FT article with surprisingly good insight into what's really going on:
The 3G window of opportunity
By Alan Cane in London
Published: March 28 2001 19:55GMT | Last Updated: March 28 2001 22:23GMT
Europe's proudest technological boast is its leadership in mobile telephony. Of 700m cellular subscribers
worldwide, more than
two-thirds use the GSM (Global System for Mobile telephony) standard created, adopted and nurtured in Europe.
The economic consequences for the region have been profound. Companies such as Nokia, the leading cellular
phone maker, and
Vodafone, the world's largest mobile operator, are the powerhouses of the wireless economy.
Europe's leadership may not, however, survive the move to the next generation of mobile phone technology. The
efforts of regulators,
vendors and operators to ensure Europe stays ahead of the pack as the world moves to third-generation (3G)
services could
inadvertently cost it its dominance.
Its chief competitor is snapping at its heels. Qualcomm of the US recently secured a licence for 3G in Australia in
what many see as a
gauntlet-hurling exercise designed to show its system works best.
Third-generation services, which will bring colour, full-motion video and the internet to mobile phones, are due to
be launched in Europe
next year. But all the 3G base-stations and telephone handsets have had to be created from scratch because of
Europe's insistence on
following its own version of the CDMA (collision detection multiple access) technology on which 3G services will
be based.
Irwin Jacobs, Qualcomm's highly vocal chief executive and inventor of the technology, has already cast doubt on
whether Europe can
meet its self-imposed target. And this is not just special pleading.
The European specification, called UMTS or Universal Mobile Telephone System, is still undergoing radical
revision. Only this week is a
definitive version expected. There are already worries that handsets will be delivered late and will perform worse
than the GSM phones
they are to replace. Critics say a complex development such as UMTS requires hugely more time to be completed
and tested than the
Europeans have allowed.
The European Commission has also given warning: "The timely availability of . . . 3G handsets will be crucial," it
said in a paper
released last week, emphasising that "Product development for 3G terminals has not in the main progressed beyond
prototyping,
pending verification of the key applications which these handsets need to serve."
Meanwhile, the rest of the world is moving fast. The largest Japanese mobile operator, NTT DoCoMo, says it will
launch 3G services this
May. Its handsets are being made by Panasonic, which has poured huge sums into their development. Verizon and
Sprint of the US are
both planning to offer 3G services this year - although neither has set a date for launch.
If, then, manufacturers fail to provide Europe's mobile companies with working equipment on time, the region's
operators face the
prospect of falling behind their international rivals.
Last month in Cannes, France, a conference saw Qualcomm demonstrate a working 3G system. Admittedly, this
involved transmitting
data to a personal computer rather than a phone, but the significance was not lost on the audience: Qualcomm's
technology,
CDMA2000, works - today. Sprint says it will use CDMA2000 for its launch. Although Verizon has yet to make
a decision, it is resisting
pressure from Vodafone, its partner, to adopt the European standard.
Europe's leading manufacturers remain confident. Tapio Hedman of Nokia's mobile division says the company is on
track to launch 3G
handsets in the third quarter of 2002 and to be making them in millions by the end of the year: "The first handset we
made was the size
of a refrigerator. The current ones are much smaller. Development is proceeding and the technical challenges are
being met in a planned
manner."
Arja Suominen, representing Nokia's infrastructure division, said deliveries of pilot commercial systems would start
next quarter with
volume deliveries in the second half of the year.
Ron Garriques of Motorola, the third largest handset manufacturer, says the chips at the heart of the new phones
are progressing well:
"It was the first time we have had newly designed silicon work first time."
And even if 3G is late, the Europeans can, they say, deploy 2.5G, a souped-up version of 2G that offers many of
the advantages of 3G,
such as being "always on", without 3G's huge expense.
Why, then, do the worries persist? Qualcomm has been developing CDMA over many years. Its 3G version,
CDMA2000, has been
adopted by operators in the US, Japan and South Korea and now a Qualcomm company has secured a licence in
Australia.
Nevertheless, in the late 1990s, when standards for 3G were being agreed, the European authorities were
determined to repeat the
success of GSM. Rather than accepting a US CDMA, they opted for a home- grown version, wide-band or
w-CDMA. DoCoMo, the
largest Japanese operator, elected for a slightly different version. The possibility of a world phone using the same
technology in every
country has been, for the moment, lost.
A key point, however, was that while GSM operates at frequencies of 900MHz and 1,800MHz, the European
authorities insisted that
w-CDMA ran at 2.1GHz. There are some technical advantages in using this region of the spectrum but most
observers believe creating a
unique European standard was a political move: "I believe this was a conscious effort to force operators to invest in
a technology that
would recreate the success of GSM and create a new export engine for Europe in the process," says one
manufacturer.
The decision to opt for w-CDMA offers economies of scale, especially if subscriber demand is high. Mike Short,
in charge of standards
at BT Wireless, says: "I have no doubt w-CDMA is the best route to follow."
But choosing 2.1GHz has drawbacks. First, manufacturers had to start from scratch to design, build and test the
system. Operators
have been unable to use their existing GSM spectrum to introduce or test-market the new services.
Second, new networks of base-stations will have to be built. This represents a huge investment on top of the
colossal sums many
operators have already paid for 3G licences. Many more base-stations are needed at 2.1GHz than at lower
frequencies because the
signal propagates poorly.
Third, because there will be, to begin with, only islands of 3G in a sea of GSM, handsets will have to be able to
operate seamlessly in
both modes, switching spontaneously from 3G to GSM according to the area. These phones represent a significant
technical challenge.
The continent is on a knife edge. If the technology is delivered on time, Europe will maintain its leadership position.
If not, the initiative
will inevitably pass to the US which will become the source of the most advanced business and leisure applications
for mobile phones,
just as it is the source of the most advanced personal computer software. The many US mobile software
companies that have invested
in Europe because of its leadership in GSM will focus back on their homeland.
One senior telecoms executive summed up the position: "I fear the European side of this industry is in for a
protracted
business winter because of misguided manoeuvres by regulators, vendors and operators to dominate the wireless
marketplace."
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