America's 3rd Generation (3g) Wirless Race 10/2001

America's Leaders in the 3G Service Provider Evolution

There are a wide variety of theories about how companies should go about transforming their networks from 2G to 3G. Some wireless providers seem inclined to take their time in evolving to 3G status. These companies, which include Cingular Wireless, Nextel Communications, and VoiceStream Wireless, will likely be deploying a set of so-called 2.5G services. Many feel that this conservative rout will benefit these companies by allowing them to get a better understanding of the emerging market's technology before making a more aggressive push towards 3G. It will provide them an opportunity to observe the market leaders to determine which of their paths to 3G seems the most promising, and follow that path. After all, the progression from 2G to 3G will be one of evolution rather then "big bang". For example, a service such as mobile banking may be released in 2G as a simple balance inquiry, and then extended in 2.5G to offer personalized portfolio management, and in 3G to include full transaction capabilities.

Wireless providers Sprint PCS, Verizon Wireless, and AT&T Wireless have emerged as the front-runners to first deliver a 3G network in North America. All three plan to begin offering introductory versions of 3G (3G Lite) by early 2002, and have already begun limited rollouts in selected cities. These companies are spending billions of dollars to establish the mobile infrastructure necessary to lay the foundation for 3G. Let's take a closer look at these leader's 3G implementation strategies.

Sprint PCS
Sprint PCS is hoping to be the first U.S. mobile provider to implement 3G. Their network is based on CDMA technology and will therefore be following the CDMA 2000 path to 3G. They are currently testing rollouts of CDMA 2000 1XRTT, and expect to complete their network upgrade to CDMA 2000 by the end of the first quarter of 2002.

"Sprint PCS has established a reputation as an innovator and industry leader. Our leadership advantage in the evolution to 3G is no exception. The clarity, coverage and reliability of a single-frequency, all-CDMA nationwide network, breadth of existing services and applications, and consistently sound business decisions puts us in an enviable position. Sprint PCS has the clearest, fastest, most economical path to more robust applications, faster data speeds, a richer wireless experience and greater overall mobility for our customers." - Charles Levine, President, Sprint PCS

Verizon Wireless
Verizon's situation closely resembles that of Sprint PCS, in that their 2G network uses the CDMA protocol and they are currently in the process of conducting field trials of CDMA 2000 1XRTT. Their early deployments of 3G technology seem to be trailing Sprints by a few months.

In March 2001, Verizon entered into a $5 billion contract with Lucent Technologies, which will substantially increase Verizon's network capacity, and speed deployment of 3G wireless services in the United States. This upgrade will double the voice capacity and increase data transmission speeds by 10 times. This deal makes Lucent the largest supplier of 3G infrastructure equipment to Verizon.

AT&T Wireless
AT&T's 2G network was originally based on TDMA, which distinguishes them from Verizon and Sprint and makes their transition to 3G a bit more complicated. In November 2000 NTT DoCoMo, arguably the world's largest mobile-phone carrier, announced that they would pay $9.8 billion for a 16 percent stake in AT&T Wireless. NTT DoCoMo's minority stake in AT&T Wireless doesn't give them any management control, but does give them a foothold into the U.S. market. With AT&T's recently formed relationship with NTT DoCoMo they have begun to shift their network from TDMA to the global standard GSM. AT&T's current network foundation forces them to follow the GPRS - EDGE path to 3G. They must transition their network through the 2.5G stages of GPRS and EDGE before being able to rollout the full-3G W-CDMA (also known as UMTS).

AT&T recently rolled out 2.5G services for Seattle businesses. They say that this service will allow users to access information via wireless handsets, at speeds up to ten times faster than any other current U.S. wireless networks. The company's management claims they will deploy a GSM/GPRS network to about 40% of their market by the end of 2001, and will cover 100% by the end of 2002. These deployments will lay the foundation for the company's eventual shift to a full 3G protocol. AT&T Wireless' upgrade in protocols will necessitate them changing their pricing structures. GPRS transmits data via packets, and therefore customers will be billed based on the amount of data sent and received, not on airtime incurred. Combined data and voice services begin at $50, which includes one megabyte of data allocation and 400 voice minutes. Incremental use above a plans allocation will be billed at less than one cent per kilobyte.

The company's next step will involve the rollout of EDGE. This will likely begin to occur towards the end of 2002. After this AT&T will need to overlay W-DMA, which they hope to begin in 2003. Some experts argue that although the use of CDMA 2000 will likely dominate the U.S. market percentage wise, AT&T Wireless through their alliance with DoCoMo, will be able to deploy W-CDMA to reach the 3G plateau first.

Wireless service providers will succeed by taking an early lead in establishing a viable infrastructure, developing a powerful brand, building a loyal customer base, and partnering with handset and application providers to roll out a series of differentiated and revenue earning services. These application providers will be discussed in the next section. Figure 4.1 gives a snapshot of the major U.S. provider's march towards 3G.

Figure 4.1
The U.S. Carriers march towards 3G

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