3G/ Generally gloomy goings-on?
individual.com
April 20, 2001
Rich Santalesa
Dark clouds are gathering over 3G, the shorthand
used to describe high-speed, third-generation
384Kbps wireless systems.
3G promises always-on Internet access to mobile
phones and wireless devices at speeds
significantly higher than today's 0.9G networks. But
in the United States, the technology is mired in
political infighting over spectrum use, frighteningly
high initial investment costs, and uncertainty over
when--or even whether--users will take to it and
at what price. (For a concise summary of 3G's
ongoing development and issues, pop over to the
FCC's 3G site.)
For my own part, I think that without a good dose of
out-of-the-box thinking from organizations not
known for their creativity, 3G is on the road to
short-term financial failure.
Take Verizon, the company formed from the merger
of Bell Atlantic and GE. Verizon last month
awarded a three-year, $5 billion contract to Lucent
to build a CDMA 2000-based, 3G network running
at 144Kbps. Inelegantly named 3G1XRTT, it'll be
followed, according to Verizon, by a 384Kbps 3G
wireless system that ramps to speeds in the Gbps
range in some distant future.
Now, $5 billion is nothing to sneeze at--and that
figure doesn't even count spectrum auction fees to
be paid once the FCC chooses the spectrum
bands that 3G will call home. The FCC's 3G Final
Report reveals that merely relocating existing
users to free up spectrum for 3G could cost from
$3 billion to $30 billion--depending on the band in
question.
Whether we're talking Verizon's $5 billion or the
$20 billion that Vodafone has already spent on
spectrum licenses, you don't need an MBA from
Harvard to realize that both companies have a
tough row to hoe once all the roll-out costs are
added. The answer to the question of "how many
users at X dollars per month net will earn back $5
billion to $20 billion with interest and operating
costs" is, unfortunately, many times more than will
sign up at the $20 to $100 prices likely to be
charged. After all, how many monthly subscriptions
will the average household or business spring for
before deciding enough is enough? If Verizon's
counting on 50 million hipster teenagers watching
streaming video on 3G phones to cover its
investment, well, I wish it luck.
So what will it take to get 3G off and running? Not
the pie-in-the-sky "if we offer it, you will use it"
brand of wishful thinking. I'd argue, conversely, that
3G apps aimed squarely at the mundane tasks of
daily work and family life, rather than those geared
toward fulfilling a Jetsonesque future, stand the
best chance of getting 3G off the ground in the
shortest amount of time.
What type of boring but useful apps could these
be? How about, for starters, a family-wide,
one-price plan that ties Mom, Dad, and the kids
into a secure wireless system? Think a VoIP,
Nextel-like squawk box on a handheld with a
video-fax ability of sending short clips and a
built-in GPS. How many times have you lost family
members at the mall, a park, or on the slopes?
Already, many people rely on inexpensive FRS
(Family Radio Service) radios to keep in touch at
such events. Add in a few more capabilities and,
well, things begin to get interesting. A key to 3G's
success will be what I call the "combo
factor"--combining high-speed wireless with a
host of other functions and abilities, rather than
expecting high-speed wireless to succeed alone.
Reason to pause
While I'm convinced that fast wireless connections
will one day be nearly as ubiquitous as dial tones,
and I'd love a high-speed wireless connection
wherever I go, I'm a skinflint even in good
economic times. And if the dot-com collapse
validated any fiscal philosophy, it surely proved
that realism carries the day in the end.
Need a splash of cold water on the face to view 3G
realistically? Look at Metricom. I love Metricom's
Ricochet 128Kbps service. Its patented Micro
Cellular Data Network technology is elegant.
Indeed, 128Kbps Ricochet service often reaches
160Kbps in my experience, and I've quietly
watched Ricochet WAPs spring up on light poles
all around New York City.
But reading Metricom's balance sheet and SEC
filings is enough to give even a 3G optimist pause.
Metricom lost $245 million last year and counted a
mere 34,000 subscribers by Dec. 31, 2000. The
company has announced a virtual freeze on its
network deployment, fired 22 percent of its
workforce, and fessed up to the reality that it will
run out of cash this year unless additional funding
materializes. In short, the next two quarters are
make or break, and hinge strongly on Metricom's
marketing and financial deals with MCI WorldCom.
If Metricom, a company with a decade of wireless
connectivity experience, a system that works and
that already covers millions of potential
subscribers with enough bandwidth to be extremely
useful, a patented network system, and virtually no
spectrum fees, can't succeed at wireless
high-speed consumer and business networking,
who can?
What does all of this mean mean for you, the IT
professional? It means you can safely ignore 3G
for the next three years and focus on other
initiatives. In a technical landscape with many
other distractions, being given "permission" to
ignore something is pretty valuable in my book.
But for companies planning to build 3G networks,
they don't get off so easily. Right now, they should
sit down, put on their consumer hats, and figure out
what makes sense in the real world. Otherwise,
telcos and 3G wanna-bes will inevitably stumble
down the road of merely offering what's technically
possible and trying to sell it through flashy
marketing. If they do that, they'll have already
thrown away not only their money--but yours, too.
What do you think will be 3G's killer app? Talk
Back below. Rich Santalesa is the chief analyst at
PDA & Wireless World, an editorial, network, and
wireless analysis firm based in New York.
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The author overlooked the fact that Verizon's 1X investment will double voice capacity and can be justified on that. Voice is the killer app.
Metricom's Ricochet doesn't do voice. Data alone doesn't generate enough revenue to carry it. - DPR |
