Vic, maybe me buying Opwv at 15 was a little premature.
October 2, 2001
It was raining in Tokyo yesterday as the long-awaited "third generation" of wireless technology hit the market, with Japan's NTT DoCoMo selling futuristic phones that offer two-way video communications and high-speed Internet access.
Several thousand shoppers braved the foul weather to buy the phones, which retail for as much as $634. Within the next three years, DoCoMo hopes to sell 6 million third-generation or 3G phones, although some analysts are skeptical the company will hit that target.
Despite the thrill that users might get by talking to each other on pocket-size video screens, analysts say there will be some major hurdles before 3G -- touted by its backers as the future of the wireless industry -- gains worldwide acceptance.
And that could have major implications for Qualcomm, Ericsson, Nokia and other wireless providers, which have spent several years and an estimated $100 billion trying to bring their own 3G technologies to market.
"Everybody's going to be looking at DoCoMo over the next few months," said Shiv Putcha, an analyst at the Yankee Group in Boston. "But given the current state of the Japanese economy, I'd be surprised if they get 1 million people by the end of next year, let alone 6 million by 2004."
In fact, the prospect of recession seems to be cutting into 3G's prospects throughout the world.
DoCoMo has postponed a launch in Europe. And analysts say it is likely that after the Sept. 11 terrorist attacks, the market in the United States has weakened. San Diego's Packet Video, which supplies some video services for DoCoMo's phones, laid off about 10 percent of its 300-person staff Friday -- largely sales and marketing staff members involved in U.S. sales.
"We're focusing our efforts on a commercial deployment of 3G technology in Europe and Asia in 2002," said spokeswoman Anjeanette Rettig. "The U.S. market is very slow in deploying."
The race for 3G technology has been heating up for the past several years, with wireless companies racing to bring high-speed Internet access to cell phones now equipped with the first two generations of analog and digital technology.
Two forms of 3G technology are vying to dominate the market: WCDMA, which is used by DoCoMo, and CDMA2000, which is championed by Qualcomm and other companies in the United States and Korea. Most European and Asian wireless operators have been migrating to GPRS, a halfway point between the second and third generations, with the goal of moving to WCDMA if it proves itself.
DoCoMo was the first to make it to market, thanks to its close relationship with the Japanese government. As an offshoot of the former Japanese telecommunications monopoly Nippon Telephone and Telegraph, DoCoMo held a favored position with regulators, who provided it with vast subsidies and free spectrum for its transmissions.
"Since DoCoMo didn't have to pay for its spectrum, it has a huge amount of capital for investment that other companies don't have," said Michael Alfart, president of Building2, an Internet company in Tokyo. "The regulators have been very hands-off when it comes to DoCoMo, allowing it to ride roughshod through the market."
Despite the assistance from above, DoCoMo has run into a series of glitches in its race to market.
DoCoMo's phones were initially slated to hit the market in May. But that was scaled back to a test launch, with DoCoMo giving away 4,500 phones to selected customers. Over the past five months, it endured two recalls of its 3G handsets, manufactured largely by Panasonic. Even after five months of testing, the phones cannot download video and music clips, originally touted as key features for its phones.
"Those glitches show that even the Japanese are having problems with this technology," said Rudy Baca, an analyst with the Precursor Group in Washington, D.C.
"In Japan, where you get spectrum for free, you can handle those problems. In Europe, where you have to justify spending billions of dollars on spectrum to your shareholders, those problems can spell trouble."
Qualcomm, meanwhile, has allied itself with two companies: KDDI, a spinoff of Japan's former long-distance provider, and Japan Telecom. Both companies have delayed their launches until next April.
Ken Matsumoto, who heads Qualcomm's operations in Japan, said he believes CDMA2000 will ultimately prevail because it is cheaper than WCDMA, although it does not have all the bells and whistles.
"Most people buy cell phones just to send e-mail," he said, citing statistics that young Japanese spend 70 percent of their phone time sending e-mail, which is cheaper than voice communication. E-mail can be relayed by either WCDMA or CDMA2000.
Analysts echo Matsumoto's concerns, questioning whether consumers really want some of the high-speed functions, such as two-way video capabilities.
"Video's really a waste of bandwidth," Baca said. "Most people don't want to be seen when they're talking on the phone." |
