IN THE BEGINNING, there was the analog 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
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 analog 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
Enter the so-called third generationor 3Gwhich 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's
Personal Communications Sector in Libertyville, Ill. "With all of
3G's amazing abilities, being out of the office will become less of a
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 spectrumthe 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 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 percent to 80 percent 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 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 $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 DoCoMoJapan's dominant wireless carrierplans
to spend $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 and AT&T Wireless Services, 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 servicesso named because they offer
speeds that fall between 2G and 3G. At 2.5G, wireless users can transmit
text at fast speedsup 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 percent 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 $3.4 billionroughly
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 114Kbpstechnically 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 traveling or working
from home. "Today's killer app is voice," says Andy Bezaitis,
founder and CEO of Cambia Networks 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.