Nextel's technology waiting game - RCR Wireless News
June 10, 2002
Nextel's technology waiting game
By DAN MEYER
With most of the world's largest wireless operators having already introduced or in the middle of implementing next-generation networks based on either cdma2000 1x or GPRS technology, Nextel Communications Inc. made a bold move earlier this year when it said it planned to forego the typical migration path to higher data speeds and instead implement improved versions of Motorola Inc.'s proprietary iDEN technology on its network.
The improvements include a recently introduced data compression solution designed to increase packet data speeds from around 20 kilobits per second to as high as 75 kbps and an announcement with Motorola to introduce half-rate vocoders on Nextel's network by the end of next year, providing almost double current voice capacity.
These moves have allowed Nextel to provide data throughput equal to or better than the more traditional 1x and GPRS networks of its competitors, while the voice capacity enhancement should equal the results the carrier would have achieved if it had gone ahead with its expected migration to 1x.
"What appears to be a hindrance for Nextel is actually a strength," said Andrew Cole, global wireless practice leader for Adventis Corp., which counts Nextel as one of its clients. "iDEN is surprisingly robust."
Financial analysts also point out that the move saved Nextel from having to invest billions of dollars on infrastructure at a time when investors are concerned about the company's debt load.
"Before the announcement, we had been modeling $5 billion for Nextel's upgrade to CDMA technology in 2003-04, so its delay or cancellation definitely alleviates some funding concerns," said Bear, Stearns & Co. Inc. in a report. "We now believe that the build could cost up to $3 billion, but not until 2004-05."
While the voice capacity enhancements are still down the road, Nextel feels the increased data transmission capability possible with the use of compression technology allows iDEN to compete with other 2.5G technologies out there and fits in well with its business-oriented customer base.
"We have found that between 50 and 100 kilobits per second is the sweet spot for our customer base and we are already achieving those results now," said Barry West, executive vice president and chief technology officer at Nextel.
While some analysts have questioned the ability of iDEN to continue to compete with the increasing speeds of rival technologies, Nextel feels iDEN still may have some life left.
"We still have quality enhancements in the pipeline for iDEN, including a vocoder enhancement for Direct Connect that is similar to the one we are going to introduce next year," West said. "We are also looking at something similar to EDGE for iDEN to provide higher data speeds."
But, even with the enhancements that have already been made or are planned for iDEN, Nextel is keeping its eyes open to migrating to a more standard technology based on CDMA, eventually. Those plans were bolstered earlier this year when Nextel and Motorola announced a deal with CDMA giant Qualcomm Inc. to develop Direct Connect service compatible with next-generation CDMA networks.
"CDMA technology has done reasonably well," West said. "The nice thing about CDMA is that it's an evolutionary migration path and not a revolutionary path. We have always been a big fan of that technology and there is a good chance we could follow that technology path in the future."
Nextel's spectrum realignment plan, which is being deliberated by the Federal Communications Commission, could also play into the carrier's next-generation plans. The proposal calls for Nextel to exchange 16 megahertz of spectrum spread around the 700 MHz, 800 MHz and 900 MHz bands for 6 megahertz in the upper 800 MHz band and 10 megahertz in the 2.1 GHz band. If approved, this would leave Nextel with 16 megahertz of contiguous spectrum in the upper 800 MHz band, on which the carrier could continue to offer its voice service, and 10 megahertz in the 2.1 GHz band to offer 3G services in the future.
"Using that spectrum as a data play is a possibility," West said.
Further adding weight behind the possibility of Nextel using CDMA as its 3G technology choice is that the carrier could implement multiple 1x channels into the 10-megahertz space instead of going with UMTS, which requires a minimum of 10 megahertz to introduce service.
The possibility of Nextel moving toward CDMA also opens up a broader infrastructure base for the carrier. Currently, Nextel must depend on Motorola for network equipment and handsets, but, with the integration of CDMA onto its network, Nextel could begin working with additional infrastructure partners. It was rumored Samsung was looking at developing iDEN equipment for Nextel, but with the possibility of Nextel going with CDMA, Samsung could capitalize on its CDMA expertise.
While the industry continues to wait for Nextel to make its 3G decision, the carrier said it is working with fourth-generation network manufacturers like Flarion on implementing even higher-speed networks in the future. But, West added, that technology is not expected to be available for some time and there is still the question as to whether people will need applications that will require network speeds faster than what are available today.
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