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3G is a strange kind of horse race. One of the horses pulled up lame, the location of the finish line is in dispute, many of the spectators have gone home, throwing their betting slips on the ground and, look over there! Someone just entered on a zebra!
A year ago it seemed like the winner had already been decided. Wideband CDMA (also known as UMTS), building on the incredible success of GSM, was far ahead in the development of standards, and it looked like the migration from GSM to GPRS to EDGE to W-CDMA, although awkward, was going to be accomplished in record time. 3GPP was even winding up work on the first commercial release of their 3GPP standard.
By contrast, the portion of the world running on the ANSI-41 network, seemed to be stuck on a horse without a sense of direction. What was, in the late 1980’s, the envy of the world, with North America wide compatibility between AMPS systems, had splintered into at least five different standards (AMPS, N-AMPS, D-AMPS, CDMA and GSM). Europe, which had started with many incompatible analog standards, had successfully transitioned in the mid-1990’s to a single digital standard, and now is claiming about half a billion customers on their networks. America’s 100 million seems trivial by comparison.
ANSI-41, the signaling network that supported all North American wireless standards except GSM, struggled to provide compatibility, and to move forwards being ridden by companies who were often bitter technological foes. It was, at times, like riding one of Dr. Doolittle’s two-headed Pushmepullyus [note: this is the real Dr. Doolittle, not the Eddie Murphy version!]. The defection of AT&T Wireless from the ANSI-41 camp was, in one way, a victory for W-CDMA, especially when combined with rumors or solid announcements that other major ANSI-136 carriers such as Cingular and Rogers would join. However, this move also had the effect of solidifying ANSI-41 as the network for the ANSI-95/IS-2000 CDMA family of standards, allowing that horse to regain its sense of direction.
The 3GPP2 camp (responsible for the development of 3G versions of cdmaOne and cdma2000 standards) can claim some recent solid victories, with the implementation of 1XRTT systems in Korea that meet the ITU definition of 3G data rates (144 kbps in a mobile environment). 3GPP can currently only claim GPRS, a data service running over GSM channels, that does not quite meet 3G data rates, even at its maximum rate. GPRS was also recently bedevilled by arguments over critical aspects of the standard, that left Motorola as the only company producing quantities of terminals, but taking a risk that theirs would all be made obsolete. NTT in Japan also stumbled when the promised commercial launch of W-CDMA promised in May 2001 was pushed back to October, and then turned out to be limited in scope. And, even then, their system was not compatible with European versions of W-CDMA.
Standards, however, are only one of the challenges facing 3G. A bigger problem is that technologists can generate high speed data services much faster than carriers can figure out how to sell them and consumers can figure out which ones they cannot live without. Short message service has turned out to be a very desirable data capability using very low bandwidths. This was undeniably a victory for GSM, because short messaging could not be supported by AMPS, and ANSI-41 could not be used to send short messages directly between TDMA and CDMA terminals, let alone to GSM. The demand for text-based email, using considerably more bandwidth, is growing, with devices like the RIM Blackberry becoming very popular, and newer ones integrating voice and email services. Web services, such as WAP have not proven as popular as Japan’s iMode, because so many North Americans are spoiled by cheap, high speed services with much more capable user interfaces at home. Even with these recent victories for data, the killer app on cellular and PCS networks is still voice.
European carriers who paid enormous sums of money for 3G spectrum cannot afford to wait for the market demand to gel. They need to load millions of subscribers on their systems almost at once, but that is simply not going to happen. The only service that can be guaranteed to bring customers along in droves is voice, and that hardly makes the best use of spectrum set aside for 3G.
One of the conundrums for carriers is that voice may pay them better than data, at least on a bit-by-bit basis. Digital voice has very modest data demands (8-13 kbps) and these demands are as likely to go down in the future as up. A focus on bit rates leads to a pricing problem. Should an 80 kbps data user be charged at ten times the voice rate? What about 800 kbps?
A dark horse, well maybe a zebra, that entered the race late is 802.11 (WiFi). It may have a big impact on 3G because companies that have installed these systems using unlicensed spectrum in their offices will certainly not want their employees using pay-by-the-minute 3G systems, when the corporate system has unused capacity. The success of WiFi in serving the public marketplace is less sure, as shown by the bankruptcy of MobileStar. Cellular and PCS carriers have much more experience in running nationwide systems with mobile devices, providing fraud protection, billing and roaming services.
Wireless carriers need to sell data services (whether 3G or not) based on their service’s advantages. Going head to head against cable modems and DSL in urban areas is a losing proposition. The big advantage of wireless is mobility. It is not smart to pretend that a wireless device will have the capabilities of an office computer for the forseeable future. But, they can compete very nicely with wired phones and PDA’s. The current flowering of innovation in devices that look a bit like a PDA and a bit like a phone is evidence that manufacturers are realizing that this is the space where 3G (and 2.5G) is going to be playing for the next while.
In rural areas, the picture is different. Here spectrum is cheap, wiring high speed connections is difficult and expensive, and broadband wireless (point to multipoint) is moribund. 3G services could become a valuable adjunct to wireless carriers with a thin population base. Adding data to their voice packages could increase their revenues, while helping justify a transition from analog or 2G digital to a full 3G system, which will also provide more voice capabilities, as well as integrated voice/data services.
I am enjoying sitting in the stands watching the race. An unusual thing about this race is that every horse that reaches the finish line will pay out. So, I think now that the odds are pretty even, I’ll go put a little money on both the horses, and maybe even some on the zebra.
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