Coming Attraction

Auctions and open spectrum pave the way to 3G.

Few will ever accuse the wireless industry of thinking small. Visions of global connectivity, with super-fast networks supporting audio, video and mobile commerce — they're all the stuff of 3G.

But for all the hype — and, in some cases, hyperbole — questions persist: Who will deliver on the promises? Who will pay the enormous costs, and when?

More mysteries lurk: What vendors will deliver the technology — the gee-whiz handsets, PDAs and laptops — that would, in turn, carry the promise of 3G to end users?

Now, a single question may replace all others: Who won't?

Consortiums and coalitions, providers and vendors are joining ranks like never before to make good on the hype. A late winter meeting in Geneva highlighted the cooperation that has taken hold of 3G migration. The Working Party 8F, a private-public forum led by Stephen Blust, BellSouth Cellular chairman, and Stuart Cooke, Nokia vice chairman, started work on IMT-2000 — International Mobile Telecommunications — the corral of standards for linking land- and satellite-based networks. Groups and others such as the UWCC, UMTS Forum and ETSI are working hard to reach UMTS by creating adequate regulatory frameworks, ensuring the availability of licenses, affording enough spectrum to service providers and producing timely standards.

"They work together because they see the common global market," said Dr. Bernd Eylert, chairman of the UMTS Forum, a U.K.-based consortium devoted to promoting 3G telecom through the UMTS. "It's important for these organizations to give information to standards bodies along the lines of what the market needs."

Like others racing to reach 3G, Eylert envisions full-featured browsing that replicates the desktop, with smooth audio and video reaching end users over super-fast 2Mb/s or higher networks. Packet-based transmission of text, digitized voice and multimedia will offer users constant connectivity to the Internet, no matter where they are.

But a familiar obstacle figures to influence 3G the whole way — from acquiring licenses to deployment to making the technology accessible to users.

Recent auctions of 3G licenses in Europe underscored the concern. Springtime auctions in the United Kingdom drew multi-billion-dollar price tags for the highly coveted 3G 2GHz spectrum licenses. Vodafone AirTouch will pay $9.5 billion for its license, with Telesystem International Wireless and Orange each shelling out more than $6 billion. Companies barely blanched. Seeing the 10-figure prices, it's evident that 3G is a transforming event for wireless.

UMTS licenses in Italy — five will go up for auction soon — are expected to fetch similar prices. Italian officials hope to draw at least $11 billion from the auction. In Germany, bidding is expected to start in late July or early August. There, between four and six licenses are likely to be doled out, with a potential windfall of $60 billion for the German government.

Remember, the costs are just for the licenses. And that has Eylert and others worried that what companies spend now for licensure could leave them short when it comes to deployment.

"We have some concerns because of the high amount of money," Eylert said. "There is a high upfront payment for the license, and this money is not at hand to roll out the network. We saw this with the PCS auction in the United States seven years ago. Some of the bidders who got a license hadn't enough money to build up the network and deliver services."

Others disagree completely, and for good reason. There was a sharp lesson to be learned by the PCS example. Winners of previous license auctions in the United States failed, forcing companies into bankruptcy saddled with billions in unpaid debt. But those companies generally were smaller entrepreneurs with limited funds. Some of the 3G applicants in Europe have nearly bottomless pockets to draw payment from.

However, even in Europe, the prices were too steep for some companies. In Britain, several bidders dropped out because the cost was too much. Telefonica, Crescent Wireless, Eircom and Spectrum — the bidding consortium that includes Sonera, Virgin Mobile, Tesco, Marconi, and Australia's One.Tel -- all dropped out. They withdrew when it was clear that the initial investment would eclipse hopes of profitability.

How High Is Too High?
There's another concern that the precedent set by the U.K. auctioning has pushed the price bar too high in other countries as already evidenced by predictions in Germany and Italy. A recent Yankee Group report suggested the higher than expected cost for a license, along with giant infrastructure costs in deploying the UMTS network, "casts doubts on whether demand for 3G services will be able to justify the costs."

The Yankee Group's same report suggested that license fees paid in Britain could make companies reluctant to pay the same price again in Germany, Italy and other countries where government treasurers will set bid minimums.

Others see a different side, arguing that the decision to spend billions on licenses, although it may sound extravagant, speaks volumes about the companies' wherewithal and a commitment to see deployment through. Europe should see full-fledged 3G sometime in 2002.

"We're talking about some extremely large organizations that obviously have access to capital or had a capital plan," said Chris Pearson, UWCC vice president of marketing. "They wouldn't be bidding if they couldn't build out the network quickly with capital."

Flip the argument, suggested Pearson. What's the cost of not winning one of the licenses? The spectrum that comes along with licenses are fixed assets — a 1-time cost, sort of.

"If you don't get your spectrum when you can, you might be shut out and never be able to enter that market," Pearson said. "Once you've got the network in place, you're looking at revenue streams over a long period of time. You'll never have to make that deployment again."

So, assuming money is no object — or at least it's an object that companies hope to recoup over the long haul — what are they doing to turn their licenses into moneymakers?

Partnerships Flourishing
Network-solutions firm Alcatel recently announced its venture with Fujitsu to develop and manufacture next-generation mobile-communications-network systems. The new company will leverage both companies' resources to develop the 3G market, with a "special emphasis" on quickly bringing UMTS to the market.

Alcatel and Fujitsu anticipate getting roughly 20% of the UMTS network-equipment market in Japan and Europe, and the first 3G offering will be ready for deployment by the first half of 2001, the companies said.

Cisco and Motorola announced their own joint venture, called Invisix, formed to create an integrated architecture carriers will use to bring competitive services. Those networks would use applications rather than network technology, giving users the choice of access, such as UMTS, GPRS or wireless LANs.

3Com has announced plans for enabling CDMA wireless-service providers to migrate to 3G networks, including UMTS. The migration plans include the development of a suite of industry-standard, open-interface network products for a 3G CDMA wireless-data-network infrastructure.

Set for early 2002, 3Com's second phase of the plan will initially support the IS-2000, Release A (3XRTT) standard for higher access speeds of up to 384kb/s for mobile-packet data and voice, as well as video. This phase is expected to ultimately support access speeds as high as 2Mb/s for stationary packet data/voice/video applications.

"3G technology requires a fundamental change in the design of wireless networks," said Irfan Ali, 3Com Carrier Systems senior vice president & general manager. "Until now, circuit switches have been at the core of virtually every wireless network. But with the migration to packet switching and higher data speeds, today's circuit switches are ill-equipped to handle the demands of this new technology."

Network providers also are busy trial testing UMTS equipment and terminals. British Telecommunications (BT) and Nortel Networks are testing equipment and terminals at BT's research center in England. Similar trials were planned for Australia, Canada and France.

"We want to try to simulate as realistically as possible the way real customers will use third-generation services as they become available," said Sohail Qadri, BT director of Mobility. "This means we have not only to certify that the technology works, but more importantly also understand how content providers, wireless operators and customers will interact with each other as mobile multimedia services evolve."

Just days after the IMT-2000 conference in Geneva, ETSI — yet another coalition of industry players — finalized the transposition of the first series of 3G Partnership Project Release 99 specifications, which ETSI says will assure stability for 3G roll-out.

The UMTS first series specifies more than 50 services including multimedia messaging, the new radio access UTRA (universal terrestrial radio access) and other functions to support speech and data apps. Release 2000 should be ready by year-end.

"The transposition of the UMTS Release 99 first phase proves that we have been able to meet the very aggressive targets for the completion of the first step," said Karl Heinz Rosenbrock, ETSI director general.

Laying networks and infrastructure is one thing, but will mobile devices be ready to handle what 3G can deliver?

Companies such as Qualcomm and Texas Instruments are testing 3G-enabled chipsets, the critical component that will process the voice, data, video and audio functions in the mobile device.

Earlier this year, Qualcomm announced shipment of chip samples and system software for the MSM5000 mobile-station modem, billed as the world's first 3G CDMA 1X multicarrier solution for CDMA handsets that's compliant with the 3G standard set down by the ITU.

Others working on 3G network equipment and phone technology include Ericsson, NEC, Nokia, Sharp and Siemens.

Siemens, for example, claimed in March to place the world's first UMTS call over a TD-CDMA (TDD) air interface. After the recent decision of the 3GPP to not only establish a worldwide standard for wideband CDMA but also lay the foundation for a standardized TD-CDMA air interface within the UMTS "Release 99," the call was "another major leap" into the future of mobile communications, Siemens said. Progress made on the standardization and technological development of both modes brought Europe's 3G initiative to the fore.

As for the handset, most agree WAP-enabled phones — particularly those unveiled nearer to UMTS roll-outs — will be ready.

America, Not So Fast
When will the United States join the party?

Roll-out of UMTS networks in the United States is a long way off, but 3G enthusiasts shouldn't fear falling behind the rest of the world, at least not yet. UMTS' rough 3G equivalent — EDGE — can be deployed in the existing 700MHz spectrum. What's more, EDGE will ultimately have the same network backbone — GPRS — as UMTS.

UWCC's Pearson speculated that by the end of 2001, there will be limited 3G deployment via EDGE, with wider deployment anticipated in 2002.

"We've heard there won't be any auctions in higher frequencies for quite some time," Pearson said. "Spectrum is spectrum, and 700 could be utilized for voice or data, depending on what the operators and vendors can agree on. It may not be true 3G, but in fact 700 could be used to offer 3G services because you would be able to take 700 and deploy EDGE. In the west, EDGE has the advantage, because it can be deployed with the current spectrums."

So what's the difference to end users? Whether or not overseas UMTS deployment ever reaches the United States, the effect on consumers could be negligible, especially if network providers successfully mimic UMTS deployment through EDGE.

"What you find between most of the proposals in EDGE or UMTS, there's not going to be a great deal of difference to the user," Pearson said. "If you talk to the normal person, when they turn on their telephone, they won't be able to tell you what frequency they're using. They know they can send or receive calls."

Once again, the PCS example. Many said PCS's 1.9GHz spectrum would provide eye-popping new features and applications to provide easy migration to newer technologies down the road.

"But in the end, PCS was just another frequency," Pearson said. "A customer can't tell."

Clark (caclark@earthlink.net) is a freelance writer based in Kansas City, MO.