<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." >
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." |
