The Wireless Industry Heats Up

In the wake of a disappointing debut in the United States, the wireless data industry was shaken up last December when AT&T Wireless (soon to be spun off from AT&T) announced that they were teaming up with NTT DoCoMo, a Japanese telecom company, to bring wireless data services to America.

Industry analysts have been raving about NTT DoCoMo’s wireless data service, I-Mode, which has been a huge success in Japan, with more than 17.8 million subscribers for months. I-Mode is often referred to as the model for wireless data services, especially when compared to less than extraordinary wireless Web services in the United States. Like wireless Internet services in the U.S., I-Mode allows users to access a compact version on the Net on a handheld device (like a phone or PDA). But I-Mode is faster and always on. It also allows users download things like video games and ring tones from the Net.

NTT DoCoMo will invest about $9.8 billion in AT&T for 406 million shares or 16 percent of AT&T Wireless tracking stock -- an investment that will give AT&T a needed cash infusion as well as license to the I-Mode technology platform.

The alliance changes the technology landscape in the U.S. because AT&T will now support the GSM standard, which few U.S. carriers currently use. Up to now, GSM has been more dominant in Europe and Asia; the deal gives its carriers more leverage in the U.S. market.

GSM, which stands for Global System for Mobile Communications, is a way to transmit information (a conversation for example) over a wireless network. It is an alternative to technologies like Code Division Multiple Access (CDMA), which is more prevalent in the U.S. The primary difference between CDMA and GSM is a technical issue concerning how data is sent over networks.

There is an ongoing debate in the wireless industry about which technology will be used to transmit data in the future -- and therefore become the third-generation standard. Currently, AT&T carriers use a technology called TDMA, or Time Division Multiple Access (a standard that GSM is based on), which is another one of the several ways to transmit data wirelessly. The announcement that AT&T will be supporting GSM is important because it will have a significant impact on which technology dominates in the future.

The carrier with the most subscribers will most likely have the best service because higher volume means more/better devices and lower costs regardless of which technology works better.

Industry analysts view NTT DoCoMo’s motive for making alliances around the world as a way to ensure that the technology that they support -- Wideband-CDMA (in contrast to a technology referred to as CDMA2000) -- will be the dominant third-generation technology.

“NTT is putting is putting global partners in place, and AT&T will benefit from them because they have already deployed a successful technology,” says Kelly Quinn, an analyst at the Aberdeen Group.

As an early developer of W-CDMA, NTT DoCoMo – which counts KPN Mobile from The Netherlands, Telecom Italia Mobile from Italy, and SK Telecom from South Korea among its international alliances – would reap rich rewards if the technology becomes a dominant third-generation force.

AT&T also hopes to benefit from NTT DoCoMo’s international influence. According to AT&T Wireless Services Vice President of Data Prodduct Development Tom Trinneer, AT&T Wireless’s arrangement with NTT DoCoMo will affect competition in relation to third generation standards and the use of I-Mode components in the U.S.

“Relative to the third generation standard, we really believe that this act shifts the playing field in a pretty dramatic way,” says Trinneer. “We are moving down the GSM path in entirety to UMTS (W-CDMA) and we are doing that in association with DoCoMo.”

The AT&T/NTT DoCoMo alliance gives current technologies in the GSM path a strong foothold in the U.S. and should substantially boost W-CDMA’s base market. More users means better handsets, services and prices. Competitors that don’t support these technologies would be marginalized.

For global business travelers using AT&T services, the switch to GSM means that they will be able to carry one phone almost all the way around the world (from Central Europe, across North America, to Japan). AT&T is already a dominant provider of business services and these new offerings will help the company maintain its position. AT&T also hopes to help NTT, which is currently more consumer oriented, provide business offerings for its customers.

AT&T’s Trinneer offers advice to CIOs: “Today, every major software corporation has very serious wireless initiatives. Just like ever CIO gets a bi-annual or quarterly review from their major software providers, they should be asking hard questions about how their provider is going to take them wireless. For example: I’ve got a legacy installation of product X, how will you get me to the next version, and how will I be able to wirelessly enable my workforce? They should be planning for that now.”

There are already numerous possibilities for enabling a work force with wireless technology, but it is important to remember that the industry is still in its infancy. “If CIOs want to move now, all of those providers have that capability,” Trinner says. “The early adopter types of corporate America are already doing this, either in small deployments, trials or in some cases tens of thousands of deployments.”

This alliance between AT&T and NTT DoCoMo is a sign that the wireless data market is heating up. Even if they haven’t yet moved into the world of wireless technology, CIOs should be aware of what is happening and preparing a wireless plan.

GLOSSARY

GSM (Global Systems for Mobile Communication): Commonly considered the European standard for voice communications, GSM is used to send information across wireless networks by digitizing and compressing the data before if is sent. It is based on TDMA (see TDMA).

CDMA (Code Division Multiple Access): A technology used to send information across a wireless network in contrast to GSM. CDMA uses mathematical code to differentiate between transmissions that travel on the same signal. U. S. carriers like Sprint and Verizon use CDMA to transmit data across networks.

The Third Generation of Wireless Communications (3G): 3G is often referred to as the next generation (we are in the 2nd generation of wireless communications). 3G networks promise faster, better wireless data experiences on mobile devices (phones, handhelds). 3G hopes to bring a multimedia experience to wireless users, but 3G networks need a lot more bandwidth than the current wireless networks. NTT DoCoMo plans to provide the first 3G networks in Japan, and AT&T hopes to roll one out (with NTT

This story, "The Wireless Industry Heats Up" was originally published by CIO.

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