Do I detect a change in wind direction?
Cutting the Cord: Europe's Dirty Little Wireless Secret
By Brian M. Carney
Mar. 19, 2002
The Wall Street Journal Europe
Page A10
(Copyright (c) 2002, Dow Jones & Company, Inc.)
BRUSSELS -- Having paid more than 100 billion euros for third-generation wireless licenses, Europe's telecom giants are saddled with mountains of debt, and face the prospect of shelling out billions more to build the networks they need to use those multibillion-euro licenses. Thanks to greedy and regulation-happy European governments, the telecoms have bought into a 3G system that can only raise the cost of wireless Internet access higher than it needs to be, mostly because of the cost of amortizing the licenses. Regulators, having sold the telecoms a load of wood, will be very reluctant to approve use of a cheaper technology that is already being used outside of Europe. In order not to be eclipsed, telecoms will have to persuade regulators to release their stranglehold on the use of old radio spectrum -- the same stranglehold that made 3G licenses so expensive to begin with.
The technology for wireless data transmission is already well-established. In my own apartment, I have what is known as a "Wi-Fi" wireless network. Thanks to Wi-Fi, I can use my laptop computer online anywhere in my apartment with no wires attached. But I can do this only because the network is plugged into an ADSL modem, which is plugged into a phone jack, which is connected to the phone company, which is hooked up to the Internet. In other words, Wi-Fi doesn't get me on the Internet, but it connects my computer to something that does.
So, as useful as Wi-Fi is for freeing my laptop from wires, it's still dependent on my DSL connection, for which I pay the phone company 40 euros a month. My wireless network is like a cordless phone for the Internet. But Wi-Fi is no more the wireless Internet than a cordless phone is a GSM. For true wireless Internet connectivity, more is needed than the sort of small-scale network I have in my apartment.
So Wi-Fi isn't going to free the Internet from wires. The technology is being used to network Starbucks coffee shops in the U.S. and airport terminals around the world. But the range of Wi-Fi transmitters -- about 100 meters under ideal conditions -- is simply too small to allow the construction of nation- or continent-wide networks.
One alternative is the very same third-generation wireless, or 3G, which is supposed to bring high-speed Internet access to your mobile phone. Everyone has heard of 3G by now, if only because Europe's telecom companies destroyed their balance sheets buying licenses to sell the stuff last year. But few really understand it.
Part of the problem is that Europe already has the Internet on mobile phones. It's called WAP, and it's a flop. It's slow, frustrating and hard to use.
This is not entirely WAP's fault. Phones are designed to facilitate talking. They will never make Web surfing a pleasant experience, no matter how many Gs you've got. Sure, NTT DoCoMo has met with some success with its i-Mode technology in Tokyo, where you can pay for sodas from vending machines with your phone. In Europe, Hutchison 3G wants users to sign up for a service that will automatically beam a film clip to your phone every time David Beckham scores a goal. That's cool technology, but it's probably not 100 billion euros cool.
To make the wireless Internet payoff, Europe's telecoms are going to need more, and they may need to devalue their dearly-bought 3G licenses to get it. A company called Monet Mobile Networks based in Seattle, Washington may show the way forward. In Fargo, North Dakota and Sioux Falls, South Dakota, Monet is setting up 3G wireless networks with a twist.
On Monet's networks, you can't make phone calls, but you can be on the Internet anywhere within their service area for $50 a month, with no additional per-minute or bandwidth charges. Right now, speeds are only about two times average dial-up connections, but an upgrade of its network later this year should allow speeds as much as twice as fast as the typical DSL connection, or 40 times faster than dial-up.
Irwin Jacobs, the chief executive officer of Qualcomm, which supplies chipsets and software for Monet's network, is confident that similar speeds are achievable in Europe. "The technology will be able to support a high number of users at a high throughput at a reasonable price," Mr. Jacobs said in an interview last week.
Monet's service in the U.S. works on palm-top devices, but is really designed for desktop or laptop computers. For desktops, it can supplant DSL, cable-modem or dialup Internet, eliminating the need to wait for the cable or phone company to come out and check the lines to your house, and so on. For anyone who has tried to sign up for wire-line broadband, this fact alone is a godsend.
For laptops, it means you can be on the Net in the car, on the train, in the pizza parlor in town -- anywhere there's network coverage, which means anywhere you might have used a mobile phone. According to Qualcomm's Mr. Jacobs, Romania has a relatively low-speed wireless Internet network in place already, which is used in lieu of dial-up or other wire-line Internet-access options.
This sort of service is a natural for Europe, with its high population density and low Internet penetration. It would eliminate at a stroke the need for the nasty regulatory fights currently under way over unbundling the "local loop" controlled by the former state-owned monopolies by bypassing the local loop altogether.
While it could run on the 3G networks that Europe's 3G license holders must build out in any case, there is a fly in the ointment here too. It turns out that the 3G spectrum for which Europe's telecoms paid so many billions last year is really not ideally suited to this sort of bandwidth-intensive use, because it would require a large number of the signal towers that make up the wireless network. The 900MHz and 1800MHz spectrum that second-generation, or GSM, networks currently use would work better, requiring fewer base stations and relying on an infrastructure that's already in place. The reason they have to use so-called 3G spectrum instead is because regulators won't let them use anything else.
Another way of saying this is that "3G" is not a technology -- it's a standard that defines what speed users will get. There are numerous possible paths to meeting the standard. Europe has settled on one, which is known as UMTS, and decreed that it will operate in a specific piece of radio spectrum. This restriction creates an artificial scarcity of available "3G" spectrum, which in turn drove the prices of 3G licenses into the stratosphere. Other locations will choose different paths and different spectrum bands; some already have. In Europe, 3G and UMTS are synonymous, but this is the result of regulatory fiat, not technological requirements.
According to Mr. Jacobs, the same enhancements Monet is making to its networks in the U.S. could be used to upgrade Europe's GSM networks to allow Internet services like Monet's. But currently, regulations in Europe forbid them from offering anything more than the slow, limited "WAP" access currently available on their GSM networks.
An upgrade to Monet levels would make Europe's current 3G standard, which calls for speeds just one-eighth as fast as Monet's next-generation network, look slow, while allowing them to make use of GSM spectrum they already have in addition to the 3G spectrum they've recently and dearly bought. Liberalizing the regulations that govern the use of GSM spectrum would bring the cost of high-speed wireless Internet in Europe down to the point that Monet-style flat-rate pricing is feasible.
Of course, some will argue that this will devalue the famously expensive 3G licenses everyone's just bought. But in most cases, the 3G license-holders also hold the GSM licenses, so their loss is also their gain. And arguably, flat-rate, high-speed Internet access aimed at computer users needn't compete directly with localized restaurant listings and David Beckham video clips on your mobile phone. If the telecoms are willing, and regulators are accommodating, high-speed wireless Internet access might just save 3G. In that case, Europe's cable-modem and DSL providers had better watch their backs.
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Mr. Carney edits the Business Europe column, which appears Mondays. He can be reached at brian.carney@wsj.com. |
