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Margo McCall
December 11, 2000
Wireless week
Just a few weeks ago, it looked like wireless equipment makers were facing a winter of discontent. Nortel warned that next year's sales would fall below forecasts. Lucent worried about deadbeat customers. Analysts theorized carriers were about to cut spending. Handset makers grimly dropped their numbers for global sales.
In short, it appeared that tough times had arrived. But just as equipment makers were preparing for belt-tightening, along came AT&T Wireless and its announcement that-thanks to an alliance with NTT DoCoMo-its TDMA network would be overlaid first with GSM-general packet radio services capability and eventually with Universal Mobile Telecommunications System, the GSM third-generation standard.
The news that AT&T Wireless will embrace such a feast of new technologies-while maintaining its migration path from TDMA and cellular digital packet data to enhanced data rates for global evolution-means that equipment vendors will be able to feed shareholders through 2003, when UMTS service will roll out.
AT&T Wireless named Ericsson, Lucent, Nokia and Nortel as its main equipment vendors. Ericsson, Motorola, Nokia and Siemens also will provide some of the sophisticated phones needed to pull off this technology transformation. Although Ericsson, Lucent and Nortel have long helped fill AT&T Wireless' equipment needs, this is the first contract Nokia has had with the third-largest U.S. wireless carrier.
Nokia, which will supply AT&T Wireless with 1900 MHz radio systems that can operate with GSM, EDGE and UMTS, stands to be the biggest beneficiary of AT&T Wireless' technological jump to 3G. Nokia will build a test network for the three technologies at AT&T Wireless' campus in Redmond, Wash., establish a center for the development of mobile Internet technologies and applications and probably supply some of the phones. It has been estimated that Nokia will receive $1 billion for the equipment and technical assistance alone.
Lucent, meanwhile, will engineer and install GSM base stations with GPRS that operate in both the 850 MHz and 1900 MHz frequencies. The base stations, which already are commercially available, also will support UMTS.
Nortel, which recently won $1.8 billion worth of European UMTS contracts, will supply equipment for an advanced voice-over-Internet-protocol network that will allow high-speed delivery of video, data, graphics and other multimedia directly to wireless devices.
Nortel will also work with AT&T to create an application lab for wireless Internet services.
Ericsson, AT&T Wireless' primary vendor for years, will supply R520 mobile phones, as well as base station systems capable of supporting GSM, GPRS, EDGE and UMTS. Ericsson, the world leader in wireless equipment, has sold 50 GPRS solutions to operators around the world.
The dollar amounts associated with the contracts were not disclosed. However, Frank Marsala, vice president of wireless telecom with ING Barings, estimates that AT&T Wireless' capital expenditures will be $3.9 billion in 2001, $4.2 billion in 2002 and $3.3 billion in 2003.
AT&T Wireless contends it will cost only $10 per potential customer to take its network all the way to 3G. That represents the high range of what the company anticipated spending to migrate to EDGE. But AT&T Wireless is able to cut costs by using an overlay. And its alliance with DoCoMo has resulted in AT&T securing cut-rate vendor contracts. John Zeglis, CEO of AT&T Wireless Group, says the $10-per-customer number is firm. "We're not guessing about these numbers. We already have agreements in place that will take us down this path."
AT&T Wireless' migration path should be good for handset makers as they churn out single-, dual- and tri-mode phones with various arrangements of standards. And just as there will be phones with combinations of voice standards, so will there be phone browsers based on both Wireless Application Protocol and DoCoMo's proprietary i-mode, which are incompatible.
The fact that AT&T Wireless is moving to GSM, Marsala says, is something of an admission that TDMA was the wrong standard in the first place. Of the millions AT&T will spend on its 3G transformation, only $2 million will be spent on creating data capability, Marsala says. The remainder will go toward building the GSM overlay. "It's not a slam dunk. You don't just show up and slap up a GSM network. I think there's some execution involved," he says.
More certain, Marsala says, are plans by Sprint PCS and Verizon Wireless to update their CDMA systems to 1XRTT, which is seen as a 2.5G technology. Yet AT&T Wireless still can learn from DoCoMo's May rollout of its 3G wideband-CDMA, which is the same as UMTS. And if AT&T needs more equipment to accomplish its goals, there are always hungry vendors out there willing to help. <<
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