Uusurprisingly, More Troubles Surfaced
Mike Hibberd, mike.hibberd@informa.com
Mobile Communications International
Issue 97, 02 December 2002
Reality has not been kind to UMTS. 2002 played host to events which managed to horrify the pillars of the UMTS dream, while probably failing to actually surprise them.
The biggest news was Telefonica Moviles' decision to suspend all 3G operations outside of its domestic Spanish market. The operator had invested heavily in Germany, Austria, Switzerland and Italy but, at the end of July 2002, Moviles became the first European heavyweight to admit the gross impracticality of its grand scheme. Sonera, the first operator to return a 3G licence - its Norwegian property handed back in August 2001 - joined Telefonica's asset freeze in Italy and Germany, where the two operators were co-investors in UMTS licences. Alongside the freeze, Telefonica wrote down its 3G assets by $4.81 billion, a searing assessment of the prospects for near-term UMTS and, in September of 2002, Telefonica Moviles made it known that it was actively seeking buyers for its frozen 3G licences outside of Spain - a kick in the teeth to an already battered UMTS PR machine.
Telefonica was simply acting on fears held by all UMTS licence holders, whether they were prepared to admit it or not. And, as the year progressed, more licensees seemed more prepared to admit it. The Norwegian market took a further blow on the news that Tele2 was to become the second licence holder in that market to return its merchandise un-opened. The Norwegian government had been attempting to bully licence holders into faster roll-outs by dangling the threat of heavy fines over their heads. Knowing when to quit is sometimes a valuable skill and Tele2 clearly thought the time had come in mid-November.
Across the way in Sweden, UMTS woes were also readily apparent. All four licence holders, Vodafone, Orange, Tele2 and Hutchison, requested that stringent licence conditions be relaxed as they struggled to meet roll-out deadlines. The Swedish regulator maintained an unsympathetic demeanour throughout the year until Hutch dealt the final blow, claiming, like the others, that site location was proving nigh on impossible, effectively scuppering roll-out plans. Whether or not this was the true reason behind the requests for delay, given that all these players had postponed rollouts in other markets for different reasons, was immaterial. The regulator consented to round table discussions with all parties, the length of which could well be considerable.
Meanwhile, Hutchison 3G, the operation branded '3' in 2002, was failing to live up to its reputation as the UMTS community's Chief Executive Optimist as the year drew to a close. The launch date slid back repeatedly and, although the company did punt out a few handsets to a select bunch of users who weren't so much friendly as blood-related, there was very little happening. "We don't want to release it until we have it absolutely right," a Hutch spokesman told Mobile Communications International. In fact, 3 kept up the promise of a launch through to the bitter end of 2002, despite a Hutchison insider revealing to MCI that the solid launch date had already been set for March 3rd 2003 (3/3/03, get it?) - and had been set for some time.
Nonetheless some voices, admittedly isolated, remained chirpy. The end of 2002 saw a half-hearted contest between Telecom Italia Mobile and Telekom Austria to be the first operator to launch UMTS in Europe. The Austrian operator claimed success on November 7th but it was all spin. There were no handsets and only a sprinkling of test units were in the field. A meaningless victory in a meaningless race.
UMTS remains in the middle distance for the time being. Even NTT DoCoMo continued to fall way short of its subscriber aims, dealing another blow to the WCDMA camp. At the end of April 2002, the operator had signed up only 106,000 Foma users, having planned to hit 150,000 a month earlier. Come the end of October, according to EMC, the operator had amassed just 142,400 3G users.
The withdrawals and delays, particularly the former, were not just bad news for the UMTS PR machine. Vendors counting on booked orders to shore up their wobbly finances looked on in dismay. The Telefonica and Tele2 retreats hit Siemens, Nortel, Ericsson and Lucent among others. And the growing realisation that roll-outs would be limited, shared or non-existent did nothing for their moods.
If 2003 does see a greater number of UMTS network roll-outs, the majority will likely be partial and uptake will be carefully stage-managed. The handset issue remains thorny, as vendors will focus closely on 2.5G MMS products as a priority. Since the powerful MMS push is not expected until Christmas 2003, we can reasonably expect widespread UMTS marketing to be one or two years down the line from that.
It seems clear that '3G-like services' - a concept and phrase that represents another of the great attempted spins of 2002 - will have far more impact in 2003 than the real deal they are supposed to imitate.
telecoms.com
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One country, three systems
James Tulloch, james.tulloch@informa.com
Mobile Communications International
Issue 97, 02 December 2002
When it comes to standards wars, China plays a pivotal role. Three technologies - WCDMA, CDMA2000, and now TD-SCDMA - have taken the field in the biggest 3G battleground yet. For vendors, the outcome could have huge repercussions.
It was a move that many half-expected, but few confidently predicted. On October 24th, China's Ministry of Information Industry (MII) embraced TD-SCDMA, allocating 55Mhz to the 3G standard developed by Datang and Siemens. Beijing then summoned industry leaders to the Great Hall of the People and unveiled the TD-SCDMA Industrial Alliance. "China's mobile telecom market will no longer be a playground for overseas companies in the coming 3G age," declared minister Zhang Guobao. China ended 2002 as it began it; introducing a new technology. In January, China Unicom launched CDMA. China Mobile's GPRS services followed in May.
September and October saw Unicom back CDMA 1X by ordering $400 million worth of Samsung handsets and then $1.3 billion of infrastructure. Unicom may also trial Qualcomm's GSM1X solution next year. Meanwhile, PHS networks run by fixed-line telcos have flourished. Now, with a potential full house of standards (WCDMA and CDMA2000 got 60Mhz each on October 24th) when 3G licences are awarded, probably in early 2004, China will be the world's most diverse wireless market.
And a rare growth engine for the industry, which is why China, as Zhang Guobao suggested, is telecoms' version of 'The Great Game': one quarter of the global handset market, 195 million subscribers, 15 per cent penetration, vast territories in which to deploy new networks, and the technology of those networks undecided. How China chooses has multi-billion dollar implications for vendors' R&D investments, not to mention handset sales.
Hence the frenzy of shuttle diplomacy by luminaries such as Jorma Ollila and Irwin Jacobs. "It has been great for the airline industry," says Bertrand Bidaud of Gartner Asia-Pac. "There have been a lot of CEOs going to China to explain why their technology is better and why the MII should favour it."
Lucent, Motorola and Qualcomm are backing CDMA2000 and Ericsson and Nokia prefer WCDMA. Honeyed words have been backed up by serious investment in R&D facilities and manufacturing plants. Motorola, for example, has invested $3.4 billion in China to date, Nokia over $2 billion.
The debate is highly politicised. Unicom's CDMA 1X contracts, the pick of which went to US firms Lucent and Motorola, were announced a week before President Jiang Zemin visited President Bush. Likewise, the TD-SCDMA twist prompted a response from EU official Franz Jessen that had WCDMA vendors' interests in mind. "We should avoid a re-fragmentation where every country protects its own industry by promoting its own standard," he argued.
GSM operator China Mobile is hedging on WCDMA, even stating that it will consider other technologies if other 3G roll outs falter. A reverse by China Mobile would be a severe setback for Nokia and Ericsson. China Mobile slashed capex for this year and next, suggesting it isn't planning anything beyond rolling out GPRS, which has been slow to catch on.
Unicom is favouring its CDMA properties, which have gained momentum thanks to heavy subsidies. "They perceive the GSM network akin to the old analogue network in the US," says Paul Jacobs, president, Qualcomm. "They know that 3G is CDMA," and so have no plans to upgrade to GPRS. Round one to CDMA.
As for TD-SCDMA, it may be mandated for new operators spun out of China Telecom and China Netcom. Its adoption would hurt all the big vendors except Siemens, not just through lost IPR and infrastructure contracts, but also if they have to reallocate resources to develop TD-SCDMA. Datang and other Chinese manufacturers would benefit and Philips VP Mario Rivas sees it as, "a protocol you can't ignore...You can put more subscribers on the network earlier." Ideal for China's densely populated cities.
Qualcomm and Nokia are dismissive of TD-SCDMA, and some see it as a bargaining tool to keep the WCDMA and CDMA clans honest, not only when it comes to awarding network contracts but also when licensing IP to Chinese manufacturers of handsets.
Amidst all the intrigue, however, vendors must remember something about China: the market is maturing. Cao Shumin, a MII official, recently told Reuters that, "Next year's growth rate should be slower. The market can't grow at this rate forever." PHS is cannibalising the low-end market, price wars have taken their toll, and ARPUs are falling (although not on Unicom's CDMA network). All the more reason to prepare for the next adoption curve, say the vendors, but, whether international politics, nationalism or market forces decide the technology landscape in China, manufacturers may find the pickings not as rich as they once thought. |
