Third-Generation Wireless: Still On Hold
Problems with standards, spectrum, and costs leave wireless' next iteration up in the air
By Matthew G. Nelson (mgnelson@cmp.com)
May 7, 2001
informationweek.com
High-speed wireless communications. Untethered devices that can send and receive any amount of data at any time. Wireless connections that don't fade in and out or die in the middle of a transmission. This is the promise of third-generation wireless. But it will be some time before reality catches up to the hype.
Third-generation represents the next era of wireless data access, which promises speeds of up to 1 Mbps compared with today's speed of 14 Kbps. 3G is also supposed to support always-on connectivity so mobile users don't have to dial into a network to read wireless E-mail, download customer data, or cruise the Internet with handheld devices. It's also expected that wireless users will be able to perform bandwidth-intensive tasks such as watching videos.
"It's really cool, and I can't wait for it to be here in a meaningful way. It will have an enormous impact,'' says Jon Klein, president and CEO of FeedRoom Inc., a New York news and information network that digitalizes its customers' content so the information can be distributed on the Internet. Still, Klein admits he's "not holding his breath" for 3G.
Exactly when 3G will emerge as a viable wireless networking option is in question and depends on several factors. Its biggest champions--the telecommunications and wireless carriers--have put the brakes on deployment for a number of reasons, including unresolved standards, delayed spectrum auctions, and skepticism that the carriers won't recoup the hundreds of millions of dollars it'll take to build a nationwide 3G wireless infrastructure.
The best-case scenario, analysts say, is that 3G services will become available in 2004--three years behind schedule. A year ago, industry experts were predicting these services would hit the market by the end of 2001. "For 3G to see momentum, at least 50% of the population has to have access to 75% of the services, and at least 5% of the market has to have the handsets. By that definition, 3G [won't be available until] 2004 to 2005 at the earliest," says Bob Egan, VP and research director for mobile and wireless at Gartner.
3G's primary stumbling block rests squarely on the shoulders of the carriers. AT&T, BellSouth, Sprint, Verizon, and others have the task of deploying the requisite networking receiver base stations, which act as transmitters and receivers and connect wireless devices to the Internet.
Analysts say some carriers have delayed plans to upgrade their systems to 3G. For their part, carriers say their initiatives are moving along. The plan has been to begin upgrading to 3G in 2003 and to have coverage by the end of 2004, according to an AT&T Wireless spokesman. "Some people are getting confused, but we haven't backed off. We put a stake in the ground." the spokesman says. Regardless, carriers have to decide between competing protocols under consideration for 3G transmission speeds.
The more popular CDMA2000 standard stems from the well-entrenched CDMA standard and was spearheaded by Qualcomm Inc. But carriers that choose CDMA2000 will incur expensive system upgrades. Sprint PCS, for example, will spend about $1.5 billion this year to upgrade its nationwide network to 3G speeds.
The competing standard, WCDMA, is more popular with European and Asian carriers and AT&T. Created by LM Ericsson Telephone Co., WCDMA grew out of the Global System for Mobile Communications and TDMA (Time Division Multiple Access) technology. It's also not cheap: To support WCDMA, carriers will have to "overhaul the entire network," says Warren Wilson, practice director with Summit Strategies, a market research and consulting firm.
Both standards must adhere to ITM 2000, a protocol specification put forth and monitored by the International Telecommunications Union.
The standards battle was particularly heated several years ago, when Qualcomm, a CDMA2000 proponent, claimed that it owned patents on technology incorporated into the WCDMA standard. Anyone using 3G technology based on either standard would be required to pay Qualcomm licensing fees, according to Qualcomm. The ensuing legal battle between Qualcomm and Ericsson was eventually settled by a cross-licensing agreement between the companies.
But the settlement is shaky and has resulted in a morass of political decisions and licensing deals, which have left potential 3G providers with a wait-and-see attitude, Wilson says. "This is a matter of ongoing dispute in the industry right now."
Spectrum is another thorny issue that's yet to be resolved. Because there's a fixed number of radio frequencies available, the U.S. government, under the auspices of the Federal Communications Commission, regulates the allocation of spectrum. But the FCC has yet to hold an auction on the 3G spectrum; in fact, it's postponed several auctions and hasn't scheduled a new one.
The issue is further complicated by the fact that the military and UHF television stations use spectrum that could support 3G networks, but neither seems willing to give up its spectrum. Carriers with sufficient spectrum are lobbying hard against future sales, says Gartner's Egan. "The spectrum issue is also a big political game."
The biggest obstacle to the creation and installation of 3G networks is simple: Will people actually pay the high prices for 3G ac-cess and will the fees cover carrier installation costs?
"The network owners have suddenly had a failure of nerve over the issue of whether the customer will really pay for the services that all this new technology really enables," says Neal Hill, managing director at Venture Investment Management Co., an early-stage venture-capital firm.
Despite 3G's grand promises, Hill says there still isn't a killer application that will require the bandwidth of 3G networks and stir user demand.
United Parcel Service Inc., for example, only needs to send over its wireless network small packets of information--simple messages that specify when a package arrived and who signed for it. "We don't have a lot of need for 3G,'' says Guy Hamblen, information services manager for the delivery company.
3G's troubles may have had an effect on Japan's NTT DoCoMo, which recently said it would delay its upgrade to a 3G system by more than four months. NTT DoCoMo denies there are technical problems associated with the delay and refuses to give further information. Hill says it's likely the company is looking for some breathing room to test the new technology. "What NTT DoCoMo is saying is, 'We're in no hurry to roll this stuff out; we've got good usage numbers on the high-end services we've rolled out so far,' " Hill says.
Hardware manufacturers such as Motorola Inc. and Toshiba Corp. say they're ready for 3G. Toshiba is already shipping 3G hardware and software in Japan and plans to roll out similar products in the United States when the market is ready. "It's not a matter of technology. It's a matter of carriers and coverage," says Dang Nguyen, senior manager with the wireless group at Toshiba America Information Systems Inc., the U.S. division of the computer company.
3G's troubles and ongoing delays mean companies shouldn't pin today's business plans on the high data speeds 3G promises. "It's too much risk, zero reward, and an extreme amount of uncertainty," Egan says.
Instead, Egan and others recommend that businesses use technlogies such as GPRS (considered 2.5G today), which works with networking infrastructures and relies on compression and other techniques to provide faster transmission speeds. Says Summit Strategies' Wilson, "That makes more sense than waiting for 3G."
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08:26 ET Nokia (NOK) 17.00: -- Update -- On call, company said its Nokia Networks business is expecting modest growth in the second half...Nokia will begin shipping 3G gear in October, allowing operators to launch 3G in mid-2002. However, while shipments will start, company will not recognize revenue for 3G gear until mid-2002 which partly explains the lower revenue guidance...Goal is to reach 35% market share in 3G infrastructure...Briefing.com views this as a positive as finally a company is giving concrete timetable for 3G rollout...stock at 19.37.
So timetables for rollout seem to still be a little foggy at best, especially in the US.
Jim |
