Ready, Set, Grow

— May 01, 2006

These are the best of times and the worst of times for 3G technology developers and wireless solutions providers. Verizon Wireless, Sprint Nextel and other 3G operators in the United States have poured hundreds of millions of dollars into the development of faster 3G networks over the past few years and invested millions more promoting the benefits of 3G services to their current subscribers and potential new customers. Now, it's payback time, as Verizon Wireless, Sprint Nextel, Cingular and soon T-Mobile--the four major U.S. wireless carriers--scramble to add wireless broadband customers who are willing to pay a premium for faster unwired services.

The problem is that the jump from traditional wide-area wireless services to the 3G fast lane isn't happening quickly enough. "Many subscribers are using [3G] without really being aware of the underlying technology, and carriers do not need to do any 3G marketing in order to attract new customers," says Craig Mathias of Farpoint Group. "The upgrade market is almost entirely 3G, and new users likewise almost always get 3G handsets as well."

While there are a handful of different 3G technologies and approaches available today, all of them adhere to standards approved by the International Telecommunication Union. These requirements call for technologies that improve system capacity, are backward compatible with second-generation systems, provide multimedia support and offer high-speed packet data services ranging from 144 Kbps in suburban environments to 384 Kbps in urban locations and 2 Mbps in fixed or in-building environments. To borrow a caveat from the automobile industry, speed mileage may vary according to conditions.

As of March 2006, there were 194 commercial 3G operators in 84 countries. In the United States, however, Verizon Wireless may be the carrier with the most to lose, since it started pumping up the column on its service speeds as early as 2001 and deploying 3G systems in the United States a year or two later. As of last year, the company's high-speed EV-DO service was available in 180 major metropolitan areas, representing a potential user base of 150 million people, according to Verizon.

Cingular claims to have the largest all-digital network in the States, although it lags in terms of 3G development, compared with Verizon. The company's BroadbandConnect 3G services are currently available in 52 communities across the country and as of December 2005 had a potential customer base of 35 million. However, Cingular makes up for this disparity, to some extent, since users of its video services can access them through its Media Works service packages and not just through its EDGE 3G network, now offered in 16 cities.

Sprint Nextel is the number three wireless carrier, although it has been the most aggressive in terms of more video-rich services since it launched multimedia applications and video services about 18 months ago. The company has since expanded its Power Vision data service to more than 215 markets and a potential audience of 150 million people at year-end 2005. Of course, there is a lot of overlap in these numbers, with other competing services, but Sprint nonetheless has a perception lead in channeling video programming to cell phones.

T-Mobile is not yet in the 3G game, but it will most likely buy spectrum in the upcoming AWS auctions to roll out GSM-based 3G, say the experts.

In order to drive demand for 3G, the carriers are also partnering with mobile computer manufacturers to add cellular wireless capabilities to notebooks and other portable devices. Dell, HP, Panasonic and Lenovo (IBM ThinkPad) have all announced plans to introduce systems that have embedded 3G radios, and demonstrated some of these systems at the Consumer Electronics Show in Las Vegas this year.

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