Will They Come?>
From the July 19, 1999, issue of Wireless Week
Chasing The Elusive 3G Dream
By Ed Lopez
In the movie "Field of Dreams," a corn farmer builds a baseball field after hearing a voice that promises, "If you build it, he will come." A new study suggests similar
stirrings among industry executives-except the "it" is third-generation wireless and "he" is presumably a customer base just aching to soak up the huge buckets of data
that 3G promises.
In the movie there were doubters and, in fact, the study also reveals some misgivings and qualifiers about whether a rollout of 3G, with its enticing lure of high-speed
data and multimedia, is an achievable dream or simply an illusion.
The varied perspectives highlighted by the study underscore the uncertainties in 3G's future. Meanwhile, end users may find another game to attend in the high volume
data playoffs.
When The Strategis Group asked 47 industry executives, "Is there enough demand for 3G services to justify the cost of rolling out a 3G network," 54 percent
answered yes and 7 percent said no. Underscoring the cloudy outlook for 3G's prospects, 39 percent responded with a tepid "depends."
Interestingly, the rosiest view of 3G's potential wasn't among manufacturers, who are leading the charge for deployment of third-generation technology. When
answers are broken out by groups, 53 percent of manufac-
turing executives answered yes, lower than the 63 percent of more sanguine operators. Also, 10 percent of manufacturers said demand for 3G doesn't justify the
cost, compared to 5 percent of operators. And a greater percent of manufacturers, 35 percent compared to 32 percent for operators, believe justification for a 3G
rollout depended on various factors.
"Manufacturers are closer to the development of 3G and may have more realistic expectations for the rollout of the technology," said Heather Henyon, a consultant
with The Strategis Group's International Wireless Practice. "The fact that more operators than manufacturers believe that greater demand exists is cause for concern
since operators will be the primary investors in 3G networks. If they invest under the premises of false market potential, then ultimately 3G may not be profitable."
The study also showed that while more operators than manufacturers believe that market demand exists, they seemed to have a fairly low level of awareness of
licensing activities and were unsure of the cost structures of 3G networks.
Executives who gave a "depends" response raised several issues: the number of operators in a given market, the ability to nurture and segment the market, license and
tariff pricing, and overlay costs vs. the cost of new networks.
"Manufacturers see 3G as mainly data driven and a way to increase spectrum and capacity," Henyon said. "Operators may see it as more voice usage than data in the
beginning. I think operators are unsure of what 3G will be exactly. They feel the first market segment will be the corporate segment and over the next 10 years it will
roll over into the mass market."
Part of 3G's allure is that it dovetails with the general consumer desire to get more and more data at faster and faster speeds. But the question remains as to how
much data volume may be desired in a wireless environment and how much customers are willing to pay. And the market isn't standing still. Competing technologies
such as cable, satellite and high-speed landlines are scrambling to snag high-volume users.
"We don't understand the business case for 3G at all," said Jane Zweig, executive vice president of Herschel Shosteck Associates Ltd. "It's being pushed by
manufacturers who want to sell equipment and not necessarily end users who want the service."
Carriers are better served looking at 3G from the standpoint of network efficiency and costs, she said. Also, data transmissions are less forgiving than voice, raising
issues of reliability and greater cell density.
Will customers come if 3G is built? The farmer in "Field of Dreams" only risked taking a few acres of corn out of production to build his field. The wireless industry
doesn't have that luxury.
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