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Lucent Rallies in Nuremberg

Lucent Technologies Inc. (NYSE: LU) has announced a pilot UMTS project with leading German mobile operator T-Mobile AG. The two parties, which have been planning the trial since October, are to provide high-speed data services to a select number of companies (particularly from the finance and insurance sectors) in Nuremberg using UMTS network equipment and data cards for laptops and PDAs (see T-Mobile Trials 3G With Lucent).

Lucent is supplying all the network hardware and software, as well as the data cards that those involved in the trial will need to connect to the pilot network. The number of base stations has not yet been determined, but they will be housed at existing T-Mobile sites.

According to Carlos Mira, the president of Lucent's Mobility Europe business unit, the aim of the pilot scheme is to help mobile carriers "understand the benefits of high-speed data to the enterprise," and for the vendor to learn more about how best to develop 3G infrastructure that will be of most use to the operators.

However, it is clear that Lucent is running out of time in its efforts to persuade operators that it has the best UMTS network offering, and Mira admits that 2003 will be the decisive year for the company's aspirations to be a major supplier in this market (see Lucent Harbors UMTS Hope). The company hopes that this trial, which follows a similar arrangement with the leading Spanish mobile operator Telefónica Móviles SA, will win it the experience and respect that will result in purchase orders.

In a nutshell, Lucent is trying to persuade the operators that they should target the high-spending enterprise market first with 3G services. By doing this, and by focusing on wide-area high-speed and secure data connections that would offer corporates office-type connectivity (via VPNs) while on the move, the carriers could make money from 3G without having to wait for handset vendors to deliver the millions of compatible handsets required for a commercial consumer rollout.

All an end user would need is a PCMCIA card to slot into his or her laptop or PDA and some software to manage the connection. These cards have been developed by Lucent in conjunction with several specialist partners, such as Option, the partner in Nuremberg, and Novatel Wireless Inc. (Nasdaq: NVTL) (see Novatel, Lucent Team on UMTS). These cards allow connectivity to existing GPRS networks (for when a user strays outside the UMTS network) and, by the end of 2003 says Mira, they will also incorporate wireless LAN (802.11b) capabilities.

Lucent believes it is initially possible to attain average bandwidth of 80 kbit/s with UMTS in real-life situations, compared with the average 20 kbit/s that the vendor says is delivered by GPRS. This is a refreshingly honest statement, as UMTS speeds are often quoted at the theoretical maximum of 2 Mbit/s.

By the end of 2003 Lucent will know whether it has a future in UMTS, or whether it should consolidate in wireless on its strong position in the CDMA sector (see this market share chart from the December 2002 Wireless Oracle). "The real commercial launch of UMTS will not be until 2004 -- that's when the majority of networks will go live. So we believe most UMTS license holders will reassess their network supply decisions this summer, starting in May, June, and July. That's when we will be able to bring our experience to the table," says Mira.

Given Lucent's complete lack of traction to date in this market (it has no purchase orders), is there much hope that it will win any business? Mira is "optimistic." But then so is LM Ericsson (Nasdaq: ERICY), Nokia Corp. (NYSE: NOK), NEC Corp. (Nasdaq: NIPNY), Nortel Networks Corp. (NYSE/Toronto: NT), and even Siemens AG (NYSE: SI; Frankfurt: SIE) and Alcatel SA (NYSE: ALA; Paris: CGEP:PA) (see Siemens One to Watch in UMTS and Alcatel Gets Real in Europe). "Between now and the end of 2003 we will be able to see what kind of footprint Lucent will have in UMTS," says Mira.

Jeremy Green, principal analyst and a wireless specialist at Ovum Ltd., believes this footprint will be more akin to an ant's than an elephant's. "Business customers do not like to be first movers, so I am not convinced that they will be the early adopters of 3G. It is true that the increased bandwidth UMTS can deliver will make wireless data more attractive to businesses, but they will not flood to 3G just because that additional bandwidth is available. I would like to be proved wrong, but…" says Green, trailing off in the telephone equivalent of a wry shrug.

Ovum's predictions for global revenues from wireless data for 2004 back up his argument: $44 billion from consumer users and just $4 billion from enterprise customers. The Yankee Group agrees that the business sector is not the cash cow that some believe it is (see Yankee Explodes Enterprise Myth).

Ovum's Green also believes that, although 3G will be "very slow off the blocks, 2003 will be the make or break year for winning infrastructure contracts."

— Ray Le Maistre, European Editor, Unstrung Editor's Note: Neither Light Reading nor Unstrung is affiliated with Oracle Corporation.

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