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Nokia Triggers 3G Standards Debate

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LR Mobile News Analysis
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2/22/2002
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CANNES, France – 3GSM World Congress – Calls for more standardization of third-generation (3G) wireless technology reached fever pitch here this week when Nokia Corp. (NYSE: NOK) announced an initiative aimed at making it easier for operators to mix hardware and software from different vendors in their base stations. Nokia says its standardization effort will help stimulate the development of easy-to-use wireless data applications – the key to generating user demand for 3G services.

Without such standardization, in fact, operators won’t achieve the massive increase in revenues from wireless data they’re banking on, according to “Dr. J.T.” (as he likes to be known) Bergqvist, senior vice president and general manager of IP mobile networks at Nokia. Operators will face financial problems if they fail to achieve a five- to ten-fold increase in wireless data revenues in the next few years, Bergqvist contends.

Nobody in the industry would dispute the need for open standards for 3G networks. What’s less clear, however, is whether Nokia will get the support of other vendors for its Open IP Base Station Architecture initiative.

The aim of the project is to define base-station architecture for use in next-generation, all-IP radio access. Nokia reckons that the project will lead to modular base stations with open internal interfaces.

So far, however, the response from many of Nokia’s competitors has been muted. “It’s not perceived as any breaking news,” says Pia Gideon, executive vice president of external relations at Ericsson AB (Nasdaq: ERICY). Neither Lucent Technologies Inc. (NYSE: LU), Motorola Inc. (NYSE: MOT), nor Nortel Networks Corp. (NYSE/Toronto: NT) could find anybody at the 3GSM show who was prepared to comment.

All the same, Nokia’s announcement represents a significant shift in strategy. It’s never had an open-source base-station design before.

Siemens AG (NYSE: SI; Frankfurt: SIE) appears to be on Nokia’s side. The two companies announced joint support for a global open standard for broadband wireless networks at the same time as Nokia announced its base-station initiative. The proposed standard combines elements of the Institute of Electrical and Electronics Engineers Inc. (IEEE)’s 802.16 broadband specification and the Broadband Radio Access Networks (BRAN) standard from the European Telecommunications Standards Institute (ETSI).

Carrier Control There’s also a big question mark over whether vendors should be the ones setting the agenda for 3G standards development – or whether operators ought to have the whip hand, as they did during the successful development of GSM (Global System for Mobile Communications) standards.

The issue was the subject of an executives’ roundtable at the 3GSM conference on Wednesday.

“We shouldn’t have left the manufacturers alone,” said Mauro Sentinelli, managing director of Telecom Italia Mobile (TIM). “We should be involved, deeply involved in specifications. It seems we forgot the old GSM business model.”

Under the old GSM model, operators worked with vendors to define a single set of standards for the entire network, not just the air interface. This led to probably the most successful mobile network specification of all time. In contrast, American standards bodies allowed multiple technologies to evolve in the name of free-market competition, with the result that none of them gained anything like the momentum of GSM.

“We’ve had an interesting experience in the United States on technology diversity. I don’t believe it has benefited the industry that much," understated Sentinelli. "I think we need to standardize on one air interface and one network standard.”

Some executives went further, saying they need to wrest back control in order to make sure they aren’t forced into massive network upgrades again.

“We, as operators, have to lead the industry. We have to stay in front and make sure we’re not brought too far, too fast,” said Craig Ehrlich, group managing director of Sunday, a Hong Kong mobile operator. Governments and over-eager equipment vendors, he said, had driven the push to third-generation networks, but behind closed doors, no operator would admit to actually wanting 3G.

Now the problem is how carriers sell the concept of 3G to consumers and enterprise customers. “We don’t know enough about what people will pay for,” admitted Ehrlich. “But we’re throwing a lot of stuff at them in the hope that they will.”

According to TIM’s Sentinelli, the M-Services initiative from the GSM Association, an industry forum, has helped in developing services that appeal to users. The M-Services initiative is a carrier-defined template for the data applications that 3G handsets should support; the list of approved services includes multimedia messaging service and the latest versions of the wireless application protocol (WAP) and the Bluetooth wireless connectivity protocol.

TIM is one of first operators to offer M-Services handsets. “The increase in ARPU [average revenue per user] is phenomenal,” Sentinelli claimed, yet he did note that the phones have not yet been sold in volume. “I don’t want to set any expectations.” This is something the industry is justifiably cautious about, having over-hyped WAP services to such a degree that the reality was bound to be disappointing.

Perhaps it really is a case of throwing applications against the wall and seeing what sticks. The carriers may want more control over mobile network technology in the future, but they don’t know what services to offer to get massive amounts of data flowing over those networks.

It wouldn’t be the first time. Short messaging service (SMS) is one of the success stories of GSM; around 250 billion of the text messages were sent last year. Yet, no one predicted the success of SMS. “We kind of backed into SMS,” admitted Rob Conway, CEO of the GSM Association. Multimedia SMS upgrades should bring in more revenue. But it may well be that operators have not yet found the equivalent of SMS for 3G.

— Dan Jones, Senior Editor, Unstrung
http://www.unstrung.com

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