These are the best of times and potentially the worst of times for cellular service providers in the United States.
On the one hand, the industry has never looked better. Wireless subscriber numbers are increasing at a healthy clip, and sales of multimedia-capable and data-ready cell phones are at an all-time high. Cingular Wireless, the nation's largest service provider, just reported a surge in customer subscriptions, boosting its subscriber base to well over 57 million.
Handset shipments are also at an all-time high, up more than 22 percent over last year, with a significant number of these small devices capable of taking advantage of faster and more data-minded 3G wireless networks. Nearly 19 million smartphones were shipped worldwide in just the second quarter of this year, representing a jump of about 55 percent over the same quarter last year, notes researcher Canalys. Much of this demand is being driven by the availability of higher-speed cellular networks and the rising use of mobile, converged-capability handsets as replacements for handheld computers in the enterprise.
There are a few clouds on the horizon, however, that may ultimately rain on this wireless parade. Evolving and newer technologies not only promise much faster access speeds and reliability but in some cases may be more pervasive and much cheaper than cellular data connections. These technologies include:
- Mobile WiMAX, which borrows from cellular's approach of using multiple transmission sites and nodes, but offers much faster broadband-class speeds and is battle-ready for congested subscriber areas;
- Metro-wide Wi-Fi networks, which are already popping up in municipalities across the country and blanketing them with cheap and reliable wireless access;
- Mesh networking, which can include a variety of different technologies, from Wi-Fi to WiMAX, but provides an always-on failsafe network.
U.S. cellular service providers aren't sitting idly by waiting for that rainy day, however. Most have been investing heavily in higher-speed wireless technologies and infrastructures that will eventually provide broadband-class data environments for subscribers. Verizon Wireless and Sprint Nextel, for example, plan to roll out CDMA2000 1xEV-DO Revision A network technology sometime before the end of this year. The technology promises peak downlink data rates of up to 3.1 Mbps and up to 1.8 Mbps in the uplink. Verizon inked a deal in July with Nortel Networks to provide the necessary hardware to build this network in top U.S. markets.
Just the Beginning
Most wireless carriers agree that 3G is finally here and ready for mass adoption. A number of carriers are also moving to take these communications architectures to the next level by bumping up to 3.5G technology, with a software upgrade called High Speed Downlink Packet Access, or HSDPA. This will essentially move 3G closer to delivering on its original promise of broadband speeds. There are now roughly 108 operators worldwide committed to this technology, says the GSA, although most activity will initially be centered outside the United States.
Closer to home, nearly all of the top U.S. wireless carriers have launched or are at least in the process of testing higher-speed 3G networks, with an eye toward using these networks to expand their data services business. The lone exception is T-Mobile USA, which has yet to launch a 3G network within the United States.
"They have implemented Wi-Fi and Wi-Fi hotspots instead and just didn't get into the 3G game in the U.S.," says Stephane Teral, a principal analyst with Infonetics Research. "They don't have a 3G spectrum, but are making up for it in another way."
Over the past year or so, T-Mobile has focused much of its attention and resources on building its customer base and fighting a customer satisfaction battle with bigger players such as Cingular. T-Mobile added 700 new cell sites in Q106, for a total of 33,600 nationwide. It has also put more effort into catering to users of converged devices, such as the RIM BlackBerry and the T-Mobile Sidekick, and now supports more than 1.2 million users of these devices.
Text and multimedia messaging account for a significant portion of T-Mobile's bread-and-butter revenue, with a total of about 6.9 billion SMS and MMS messages flowing through its network in the first part of 2006, says the company. This strategy may, in fact, give T-Mobile an edge in the battle for subscribers, since it has a more vested interest in converged technology devices that mix cellular with Wi-Fi and even evolving infrastructures such as WiMAX.
"You really have to look at how the cell phone is used," explains Infonetics' Teral, noting that some service providers have found that up to 70 percent of cell phone usage occurs within a building or the home. "Why would you need a cellular network if 70 percent of all calls are being done from inside a building?"
In this case, WiMAX and Wi-Fi would be seen as complementary technologies to cellular, especially when users channel more data-intensive applications over these networks and more broadband-capable communications pipelines are needed. "Then you can automatically switch to WiMAX," says Teral.
The VoIP Push
The cellular carriers have recently taken their street fight indoors and mounted a campaign against Wi-Fi and eventually WiMAX on their home turf, which now includes the inside of office buildings, hospitals, airports and even scattered Wi-Fi hotspots.
The crux of these campaigns is that cellular coverage follows you as you exit the building, without any need for re-authentication or reconnections. However, the rapid spread of municipal Wi-Fi systems and Wi-Fi mesh networks may soon negate that argument, especially as more business and consumer users opt for voice over IP (VoIP) telephones as an alternative to traditional phones and cellular devices.
The number of VoIP subscribers in the United States is expected to nudge the 32.6 million mark by 2010, which means that roughly 40 percent of all broadband households in the country will soon be a part of the VoIP movement, says market researcher eMarketer. This compares with about 5.2 million VoIP subscribers and an expected 9.6 million users by the end of this year.
The Telecommunications Industry Association (TIA) is more conservative in its outlook, but nonetheless gung-ho on growth projections for VoIP. Its research shows that VoIP usage in the U.S. will grow at a annual rate of 43.9 percent and will most likely reach 18 million subscribers by 2009. It is important to note, however, that the TIA primarily tracks telephone-based VoIP activity and not PC-to-PC activities, which is why its figures may vary from eMarketer's forecast.
This surge in VoIP activity and interest may be part of the reason that Verizon earlier this year filed a lawsuit against VoIP service provider Vonage, claiming the company stole its VoIP technology and is using the design of its gateway interfaces between packet-switched and circuit-switched network without proper licensing or authorization. Some analysts claim the suit has no technology teeth, but it does create a legal headache for Vonage as it continues to push the VoIP alternative.
When the dust settles, the winner will be the wireless technologies that can provide the best, fastest and most widespread coverage and do so at the right price, with support for a variety of applications.
Despite the growth of VoIP, the fight for subscribers and business users may ultimately be fought on a data battleground, since many small to medium-size businesses (SMBs) increasingly rely on instant messaging to keep in touch with mobile workers and customers. Approximately 37 percent of the SMBs in North America have deployed or are presently rolling out carrier-based mobile data services. Another 13 percent are evaluating these services, or are in the midst of a pilot, says Forrester Research, compared with 29 percent of these SMBs using or currently deploying data applications based on Wi-Fi.
This is perhaps one of the reasons why wireless carriers are eyeing IP-based communications infrastructures as complementary architectures, or as backhaul alternatives that might replace expensive T1 lines. It is also one of the reasons why WiMAX is generating a strong buzz right now, and major companies continue to pour money into research and new deployments.
Earlier this year, for example, Intel and Motorola spent a combined $900 million to buy into Clearwire, a fixed WiMAX service provider that presently serves 200 cities and towns in the United States, Ireland, Belgium and Denmark. The proprietary service operates on the 2.5GHz licensed spectrum and provides downlink speeds of 1.5 Mbps and uplink rates of up to 256 Kbps.
Intel hopes to use its investment in Clearwire to steer development in mobile WiMAX, which is expected to be a strong competitor to 3G and emerging 4G cellular services. The company will also parlay that investment to create an instant market for its 802.16e-compatible WiMAX chips, codenamed Rosedale 2, which support a standard that can handle both fixed and mobile WiMAX duties.
The Rosedale 2 chips are expected to be commercially available in laptops and other mobile systems as early as next year. Meanwhile, Motorola is one of the first to incorporate 802.16e technology in a series of prototype handsets that will be used in a WiMAX trial in Japan this month.
"Mobile WiMAX is really a direct competitor to mobile cellular, and we will soon be seeing a 'clash of titans,'" says Greg Caltabiano, president and COO of SOMA Networks, a broadband wireless solutions provider that specializes in WiMAX technologies.
Speeds with 3G technology are much faster than they were a year or two ago, says Caltabiano, whose company admittedly has a more than passing interest in broadband-class WiMAX and wireless VoIP than cellular architectures. But, "to our understanding, there are no mobile operators in the world that are truly offering broadband to the home at the all-you-can-eat price points that are being offered by the fixed WiMAX carriers," says Caltabiano. "The networks just aren't optimized, and the mobile frequencies are very expensive and scarce."
Cellular has a very narrow bandwidth, which the carriers are desperately trying to stretch, adds Ellen Kirk, VP of marketing at Tropos Networks, a provider of mesh networking solutions that combine multiple communications architectures, including Wi-Fi and WiMAX. While 3G networks play well with faster WiMAX systems, they are really not in the same league, "because data is all about bandwidth and how much you can put through that pipe, and we have an inherently fat pipe," says Kirk.
Best of Both Worlds
Not everyone agrees that WiMAX is positioned to give 3G cellular a solid beating when it comes to broadband access. While there are more than 150 802.16d fixed WiMAX deployments and trials worldwide today, according to the nonprofit industry group WiMAX Forum, there are little if any 802.16e mobile WiMAX trials in existence. This is a concern, since it is mobile WiMAX that will give 3G cellular the most problems in terms of competition and broadband acceptance, say the experts. On the other hand, there is lots of data capacity now available on the cellular side, and metro-scale Wi-Fi systems are quickly emerging that could fill in any speed gaps that exist.
Cellular, Wi-Fi and mesh networking "are great technologies, but they solve different problems," says Caltabiano. In the end, all of these architectures may be more complementary than competitive. Fast, affordable, more ubiquitous communications options are bound to result, and it's both global and local enterprises that will come out on top.
Tim Scannell is president of Shoreline Research and frequently writes about mobile and wireless topics.