Telecom Makers Moving EDGE Technology To Center Stage
Dow Jones Business News, Thursday February 20, 7:05 am ET
By Buster Kantrow, Of DOW JONES NEWSWIRES
biz.yahoo.com
CANNES -(Dow Jones)- There's a hope-filled acronym on the lips of sales- starved suppliers of telecom equipment here this week: EDGE. Short for Enhanced Data Rates for Global Evolution, it's a cellphone network technology that's being talked up by the world's cellular vendors at their largest annual confab, the 3GSM World Congress.
EDGE is an upgrade to existing networks that allows operators to pump more traffic, and at higher speeds, permitting them to offer new multimedia services such as video and audio streaming.
It's not as fast as those third-generation, or 3G, networks that were once the industry's big hope for the future. But it's cheaper.
Vendors from Telefon AB LM Ericsson to Nokia Corp. to Alcatel say they see a future for EDGE in Europe. "There's a lot of interest around from European operators for EDGE network deployment," said Lothar Pauly, chief operating officer of Siemens AG's wireless unit.
But analysts are warning that EDGE isn't the answer to the industry's concerns over long the run. Some operators are interested in EDGE because the more- advanced 3G technology selected for Europe, known as Wideband Code Division Multiple Access or WCDMA, may not work well for some time. But EDGE, too, is untested, they point out.
There is a "chicken-and-egg situation," says Anders Lindqvist, a senior partner at wireless consultancy Northstream AB. Operators don't want to deploy EDGE if there aren't going to be compatible mobile phones. Phone suppliers, especially smaller ones, aren't keen to develop EDGE units until they see that operators will use it.
There's also the pride issue. European operators paid EUR120 billion for 3G licenses in the frenzy of 2000-01. Installing EDGE instead of a true 3G network would be an admission that perhaps this sum wasn't wisely spent. In some cases, it could trigger write-downs on those licenses, hitting profits.
Perhaps not surprisingly, no Western European operator has yet said it would deploy an EDGE network. But a boost to EDGE technology came this week when a host of European carriers gave indications they were seriously looking at it for specific needs.
Perhaps strongest came from Peter Erskine, chief executive of mmO2 PLC , who said the British operator is considering deploying EDGE because of delays in 3G technology.
Also showing interest were the three operators in France: France Telecom SA's (FTE) mobile arm Orange SA , Vivendi's SFR and Bouygues' Bouygues Telecom. But all said they weren't planning to deploy EDGE for the time being.
U.S. operators AT&T Wireless and Cingular Wireless were first to jump on board with EDGE, saying it would be their first step to 3G. Several operators in Latin America and Asia have also signed up.
U.S. operators didn't have much choice. They didn't have a route to the faster European-style 3G world of WCDMA because they didn't have access to the necessary frequency spectrum.
Nokia, the world's largest handset maker, has so far announced only one EDGE phone, aimed at the U.S. market. But, in perhaps a sign of its growing confidence in EDGE, it said this week it would start including EDGE as a standard feature on its phones in the second half of 2003.
"Over time, EDGE will be in basically all of our phones, except maybe the very cheapest phones," said Erik Anderson, a senior vice president for Nokia's phone unit.
Motorola Inc. (NYSE:MOT - News) , the world's second-largest cellphone maker, plans to begin commercial shipments of its first EDGE handset for the U.S. in the fourth quarter of 2003. Shipments for Europe will start in the second quarter of 2004, said Ron Garriques, head of Motorola's phone operations in Europe. He said the company is doing EDGE interoperability testing with one European operator.
Europe's operators have already upgraded their networks once. They're using a technology known as General Packet Radio Service, or GPRS, which allows phones to access data services without annoying waits for connections. It works at typically 30-40 bits per second, slower than a dial-up phone line but enough for a still photo from a cameraphone or for downloading a few share prices.
True 3G networks transfer data at 384 kilobits a second, the speed of a home broadband line or fast office connections, and allow video clips and even person-to-person video calls, opening up, operators hoped, new and lucrative revenue streams.
EDGE nestles in between these. It works at 80-160 kilobits per second. It may not have the magic features touted for 3G, but could offer basic video or high- quality audio streaming.
Easy In US, Harder In Europe
But bringing EDGE to Europe has more problems than just the lack of handsets. U.S. operators are still building current generation networks, and can easily build in technology to their base stations. When consumers are ready, the faster service can be simply switched on.
But many European operators have much older networks, and would have to upgrade existing base stations to support EDGE. Under pressure to cut costs and facing the task of building out costly 3G networks, that isn't a particularly attractive option.
Because of that, it's unclear how much money there is in EDGE for the telecom- equipment vendors. Ericsson Chief Executive Kurt Hellstroem estimated that upgrading to EDGE would cost 10%-15% of an operator's original network investment.
Siemens' Pauly said EDGE has two routes to growth in Europe. EDGE is likely to be embraced by operators in smaller European countries that plan to move to 3G WCDMA at a later stage, such as Bulgaria and Slovenia, he said, adding that Siemens is already providing price quotes for EDGE gear to operators in Eastern Europe.
Other countries that fit the description include Poland, the Czech Republic and even Russia, said Rene Svendsen-Tune of Nokia's networks division.
The other likely use for EDGE in Europe is as a gap-filler, to provide higher- speed services in areas, mainly rural, where it does not make sense for an operator to extend a WCDMA network, vendors said this week.
The vendors - who have a stake in both WCDMA and EDGE - contend that EDGE isn't a substitute for faster speed and wide bandwidth of WCDMA. Rather, many experts say, it could fill some important niche roles.
Many analysts, too, seem to have given up on the idea that operators may permanently opt for EDGE in places where they originally planned WCDMA.
"Given that there is very little commitment to EDGE, we don't think it's going to be something that reduces the need for 3G," Northstream's Lindqvist said.
Company Web sites:
alcatel.com
bouygues.fr
ericsson.com
francetelecom.com |
