Experts Make Sense of 3G

Panelists debate reasons for technology's slow adoption.

Once upon a time, 3G wireless services were the next big thing, especially in Europe and Asia, where the technology had a head start. Today, industry vendors, analysts and investors are asking what went wrong. After shelling out hundreds of millions of dollars in license fees, carriers abroad found too few users flocking to 3G. In the United States, the technology is almost there, but are users ready?

At the recent Harvard Business School Cyberposium, in Cambridge, Mass., a panel of experts debated the topic, "How to succeed with 3G in the U.S.: Avoiding the mistakes of European telcos." The group pointed to a variety of reasons, from the technological to the cultural, for the slow adoption of 3G services and was united in its beliefs that the technology will eventually become widespread in Europe and the United States—but only if enterprise and consumer customers begin to adopt it before something new comes along.

The definition of 3G services varies by technology vendor and carrier but is characterized as the ability of 3G networks to carry fixed- and variable-rate data and voice traffic and facilitate bandwidth on demand, according to the Federal Communications Commission. In addition, 3G supports broadband access up to 2M bps under ideal conditions. It also is supposed to be much better at carrying data over the voice traffic of its earlier siblings, but heres where some experts differ. In fact, the panel pointed out that the type of traffic—voice or data—thats best for 3G is still unclear.

"3G is still a voice technology," said Craig Mathias, an analyst for Farpoint Group, of Ashland, Mass. "It will never be a great technology for data."

"The incremental effect of 3G isnt that much over 2G for GSM [Global System for Mobile Communications] voice," said Damon Guirdham, director of European wireless equity research for Morgan Stanley, of New York.

3G deployments have not been a total failure but a relative one—one that has not met the expectations of the hype and one in which vendors and carriers overshot the target, the panelists said. Mathias said that early adopters in Europe were victimized by failures of telecommunications policies in which expensive licenses were gobbled up by companies such as Vodafone Group plc., of Newbury, England, which ended up taking losses when the technology failed to catch on.

"Huge mistakes were made in license valuation [and] the high-tech bubble; they overpaid," said Guirdham. Due to the failures, he added, "there were supposed to be four [carriers] in Norway; now there are only two. European prices are higher for consumers as a result."

In terms of who is using, or would use, 3G services, technology and service providers never had a clear picture of who were the potential customers—enterprise or consumer. So both potential markets fell short, panelists said.

"Carriers are very consumer-oriented and cant get enterprise services [going]," said Mathias. "Right now, theyre selling mostly ring tones. Customers dont know who to call [for enterprise customer service]. The vast majority of enterprise customers are SMB [small and midsize business] and dont know how to get started."


"Are they serious about the enterprise or the consumer customers?" asked Letina Connelly, director of strategy for the Pervasive Computing Division at IBM, of Armonk, N.Y.

Connelly argued that rather than trying to force 3G on consumers or enterprises, providers are going to have to let demand dictate the supply of 3G services. In South Korea and Japan, for instance, the services have fared better than in Europe by appealing to the youth culture, she said.

"In Japan, teens love picture technology [trading digital photos over cell phones]. The technology goes all the way out to the culture," Connelly said. "Korea and Japan are unique because the culture lends itself to that style of application. But in the U.S., the enterprise flavor is work force mobility."

Wireless: Whats in a number







Protocols use digital encoding and include GSM, D-AMPS (TDMA) and CDMA. These protocols support high-bit-rate voice and limited data communications. They offer auxiliary services such as data, fax and SMS. Most 2G protocols offer different levels of encryption.

Protocols extend 2G systems to provide additional features such as packet-switched connection (GPRS) and enhanced data rates (HSCSD, EDGE).

Third-generation protocols support much higher data rates, measured in M bps, intended for applications other than voice. 3G network trials started in Japan in 2001. They began in Europe and parts of Asia/ Pacific in 2002, and later in the U.S. 3G will support bandwidth-hungry applications such as full-motion video, videoconferencing and full Internet access.

Scot Petersen

Scot Petersen

Scot Petersen is a technology analyst at Ziff Brothers Investments, a private investment firm. Prior to joining Ziff Brothers, Scot was the editorial director, Business Applications & Architecture,...