Subject: [NEXTEL-1] Urgency slows for wireless 3G

From: Marcel <[email-masked]>
Date: Wed, 15 Jan 2003 21:16:57 -0500

Plans to Deploy 3G Technology in U.S. Slow

U.S. wireless carriers appear to be trimming the scope of their plans to deploy
so-called third-generation wireless services. Observers say the change was
confirmed in December when AT&T Wireless announced a scaled-back
deployment of wideband CDMA technology. Instead of introducing the high-speed
technology in 13 cities by the middle of 2004, the company announced that it
would introduce it in four cities by the end of 2004. Analysts say some carriers
are obscuring the issue by implying that their fastest networks are as fast as 3G
technology. Originally, 3G was defined at having speeds of 384 Kbps. The
high-speed CDMA networks run by Verizon Wireless and Sprint PCS claim
speeds of up to 144 Kbps. AT&T Wireless, Cingular and T-Mobile USA offer
General Packet Radio Service networks that offer speeds equivalent to dial-up
Internet connections. They are expected to move to a faster EDGE (Enhanced
Data Rates for GSM Evolution) technology starting this year in some markets.
Nextel uses a iDEN (Integrated Digital Enhanced Network) technology along with
compression technology that allows it to offer its customers speeds around 40
Kbps, and says its customers haven't said that higher speeds are necessary.
Should customers ask for higher speeds, and cost-effective technology is
available, Nextel would move to it.

Urgency slows for wireless 3G

By Nancy Gohring
Special to The Seattle Times

A few years ago, even before the dot-com
boom, cellphone providers had an enticing view
of the future in which we'd all be carrying funky
handheld devices hooked to the Internet wirelessly at very high speeds.

Commuters would spend their morning bus rides watching the news, getting a
head start on the workday by sending out huge PowerPoint presentations or
conducting live video conferences — all from the palms of their hands.

That vision hinged on the deployment of a third generation of wireless networks
that offer high-speed data rates and an increased capacity for voice services.

But the introduction of 3G, shorthand for the third generation, hasn't gone
according to plan. Technology glitches pushed back the timeline for the delivery
of enabling gear, operators began pinching pennies after the entire
telecommunications industry withered under immense financial pressure, and
demand for services that could use the high-speed data networks failed to
surface.

Now, while few of the giant wireless carriers will admit it, analysts say that
behind closed doors some are putting 3G on hold, even considering scrapping it
entirely.

That slowdown became more publicly apparent in late December when AT&T
Wireless said it was pushing back its plans for delivering 3G. Instead of
launching it in 13 cities by mid-2004, the Redmond company now intends to
target just four cities by the end of 2004.

At the same time, other technologies are advancing quickly, prompting
questions about 3G's future. In particular, Wi-Fi, the technology that lets laptop
or handheld computer users wirelessly access the Internet at high speeds, has
grown substantially, possibly making 3G less crucial.

"The pressure to get the high-data-rate networks is less because Wi-Fi might
pick up," said Andrew Cole, global wireless practice leader for Adventis, a
Boston consulting group. When it comes to high-speed networks, each carrier
is in a different position, depending on the technology it uses and the amount of
wireless spectrum — the electromagnetic frequencies that carry cellphone calls
— it controls. Many have also confused the market about their progress by
spinning the use of certain terms and exaggerating data-rate claims.

Among the six companies that control most of the nation's wireless
infrastructure, Sprint PCS and Verizon Wireless appear to be in advantageous
positions by virtue of their underlying technology, called CDMA, or code-division
multiple access.

By contrast, AT&T Wireless, T-Mobile and Cingular use a competing technology
based on the worldwide global system for mobile standard, or GSM. Nextel
stands alone in its use of IDEN, for integrated digital enhanced network, a
technology that enables its unique, walkie-talkielike service on top of
conventional cellphone use.

Analysts agree that the introduction of CDMA 1X, an upgrade technology that
offers customers high-speed access to retrieve e-mail and other online services
on their cellphones, has been easier and smoother than those of similar
services by competitors.

Stretching for speed

On the other hand, analysts think Sprint PCS and Verizon Wireless' claim that
their services can offer data transmissions at speeds of up to 144 kilobits per
second (Kbps) — almost three times faster than conventional dial-up
connections — is a stretch.

"Whether we're talking about GSM or CDMA, right now speeds are available
from 28 Kbps to sometimes, if you're really lucky, 65 or 70 Kbps," said Ray
Jodoin, director of wireless research at the Newton, Mass., research company
In-Stat/MDR. "I think if anybody saw 144 Kbps, they'd have a heart attack."

To further complicate the issue, Sprint PCS and Verizon Wireless refer to 1X as
3G, even though the original international plan defined 3G as having data rates of
384 Kbps.

"It's a war of words and not a helpful one," said Jane Zweig, CEO of The
Shosteck Group, a Wheaton, Md., wireless consulting and research company.
"Is 1X 3G or isn't it? The real issue is what are people doing with their devices."

The answer is: not much. "In the U.S., the 1X market hasn't really taken off,"
she said.

And therein lies another reason 3G is flagging. Low demand means data
services aren't paying off for the carriers. "CDMA players are ahead of the
others, generally," said Cole, the Adventis analyst. "But, that said, in terms of
how that translates into market share or revenue, it's not that great. It's an
advantage, but the implication is modest."

Rethinking the investment

Without a major demand for existing data services, the carriers are questioning
the investment necessary to build 3G, given that its main benefit is higher
speeds.

"No one in any country, with the exception of the Japanese and the Koreans,
has been able to really profit from high-speed data," said In-Stat's Jodoin. "And
that's what it's all about. If you can't make money, it's not worth it."

The carriers face technical challenges, too. In early December, Denny Strigle,
president and CEO of Verizon Wireless, said that Verizon needs more spectrum
to get to the next step in the network evolution, a high-speed technology called
1XEV-DO.

Because the company isn't willing to take spectrum away from its existing voice
and data service for that next step, it will have to wait for the opportunity to
obtain more spectrum. Strigle also said the company is waiting until the market
is ready.

So it was not surprising to observers when AT&T Wireless, which has been
developing 3G technology with Japan's NTT DoCoMo, said it was shrinking
plans for its rollout of services.

"We agreed along with DoCoMo that the most effective plan would be to
carefully pace our deployment of WCDMA to market demand," said David
Caouette, spokesman for AT&T Wireless.

Zweig's translation: "They're waiting to see if it's worth doing."

But AT&T Wireless can't entirely shelve plans for WCDMA, its 3G technology,
because of the $10 billion investment DoCoMo made in the U.S. company. If
AT&T Wireless doesn't meet a deadline to roll out services by 2004, DoCoMo
can sell its stake back to AT&T Wireless.

DoCoMo may be eager for AT&T Wireless to introduce WCDMA in hopes of
showcasing a success for that technology, which has had technical problems
and meager market acceptance in Japan. DoCoMo has attracted only 150,000
subscribers to the system, compared with the 3 million drawn by its rival, KDDI,
which uses CDMA 1X technology.

Compared with Verizon Wireless and Sprint PCS, AT&T Wireless and Cingular
face another difficulty stemming from a mishmash of technologies and spectrum
that make up their networks. "I often wonder how they get anything done. It's a
magician's feat," said Cole.

Faster and faster

Currently, AT&T Wireless, Cingular and T-Mobile (formerly Voicestream) all offer
data services based on GPRS (or global packet radio service) technology, which
moves bits at speeds that can reach conventional dial-up connections. Their
next step is to introduce offerings based on the faster EDGE (for enhanced data
rates for GSM evolution) technology. They expect to introduce EDGE in some
markets in 2003.

EDGE is the end of the line for Cingular, which doesn't have enough spectrum to
deploy WCDMA. Some say AT&T Wireless maybe should follow suit.

"When AT&T gets to EDGE, they will probably have all the speed that most
reasonable people are willing to pay for," said Jodoin. "To take it to the next
step, up to true 3G, does anybody really need it?"

The other nationwide operator, Nextel, is in a unique position because of the
difference in its technology. It has very publicly taken a wait-and-see stance with
regard to 3G.

Nextel has had a packet data offering for more than 3-½ years and, because it
mainly attracts the business market, it boasts a high number of data customers
— 20 percent of its users.

Nextel has implemented a data-compression technology that improves its 19.2
Kbps service to closer to 40 Kbps. Currently, it doesn't see that higher speeds
are necessary.

"Should there come a time when it's cost-effective to get higher speeds and our
customers are telling us, hey, we absolutely have to have video over cellphones,
we'll do it," said Audrey Schaefer, a spokeswoman for Nextel. "Right now,
they're not telling us that."

Nancy Gohring is a Seattle freelance writer who writes frequently on
telecommunications and wireless technologies.

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