Nortel CEO: 3G Can't Cut It

BARCELONA -- 3GSM World Congress -- Only weeks after selling his company's 3G access equipment business to Alcatel-Lucent (NYSE: ALU), Nortel Networks Ltd. CEO Mike Zafirovski told a keynote audience here this morning that 3G isn't good enough to meet wireless broadband demands. (See Alcatel Snags Nortel 3G Unit.)

On stage with the leaders of three other vendors -- Alcatel-Lucent, the soon-to-be-created Nokia Networks , and NEC Corp. (Tokyo: 6701), all of which are active players in the 3G market -- Zafirovski said 2G and 3G were never designed to support the wireless bandwidth demand carriers now face.

Most current 3G connections can achieve up to 1 Mbit/s on a good day if a user is close to a mobile cell. This week in Barcelona has seen presentations of HSDPA (high-speed downlink packet access) technology, the latest iteration of 3G, that has the potential to achieve up to 14 Mbit/s under perfect conditions. (See Vodafone's 3G Broadband Service.)

In the less-than-perfect conditions that prevail in real life, 3G has been disappointing, according to not just Zafirovski but also Simon Beresford-Wylie, CEO Designate of Nokia Siemens Networks, which is set to be created before the end of March. Beresford-Wylie said that, while there might be more than 100 million 3G subscribers now, "it's surprising that 3G hasn't been a great success. It hasn't lived up to the expectations of customers, carriers, or suppliers." (See Nokia Siemens Reveals Product Picks.)

But that doesn't mean Beresford-Wylie is abandoning 3G, a move that has clearly run through the minds of some network operators. "Carriers say to us, 'As you are developing WiMax, does that mean you are deserting the [3G] camp?' " said the soon-to-be CEO. "Not at all. HSDPA is the way forward, but WiMax will be suitable for emerging markets."

Zafirovski has greater hopes for WiMax, one of the technologies he refers to as 4G, which is promising access speeds of up to 100 Mbit/s (theoretically). (See Zafirovski: We'll Get 4G Right.)

"4G will enable true [wireless] broadband," giving people the same bandwidth experience with a wireless connection as they currently can get with fixed-line high-speed access. "This industry has done a great job driving 2G and 3G," and it's changed the world, but WiMax, LTE (long-term evolution, the next generation of GSM after HSDPA), CDMA Revision C, and mobile video technology is essential for delivering the required wireless broadband experience, said the Zed Man.

Beresford-Wylie, though, says carriers aren't ready to accept a 4G story. "A lot of people [in carriers], the CEOs and CFOs in particular, are wary of 4G because they're still trying to digest 3G."

— Ray Le Maistre, International News Editor, Light Reading

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SolitonWave 12/5/2012 | 3:14:30 PM
re: Nortel CEO: 3G Can't Cut It Tell that to European Mobile carriers that spent billions in 3G licenses and equipment (some from Nortel)... You better help them to carry their customer packets in their obscenely expensive 3G networks... or they won't rely on you to sell them a single 4G box... Know that second-hand car salesman syndrome ? nobody likes to be fooled twice...
materialgirl 12/5/2012 | 3:14:30 PM
re: Nortel CEO: 3G Can't Cut It Everybody yacks about air interface cost and remains silent about backhaul, which is the same across all technologies. A cheap air interface just seems to create a ticking backhaul time bomb.
light_geeking 12/5/2012 | 3:14:27 PM
re: Nortel CEO: 3G Can't Cut It What Nortel CEO is saying in theory has some grain of truth albeit it is going to be unsustailable, i.e. short term WiMAX bandwidth advantages over 3G. However when one looks at 3G roadmap (thru LTE) those WiMAX advantages can't be claimed anymore.
WiMAX is an air-interface. So whichever way the wind blows, 3G or WiMAX, the core network (which is most likely going to be the same (e.g. IMS-based)will be good news for core-network suppliers (e.g. ALU to which NT sold their cellular assets and NT itself if it is still in the IMS business).

Another thing is that holders of 3G spectrum (service providers/network operators) have lots of sunk costs in both the licenses and the network build-out. By the time, WiMAX is ready for prime time (not just access network but end-to-end network), the cost differential shall most likely not amount to much (e.g. 3G infrastructure costs could drop, etc.)thus erasing the WiMAX cost advantages. [Recall the case of VoIP hype 7+ years ago, but it is only since last year or so we are seeing a little bit of traction of VoIP as a prime-time technology.]

What other advantages are there for WiMAX camp besides bandwidth and cost claims, both of which have been shown to be unlikely biggies, as explained above?

stryke_d 12/5/2012 | 3:14:26 PM
re: Nortel CEO: 3G Can't Cut It And we do need to remember that emerging markets (India, China, Indonesia) have close to 3billion people who by the time Wimax hits prime time will be wanting to watch youtube on their handsets. And most of their carriers didn't spend what their EuroCousins did on spectrum
yhza 12/5/2012 | 3:14:26 PM
re: Nortel CEO: 3G Can't Cut It To name a few:-

- A chance for new operators to introduce disruptive services (fixed subscription , free VOIP, etc)
- Cheaper spectrum compared to 3G
- The promise of cheaper user terminals (no royalties)
- BTS cost difference is probably too large to close. Current WiMax BTS are sold for less than 30K. Just wait until Huawei get their working.
- Bigger carrier: up to 20MHz = more bandwidth per sector
- Higher modulation: QAM64, at least for now
- OFDMA uplink (not planned for LTE) which means better support for bursty traffic (data)
light_geeking 12/5/2012 | 3:14:25 PM
re: Nortel CEO: 3G Can't Cut It stryke_d:

Did you check how Nokia is doing in terms of handset sales? Couple of weeks ago they reported 18% increases in revenue, most of them due to handset sales in emerging economies that you have named. Those markets are very price-sensitive, but if you look at the Nokia story they are winning market share based on attractive pricing. And handset business is a very very competitive one. Lots of asian manufacturers already in that game to give immense pricing pressures on 3G handsets itself. And BTW, did you also check why motorola stock took a tumble when they announced their earnings a couple of weeks ago also? Main reason is drop in the ASP of their popular handset model RAZR. It went from $399 (subsidized pricing by the service providers) to $49.99 in a matter of just one year, and that too in a developed country like USA. So pricing is not going to be a big deal for WiMAX handsets as compared to 3G handset regardless of the specific market (developed or emerging).

light_geeking 12/5/2012 | 3:14:25 PM
re: Nortel CEO: 3G Can't Cut It yhza non of your points are new and really going to hold water compared to my previous posting:

free VoIP (good please go ahead. caution: dot-com like crash-n-burn company by Yhza ahead!).

Cheaper spectrum compared to 3G. (apparently you didn't read my earlier post. 3G license is mostly a sunk cost for holders of 3G spectrum. So the argument of cheaper license doesn't hold either for all the 3G incumbents.)

The promise of cheaper user terminals- no royalties (you said it -> it is a promise. nothing more. Watch out for the big battery drain for higher speeds too. Higher speed also means lower terminal battery life, unless managed very carefully. Why do you think AMD left Intel in the dust? It was first with dual-core but that was not the main story. Main point was lower power consumption. And about royalties, Qualcomm has already brought Flarion. And guess who has a bunch of WiMAX patents? Flarion. And guess what is ailing the 3G royalties, primarily? Qualcomm with its royalty hand extended for collecting all WCDMA related royalties. No royalties for WiMAX terminals is really a wishful thinking to say the least. Come back after you have converted the promise into reality).

BTS cost for WiMAX is 30K. (Who cares about BTS cost standalone. Lets look at the total cost of ownership. Provide a legitimate cost comparision for both 3G and WiMAX BTS to be credible).

Just wait till Huawei gets their working (And if Huawei was so damn smart, why do they have to wait for WiMAX. Why cant they do the same thing for 3G too?).

Bigger carrier: up to 20MZ (Apparently you have not studied the 3G roadmap. 20MHz is fully laid out via LTE. Please study the topic fully first before you make any more claims you cant really prove)

Higher Modulation QAM64 (non going to be a big deal anyways. See my earlier post and discussion on bandwidth/speed analysis).

OFDMA uplink (LTE has chosen SC-FDMA which is derived from OFDMA but doesn't have the PAPR problem of OFDMA. So WiMAX has no advantage in uplink speed either)

freetoair 12/5/2012 | 3:14:24 PM
re: Nortel CEO: 3G Can't Cut It yhza,

keep drinking the koolaide - but spend some time really thinking it through as light_geeking clearly has.
stryke_d 12/5/2012 | 3:14:24 PM
re: Nortel CEO: 3G Can't Cut It Don't really care about foreign vendors. I am from here and walk around Seoul and Japan to see what the Asians will buy next ;-).
yhza 12/5/2012 | 3:14:23 PM
re: Nortel CEO: 3G Can't Cut It - Free VOIP is already here (Google, Skype, etc) and it's no different than fixed lines and broadband a few years ago. Free mobile VOIP is inevitable and there is nothing you can do about it.

- Unless carriers depreciate their spectrum over 5 years where you live, its never going to be cheaper then the WiMax spectrum. I'm talking about 30 MHz for 5 Million US$ (what we paid) compared to 260 Million US$ paid for a 3G license by a GSM operator.

- WiMax terminals are already within 30-40% of the existing 3G PCMCIA cards even though only a single vendor is offering them. What happens when everybody starts making them in China?

- Battery life is currently a problem in WiMax terminals but that has been always the case with new technologies. Why are you ruling out improved and new batteries in a year or two?

- I only mentioned the BTS cost because with the exception of the network ASN gateway which cost around 200,000 US$ and one is needed for every 100 BTS, thatGÇÖs pretty much it. TCO figures are heavily on WiMax side with fewer elements and less network complexity. Since you are a 3G expert, you should be able to see the difference ;) The guys at Sprint think the cost of bandwidth on WiMax is 10 times cheaper than 3G.

- Sxxxw Huawei!! My argument is that competition will drive prices down. 3G gear is already cheaper than it was a couple of years ago.

- 20MHz 3G spectrum?? That much spectrum is hardly available in a lot of countries. I know carriers using either 5 or 10 MHz. Assuming that it is available in whatever band LTE will end up, carriers will still have to pay for it, again!!!

- QAM64 and OFDMA uplink advantages are clear. While higher modulation means more bandwidth, OFDMA uplink provides better traffic scheduling for multiple traffic streams.

3G is here to stay and evolve. I totally agree that the performance aspects are hardly enough for 3G operators to scrape their network and jump on WiMax.
But In emerging markets where wireline penetration is very low, WiMax is a solid solution. New operators, like us, are getting a chance to launch and compete.
This is what WiMax is all about: A new disruptive and cheaper technology that will allow new operators to challenge and change the shape of the industry.
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