|  By
Goli Ameri
Over
$120 billion has been spent in Europe in 3G license fees and the
cost of network buildout is estimated between $5-$7 billion per
market. Many mobile operators who have won the licenses however
are now concerned about recouping their investment and uncertain
as to the level of consumer interest and eventual take up of services.
In contrast to 2G (and even 2.5G) services, which derive their competitive
differentiation from geographic coverage, 3G business models’
competitive edge will reportedly come from delivering high quality
data ‘content’. The problem is that no one really knows
today what this high quality data content should be. Successful
and coveted applications address real needs, hence they become killer
apps, whereas the services proposed for 3G are more a rerun of current
wireless data services with the addition of some interesting features
such as full motion video and VoIP. (See Figure 1). Wireless data
in 3G is still a technology looking for a killer application. It
is not clear as to why consumers would need 3G’s high data
rates when all they are downloading is the weather report or restaurant
information.
3G’s other benefits such as always-on connections for the
end-user and packet switching for the operators is being delivered
through the deployment of 2.5G services. The technology is also
faced with other widely-reported problems such as its complexity
which have led to widespread delays in network deployment coupled
with an absence of handsets and even spectrum in the U.S. Last but
not least, the general malaise in the telecom market and the $650
billion industry debt load is having major effects on 3G’s
business case.
The bottom line is that the business case for 3G mobile services
is rapidly eroding and the value proposition of the technology is
being widely questioned within the industry. Will 3G’s promised
services and benefits justify the necessary and enormous investment?
Will customers even want 3G’s services and will carriers make
any money providing those services?
In the ruthless high-tech world, when the value proposition of a
technology is questioned, it automatically opens the door for competitive
products and services. 3G’s nemesis will prove to be wireless
LANs in the hotspots market which can be deployed at lower costs
and provide higher bandwidth as well as the types of data services
that are actually in demand by customers.
The “hotspots” market, or the public domain include
areas such as airports, hotels, convention centers, coffee shops
and train stations where 40-45 million road warriors spend a great
deal of unproductive time. Mobile service providers will lose valuable
revenue from these lucrative customers with the incursion of wireless
LANs, and they will be wise to make up for lost revenues by taking
an active role in the deployment of this technology.
Wireless
LANs
Several issues are making wireless LANs the poster-child of wireless
Internet technologies. These include the 2.4 MHz GHz unlicensed
spectrum, the standardization of the technology, the high bandwidth,
its technical feasibility and the potential ubiquity of the product
in the home, the enterprise, and the public domain market.
Consumers and particularly road warriors are most interested in
high data content services, such as email with attachments, web
browsing and access, to company networks and servers rather than
limited content Internet access (via cell phones). Users usually
perform these tasks while in a portable (stationary) mode and on
laptop-like devices, and not while mobile, which is the ideal venue
for the usage of wireless handsets. All PC vendors including Toshiba,
Dell, Compaq, IBM and Sony are now selling wireless-LAN enabled
laptops and Microsoft is supporting 802.11b in the new Windows XP.
3G systems in effect are mostly designed around voice, and the amount
of data that can potentially be transmitted through the channel
will be capped at 384 Kbps for wide-area/high-mobility/portable
mode and up to 2 Mbps for local area/low-mobility/stationary coverage.
Road warriors, however, require accessing and manipulating their
corporate files and surfing the Internet, all of which can be accomplished
in a more streamlined, easy-to-use manner with 11-54 Mbps wireless
LANs.
Although 3G systems are designed around voice, networks are expected
to generally derive their revenues from data services and content,
both of which require bandwidth. However, long before the roll-out
of 3G, real data applications will be delivered over wireless LANs
in the hotspots market and further erode 3G’s business case
for wireless data.
In addition, the deployment costs of wireless LANs in the hotspot,
market and dense metro areas are far more cost-effective then than
3G systems. The bandwidth and cost discrepancy between 3G and wireless
LANs will become even more apparent with 802.11a, which is expected
to offer bandwidth of 54 Mbps. Wireless LANs are also currently
available, whereas the general consensus regarding 3G is that it
will not be available in the United States before 2005 and Europe
before 2004.
Seamless
Mobility: Way of the Future
Although
wireless LANs will no doubt put an additional dent in 3G’s
business case, the bottom line is that the wireless world is moving
towards seamless mobility and those operators will be the ultimate
winners who see this trend in advance and are able to provide seamless
services across various types of networks.
The hotspots market is still undeveloped due to the weak business
models of some wireless ISPs, the half-baked assistance programs
of wireless LAN vendors and the demise of the telecom capital markets
in general. Although the current weakened state of the telecom market
is not conducive to trail-blazing thinking or bold marketing strategies,
the wireless service providers are in the best position to deploy
wireless LAN networks and take advantage of the seamless mobility
trend both for their own benefit as well as those of consumers.
There are a number of factors which point to the wireless service
providers as the ideal candidates for wireless LAN-based networks
in the hotspots market. These operators need the revenue, have the
experience and own the customer relationship.
It is estimated that it will take anywhere from five to seven years
before investments in 3G networks is paid off assuming revenue from
data services is included in the equation. Although the wireless
LANs have not had much success through the wireless ISP business
model, the success of the Microsoft/Starbucks/Compaq /MobileStar
alliance and consumer uptake could potentially be a turning point
for the technology in both the U.S. and Europe. This success would
once again open the coffers of the capital markets as well as vendor
financing. The wireless service providers would lose a golden opportunity
to not only be the primary providers, but they would also lose revenue
for data services from their most lucrative customers, the business
user on the move.
Wireless LAN services would help operators to not only increase
their average revenues per user but also bring in additional revenues
while building their 2.5G and 3G networks. In addition, carriers
can collect and capture significant revenues from e-commerce or
content services that are provided over wireless LANs which are
more amenable to full Internet browsing than cellular phones.
Carriers already have relationships with customers as well as the
back office systems to support and nurture the relationship. Subscribers
are looking for maximum mobility at minimum cost with the ability
to roam between locations without having to reconfigure their laptops
or worry about additional charges or dealing with several service
providers. The standardization of wireless LANs around 802.11b and
the integration of the technology into Windows XP has solved a large
part of this problem. Wireless service providers are the ideal candidates
to offer customers a single bill for both their cellular and wireless
LAN services. Sonera is currently offering this service in Finland
with its wGate product.
Two years ago, wireless LAN vendors were targeting the incumbent
wireless service providers especially in the U.S as potential customers.
These operators however would not even consider the 2.4 GHz band
because of its unlicensed and ‘open to all’ quality.
Today, the spectrum constraints in the U.S. have created a different
environment. Wireless service providers are worried that their current
and future data needs with the advent of 3G may mean that they have
to use up all their spectrum for flat rate data, and they are concerned
about the cannibalization of their voice services. As a result,
overlay networks have garnered some interest, and the possibility
of using the ISM band to off-load some of the data requirements,
instead of buying more frequency, has taken on a sense of urgency.
Who
are the Players?
Some
European operators (especially the visionary Scandinavian ones Telia,
Sonera and Telenor) have embraced the trend towards seamless mobility
and have opted to install wireless LAN systems in the hotspots market
complementing their wireless networks.
Telia’s HomeRun service for example offers wireless LAN service
in over 100 sites in Sweden including airports, train stations and
hotels. Sonera offers the wGate wireless LAN service in airport
lounges and convention centers in Finland. Sonera is pursuing seamless
interoperability of wide and local area wireless networks, and as
a first step the company now supports Nokia’s SIM card based
WLAN connections in its wGate service, enabling a single bill for
both GSM and WLAN subscriptions.
Telenor and Ericsson are involved in a joint project called H2U
to evaluate and test an integrated UMTS/wireless LAN system as complementary
radio access technologies to add capacity in typical hotspots. The
testing involves a laptop roaming between a HiperLAN2 wireless LAN
network and a 3G CDMA WAN network providing seamless mobility to
the subscriber. The laptop includes both an 802.11b network interface
card as well as a prototype CDMA modem (which is currently too large
in size). Ericsson is already shipping cards that add 802.11b capability
to CDMA base stations near hotspot areas.
In the U.S. however, the strategy of mobile operators regarding
wireless LANs is not very clear or public at this point. Sprint
is conducting wireless LAN trials with Nortel’s eMobility
suite of products, but the company is not commenting publicly. AT&T
Wireless, Verizon and Cingular Wireless have made no public announcements.
We hope that these operators are not too consumed by the deployment
of their 2.5G networks as well as gaining access to the elusive
3G spectrum to lose track of a wireless data application and network
that could actually be used by subscribers.
|
