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AT&T 3G Rollout Delayed, Scaled Back

Plans by AT&T Wireless and NTT DoCoMo to launch third-generation (3G) wireless services in major U.S. markets by next July have been dramatically scaled back, the companies announced Thursday.

Instead of launching WCDMA services in 13 major U.S. cities next June, the rollout will now be limited to four cities -- San Francisco, Seattle, Dallas and San Diego -- and won't be ready until the end of 2004.

In a statement, AT&T Wireless made no mention of the reasons for the 3G delay but hinted the decision hinged on financial considerations. "[The] WCDMA deployment plan announced today will allow the company to cover some of the most promising U.S. markets while maintaining a prudent level of capital expenditures," the company said.

In November 2000, AT&T and NTT DoCoMo signed a $9.8 billion deal to develop wireless multimedia applications, an agreement that included plans for the 3G network rollout.

The delay is sure to hurt AT&T Wireless in the high-stakes 3G race, especially since rival Sprint PCS has already completed a nationwide 3G 1X network upgrade. Another competitor, Verizon Wireless, is also hawking its own commercial 3G 'Express Network', offering high-speed data transmission and features like face-to-face video calling.

AT&T Wireless said Thursday it would form a technical committee to oversee the results of the four-city launch and make recommendations to the full board about the scope and timing of future WCDMA rollouts. DoCoMo will have a seat on the committee. Additionally, AT&T Wireless said another representative from DoCoMo would be added to its board of directors, a move that means the Japanese wireless giant will have a larger role in planning AT&T Wireless' operations.

In a regulatory filing, AT&T Wireless said the 3G build and launch will follow deployment of high data speed EDGE technology (enhanced data rates evolution) later next year. "This is the next step in AT&T Wireless' planned global-standard technology evolution, which will enable it to offer customers the most advanced voice, data, messages, music, information and video services as it progresses from GSM and GPRS technology to EDGE and then to WCDMA," the company said.

The latest snags to hit AT&T Wireless come as no surprise. Despite offering wireless surfing speeds of up to 2 Mbps for voice, video, data and image transmission, 3G services has been dogged by criticisms over pricing and limited coverage areas.

Despite the obstacles, research firm In-Stat/MDR believes the transformation of many networks to CDMA2000 1x is proceeding at a rapid pace because of the relative ease in making the upgrade. "The primary hardware addition is the PDSN, which is the CDMA 2000 equivalent to the UMTS GGSN. Existing BTSs, BSCs, and MSCs require modification rather than replacement," said In-Stat/MDR director Ray Jodoin.

While UMTS, a 3G mobile technology , has borne the brunt of doom and gloom scenarios, In-Stat/MDR found it was "actually being deployed, and generating manufacturing revenue, at a reasonable rate."

"It will continue to be deployed at an increasing rate as handsets become available and coverage deadlines advance. In Europe, the driving factor will not necessarily be a "killer application," but quite probably will be the need for more voice capacity to supplement the strained GSM urban networks. While UMTS is often portrayed as "expensive," the reality of the situation is that the hardware cost-per-voice channel is less than one-half the cost of GSM," the research firm said.

While 3G networks are up and running with some success is Europe and Japan, the U.S. is a different kettle of fish. Sprint's nationwide rollout this summer finally gave the United States a national data network with burst speeds of up to 144 Kbps and average speeds from 50 to 70 Kbps.

Sprint's network rollout is the slowest of the major U.S. wireless carriers. AT&T Wireless, Verizon Wireless, VoiceStream and Cingular have chosen to construct their 3G networks piecemeal.