Up in the Air

 
 
By eweek  |  Posted 2001-01-08 Email Print this article Print
 
 
 
 
 
 
 

U.S. still can make 3G comeback

This year promises to be busy for wireless operators as they jockey for position in the global race to deploy new networks. In the U.S., though, operators will be busy working out the kinks of building untried next-generation networks, and consumers are unlikely to see commercial services before the dawn of 2002.

But dont count the U.S. out of the wireless game just yet.

"The world view of the U.S. is that its missed the boat," says Craig Farrill, managing director and chief technology officer at inOvate Communications Group, a venture capital firm and incubator. "I dont think that view is fair or correct."

Some European operators are critical because the Federal Communications Commission hasnt yet identified or distributed the necessary additional spectrum for third-generation technology; in Europe, most of the 3G spectrum auctions are complete. U.S. operators are also criticized for low penetration rates and slow rollout of services other than voice.

But those problems are precisely what Farrill believes make the U.S. market so promising.

The spectrum reauction and the upcoming auction of licenses in the 700-megahertz bands promise to add new competitors to the mix, which will drive innovation and penetration. "The U.S. has more [frequency] bands, more operators, more technology, more venture capitalists, more investment and lower penetration. I call that a good place to be," Farrill says.

Japans NTT DoCoMo is expected to be the first operator worldwide to deploy a 3G network, possibly by next year. It has been driven to deliver a next-generation network because its network is nearly at capacity. The operator can also move quickly without the baggage of hefty license payments because its spectrum was free.

Meanwhile, U.S. operators may turn being behind in the 3G race into an advantage. "The U.S. is well-placed to catch up and overtake others using its Internet heritage, and by looking at the bad examples of what not to do," says Andrew Cole, vice president at consulting firm Adventis.

Since the spectrum auctions in Europe, there has been concern over whether the winners can afford to both build networks and make astronomical license payments. "The sheer amounts of money they spent will be a shackle around their ankles and a huge burden," Cole says.

In fact, the Bank of England has twice warned that the high debt loads shouldered by European and U.S. telephone companies could lead to a worldwide financial crisis. The warnings were mainly in response to the debt accrued by major European operators that have pledged billions of dollars for 3G licenses.

By contrast, some U.S. operators are positioned to reach 3G without large amounts of additional spectrum. Sprint PCS, for example, has plenty of spectrum and a smooth migration path through the next generations of Code Division Multiple Access (CDMA) technology.

Other operators will need more spectrum. But because its not clear what additional spectrum might be available, they plan to build interim, or 2.5G, packet-based networks using the spectrum they currently own. The interim step will allow operators to experiment with pricing models and popular data services in anticipation of rolling out the higher-speed 3G networks. "They need 2.5[G] to prove the business model," Cole says.

The interim steps should help dispel some of the disillusionment that users may be feeling today. "The hype hasnt met up with reality," says Perry LaForge, executive director at the CDMA Development Group. Until operators can deliver higher speeds and more enticing applications, the market wont take off, he says.

Unknown Territory

Plenty of behind-the-scenes activity is expected in 2001, as operators enter the unknown territory of delivering packet-based services. Nearly all operators, regardless of the air interface technology they use, will upgrade their radio technologies and add packet-switching capabilities across their networks this year, Farrill says.

They will need to learn how to handle transactions over wireless connections. Instead of recording the length of calls, theyll record transaction types, and then compile that information for billing, Farrill says. Network management will be more complicated because operators will be handling real-time communications as well as non-real-time connections.

While operators are beefing up their networks this year, they may begin to see new competitors, both from new license winners and from what the Europeans are calling virtual network operators. Such operators dont own licenses, but make agreements with network owners to essentially resell services.

Virgin Mobile, which serves as a virtual network operator in England using One 2 Ones network, has been talking to operators in the U.S. and will enter the market here in 2001, Cole says. The U.K. has seven virtual network operators in addition to the four network owners, he says. Over the next two years, two to three new national virtual network operators will emerge in the U.S., he says.

 
 
 
 
 
 
 
 
 
 
 

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