3G: Generally gloomy goings-on?
APRIL 20, 2001
Enterprise via NewsEdge Corporation : 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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