Europeans used to think they had the definite edge when it came to wireless. Is that self-elevated position still justified?
When the GSM Association CEO Rob Conway delivered his opening speech at the association’s annual awards dinner In February 2004, he harked back to a remark made by Congressman Darrell Issa about GSM. Issa had famously described GSM as an antiquated French technology when trying to influence the decision of which air access technology would be employed for the new mobile network in Iraq.
Announcing that GSM had marked up its one billionth subscriber, Conway joked that this was “not bad for an outdated, French technology.” The joke worked on another level, because it was delivered in Conway’s North America tones. But it did speak of old wounds between Europe and the USA on wireless technology. The most obvious of all is the sense of righteousness the European industry had about GSM. One technology across multiple markets; enabling roaming and multiple vendors working to a common standard. And it worked.
Meanwhile, the Europeans looked across to the USA and saw a market where users could not necessarily roam from one network to another, and where the called party payed, and took the view that when it came to mobile, we had the better of things. Then came the 3G holy wars, and without going over old territory, that too pretty much broke down into a European/ US divide. Not that it was ever that simple, of course, there were plenty of vendors with both CDMA and GSM portfolios,
But that European feeling that we had wireless sorted and had little to learn from the US has evaporated slightly. One reason is the issues the European market has had with 3G, another is the steps the US market itself has taken. And a third is the presence of a couple of operators working at a global level, meaning there has been much more cross-fertilisation between the territories.
So what shape is the US market in at present? Well as far as revenues are concerned, spending on wireless services in the US rose 14.3% in 2003 to $89 billion, which gave it the distinction of surpassing long-distance services ($78.0 billion) for the first time, according to the TIA’s 2004 Telecommunications Market Review and Forecast. The increases in wireless services contrasted with declines in local exchange services and long-distance (or toll service) spending of -2.9 and -8.2%respectively. Indeed, the 8.2% decrease in toll-service spending during 2003 is its third consecutive decrease, as the shift from wireline to wireless in long-distance traffic continued.
The TIA predicts that the growth in wireless services spending will continue during 2004 — with a projected increase of 10.5% to $98.7 billion. This growth is vital to the industry as a whole, because even with long-distance service and local exchange service drops, the growth in wireless services will lead to a 1.2% increase in overall transport services during 2004, a slight improvement over 2003 spending. From2004-2007 the TIA expects a compound annualgrowth rate for wireless of 10.7%. Perhaps even more bullishly, Gartner predicts that mobile data connections in the USA will grow to 141 million in 2007, which shows a CAGR of 41.7% up to that period.
The TIA attributes the shift to wireless services to a transformation in residential telephone service pricing. Flat-rate pricing has proved appealing to consumers, so providers are striving to offer attractive packages of bundled local and long-distance services.
After a flat year in 2003 these are more encouraging growth figures, and the fact that it is the threat of fixed/ mobile substitution which is driving the fixed providers down on price is testament to the call bundles and tarrif plans available to US customers that some European subscribers can only dream of.
Another area where the US market may have the jump on some European markets is in the mobile enterprise. Gartner says that as of October 2003, 45% of the US workforce was using some form of wireless device. It attributed this to the growth and wide availability of a wide variety of wireless technologies. Chief among these was the approaching “ubiquity” of the wireless LAN. European wireless enterprise use, for many different reasons, is nowhere near this level.
On the mobile side, a possible though more problematic boon for enterprise is the availability, from November 2003, of wireless local number portability, Admittedly there has been less appetite for wireline to wireless number portability than was at first proposed. One reason for that may be that Gartner puts the cost of switching 1,000 users from one service provider to another to be $300,00. Even so, Gartner predicts that an enterprise could reduce its ongoing wireless costs by 35% by making such a switch. Another may be the turbulent introduction of LNP. Stories of numbers being unavailable after a subscriber had ported abounded, and many carriers did not have the technology in place to support the switch when it was made. It seems the public by and large has been watching and waiting to see the technology work, and to wait for what new offers the carriers may be forced to introduce. One possible downside for enterprises is that carriers will look to introduce longer term deals to lock them in.
An area where the US was expected to take a march on Europe was in location based services. As a result of the FCC’s Phase II E911 requirement, operators are mandated to provide location information on callers calling from cell phones. The issue is politically sensitive enough for John Kerry to have included it in his homeland defence election package. It is still to early to tell if the mandatary location requirement can be translated into profitable services.
Another area where the US market was viewed with more jaundice by those in Europe was spectrum availability, and perhaps this might still be the case.With a review of the spectrum from 700MHz up to 5GHz ongoing, at the moment there is a bitter fight between certain wireless operators, namely Nextel and the rest, over what will happen to the 800MHz and 1900mHz frequencies. Nextel’s so called “Consensus Plan” proposal is that Nextel will be given an exclusive nationwide license covering 10 MHz of spectrum in the 1.9 GHz band (1910-1915/1990-1995 MHz) for relinquishing spectrum in the 700, 800 and 900 MHz bands. Verizon, Cingular and the CTIA say this would give Nextel a huge windfall, up to $7.2 billion, Verizon says, and want an auction of the 1900MHz band to support their plans for high speed wireless data services. This uncertainty in the allocation of spectrum at 800MHz has been rumbling on for two years.
One company that will not short of spectrum is Cingular, if its proposed deal to buy AT&T Wireless goes through. Cingular hasn’t been regarded as one of the wireless data front runners with some observers attributing that to a lack of spectrum. But the AT&T Wireless purchase gives it the opportunity to try out W-CDMA services.
“We think we’re going to come out of this deal with unprecedented coverage, sufficient spectrum to add capacity where we need it and sufficient spectrum to launch unsurpassed nationwide services of high-speed wireless data,” de la Vega told US mobile magazine Wireless Week. “We think one of the best things that’s going to come out of this is the capability for Cingular to be a leader in launching nationwide wireless data services.”
Although The acquisition means that NTT DoCoMo will sell its 16 percent stake in AT&T Wireless, the operator still has to honour by a contract it has with DoCoMo to launch W-CDMA in at least four markets this year. The initial markets are rumoured to be Dallas, San Diego, San Francisco and Seattle.
De la Vega said he thought the carrier would have an “unprecedented opportunity” to bring Asian or European-style services to the U.S. market.
And this last sentence brings us back to the issue of standards again. The USA is still a country where there is no one mobile standard. Verizon Wireless recent;y announced a $1billion investment plan to launch CDMA20001x EV-DO services nationwide. The broadening of its EV-DO presence will put EV-DO in direct competition with EDGE, which is being deployed by both Cingular Wireless and AT&T Wireless.
That widespread EDGE deployment has been in part a result of the spectrum situation, argues 3G Americas, the association for promoting GSM in the Americas.
“EDGE becomes a highly attractive solution for mobile operators in the Americas as the current macroeconomic conditions do not present a favourable outlook for radio spectrum auctions in the region. EDGE may be deployed within an operator’s existing spectrum increasing radio capacity and does not require a new 3G license,” the organisation claims.
3G Americas reports that GSM’ grew by 77% in the North American market in 2003.  Â
“In 2003, the Americas as a whole saw a proliferation of new and overlaid GSM networks emerge,” Chris Pearson, president of 3G Americas, says. “It is phenomenal to think that nearly 7 out of 10 new customers in the region chose GSM in the fourth quarter of 2003 and we see that momentum continuing in 2004 as well as the uptake of EDGE third generation services.”Â
That said, the recent Chapter 11 filing of EV-DO operator Monet should not be read by Europeans as a technology failure in the face of EDGE services. Regional operator Monet Mobile Networks will shut down its high-speed CDMA 2000 1x EV-DO in April and has filed for Chapter 11 bankruptcy protection.
“This shouldn’t impact Verizon,” opined Peter Jarich of Current Analysis to industry website Unstrung. “Clearly they are looking at a very different business model from Monet.”
“This doesn’t portend badly for the future of EV-DO technology,” concurs Cliff Raskind, director of wireless enterprise strategies at Strategy Analytics Inc. “EV-DO has great legs as a future technology.”