3G 'Squeezed' By Other Wireless Systems - Merrill Lynch
Source: Newsbytes
Publication date: 2001-05-21
After months of hype, the long-awaited launch of third-generation (3G) wireless networks might never happen, according to a new report issued today by Merrill Lynch.
If and when the technology is fully developed, 3G is supposed to deliver higher data rates, allowing transmission of voice, data, images and video to mobile devices. Critics and supporters of 3G increasingly have debated the potential of the new wireless method in recent months.
Merrill Lynch today said the promise of 3G is coming under pressure from multiple angles. The investment company said the "technical challenge of building a next-generation cellular network is proving difficult for even the most advanced wireless carriers."
Two major carriers have announced delays for their 3G launches in recent weeks due to software problems. In late April, Japan's NTT DoCoMo said it would postpone its system from May 30 to October. On May 14, British Telecom said it would push back its planned 3G-network launch on the Isle of Man for three months.
These delays, according to Merrill Lynch, are combining with telecom debt issues and the rise of other wireless technologies to "put the squeeze on 3G."
The telecom industry is carrying a staggering $650 billion in debt, today's report said. About $100 billion of that was spent on the 3G spectrum in Europe in hopes that a wireless Internet revolution soon would be at hand.
Instead, notes Merrill Lynch, stock prices for the companies that invested heavily in 3G spectrum have plummeted. Deutsche Telekom AG, France Telecom SA and Royal KPN NV are down an average of 69 percent from their 52-week highs.
Telecom operators that are not weighed down by debt have benefited from the tumult in Europe, the study said. Companies such as IDT and Hutchinson have picked the carcasses of deceased competitors "at pennies on the dollar." These smaller, more nimble companies now are competing with the 3G spectrum owners in both the wireless and wireline markets, said Merrill Lynch.
The report said 3G faces big challenges from two technologies: 2.5G and 802.11b (also known as Wi-Fi).
According to Merrill Lynch, 2.5G offers users "good" voice service and short message service (SMS). The problem for 3G is, 2.5G provides the benefit of being "always on" to the user, and is much cheaper to employ.
The study puts the cost of a European 2.5G system at approximately $3 billion, compared to $250 billion to provide the spectrum and the infrastructure for the debatably faster 3G.
"The cost/benefit analysis and therefore business case for 3G appears to be eroding," said Merrill Lynch. "If 2.5G can deliver an always-on, 9.6 Kbps (kilobits per second), packet-switched cellular system for a $3 billion upgrade cost, the $250 billion needed for an always-on, 1 Mbps (megabits per second), packet-switched 3G cellular system looks like it could become the next HDTV - a neat technology with no customers."
The study praised 802.11b technology as "the sweet spot in wireless" and said many major technology product manufacturers are rushing to include it in the next generation of devices.
According to Merrill Lynch, Toshiba, Dell, IBM and Compaq are promoting 802.11b-enabled laptops, Intel has dropped HomeRF for 802.11b, Microsoft has decided to include 802.11b but not Bluetooth support in Windows XP, and Handspring has been talking about 802.11b wireless capability into its personal digital assistants (PDAs), not Bluetooth.
The study cited five reasons why it believes 802.11b is catching on. First, it is interoperable today. Second, it is cheap and getting cheaper. Third, it is as fast as most current desktop connection.
Fourth, the study continued, 802.11b is based on the LAN (local area network) standard Ethernet, "which means millions of operations people know it and trust it." Finally, 802.11b is seen as secure for enterprises wanting to access their networks.
No matter which wireless technology takes mobile communication forward, the study said numerous challenges await. These include billing, maintenance, working with existing 2G systems and interference.
"We believe the most likely usage in the next few years will be: (1) laptops with 802.11b for networking and Bluetooth for cable replacement inside; (2) cellphones with 2.5G for voice and SMS outside and possibly Bluetooth inside (to your wired desktop phone); and (3) PDAs with 802.11b for networking inside and outside, with Bluetooth for cable replacement," the study predicted.
Merrill Lynch wireless services analyst Linda Mutschler said if a move to 3G does happen, it would be driven by a need for greater capacity.
The study concluded that several mobile operators and other companies will benefit from increased 2.5G usage, including Sprint PCS, Verizon Communications, KDDI, Hutchinson, Qualcomm, Samsung, NTT DoCoMo, Cisco, 3Com, Symbol Technologies, Proxim, Compaq, Toshiba, Dell, Wayport, MobileStar, Intersil, Texas Instruments, Openwave, Mobilian, Research in Motion, and possibly Handspring.
Merrill Lynch said several companies that have "counted on" wireless 3G systems will be hurt if those networks do not come to fruition. These include Ericsson, Nortel, Deutsche Telekom, Motorola, France Telecom SA and Royal KPN NV.
More information on Merrill Lynch is available at ml.com .
Reported by Newsbytes.com, newsbytes.com .
17:51 CST Reposted 21:41 CST
(20010521/Press Contact: Steven Milunovich, Merrill Lynch, 212-449-2047/WIRES TELECOM, BUSINESS/3GEN/PHOTO)
Publication date: 2001-05-21
© 2001, YellowBrix, Inc. |
