3G ~ Not ready for Prime Time?
Hi elmat,
Re: Ray, Frank and Old Mardy prohibited me to tell that ADSL is dead on this thread.
OK, in that case, how about 3G? Here's something from Jim Seymour at TSC that makes some sense to me.... YMMV!
thestreet.com
[[Note: I've highlighted a contest for the hyper-aggessive wordsmithing competitors among our savvy readership. :) ]]
Tech Savvy
Japan Puts 3G On Hold Until Mid-2002 ... Or Later
By Jim Seymour Special to TheStreet.com 3/14/01 1:40 PM ET
The decision by Japan Telecom last week to postpone the rollout of its long-promised menu of third-generation wireless
services has sent another temblor through the world's telecommunication services -- and especially through the wireless world.
That was evident in the world markets last week, and has been an especially hot topic this week at Merrill Lynch's Global
Telecommunications conference in New York. Wired or wireless, telecom executives and investors alike are starting to
understand just how wobbly are the wheels on the 3G bandwagon.
Japan is, after all, everyone's favorite example of aggressive deployment of 3G-like services -- especially in the form of NTT
DoCoMo's cute text-messaging and other services.
So when Japan Telecom said it would delay its 3G offerings until at least mid-2002, the infrastructure suppliers like Nokia
(NOK:NYSE ADR) and Ericsson (ERICY:Nasdaq ADR), and the big telecom players like Deutsche Telekom (DT:NYSE
ADR) and Telecom Italia (TI:NYSE ADR), shuddered. They already knew very well that they weren't alone in worrying
about the future of 3G, but every drop of this continuing bad news, Chinese water-torture style, just makes things worse.
Boosters of a 3G future face at least four crippling problems. Any one of the three could bring 3G crashing down around their
shoulders, but the collective weight of all four makes the 3G future look pretty grim -- and pretty distant -- right now.
The four killers:
The infrastructure isn't there. Wireless outfits keep announcing 3G start-up dates as if they thought the necessary
communications infrastructure was already in place, or nearly so. It isn't, and it's not even close. Figure a minimum of $150
billion (more) in capital investment in Europe alone to make 3G possible. And then think about how these cash-strapped
wireless companies are going to be able to come up with the dough.
The technology isn't there. Though we hear lots about wireless-access protocol phones today and Internet access over
cell phones, WAP is a halfhearted, half-baked way to get data. In its present form, it has no future. In an evolved form, it may
well be the basis for widespread data-over-wireless services ... but there's many a technological development between today
and that point.
The demand isn't there. Try as they might, 3G boosters have not been able to show wireless customers what will make the
service so compelling. Watching little movies on our cell-phone screens? Video conferencing by cell phone? Listening to MP3
tunes on our cell phones? Sending "rich" email by cell phone? Buying vending-machine sodas and movie tickets by cell phone?
I don't see people lining up behind any of those -- let alone whatever mystical combination of those proposed services would
be enough to push people into buying new phones and upping their monthly service bills to maybe $100.
The capital isn't there. Apart from that $150 billion more needed to develop and install 3G wireless infrastructure, at least
another $150 billion -- and that figure is probably low -- has gone and will go into buying government licenses in European
countries alone, just so they can be allowed to deliver 3G service. We already see European wireless providers almost
bankrupted by the sums they've spent so far in license auctions. Where will the additional capital for infrastructure, market
development and end-user focused marketing come from, to deliver Europeans to that presumed nirvana of 3G Land?
Japan Telecom, of course, faced its own unique, additional problem: a domestic economy on the edge of oblivion. With all the
usual sources of capital in deep trouble -- you thought maybe they were going to turn to the Japanese banks? -- Japan
Telecom simply has no way to fund a 3G service, even the kind of big-cities only plan it had been talking about. Even if the
technology, infrastructure and demand were all in place.
And of course, Japan Telecom also faces the "DoCoMo Problem": the wild popularity of competitor NTT's goofy little
text-messaging service. (I have written before that I think widespread adoption of DoCoMo-style wireless connectivity is a
uniquely Japanese phenomenon, which -- like many wines -- will not travel well. That view will be tested as NTT tries to
export DoCoMo to China and, before much longer, they say, to the U.S. I will eat crow if I am wrong, but I don't think we're
headed for a Hello, Kitty future in the U.S.)
I have to add that I don't believe Japan Telecom is a bad company, with bad management. It is no worse, and in some cases
better, than such 3G-retreating telecoms as South Korea's SK Telecom (SKM:NYSE ADR), Deutsche Telekom(DT:NYSE
ADR), France Telecom (FTE:NYSE ADR), British Telecom (BTY:NYSE ADR), Telecom Italia and so on.
Indeed, AT&T (T:NYSE) last week quietly completed the sale of its 15% of Japan Telecom to Britain's Vodafone
(VOD:NYSE ADR). Vodafone, continuing its global roll-up, now owns 25% of Japan Telecom ... and in the context of world
telecommunications plays, it was probably a smart consolidation move for the Brits. (British Telecom also has a sizable stake in
Japan Telecom.)
Here in the U.S., the biggest victim of the worldwide slowdown in the former rush to 3G will be Qualcomm
(QCOM:Nasdaq). Qualcomm's CEO Irwin Jacobs acknowledged as much a few weeks ago when he talked about being
worried that the 3G market in Europe, which he logically believes will rely on Qualcomm's licensed W-CDMA technology,
wouldn't take off until 2004 or 2005 -- a reasonable forecast, I think.
(Jacobs subsequently had a semantic dust-up with the analysts who reported his comments. He said he'd only expressed
"concern" about a possible delay; analysts said he "expected" that delay. Angels on a pinhead, etc.; Qualcomm's hurting, and it
will hurt more.)
This push to 3G is bringing major telecom players to their knees. Deutsche Telekom and British Telecom are already down by
half over the past 52 weeks. Their would-be 3G competitors are getting hit badly as well, across the board.
I have struggled to find an analogy to explain this rush to a service that promises to be profitless for many years and that may
destroy some come current telecom players. I haven't been able to come up with one; maybe readers can.
But I am struck that there are at least some parallels here to the blind rush to invest in dot-coms without prospects of profits.
Turns out that huge multinationals can succumb to irrational exuberance, too.
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My analogy is that of the generals of WWI, caught up in a new war paradigm that they simply couldn't comprehend, thus they threw treasure, technology and men into battle and at the end of the day, were pretty much bankrupted while not having achieved much of anything at all.
Best, Ray |
