3G or not 3G? That is the question

In the beginning, there was the analogue cell phone. And it was good. And then the cell phone went digital. And that was even better, providing a clearer connection and more reliability. And better begat a craving throughout the wired land for a handheld so powerful it could handle voice, data, audio and video.

If you credit the rosiest vision, the future of technology appears to be in the hands of the mobile phone industry. Cell phones and handhelds are everywhere. Promises of “always on” pervade the land. The future is now, and it’s wireless.

Except the future is still the future.

Let’s face it: Wireless technology is relatively young. The first generation has been around only since the early 1980s, when analogue voice transmission networks were introduced. The second generation took over in the mid-’90s with the advent of digital wireless voice and data networks, giving us the capabilities that spawned the cell phone revolution we know today. Yet, as remarkable as the technology is, there’s still plenty of room for improvement in the roaming capabilities and sound quality of cellular transmission.

Enter the so-called third generation or 3G which generally refers to networks capable of connecting to the Internet at speeds 40 times the rate of today’s cell phones. This level of service promises Internet connections fast enough to download streaming audio and video files, swap digital photos, and hold teleconferences. It also uses the existing spectrum space more efficiently and increases the speeds with which basic data can be transmitted over wireless devices.

While leading wireless advocates concede that 3G technology in the United States is not ready yet, they remain optimistic about its future. “A 3G wireless device will become a portal to the office,” says Liz Altman, vice president and director of business development in Motorola Inc.’s Personal Communications Sector in Libertyville, Ill. “With all of 3G’s amazing abilities, being out of the office will become less of a perceived handicap.”

Why 3G is Going Nowhere, Fast

So why the delay in moving toward the new world of wireless? To begin with, the telecommunications industry hasn’t been immune to the slumping economy. Motorola, in particular, laid off about a quarter of its workforce by the end of 2001 in an attempt to get back in the black in 2002.

Another major obstacle is a shortage of available spectrum the airwaves that carry the calls and messages. Much of the available spectrum has been allocated to the U.S. Department of Defense, which isn’t willing to part with it. Prior to Sept. 11, the U.S. Federal Communications Commission had been negotiating for spectrum, but those negotiations are no longer a priority for the Defense Department. In addition, carriers and vendors alike need to commit billions of dollars to licensing fees for the spectrum space and investments in hardware for the new technology. Finally, although most people are impressed when they see the fancy handheld devices associated with 3G services, they blanch at the prices, which are predicted initially to cost 50 per cent to 80 per cent more than current cell phones.

Unrelated to the technology itself is the sour economy. Even before the terrorist attacks, economic concerns were forcing executives to think more practically about technology spending, and wireless was no exception. “We saw a significant ‘sobering up’ take place in late spring 2001 of questioning where the business value is in 3G and what services would generate the needed return on investment,” says Leif-Olof Wallin, an analyst at Meta Group Inc. in Gothenburg, Sweden.

In addition, the Sept. 11 attacks drove home the overwhelming importance of communication without the frills. Executives are now concerned with networks robust enough to handle more calls in peak periods and more basic services like simple text messaging.

The U.S. telecommunications industry itself has also closely followed the deepening debt of the large European wireless carriers, which agreed in 2000 to spend a combined US$150 billion on licenses to provide 3G services. In light of their financial woes, European wireless companies have been trying to find ways to free themselves from some of the license obligations to which they’ve committed.

Even in Japan, where cell phones are prevalent and widely adopted, consumers are approaching the service with caution because the handsets have proven to be pricey and difficult to work with, says Wallin. Third-generation wireless has been available in Tokyo since October 2001, and more recently in Osaka and Nagoya; and NTT DoCoMo Inc. Japan’s dominant wireless carrier plans to spend US$8 billion to extend the existing service to most of the country within the next three years, adds Wallin.

By contrast, wireless carriers in the United States, such as Verizon Wireless Inc. and AT&T Wireless Services Inc., have taken their spectrum squabbles with the federal government to the U.S. courts, which will decide how to parcel out additional airwaves.

2.5G Will Take You There

Vendors in the United States recognize that 3G will not be ready for mass consumption anytime soon. As a result, carriers such as AT&T Wireless are beginning to offer 2.5G services so named because they offer speeds that fall between 2G and 3G. At 2.5G, wireless users can transmit text at fast speeds up to 114Kbps, which technically puts it at the low end of 3G’s capabilities. So some service providers have opted to repackage their 2.5G offerings as 3G, blurring the lines between the two.

“You will get all the business benefits you need by embracing 2.5G,” says Wallin. “It’s always on, it’s dependable, and it gives you just about the same bandwidth that you can get from 3G.” Motorola’s Altman admits that 2.5G is a more realistic aim for the United States in the near term. “It is building the foundation for 3G,” she says, “so that by 2005, more than 60 per cent of wireless devices in use will be 2.5G- or 3G-enabled.”

Sprint PCS Group, however, claims it is ready to surge into the 3G marketspace. The carrier promises nationwide 3G availability by midyear, according to Jason Guesman, director of business marketing, who’s located at company headquarters in Overland Park, Kan. Sprint purchased spectrum space in 1996 at what Guesman calls bargain-basement prices. It paid US$3.4 billion roughly one-third of what it would cost today. Boasting a first-to-market advantage, Sprint claims it is well positioned to provide customers with speeds of up to 114Kbps technically the low end of 3G’s threshold. And because Sprint already has its network in place, it says its customers can readily upgrade from 2G to 3G simply by buying a new handheld device.

That said, when negotiating with vendors for wireless services, it’s safer to speak in terms of bandwidth rather than generations, so that you can be sure you’re speaking the same language and purchasing a technology that your company truly needs.

The truth is, most business data doesn’t need the full-motion video provided by 3G. Generally, the goal is to transmit text data to employees who are attempting to keep in touch with the office while travelling or working from home. “Today’s killer app is voice,” says Andy Bezaitis, founder and CEO of Cambia Networks Inc. in Rosemont, Ill., a provider of wireless data-networking equipment for wireless carriers and network service providers. “The CEO should concentrate on wireless LAN in the office and on the road, and should provide secure access to data within the enterprise.”

“It’s a myth that current networks aren’t good enough to adequately support the needs of your business,” says Erik Lassila, a managing director with Clearstone Venture Partners, a VC firm in Menlo Park, Calif. “Businesses should focus their technology investments in the area of wireless data transmission,” not streaming video capabilities.

Before succumbing to the hype that surrounds 3G, focus on mobile applications that can help your company gain customer loyalty. Assess how important it is for your business to access accurate inventory data, sales objectives and product details from anywhere via Web-connected cell phones and PDAs. Look only at those wireless systems that can enhance your company’s business processes and show immediate payback.

It’s true that mobile computing will help employees work smarter and more efficiently. But companies must be cautious in how they roll out wireless services and take the time to factor in the ROI before chasing the next big technology.

In other words, don’t pitch that cell phone just yet. Focus instead on the demands of your individual company.

The Technology Of Wireless Generations


The first generation of wireless that introduced analogue systems transmitting over radio frequencies, used primarily for voice. This gave us the cell phone. Early 1980s


The second generation of wireless introduced digital encoding and text messaging, and was also used primarily for voice. Mid-1990s


The highest level of wireless technology currently available in the United States. Allows for voice and text communication and Web access. 2001


The third generation will provide speeds of up to 2Mbps, and multimedia data and voice transmissions. Currently available only in Japan. Expected 2002

Darwin (US) assistant managing editor Kathleen S. Carr can be reached atkcarr@darwinmag.com.