OT for CC writing but on topic regarding one of the stocks many of us are writing calls on, QCOM.
The following did not influence me to write calls recently, by the way, as I believe there is a future for 3G. But Merrill Lynch clients are being told, "We don't need no steenkin' 3G." Who wants better when you can have good?
3G "Squeezed" By Other Wireless Systems - Merrill Lynch
May 23, 2001
By Michael Bartlett, Newsbytes
NEW YORK, NEW YORK
After months of hype, the long-awaited launch
ofthird-generation (3G) wireless networks might never
happen, according to a new report issued today by Merrill
Lynch.
If and when the technology is fully developed, 3G is
supposed to deliver higher data rates, allowing
transmission of voice, data, images and video to mobile
devices. Critics and supporters of 3G increasingly have
debated the potential of the new wireless method in
recent months.
Merrill Lynch today said the promise of 3G is coming under
pressure from multiple angles. The investment company
said the "technical challenge of building a next-generation
cellular network is proving difficult for even the most
advanced wireless carriers."
Two major carriers have announced delays for their 3G
launches in recent weeks due to software problems. In
late April, Japan's NTT DoCoMo said it would postpone its
system from May 30 to October. On May 14, British
Telecom said it would push back its planned 3G-network
launch on the Isle of Man for three months.
These delays, according to Merrill Lynch, are combining
with telecom debt issues and the rise of other wireless
technologies to "put the squeeze on 3G."
The telecom industry is carrying a staggering $650 billion
in debt, today's report said. About $100 billion of that was
spent on the 3G spectrum in Europe in hopes that a
wireless Internet revolution soon would be at hand.
Instead, notes Merrill Lynch, stock prices for the
companies that invested heavily in 3G spectrum have
plummeted. Deutsche Telekom AG, France Telecom SA
and Royal KPN NV are down an average of 69 percent from
their 52-week highs.
Telecom operators that are not weighed down by debt
have benefited from the tumult in Europe, the study said.
Companies such as IDT and Hutchinson have picked the
carcasses of deceased competitors "at pennies on the
dollar." These smaller, more nimble companies now are
competing with the 3G spectrum owners in both the
wireless and wireline markets, said Merrill Lynch.
The report said 3G faces big challenges from two
technologies: 2.5G and 802.11b (also known as Wi-Fi).
According to Merrill Lynch, 2.5G offers users "good" voice
service and short message service (SMS). The problem for
3G is, 2.5G provides the benefit of being "always on" to
the user, and is much cheaper to employ.
The study puts the cost of a European 2.5G system at
approximately $3 billion, compared to $250 billion to
provide the spectrum and the infrastructure for the
debatably faster 3G.
"The cost/benefit analysis and therefore business case for
3G appears to be eroding," said Merrill Lynch. "If 2.5G can
deliver an always-on, 9.6 Kbps (kilobits per second),
packet-switched cellular system for a $3 billion upgrade
cost, the $250 billion needed for an always-on, 1 Mbps
(megabits per second), packet-switched 3G cellular
system looks like it could become the next HDTV - a neat
technology with no customers."
The study praised 802.11b technology as "the sweet spot
in wireless" and said many major technology product
manufacturers are rushing to include it in the next
generation of devices.
According to Merrill Lynch, Toshiba, Dell, IBM and Compaq
are promoting 802.11b- enabled laptops, Intel has
dropped HomeRF for 802.11b, Microsoft has decided to
include 802.11b but not Bluetooth support in Windows XP,
and Handspring has been talking about 802.11b wireless
capability into its personal digital assistants (PDAs), not
Bluetooth.
The study cited five reasons why it believes 802.11b is
catching on. First, it is interoperable today. Second, it is
cheap and getting cheaper. Third, it is as fast as most
current desktop connection.
Fourth, the study continued, 802.11b is based on the LAN
(local area network) standard Ethernet, "which means
millions of operations people know it and trust it." Finally,
802.11b is seen as secure for enterprises wanting to
access their networks.
No matter which wireless technology takes mobile
communication forward, the study said numerous
challenges await. These include billing, maintenance,
working with existing 2G systems and interference.
"We believe the most likely usage in the next few years
will be: (1) laptops with 802.11b for networking and
Bluetooth for cable replacement inside; (2) cellphones
with 2.5G for voice and SMS outside and possibly
Bluetooth inside (to your wired desktop phone); and (3)
PDAs with 802.11b for networking inside and outside, with
Bluetooth for cable replacement," the study predicted.
Merrill Lynch wireless services analyst Linda Mutschler said
if a move to 3G does happen, it would be driven by a
need for greater capacity.
The study concluded that several mobile operators and
other companies will benefit from increased 2.5G usage,
including Sprint PCS, Verizon Communications, KDDI,
Hutchinson, Qualcomm, Samsung, NTT DoCoMo, Cisco,
3Com, Symbol Technologies, Proxim, Compaq, Toshiba,
Dell, Wayport, MobileStar, Intersil, Texas Instruments,
Openwave, Mobilian, Research in Motion, and possibly
Handspring.
Merrill Lynch said several companies that have "counted
on" wireless 3G systems will be hurt if those networks do
not come to fruition. These include Ericsson, Nortel,
Deutsche Telekom, Motorola, France Telecom SA and
Royal KPN NV.
More information on Merrill Lynch is available at
ml.com .
Reported by Newsbytes.com, newsbytes.com .
17:51 CST Reposted 21:41 CST
(20010521/Press Contact: Steven Milunovich, Merrill
Lynch, 212-449-2047/WIRES TELECOM,
BUSINESS/3GEN/PHOTO) |
