US: 3G or Not 3G?
In the latest move in the saga over NextWave Telecom Inc.'s "3G" licenses, the Federal Communications Commission (FCC) is now planning to allow carriers, who collectively bid around $16 billion for NextWave licenses, to pull out of the sale (see Nextwave Case Drags On, Drags 3G Down and FCC Offers 'Opt-Out' Plan).
The FCC is mulling the possibility of allowing carriers to either fully or partially opt out of the auctions. Industry figures say that this will help to remove a dark cloud that has hung over the entire sector.
“[This] action promises to provide a boost to every wireless carrier, whether they participated in the auction or not," says Tom Wheeler, president and CEO of the Cellular Telecommunications & Internet Association (CTIA) in a statement. "This debt overhang had created severe capital restrictions throughout the entire industry."
But where does this leave the rollout of advanced 3G services in the U.S.? Back when the FCC seized the licenses from bankrupt service provider NextWave and auctioned them off in January 2001, the prevailing wisdom was that most operators needed extra capacity to provide whiz-bang wireless services like streaming video.
But now, with the slowdown in the U.S. economy, a distinct lack of new spectrum on the horizon, and investors on Wall Street looking for return on investment -- not massive debt burdens to be paid off sometime in the future -- analysts say carriers are looking at a variety of ways to develop their services.
Seamus McAteer, principal analyst at the Zelos Group LLC, expects to see more networking swap-and-share agreements as major carriers look to plug the holes in their networks. Cingular Wireless already has a sharing agreement in place with T-Mobile U.S. to cover their bald spots in New York City and California respectively.
Cingular and T-Mobile are the two GSM/GPRS operators that are seen as most likely to merge because of spectrum concerns, according to McAteer (see T-Mobile US up for Grabs?). AT&T Wireless Services Inc. (NYSE: AWE) has enough spectrum to move to UMTS in most of its markets, according to both McAteer and Roger Entner, program manager of the Yankee Group's Wireless/Mobile Services research and consulting practice.
However, both analysts question just how relevant the original hype around 3G and the need for [data transfer] speed is anymore.
After all, early UMTS systems have delivered data transfer rates of around 64 kbit/s -- certainly nothing like the 2 Mbit/s originally proposed.
"It's very difficult to build a rationale for wideband," McAteer claims. "It's hard to come up with any compelling applications." "It's not about speed, it's about strong coverage with packet data, appealing applications and services, and great handsets," he adds.
— Dan Jones, Senior Editor, Unstrung