3G begins to gather momentum, but vexing issues remain

Plans for the initial roll out of 3G (third generation) wireless networks have been announced for several countries this month, although analysts say use of the high-speed data networks will grow slowly due to high usage costs and low handset availability.

Taiwan on Friday joined a growing list of countries announcing dates for their 3G rollouts. Asia Pacific Broadband Wireless Communications Inc. (APBW) plans to launch a 3G wireless service there in the third quarter using equipment from Nortel Networks Corp., according to a Nortel statement.

The network, based on CDMA2000 1X (code division multiple access) technology, will offer data services at speeds up to 153K bps (bits per second), Nortel said in a statement. In the Taipei metropolitan area APBW will offer a peak rate of 2.4M bps, Nortel said.

3G networks will offer high data speeds, allowing carriers to offer new services such as video streaming, video links, and fast downloads. The 3G networks will improve the carriers' capacity overall, allowing them to cope with subscriber growth.

In Hong Kong, Hutchison 3G HK Ltd. announced on July 14 that NEC Corp. and Siemens AG are to provide the radio network of its WCDMA (wideband CDMA) network. The two companies have already worked with Hutchison in building networks in the U.K. and Italy. Hutchison 3G HK plans to launch its service in August.

On July 20, Siemens AG announced that the first commercial 3G network in the Middle East -- in Bahrain -- will launch in early 2004. Siemens plans to install a new network for Kuwaiti telecommunications company MTC Vodafone Co. that includes GSM (Global System for Mobile Communications), GPRS, EDGE and WCDMA, it said. Earlier in the month, on July 10, Nokia Corp. and Greek operator STET Hellas Telecommunications SA (known as Telestet) announced that they had publicly demonstrated a call over Telestet's WCDMA 3G network. Telestet has already set up 3G networks in Athens and Salonica, it said, and plans to launch the first services toward the end of the year.

While 3G networks are being built internationally, high usage costs and handset supply problems will hold back widespread use until around 2005, Neil Mawston, a U.K. senior analyst with Strategy Analytics Inc. of Boston said.

"(3G) will be relatively limited for the next few years. Speeds are still slow, costs high and the technology is still immature," Mawston said.

Jason Chapman, a principal analyst with Gartner Inc. in the U.K., agreed with Mawston's 2005 predictions. "Things are slowly moving forward but note that these announcements are coming mostly from the equipment suppliers rather than the carriers, and it may be another year before they're available. Having said that, these announcements do show that there is momentum. Carriers are still awarding contracts, they haven't lost faith."

There are two main factors driving carriers, Chapman said. "The 3G licenses that they bought came with conditions, often giving deadlines and stating what percentage of the population must be covered. Also, they need the additional capacity that 3G brings -- existing GSM networks just can't support large growth in subscriber numbers. It's not a very exciting reason to want 3G but it's important," he said.

As for the consumers, "they don't want 3G, they want better services," Chapman said. A consumer who gets used to sending pictures from their phone will want to send better quality pictures, and to send them faster, and will choose a phone that can do that, rather than choosing a new technology, he said.

"For 3G to take off you need a competitive array of handsets available and you need networks that provide near ubiquitous coverage. We think that will take until 2005," he said.

The recent announcements show the divergence between different 3G network technologies, with some countries opting for CDMA2000 1X and others for WCDMA. CDMA2000 1X is leading at the moment, but Mawston believes that will fall back and WCDMA will pick up momentum around 2005. By 2008, he expects to see most 3G networks using WCDMA, he said.

"1X is doing quite well at the moment, with about two-thirds of 3G sales, but WCDMA will win in the long term. It can build on the installed base of GSM (networks) and four out of five of the top handset vendors are behind it," he said. Nokia, Samsung Electronics Co. Ltd., Motorola Inc. and Sony Ericsson Mobile Communications AB all back the WCDMA technology, Mawston said.

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