technology can, at least in theory, transmit video, audio and data at speeds averaging more than 20 to 30 times
the rate of current mobile phones. And that's a good thing, because current mobile phones (and other mobile devices) are
loathsomely slow. Even assuming you can cope with the current postage-stamp screens, you would only browse the Web
on a bet.
So some sort of higher-speed wireless networks is going to happen, sooner or later. So far, the "sooner" answer has been
3G. But to make 3G happen, two things have to happen: the standards have to be locked down, and the spectrum has to be
allocated. The first is happening, albeit slowly; but the second is a mess.
First things first: manufacturers have to agree on the underlying standards. Unsurprisingly, most vendors have their own
technological hobby-horses they'd like to convince other vendors to use. After all, they have all seen Qualcomm's smashing
financial success as the owner of the main patents for one cellular telephone technology (called CDMA), and -- no slouches
themselves -- they'd like to do the same thing in higher-speed wireless technologies.
But that plethora of proposals from companies in the United States, Europe, and Japan has created a Tower of Babel,
threatening to fragment the 3G market -- even before there is a market. Sure, some of these would-be standards will
evaporate as vendors learn (again) that discretion is often the better part of valor, and they come together on a subset of
proposals. But as the saying goes, a camel is a horse designed by a committee, so there is an excellent chance that whatever
3G standards become anointed will be balkier and more troublesome than they need to be.
But dueling egos at cellular manufacturing firms are only part of the problem. At least as big an issue, and arguably even
bigger, is the disastrous trouble with spectrum auctions.
Why is spectrum auctioned? Good question. New wireless technologies require spectrum in the same way that cars require
highways: It's where you travel. But for economic and technically debatable reasons, communications authorities have
decided that next-generation technologies need spectrum of their own. And wouldn't you know it? They're the only ones
that can sell the stuff.
For a little while, auctioning spectrum looked like a better business than the wireless business. On the one hand you had
over-testosteroned cellular firms. Juiced by their sky-high share prices, they felt that no price was too high to be part of
the 3G revolution. On the other hand, you had governments with exclusive access to spectrum. The two came together in a
worldwide collision of greed and need, and the result was billions in fees for selling air. Not a bad business, if you can get it.
Sadly -- at least if you're government and you're in the auction business -- the auction business is imploding. Despite some
of the low-rent cheating that went on during the auctions (some major U.S.-based wireless incumbents backed
minority-owned upstarts to take advantage of favorable rules), spectrum buyers paid so much that many are now facing
bankruptcy.
And now, the buyers think the sellers did them ill by monopolizing spectrum and coercing overpayment. It is to the point
that Chris Galvin, CEO of Motorola, said this week that he thought George Bush's administration should offer spectrum
relief the same way they're promising tax relief. He went so far as to suggest that spectrum should be given away free,
much the same way the U.S. government gave free right-of-way to railroads.
Will it happen? Don't bet on it. Governments "need" the billions raised, and over-eager buyers at any auction are hardly
sympathetic characters. Not to be sympathetic to the government case, but there is a strong argument to be made for letting
the buyers languish. If they go bust, so be it. Another auction will have to be held and buyers will know better next time:
even if they run and hide.
In the interim, 3G roll-outs are being delayed around the globe. From Singapore to Spain, companies are rumbling that they
paid too much and now they can't afford to launch products into the markets for which they paid an entry ticket. It is
magnificently bizarre. In a kind of apotheosis of the hyperbole of the last few years, 3G looks increasingly like the first
zero-billion dollar technology market to flame out before it could even start.
Government greed, Marx Brothers-style auction collusion, hyperbole, and lousy bidding mean that 3G may soon stand for
Going, Going, Gone.
Paul Kedrosky is a professor of business at the University of British Columbia. |
