RealTime IT News

Rolling With 3G

Readers could be forgiven for overlooking last week's third-generation wireless news. After all, past coverage has fallen into three categories: squabbles over standards; hand-wringing over Asia's dizzying adoption rate; and fantastic market projections for the very distant future.

But two recent announcements changed that. First, Cingular said its 3G trials are ahead of schedule. And Verizon Wireless trumpeted a 3G network expansion to 30 cities and a new video, audio and gaming service to run on top of it.

So, after years of promises and false starts, U.S. carriers appear to have turned the corner. Which equipment vendors and handset makers have joined the carriers for an early lead?

Carriers

Cingular, Verizon Wireless and other players have spent billions upgrading networks for 3G. Along the way, they've touted their particular technology -- Verizon is building on CDMA2000 1xEV-DO and Cingular has chosen Universal Mobile Telecommunications System with High Speed Downlink Packet Access (HSDPA) systems.

But experts say the specification won't be a deciding factor. Few customers will demand their voice, video and data flow over one network rather than another. Speeds for both are in the low-end of what a PC broadband user experiences.

"It's all about coverage and customer care," Bob Egan, founder of the research firm Mobile Competency, told internetnews.com. "The PR heads will continue to talk about speeds, but reliable convergence is key."

Given last week's announcements of a network expansion and a $15 per month Vcast content service, Verizon has the edge over Cingular, said Neil Strother, a senior analyst with In-Stat/MDR.

"But this isn't a one-month or a one-year battle," said Strother, who expects a close horserace over the next two years. The carriers will work to land new customers and up-sell existing users on premium high-speed services.

In addition to Cingular and Verizon Wireless, the nation's largest and second-largest mobile companies with 46 million and 42 million customers, respectively, other carriers are plotting 3G courses, albeit more cautiously.

Sprint tapped equipment maker Lucent to enhance its network for a 3G rollout this year. Sprint's proposed merger with Nextel will also increase its customer base and network coverage.

Nextel boasts the highest average revenue per user figures in the business and has experience selling premium services, such as push-to-talk, which could prove valuable in marketing 3G.

Still, Sprint is not so far behind it can't catch up, Strother said. Its cautious approach may pay off by watching Verizon and avoiding some of the same problems that inevitably accompany new service rollouts. He added that T-Mobile is farthest behind, but has deep pockets of parent Deutsche Telekom to move quickly.

In a recent analysis note, Gartner analyst Tole J. Hart counseled Verizon rivals to introduce video services on slightly slower networks "to minimize Verizon's first-mover advantage and take advantage of the market interest in wireless video."

Weston Henderek, senior analyst with Current Analysis, said Verizon has about a six-month deployment lead over Sprint. However, he expects Sprint to launch its 3G service mid-year with about 20 cities and handsets that can immediately support multimedia services.

Telecom Equipment Makers

Catching up means upgrading networks. And the projects are a welcome windfall for gear makers, especially after years of stagnant capital budgets. The significance of long-awaited 3G rollouts in the United States is not lost on equipment makers.

"It is a critical year from the standpoint of broadband access becoming widely available," said John Leonard, a Lucent vice president for mobility strategy and offer management. "It will be a key enabler, and we'll start to see more attractive services for consumers."

Earlier this year, Lucent signed a $5 billion deal with Verizon to supply 3G hardware, software and services. Verizon will use Lucent's Flexent Modular Cell 4.0 base stations, as it continues expanding its high-speed data service nationwide.

Lucent competes with Nortel and others to provide a range of network gear for advanced systems. Other well-known networking names, such as Cisco, Ericsson, Motorola and Siemens also sell critical components of 3G networks.

"There's a lot of players chasing an increasingly consolidated market," Mobile Competency's Egan said.

That's not to say Lucent or any other giant will be the only company to succeed in the space. Lucent knows that full well.

"Large carriers like to have multiple vendors," Leonard said. "That's just the way it is. It makes financial sense, and risk management sense."

Given that requirement, gear makers have to be sure their equipment is based on open standards and can be easily integrated with gear from competitors.

Handsets

As the 3G coverage map is filled in, carriers must offer a fleet of phones specially designed for the audio, video and text data that will be flowing to it.

LG VX8000
The LG VX8000 is about to make a splash in the 3G market. Source: LG

That means slightly larger screens with better resolution, higher-quality speakers and internal hardware, such as digital signal processors that are attuned to the carrier's 3G standard of choice. Also look for additional digital music capabilities and built-in cameras in new models.

Other factors will be crucial in determining 3G adoption in the United States, including price. Verizon didn't say how much 3G phones will cost customers, but most industry-watchers expect a price tag of about $200.

In the U.S. market, the three phone partners announced by Verizon Wireless -- LG International, Samsung and UTStarcom -- will be off to a quick start. Although, Motorola, which seems to be getting back on track under a reorganization, and Nokia can't be counted out because of their size and experience.

At the press and analyst event last week at the Consumer Electronics Show in Las Vegas, Verizon used LG VX8000 phones for demonstrations, Strother said. Verizon Wireless executives believe that by the end of the year, a large minority or a small majority of the phones it offers will be 3G capable.

LG, which is based in South Korea, had a strong year in 2004 with a good lineup of phones last year, Strother said. This move could only help it. And both Samsung and UTStarcom are also based in South Korea, where 3G is commonplace, although UTStarcom has a significantly larger presence in China.

"Those vendors already get it right in markets that are running today," Strother said.