Uncle,
Re: QCOM - 2.5G / 3G wireless services - CDMA - pick your flavor
Been "Schwabbed" lately?
>> 3G: Poised At The Door
September 18, 2000
Wireless Week
Peggy Albright
Network vendors jockey for position as interim technologies roll out in anticipation of full third-generation networks. As 3G licenses are awarded in many countries this year, true 3G networks remain a year away.
A wireless data expert recently uttered a curious warning for network operators facing the emerging high-speed market: You don’t want to get "Schwabbed."
Firms fighting to get ahead in the nascent wireless data market would be wise not only to watch what the regular competition is doing but also pay particular attention to nontraditional firms trying to get their feet in the door.
That’s what Charles Schwab did when it launched its Internet trading services and then became one of the earliest companies to offer online services to a broad customer base. Schwab caught mainstream brokerage firms off-guard, and the traditional establishments have been feeling it ever since.
The expert’s cryptic warning could apply to businesses competing in the third-generation wireless services market as well. While both incumbent and greenfield operators around the globe are sweating over costly spectrum and equipment decisions, vendors are fighting for lucrative infrastructure contracts.
The battleground is so new that it is even too early to pick favorites, says Strategis Group analyst Elliott Hamilton. "I don’t think it will be for another year before you can see any true shifting going on," he predicts.
Hamilton probably is right. Just a few countries have issued 3G licenses so far, and general packet radio services, the 2.5-generation service for GSM networks, is going live in a few markets. CDMA’s interim technology, 1XRTT, is still months away from commercialization. In short, there are still a lot more deals to be made compared with the number of contracts that have been signed up so far.
But there is at least one early indicator that one equipment supplier - Nortel- may shake up the scene. A long-time wireless systems provider, Nortel built an Internet protocol presence in the last couple of years and already has demonstrated its ability to use that new horsepower to get contracts away from second-generation incumbents.
Perhaps most noteworthy was an $800 million deal that Nortel won as the prime UMTS equipment supplier for the United Kingdom’s BT Cellnet, a company that is using Motorola as the sole vendor for its GPRS network. Numerous industry observers have speculated that Nortel low-balled its bid or perhaps offered financing options to get the job. Whether or not that is the case, the deal is significant in more ways than one. "That was a huge win for Nortel because Motorola was entrenched there", says Jane Zweig, executive vice president at Herschel Shosteck Associates Ltd.
Nortel also landed a $500 million deal to supply wireless and optical equipment to Verizon Wireless. That’s one-sixth of the $3 billion Verizon plans to invest in network infrastructure this year. While Verizon later named Lucent as the prime supplier for a $1.5 billion next-generation network, Nortel’s win with this company is not bad for a vendor that had barely any experience with the contracting company.
Of Verizon’s various merger partners, Nortel had a prior relationship with only one: the former AirTouch Communications, in its California market. Bell Atlantic Mobile and GTE Wireless, the other companies operating under the Verizon brand, did not work with Nortel previously. Motorola, which has not yet announced a next-generation deal with Verizon, is a current supplier to that company.
The Verizon deal is also significant for Nortel because it is the company’s first optical network contract with a wireless carrier. Nortel will use its wireless and optical platform to create a switchless network that spans both sides of the operation. The benefit for Verizon is not just that it gains optical data speeds on the wireline side but a new opportunity to avoid leasing lines from wireline operators in some markets.
What Nortel is demonstrating, in Zweig’s view, is that companies are responding to the vendor’s mantra of cost efficiency and its strength in optical solutions that will improve the efficiency of the IP backbone. While Lucent and Cisco Systems (a partner to both Lucent and Motorola) offer optical solutions, Nortel was the first to pound the IP message home to wireless carriers. Nortel has gone so far as promising operators it could tie an optical core to its advanced radio systems to get data transmission costs down to the level of landline.
Nortel’s promise is that it will reduce operating costs so far that wireless data providers can compete with other telecom companies on the basis of cost as well as services. The cost-benefit analysis features upgrades scheduled in line with traffic and revenue forecasts that help operators finance phased deployments.
So is Nortel’s BT Cellnet win a bad omen for Motorola? That company says no.
"As time goes by, you’ll see the real picture," predicts Simon Leung, vice president and general manager of Motorola’s Asia Pacific customer solutions group.
Motorola, which is deploying Aspira GPRS systems in 15 countries with Cisco, believes the real success stories are systems that are up and operating, Leung says. As examples he lists GPRS systems in several key markets, including BT Cellnet’s. Others include Motorola’s Aspira GPRS network turned on this summer by China Unicom, Germany’s T-Mobil and Turkey’s Telsim.
And one of those wins - the T-Mobile contract - came at the expense of Ericsson, which conducted what it said was the first GPRS trial with that operator.
But Ericsson isn’t suffering either, counting 50 GPRS contracts worldwide to date. It has three wideband-CDMA contracts in Europe, including a big one as a prime supplier to Vodafone, which aims to activate that system by mid-2002. But that’s a wireless-only deal, not the whole banana, though Ericsson was picked as prime contractor to deliver a complete W-CDMA system for Japan Telecom. And, along with many others, it is supplying parts to NTT DoCoMo, though that giant is building its own system.
Ericsson also is likely to be a strong contender for EDGE contracts. Late last month the company won a contract to supply a TDMA-EDGE system for Mexico’s Telcel, one of the largest wireless carriers in the Western Hemisphere.
But despite the intricacies of the competition and the long histories many of these companies have with operators, Nortel aims to rock the establishment boat. We have every intention of just dominating this space, said Mark Tharby, vice president of wireless Internet solutions marketing at Nortel.
Within a year or two, we may know if the entrenched vendors get a few more 3G surprises from Nortel. <<
- Eric - |
