Forget all this 2.5G, 3G, 1x, GPRS stuff for a minute and think about the logical progression of wireless communications in simple English. I read in an article (forgot where so I can't link nor give proper credit) that identified very clearly 5 areas: increased processing power, improved connectivity, more applications, better audio and better video.
This is identical to the Wintel evolution, governed by Moore's law. Processing power, applications, audio and video are all device/technology based. They will most like improve over time and limited only by innovation. These are the areas where QCOM, PALM, handset makers will excel in.
The lone difference between the wireless vs wintel evolution: connectivity. Wireless connectivity is limited by spectrum. While QC can continue to figure out how to best utilize them, the spectrums are of finite width. More importantly, they are of finite value.
A few years ago, some of us may remember the C block auctions. Wasn't the per pop price of the winners around or less than $50/pop? The price was so outrageous that in the end, I am not sure if any of the successful bidders survived.
UK and Germany took the lead and extorted over $500/pop for their licenses. We have to ask ourselves are the spectrums that much more valuable to the carriers? Months ago, I opined that these auctions are taxes in disguise and will kill progress. I think it is more true today than ever.
As an investor, I care about cdma2000, wcdma, HDR, etc etc. As a consumer, all I want is fast, cheap, user friendly wireless voice and data connection using clever devices. But how much am I willing to pay? Today, for my 2 person household, we are connected to the world via 2 land lines, 2 wireless line, cable TV and cable Internet with 2 IPs. This "connectivity package" costs about $100-$150 per month. Of this package, the only component that may be obsolete in the near future may be the land line(s). I do not see watching TV on my wireless handset nor surfing the internet at cable speed via wireless in at least 3+ years. With brutal competition, it is unlikely that I will be paying more for this bundle of service in the future, in fact, most likely less.
With 3G, the major difference is wireless data. How much more would I pay for the convenience of wireless data, knowing full well that the speed and quality would not be remotely comparable to cable speed and my two flat panels at home? At least for the beginning, wireless data is going to be an additional cost to my existing bundle, not a replacement. This will limit my willingness to pay extra for this wireless feature.
Evidenced by G*, consumers are unwilling to pay the price for the global feature even though many may want a phone that works anywhere on earth (theoratical). Even DSL lines are not as popular as expected, with consumers not willing to pay the extra bucks and staying with cheap 56k connection speed or slower.
That is why I think the carriers' business models for 3G is seriously flawed.
From a business strategy perspective, I think Sprint and VZ should bid like crazy to jack up the price of the spectrum and then withdraw from the upcoming auctions. This will force the desperate carriers such as Nextel and T to pay outrageous price for the 3G spectrums. Timing is then perfect for Sprint and VZ to launch 1X and a price war, thereby crippling the ability for the successful bidders to raise any capital to pay for the 3G built out.
It is becoming more apparent that 1x and 1xEV may be the most logical path to 3G. The cdmaOne carriers are going to be at a tremendous advantage. The carriers who stubbornly stick to dead end technologies may in a few years be following the footsteps of Xerox.
Ramsey |
