From: Norm Jacknis (norm@jacknis.com)
Date: Mon Jun 02 2003 - 21:31:22 EDT
http://www.economist.com/business/displaystory.cfm?story_id=1816742
Move over 3G: here comes 4G
May 29th 2003 | SAN FRANCISCO
>From The Economist print edition
Third-generation (3G) mobile-phone networks face a new rival: so-called 4G.
And, astonishingly, the new networks may even be profitable
Get article background
"THE future always comes too fast," Alvin Toffler, an eminent futurologist,
once said, "and in the wrong order". The state of wireless telecoms is a
classic example. Even as "third-generation" (3G) mobile networks are being
switched on around the world, a couple of years later than planned,
attention is shifting to what comes next: a group of newer technologies that
are, inevitably, being called 4G. More hubris from the technology-obsessed
industry? Not exactly. Some 4G networks are operating already, with more on
the way. A technology once expected to appear around 2005 is here now.
Interest in 4G owes much to the mess surrounding 3G. Operators spent euro100
billion (about $100 billion) buying licences to run 3G networks, only to
find that the technology that most had agreed to use was harder to implement
than expected. Even where 3G networks are up and running, demand for the
snazzy video and multimedia services they make possible is still uncertain.
Expectations are being scaled down: 3G could end up merely as a way for
mobile operators to boost their capacity for voice calls in overloaded parts
of their networks, rather than a goldmine of new revenues from multimedia
services. Last week, mmO2, a European operator, wrote down the value of its
3G investments by nearly $10 billion-although this week, despite reporting a
pre-tax loss of $9.6 billion (reflecting write-downs of goodwill related to
acquisitions), Vodafone chose to postpone its inevitable 3G reckoning.
As 3G has stumbled, another wireless technology, called Wi-Fi, has inspired
a mania unseen since the great internet boom. Wi-Fi provides high-speed
internet access to suitably equipped computers within 50 metres or so of a
small base-station. It is widely used in homes, offices and universities.
Several firms offer fee-based Wi-Fi access in airports, coffee-shops and
other public places known as "hotspots". But because of the short range of
Wi-Fi technology, universal coverage is impractical. Although a dozen or so
start-ups are working on ways to extend the range of Wi-Fi, it now takes
hundreds of Wi-Fi base-stations to cover the same area as a single
mobile-phone base-station.
Best of both worlds
But what if you could combine Wi-Fi-style internet access with the blanket
coverage, and fewer base-stations, of a mobile network? The various 4G
technologies developed by such firms as IPWireless, Flarion, Navini,
ArrayComm and Broadstorm offer just such a blend. There is no formal
definition of 4G, but what such technologies have in common, says Andy
Fuertes, an analyst at Visant Strategies, a research firm, is that they are
high-speed wireless networks covering a wide area, designed above all for
carrying data, rather than voice or a mixture of the two. They can pipe data
to and from mobile devices at "broadband" speed, typically 10-20 times
faster than a dial-up modem connection.
Such 4G wireless-broadband systems can be seen in two ways: as a rival to
Wi-Fi that offers wider coverage, or as a wireless alternative to the cable
and digital subscriber-line (DSL) technologies that now provide broadband
access to homes and offices. Mostly, the wireless operators evaluating 4G
see it as the first, and fixed-line telecoms operators as the second. But
the convergence of wireless and broadband, argues Chris Gilbert of
IPWireless, is actually entirely new: a fast internet connection that
follows you around. Navini calls it "nomadic broadband"; ArrayComm's term is
"personal broadband". Mike Gallagher of Flarion, a firm backed by Cisco,
likens Wi-Fi to cordless phones that work within a limited range of a
base-station, whereas 4G is akin to mobile phones that work anywhere.
Numerous 4G technologies are working today. The first commercial deployments
are in parts of America, Canada, New Zealand, South Korea, Germany, Italy
and the Netherlands. Vendors are licensing 4G to telecom-equipment makers
such as Alcatel, Nortel and LG Electronics for high-volume production. So
far none of the 4G vendors has secured the endorsement of a leading "tier
one" operator for a nationwide deployment, but many claim to be close to
this goal.
Regulatory and technical differences will determine which technologies are
likely to be adopted where. Flarion's technology is well-suited, for
technical and regulatory reasons, to both America and South Korea. In
Europe, the IPwireless system may appeal more. When mobile operators bought
their 3G licences, extra spectrum for high-speed data services was often
thrown in, and IPwireless's technology uses this spectrum. (IPWireless's
technology uses a protocol that technically falls within the European
definition of 3G.) Flarion and other vendors hope that Europe's regulators
will relax the rules to allow their technologies to be used in this 3G
spectrum too. In South Korea, operators have tested every 4G technology;
which will be adopted depends on the regulators, who are due to decide later
this year.
Advocates of 4G technology argue that, unlike with 3G and Wi-Fi, the
business case for 4G is sound. 3G was predicated on consumer demand for
multimedia services that may never materialise. Nobody is sure how
commercial Wi-Fi hotspots will make money-the number of connections per day
at most hotspots is still tiny-yet even so a "land-grab" is under way, with
dozens of operators rushing to build thousands of hotspots. But 4G is being
priced like fixed-line broadband, a service for which millions of users
worldwide are already willing to pay about $50 a month. Emphasising speed
first and mobility later, 4G networks may be built initially in regions
where cable and DSL are unavailable, to capitalise on pent-up demand for
broadband, then expanded later to provide blanket coverage for mobile users.
4G could thus prove a very disruptive technology indeed. Fixed-line and
cable operators will face a new competitor in the broadband market. Wi-Fi
hotspots will seem hopelessly limited. Mobile operators will find that there
is yet another hole in their 3G business plans. Unless, that is, they decide
to embrace 4G as the technology that 3G should have been all along.
Some operators may be leaning in this direction. In America, Nextel, a
mobile-phone operator, is said to be considering skipping 3G altogether in
favour of Flarion's 4G system. In Europe, some operators may scale back 3G
plans and adopt IPWireless's technology. As their 3G licences entitle them
to do this, they may not be as worthless as they now seem. Mobile operators
already own the key sites for base-stations, unlike fixed operators or new
entrants, so they are well-placed to build 4G networks fast. They are
already attacking the fixed-line voice market. 4G would let them attack the
broadband market too-and neutralise the Wi-Fi threat.
It is not clear how investors would judge an operator that decided to favour
4G over 3G. So far, operators have kept quiet about their 4G plans, to avoid
confusing the marketplace. Yet when Telefonica, a Spanish operator,
abandoned some of its 3G investments last year, its share price went up,
notes Mr Fuertes. For phone network operators willing to give it a try,
skipping a wireless generation might not be such a bad idea.
Copyright C 2003 The Economist Newspaper
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