After exaggerated claims for 3G over GSM, with network operators and the press being the major culprits, there is a danger that the promises of UTMS deployment will never come to fruition. What was once dubbed 'the next generation of mobile networks and the first true wave of integrated wireless Internet', is bound to become, yet another, hype-inflated bubble waiting to burst.
The billions spent by operators to become the first to offer 3G services will, most likely, never be recouped. Not only must they still pay for these licenses, but they have yet to construct the necessary infrastructure, overcome a plethora of technical difficulties, and offer compelling business models that will need to justify the use of these services.
Operators should re-appraise their mobile strategy to ensure they regain their lost competitiveness. They should stop this preposterous money shed, and seriously consider abandoning this doomed technology and concentrate their efforts and investments on the real next generation - 4G.
The Fourth Generation (4G) is more likely to come to the fore as a more logical technological evolution as telecommunications companies come to terms with the cost of implementing 3G networks and services.Orthogonal Frequency Division Multiplexing (OFDM), the technology behind 4G, promises data transfer speeds of up to 10Mbit/s, and is already being adopted by makers of wireless LAN equipment.
4G will be an ultra-high-speed wireless network - it is what broadband is to the wired Internet. The new network would enable wireless, three-dimensional virtual reality connections between phone users.
One of the main advantages of OFDM versus 3G's UMTS is OFDM's efficient use of radio spectrums. Unlike UMTS, OFDM will allow far more bandwidth per hertz, thus giving more capacity. It is also far more resilient to signal fading, a problem that often occurs when data rates increase.
Deploying the OFDM network will require wideband software radios and advances in digital signal processors.
The Internet Protocol issue
The first major obstacle that operators will have to overcome, if they decide to choose the 3G route, is the implementation of a new internet protocol that will be able to handle the millions of new addresses needed for all 3G devices.
It is expected that the world's 480 million mobile phone users today will top one billion by 2003, while internet users will surge from 400 million today to one billion by 2005 and three billion by 2010.
Furthermore, with all these new Internet addresses, current web technology is expected to be swamped in 2005 amid a flood of devices ranging from third-generation phones to refrigerators and cars that will all need an address to link to the Web.
Internet Protocol version 6 (IPv6) offers salvation from the coming crunch with enough addresses for every grain of sand in the world. It would replace today's IPv4, and skip IPv5, an experimental standard no longer used. However, until Ipv6 sees the light of day, full scale 3G deployment is unlikely to happen.
Moreover, with operators hugely indebted and Internet corporations tightening their R&D purse amid a widespread worldwide economic slowdown, funding the Internet overhaul poses a particularly large hurdle for 3G, that will take years to solve.
Until then, companies are better off taking their time in developing Ipv6 and integrate this open interface protocol into 4G networks.
The false promise of speed
Contrarily to what operators and the press might have said about the speed of 3G data transmission and the ability to conduct multimedia conversations on the move, 3G cellular system up- and down-links will be a lot slower than the 'broadbandesque' speeds promised.
However in reality, 3G offers much slower capabilities than 2 Mb/s for indoor environments and 144 kb/s for vehicular environments (in optimal conditions). Tests have shown that data transmission speeds are on average 20-40 percent slower than that. In other words, even speed, the most compelling reason for 3G deployment is, questionably, in jeopardy.
Nortel Networks has already detailed a feature list for Internet protocol-based 4G networks with data rates up to 10 Mbits/s for stationary systems and more than 384 kbits/s in a high-mobility environment.
AT&T demonstrated in New York an asymmetric network it called 4G Access that combines existing Enhanced Data Rates for GSM Evolution (Edge) technology for an uplink with wideband OFDM for the downlink.
The goal: to speed downloading of packet data, particularly for streaming audio and video, hence allowing true multimedia experiences.
The need for capacity
3G-cellular systems should not only be high-speed but more importantly, high-capacity networks, with low bit cost and the ability to support the services that the market will demand.
According to market research conducted by the Japanese Ministry of Post & Telecommunications, from 1999 through 2010, voice-oriented services (the main services in the first and second-generation systems) are expected to grow by 1.5 times in number of subscribers and double in amount of traffic.
However, growth is not expected after that, and voice-oriented services will level off after 2010. After 2010, multimedia services, which will be widely introduced in the 3G system, are expected to expand considerably. The ratio between voice and multimedia traffic in 2010 will be approximately 1:2 for total up- and downlinks.
Assuming that multimedia traffic grows by 40 percent a year after 2010, it'll be 23 times the current level, and the ratio between multimedia and voice traffic will be 10:1. This growth rate assumption is based on the fact that the expansion rates of storage cell capacity (the memory and hard disks of personal computers which process information) and the growing number of Internet Web sites (an annual rate of 40 percent in Japan and other countries).
Current 3G capacity technology will not be sufficient to handle the explosively growing multimedia traffic of the future. Capacity per unit area for 3G systems should be at least 10 times more than that promised by the current 3G proposals.
In order for telcos to be able to justify for their massive investments, operators will need to generate huge amounts of traffic which, ironically, 3G technology will not allow. Therefore, high-capacity 4G-cellular systems with improved spectrum efficiency and a new frequency band is necessary to accommodate growing traffic in the coming years and thereafter.
High user costs
To stay alive, 3G telcos will have to charge a premium for their service - even though they have no real concept of what that service should be, or how much their customers would be prepared to pay for it.
Since 3G, at least theoretically, lets you always be online, the amount of time you spend on the Internet no longer counts; services do. You'll be closer to paying for the amount of data downloaded, or the number of transactions executed. If you download a weather report you could be charged for that report, not by how long you look at the report.
A recent study by Herschel Shosteck Associates noted that operators that pay large amounts for spectrum will have to charge end users so much that adoption will be slow. Operators estimate that 3G subscription packages will be around $90-$100 (around 110 Euros - 130 Euros) per month. However, that does not include the costs of data that you download.
Therefore, the bit cost should be dramatically cut so that people can use it without worrying about charges. Nevertheless, once again, 3G will not be able to offer low cost bit transfers, because of the incapacity of the network.
4G, however, will prevail in that domain, as data transfer costs will be kept low. Professors at Stockholm's Royal Institute of Technology (KTH) are already working on establishing this scheme that would dramatically drive the costs of data transmission.
Unjustified business models
The survival of 3G will ultimately depend on the development of valid business models. We could imagine users wanting a service from MTV which would be heavily ad-driven. Or perhaps loyalty points collected from a certain petrol station could be used to get free traffic reports.
Although new business propositions will arise, the market is likely to be segmented, with voice-centric devices available on 'pay-as-you-go' deals. Regular users will probably pay a fixed charge for services, such as $3 per month for traffic reports, $15 per month for video-conferencing, or $45 per month for full, unlimited access and services.
However, even NTT DoCoMo, the only telco with a successful wireless business model (i-Mode) doesn't think there's much pent-up demand among consumers for 3G multimedia services, so it will target its initial 3G offering at businesses only.
A 2.5G skip and a 3G hop away
The full-scale deployment of 4G networks is much closer than you think. Although it is a few years away, testing and planning are necessary now if carriers are to meet demand for what researchers call an intense hunger for wireless high-speed data services.
With 4G, the world would have base stations everywhere, ensuring phone users' connection to a high-speed network anywhere, anytime - just the way operators promised in their ads for 3G, only this time, it would be affordable and feasible
Forecasts suggest that by 2005, 50 percent of cellular subscribers will be data-capable and handsets will surpass PCs as Internet access devices.
In order to fill in the mobile vacuum, companies should perhaps concentrate on upgrading current GSM with a valuable 2.5G system, then deploy a 4G network and in the process totally skip 3G. Consumers may be happy enough with GPRS until the multimedia promises of higher data rates are realistically fulfilled.
Maybe we should follow Sweden's Telia's example. They hope to start their 4G services even before 3G technology is set to arrive, with their 'HomeRun' wireless local area network service at, Stockholm's Arlanda airport.
The idea is that later this year, HomeRun will let visiting business travelers log on to the Web by plugging a wireless local area network, or LAN card into their laptops and connecting to a GPRS network. That means people can use the wireless LAN services to access the Web at high speed and use GPRS for accessing text files or e-mail messages, which don't require a very high bandwidth.
The bitter irony in Telia's proposition is that 3G has been totally bypassed and in the process 4G is becoming the next generation in mobile networks.
This wireless Internet service will definitely suffice for the time being until all segments of the industry seamlessly work together and agree on developing and integrating a truly stellar forthcoming mobile generation.
Michael Mathres is founder of mathres.net - a business consultancy specialized in project management, web site planning, content production and market research. He is also editor of Europe Media - Europe's New Media Information Hub - and Business Model X - Business Model Innovation Portal. Prior to this, he was a freelance consultant and journalist specialized in the European Technology, Media, and Telecommunications (TMT) sectors. In this capacity he has published articles in magazines such as Tornado Insider, and helped startups such as Go4Venture, with their strategy, content, and marketing.