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Is There a Convergence Crunch?

Do carriers really want converged 3G cellular and wireless LAN networks?

That's the big question posed by this month's Unstrung Insider research report "Converge This! WLAN-3G Mobility."

Not every kind of carrier is thrilled by convergence, says the report's author, Unstrung Insider chief analyst and, er, iron chef, Gabriel Brown. "The business case that will push service providers towards offering combined mobile and 802.11 services is still unclear," he warns.

In fact, the big proponents of convergence are often among the oldest players in the telecom market, Brown writes, fixed-line operators.

"The real enthusiasm for converged cell phone and wireless LAN devices and services is coming from fixed line providers and MVNOs [mobile virtual network operators]. It’s very easy to see why: The impact of mobile substitution on fixed-line operators is becoming intolerable."

These service providers need a low-cost mobile VOIP alternative that will allow them to undercut the wireless operators' calling prices while still offering some degree of mobility.

But Brown reckons that mobile carriers will only be encouraged to take up the convergence challenge if new devices and applications encourage them to offload wireless data capacity onto wireless LAN networks.

Brown pooh-pooh's the concept of a wireless voice capacity crunch as a reason to merge cellular and WLAN networks, noting that new 3G deployments are adding large amounts of new bandwidth for talk.

"In many parts of the world operators are deploying 3G networks based on WCDMA or CDMA2000 radio access technology -- either in greenfield deployments or alongside existing GSM and CMDA IS-95 networks. The result is a huge amount of extra capacity is coming online in major cities around the world, which is widely anticipated to lead to lower voice calling prices and a ramp-up of fixed-to-mobile substitution."

This means that only new applications such as wireless video or music downloads could lead to the kind of capacity crunch that would encourage carriers to look into new convergence options.

"The problem is that without capacity shortage -- and for voice services there doesn’t appear to be a capacity crunch -- there’s little incentive from the mobile operator’s perspective to integrate wireless LAN and cellular."

"The hope is that much of this 'spare' capacity will be used for data services. And, assuming it can be provisioned cost-effectively, and given millions of subscribers all downloading music and video... it’s not hard to imagine a need for it. In this case WLAN-to-mobile convergence becomes more of a data play than a voice play."

Roll on, the wireless iPod, eh?

The report, Converge This! WLAN-3G Mobility, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,350. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.

— Dan Jones, Site Editor, Unstrung

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