Cha2,
This week old article in a UK based publication has an interesting perspective on the AWS "technology flip" by a pretty wireless savvy Key West based journalist:
>> AT&T Wireless 3G bid Opens the US market to GSM
Theresa Foley
18 December 2000
totaltele.com
AT&T's decision to build out quickly a GSM overlay network on top of its existing network of time division multiple access (TDMA) basestations has swung the balance of competing wireless technologies in North America.
The decision by the third biggest cellular service provider in the United States - with 15 million subscribers - to adopt GSM systems after all as the platform for developing third generation high-speed mobile data, has fired industry analysts with expectation that the European-backed standard could now become a leader in the U.S. market.
They said that the deal resolved big concerns that analysts and investors had about the viability of TDMA signaling technology - which until now has been the mainstay of AT&T's systems - in a wireless world.
"GSM's presence in the United States is significantly enhanced and we expect other TDMA operators - such as Cingular (Wireless) - to announce similar evolutions," said Thomas Lee, an analyst with Chase Hambrecht & Quist, based in New York.
And Robert Brown, chairman of GSM North America and executive director of the North American GSM Alliance, based in Chicago, said that Cingular, the Bell South-SBC company that also operates on a TDMA network, has given indications of interest in building a GSM overlay network.
GSM was boosted when Deutsche Telekom bid for Voicestream Communications Inc. earlier this year. But that did not immediately make a difference to the estimated five million GSM cellular users in North America.
Now, AT&T Wireless's equity and partnership deal with NTT Docomo of Japan is forcing the entire U.S. wireless industry to review its building program.
But other major service providers were strongly defensive about the deal, arguing that it undervalued all their business plans.
"To sell a 16% stake (in AWE) for $6 billion ... was not a fair valuation for the wireless business today," said Ivan Seidenberg, president and co-chair of rival Verizon Communications Inc., of New York, which has delayed a proposed initial public offering for its own wireless division.
Docomo actually has tendered $9.9 billion in consideration for 16% of AT&T Wireless, but only $6.2 billion of the new investment will stay with AT&T Wireless - the rest going to the parent company.
"We are looking to generate a higher valuation than we see in the (AT&T and Docomo) deal," added Seidenberg.
But analysts pointed out that Docomo had paid a premium of at least 50% over recent market price for AT&T Wireless stock.
Frank Marsala, analyst at ING Barings, said the premium paid by Docomo demonstrated "that foreign carriers view this as a U.S. market worth pursuing, with less than 40% penetration and wireless data in the near future."
Docomo has 35 million subscribers in Japan and is 33% larger than the biggest U.S. carrier, Verizon, which has 26.3 million subscribers.
Analysts estimated that with Docomo's equity infusion and expertise, AT&T Wireless effectively has found a way to get to a third generation data service mode at an incremental cost of $10 a pop (potential subscriber in the license area), which is within the $6 to $10 range the company had aimed for and at a cost that is expected to be well below that of other carriers.
But they acknowledged AT&T had wasted some time in arguing that a TDMA variation of Edge would suffice for next generation mobile data services (CWI, 8 May 2000.)
"The sooner AWE makes the change, the better," said Linda Mutschler, an analyst with Merrill Lynch Global Securities Research in New York.
"Right now, wireless data is still in the embryonic stages. It's better to bite the bullet now and to make the change than to wait and do it later when it's more costly."
AT&T Wireless's new strategy involves a series of technologies with the first step being the addition of a general packet radio system (GPRS)/GSM overlay to the existing family of analog, cellular digital packet data (CDPD) and TDMA networks in 2001-2. The GPRS network will boost the data rate of AT&T's Pocketnet service from its current 19.6 kilobits per second data rate to 115 Kbps. Pocketnet has 350,000 subscribers using the older CDPD network for wireless Internet access. The TDMA network handles voice traffic.
"GPRS is more robust than CDPD," said Jeff Hines, an analyst at Deutsche Banc Alex. Brown. "The cost to go from TDMA to Edge was becoming more equivalent to the cost of the new strategy."
Software upgrade
The next step, in 2002-3, is for AT&T Wireless to migrate to Edge, which involves upgrading software rather than installing new equipment.
Edge will boost the speed to 384 Kbps, and while AT&T Wireless vice president for technology Jim Grams said that Edge remained firmly in the plan, at least one analyst suggested that it would be dropped.
But AT&T Wireless executives claim that deploying wideband CDMA, which Docomo will use in Japan, as the basis of mobile data, will also let AT&T Wireless support universal mobile telecommunications system (UMTS), Europe's variant of the 3G standard.
David Freedman, an analyst at Bear Stearns, said no carriers or equipment manufacturers had previously laid out an exact cost of evolving a network to 3G, but that unofficial estimates were as high as $75 per pop.
Building a 2G network from scratch can cost $50 per pop with most of the money needed for cell site construction and non-spectrum-related expenses.
Freedman said the deals AT&T struck with its equipment vendors - Nokia, Nortel, Lucent and Ericsson - and handset suppliers, which include Nokia, Ericsson, Siemens and Motorola, were the key to keeping its costs low.
Details of the contracts have not yet been disclosed.
But the mix of as many as seven technologies in AT&T's U.S. network will be complicated, according to Prudential analyst Christopher Larsen.
No-one Takes Seven
Grams said customers would not notice the complexity of all the different technologies.
"No customer would need all seven technologies," he said. "A customer would need a device with two technologies in it, but would be unlikely to need two voice technologies. It may be advantageous to have two data technologies. The challenge is on our side from the carrier perspective to manage all these things. We'd like to retire some over time, CDPD and analog, perhaps. But if customers still use it or the government requires it, we won't retire them." <<
- Eric - |
