|Topic:||4G and WiMAX: the alternatives that are not|
Chris Pearson is President of 3G Americas, LLC. Mr Pearson served as 3G Americas’ Executive Vice President and Senior Operating Officer of the corporation since its initiation in 2002. Mr Pearson came to 3G Americas from the Universal Wireless Communications Consortium, UWCC, where he served as Executive Vice President in charge of the strategic management of the Consortium. Prior to joining the UWCC, Mr Pearson held the position of Strategic Alliance Manager for the Advanced Network Services Provider Program, ANSPP, at AT&T Wireless Services. Additionally, he has held several senior level technical marketing positions at GTE Telephone Operations and @mobile.com. Throughout his 19-year career, Mr Pearson has provided lectures, training and speeches for telecommunications audiences throughout the world. Mr Pearson holds a Masters in Business Administration from Seattle University and a Bachelor of Arts in Marketing and Finance from the School of Business at the University of Washington.
3G is still here, despite WiMAX and other 4G technologies, and likely to be delivering mobile wireless broadband for years to come. 3G is the next step in the GSM migration path; there are already 167 million users and there should be one billion subscribers worldwide by 2010. GSM provides the economies of scale needed for low-cost handsets in developing markets. WiMAX is a new technology with a small user base; it will take years to rollout and build substantial usage.
Is 3G dead? Is it failing as a way to bridge the digital divide? No. It is easy to get the wrong impression, considering the many mainstream and trade press articles that have pondered these questions over the past several months. Most debates were prompted by an announcement of work on 4G, backers which promoted the message that it is time for a fresh start. Unfortunately, by promoting premature buzz on 4G, the wireless industry fragments and disrupts itself. One problem is that ‘4G’ has become a catch-all for a wide variety of technologies, often including nascent ones such as mobile WiMAX (Worldwide Interoperability for Microwave Access 802.16e) and WiBro (wireless broadband), nearly rendering the term meaningless. Although WiMAX is frequently referred to as ‘4G’, 802.16 does not meet the International Telecommunication Union’s (ITU) 4G definition, which tentatively describes 4G as a wireless technology that supports mobile throughput of up to 100 Mbps, and up to 1 Gbps for stationary use. It is a mistake to write off 3G so soon. All new wireless technologies have taken many years to build a sizable customer base. In the case of GSM, the Global System for Mobile Communications, it took seven years before the customer base reached 100 million. In fact, the third generation of the GSM, UMTS, the Universal Mobile Telecommunications System, is growing much faster than the second generation. We can say that 3G is already a success. There will be more than 167 million 3G users worldwide by the end of this year, according to a recent forecast by Strategy Analytics. Within four years, 3G customers will drive more than half of all cellular service revenues, the firm estimates. This is not wishful thinking; in the US market alone, data drove almost 11 per cent of all wireless revenue – $6.5 billion – in the first half of this year, according to CTIA – The Wireless Association. That’s a 70 per cent increase over the first half of 2005. In fact, 3G is already so successful that it begs another question: will mobile WiMAX and other alternatives to 3G be able to compete with today’s leading wireless technologies? The prognosis so far is not good, based on the limited success of existing alternatives to 3G. Look at the example of the two WiBro networks launched in South Korea in June 2006. At the end of August, they had signed up only 494 customers. Possibly as a result, one of the operators, SK Telecom, announced that it would increase investment in HSDPA, High Speed Downlink Packet Access, from 570 billion won to 810 billion won. The Long Road to Viability Roaming is a major challenge for both 4G and 3G alternatives, such as mobile WiMAX. Time to deploy into new markets, spectrum band inconsistency and standards development could delay the roaming ability for users of advanced wireless services, on such alternative technologies, making leading global technologies such as UMTS/HSDPA the best choice for customers. This fact isn’t lost on backers of 4G and WiMAX. At a September 2006 forum on 4G in South Korea, an executive from one of WiMAX’s biggest backers, Sprint Nextel, said that consumers should not have to spend thousands of dollars for devices that can work with various competing technologies just to be able to roam worldwide (Associated Press). Nevertheless, that is exactly what they might end up doing, as mobile WiMAX is unlikely to have extensive roaming agreements and a wide variety of multi-band user devices until sometime after 2010. Regional and global roaming capabilities are particularly valuable to business users, always the early adopters of new wireless technologies, but that will not be easy for 4G and 3G alternatives. In the case of mobile WiMAX, vendors and operators are likely to spend years establishing service, getting devices into the marketplace and working out bugs. This will leave little time or resources to establish an extensive roaming service. Economies of Scale New wireless technologies take years, if not decades, to develop the equipment volumes necessary to drive down the cost of devices and services to reach much of the market. As a result, 4G will remain a niche player for most of the next decade – assuming that it is even commercially available after 2010 – particularly in developing markets where consumers and enterprises are highly price-sensitive. That outlook is based partly on the hurdles faced by 3G alternatives. For example, according to Maravedis Research and Tonse Telecom, India will have only 13 million WiMAX subscribers by 2012. One reason for that limited adoption is cost – operators and their customers prefer devices priced at under $100. New technologies will have difficulty achieving that price. By comparison, the GSM community is already providing sub-$30 2G models for developing markets. Efforts are underway by several organizations, including 3G Americas, to develop technical specifications for 3G devices that are affordable enough to bring high-speed data capabilities to all socio-economic levels in all countries – even the most price-sensitive ones. Economies of scale make it possible to offer affordable 3G devices in emerging markets to help bridge the digital divide. For example, South Africa and Tanzania are deploying UMTS/HSDPA to provide voice and broadband in rural areas, where wireline services typically are not available or are too expensive for most citizens and businesses. Even advanced 3G technologies such as HSDPA already enjoy economies of scale. As of August 2006, 51 HSDPA networks were already in commercial service. Almost all of the 289 operators committed to UMTS today are likely to upgrade to HSDPA, so the technology’s economies of scale will be even greater by the time 4G debuts. The lead over WiMAX widens even more when all types of 3G technologies are considered. By 2010, 3G will have more than one billion subscribers worldwide, up from 167 million this year. Performance and Selection Backers of 4G have done an impressive job, particularly in the mainstream press, of creating the perception that their technology delivers bandwidth that 3G cannot. That is highly debatable for a couple of reasons. First, most 4G technologies have not even been defined, let alone tested in labs or the field, so claims of higher bandwidth are based on back-of-the-envelope assumptions. Second, the few 3G alternative technologies that have been tested or deployed have not shown any significant advantages over mainstream 3G technologies in terms of speed. For example, Sprint Nextel said it expects mobile WiMAX to support download speeds of 2 Mbps to 4 Mbps. By comparison, HSDPA already supports average download speeds of more than 1 Mbps under favourable conditions, and by the time of mobile WiMAX networks’ wide-scale deployments in 2008-2010, some GSM operators will have upgraded their HSDPA networks to support speeds similar to or better than WiMAX. In 2007, operators will also have begun upgrading to High-Speed Uplink Packet Access, HSUPA, which – under favourable conditions – supports uploads as fast as 1 Mbps. Just as important, GSM has a clearly defined evolutionary road map beyond HSPA, High-Speed Packet Access, through HSPA+ and Long Term Evolution, LTE. LTE’s key features include support for Orthogonal Frequency Division Multiple, OFDM, for maximum spectral efficiently and bandwidth, peak download speeds of 100 Mbps and peak upload speeds of 50 Mbps. Besides speed, consumers and business users also want a wide selection of devices with a range of prices. One of the possible reasons why WiBro has floundered in South Korea is that no handsets are available. Instead, customers must use a laptop and modem. By comparison, although HSDPA is a relatively new technology, it already has a wide variety of devices, including PC card modems, handsets and embedded laptops. This highlights a key difference between 3G and 4G: HSDPA and forthcoming 3G technologies such as HSUPA and HSPA+ are upgrades to the GSM family, that can be deployed quickly and cost-effectively; 4G or 3G alternatives such as WiMAX must start from scratch. The bottom line is that 4G is a solution in search of a problem. Today, 3G already provides high-quality voice and bandwidth-intensive data services such as streaming multimedia to more than 150 million people worldwide. GSM’s ecosystem of more than two billion subscribers is laying the economic and technological foundations for the wireless future. Instead of promoting 4G, the telecom industry should continue its focus on advanced 3G technologies, such as HSPA, to serve customers better and avoid fragmenting the market. By the year 2010, an expected three billion wireless customers worldwide will form the customer base for the GSM evolution to 3G and beyond – now that is success.