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Waiting for 3G: What about the U.S?

Light Reading
LR Mobile News Analysis
Light Reading
9/28/2001

Since the summer, reports covering global 3G networks have been about as negative as the news from Wall St. - You better downgrade your expectations. The 3G holy grail of full network, mass-deployment, 144kps+ worth of downloading speed, appears to be at least another year away for European and Asian markets, with some analysts pushing their projected launch dates back by up to three years. For those covering the U.S. 3G wireless space, the question is what’s the real U.S. deployment schedule? And are we also likely to see additional press releases in the coming months that scale back possible services and speeds?

The recent spin on these downgraded offerings has read like a series of careful negotiations between carriers' public relations departments, analysts, and mobile users. Downgrades of 3G networks have been shared with the press and then taken back, only to be corrected by a "spin" that would make a Congressional insider proud. Vodafone's September 2001 announcement that their UMTS network would not include multimedia services, and offer speeds of only 64kps, was commended by analysts as an “honest assessment” of Vodafone’s initial network upgrade. But on September 7th, Vodafone argued that this was a false assessment - promising speeds between 64kps and a true 3G network of 384kps. Not exactly a denial that their networks will run 64kps. Robin Hearn, analyst at Ovum, predicts that it could take up to four or five years before carriers deploy full 3G speeds. Hearn says that after all the hype, carriers are finding it hard to revise their early claims. "Carriers have to be seen doing as something," he explains. "Otherwise, what will happen to their share prices? Stockholders need to know that their companies are working towards 3G. The harshest news is not the slower speeds, but that carriers can not live up to the expectations of the hype." In other words, are the U.S. trials and announcements for the benefit of stockholders, or for the wireless industry? With operators spending around $200 billion worldwide for 3G licenses, and a further $100 billion to be spent on infrastructure in Europe alone, a slow-but-steady rollout in the U.S. is wiser than NTT Docomo's rollback of their commercial W-CDMA for May 2001 to October 2001 and their July recall of 1,400 trial handsets. Solid rollouts and solid predictions are needed - the 3G wait is beginning to fee like a Samuel Beckett play about Godot.

Are American Networks Ready for 3G?

America has always lagged behind Asia and Europe in terms of wireless technology. This could work to the advantage of U.S. competitors. Carriers like Vodafone and NTT Docomo could iron out the early bumps of network upgrades, and thus allow their U.S. sister companies of AT&T and Verizon a smoother deployment, as well as the two other major carriers in the U.S. - Cingular and Sprint PCS. Surely, the U.S. deployment will not be riddled with as many glitches.

AT&T: Winning the "we-got-it-first" race, AT&T Wireless launched their 2.5G services for business users in Seattle on July 17th. Although this helped the U.S. wireless market feel that it was close on the heels of European and Asian 3G launches, the reality is the upgrade from GSM networks to GPRS in Seattle only increased speeds between 25kps and 35kps. The minimum speed needed to enter the exclusive 3G club is 144kps. Undeniably, AT&T Wireless was the first to increase the speeds of their networks, offering always-on Internet access and the ability to switch between voice and data without interrupting a download, but the speed improvement will soon be forgotten as other carriers offer faster speeds. AT&T Wireless is racing to have 40% of its network upgraded to 2.5G by the end of this year, and their entire network by the end of 2002. AT&T’s build-out race begs the question: Is the speed of the deployment as important as the speed of the network?

Verizon: Jessery Nelson, Executive Director of Corporate Communications, states that speed increases of less than 144kps are not significant improvements. "There is no such thing as 2.5G," he says. "2.5G is only a marketing strategy for those carriers who cannot produce 3G speeds." As of August 1st, Verizon was the second U.S. carrier to announce network improvements - offering speeds of a true 144kps over their cdma2000 1XRTT network to northern New Jersey and Manhattan. This announcement also had its conditionals: the 144kps speeds depended on the number of concurrent users, and data services will not be available before 4Q of 2000 – after Verizon has tested handsets by Samsung, Ericsson, Kyocera, and others. This preparation should be commended. The larger issue for Verizon is how to develop 3G networks over their system that includes both UMTS and CDMA standards. Jessery Nelson states that the different networks do not pose a problem for Verizon. He predicts that 1XRTT data networks will be running for a significant portion of Verizon's market in 4Q of this year. "There will not be a significant delay between different areas. A vast plurality of geographic areas and a vast majority of subscribers will be up and running in 4Q. Verizon will be focusing on the bigger population centers." Taking a dig at carriers offering network upgrades to small markets, Mr. Nelson adds, "We will not turn on Des Moines, Iowa and call it a day."

Cingular: Cingular finds itself in a similar position as Verizon in terms of having different standards over its network - for Cingular it's GSM and TDMA. This problem is reflected in their August 28th announcement of their GPRS launch in Seattle. This Fall, Cingular aims to provide GPRS access to corporate e-mail and seeks to roll out its high-speed service in California, Nevada and the Carolinas. By early 2002, the carrier plans to have GPRS up and running in all of its service areas that have GSM networks. Cingular has released no plans for their TDMA networks. Cingular is also the most realistic about speeds over their network - between 10kps and 20kps - twice the rate of a Blackberry pager, but not close to 144kps. In the wireless world, caution is the better part of valor - and Cingular has been testing their GPRS services in Seattle for six to nine months without major problems.

Sprint PCS: Without any press releases announcing impending network improvements, Sprint PCS may just be in the best position to offer solid 3G services across its entire network. Early advertising claims by Sprint PCS stated that their network had been "built from the ground up." This statement was viewed by some as clever marketing jargon - until 3G network improvement became the prominent issue for carriers across the globe. Since Sprint PCS built their entire network on a single CDMA standard, they are not faced with the problems of connecting differing standards like Verizon and Cingular. The "built-from-the-ground-up" strategy now seems clairvoyant. Jenny Walsh, spokesperson for Sprint PCS says, "We designed the network with 3G in mind. With 3G, we will be looking to make our network faster and better, and our offerings bigger and better and brighter." However, Sprint PCS's timetable does not technically make their network 3G until late 2002. Sprint PCS plans to offer CDMA1x voice and data services in early 2002 - with speeds up to 144kps. Like AT&T and Vodafone, it is not clear exactly what speed will be offered over their networks. But by late 2002, Sprint PCS is predicting their networks will reach speeds of over 300kps. In the coming months, Sprint PCS will officially announce their 3G trials for December. While this may make them the last of the four major carriers to announce trials, they are maintaining their predictions of speed a year from now, making them the fastest network available.

Do These Predictions Add Up?
What About Spectrum Limitations? For U.S. carriers, Sprint PCS and Verizon, 144kps of downloading speed will be available by 2002 - the first to market with 3G services. Does this make sense? Analysts from OVUM, and also Yankee Research, who estimate that 3G services will be in "common" by the end of 2004, do not agree with this outlook. Analysts stand to gain nothing by downgrading 3G predictions, whereas carriers need to maintain positive predictions. Another major hurdle in producing 3G networks is the need for increased spectrum. David Williams, V.P. of Strategic Planning at Cingular, agrees with the analysts’ timetable. "The real 3G is not going to be around for a period of time," he says. "All major carriers don't have enough spectrum for 3G. Spectrum is the raw material that our factories run on. There is currently enough for voice and 2.5G services." Compounding the spectrum problem, the FCC announced on September 24th that they would not relocate occupants on the 2500-2690 band, which could be possibly be used for advanced wireless services. The U.S. market can be divided between AT&T and Cingular who claim vast network improvements, but really offer only small speed increases, and Sprint PCS and Verizon who claim 3G speeds, but face the same spectrum limitations as the rest of the market. The wireless industry hopes that the carriers timetable for network improvement will hold true, but the industry need to watch carefully as European and Asian carriers have not been able to roll out their services smoothly. David Williams of Cingular offers this light for the end of the tunnel: "The U.S. market is lagging by 18 months. We can't lag much further. But if we get it right and get the spectrum within two years, we can learn from their [Asian and European Carriers] mistakes and catch up."

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