When Cingular Wireless L.L.C. managed to squeeze the launch of its 3G network into the last month of 2005, the move catapulted 16 major metropolitan cities into the spotlight as the most competitive 3G markets in the country.
Cingular rolled out its BroadbandConnect service for business customers in markets from Boston to San Francisco and promised to add devices, coverage and consumer services throughout 2006. The carrier has plenty of competition. Verizon Wireless and Sprint Nextel Corp. are neck-and-neck in the 3G race, with T-Mobile USA Inc. expected to get in on the action by the end of this year.
According to Cingular spokesman Ritch Blasi, Cingular looked at both its spectrum position and market potential when choosing its launch markets. The carrier also wanted to fold in the former AT&T Wireless Services Inc. network so that technicians could visit cell sites just once and accomplish both integration and an upgrade to HSDPA. Blasi said that Cingular’s goal is to have UMTS/HSDPA service in the top 100 U.S. markets by the first quarter of 2007.
“It’s going to be a busy year,” he said. “3G is going to be the main focus of everybody this year.”
Cingular certainly has strong spectrum positions in every one of the markets where it launched 3G. The carrier averages 63.4 megahertz of spectrum in those markets; comparatively, Verizon Wireless averages 41.9 megahertz and Sprint Nextel trails with 36.3 megahertz. Blasi said the carrier is using only its 1900 MHz spectrum for 3G services today, though he added the carrier is testing network equipment that uses 850 MHz, which he said would provide better penetration into buildings.
Verizon Wireless was the first of the nationwide operators to launch a 3G services, followed swiftly by Sprint Nextel’s rollout in July. The two carriers are each close to covering 150 million people with their 3G networks, and buildout now means ballooning coverage around the areas that already have their mobile broadband service as well as expanding into ever-smaller markets. Roger Entner, vice president of wireless telecom at Ovum, expects that the three national carriers will reach nationwide mobile broadband footprints by the end of this year, and that marketing efforts will really take hold as the services become available to more people.
Sprint Nextel has significantly ramped up its marketing budget for 3G. Indeed, the carrier already is mulling over how to make it network even faster with the next evolution of EV-DO, Revision A, according to company officials. Sprint Nextel has been adding about 13 million people to its coverage area each week, according to David Deady, product marketing manager for mobile broadband at Sprint Nextel, who added that the carrier has seen “very strong growth” in business-related device sales.
T-Mobile USA, meanwhile, has its 3G hopes pinned on the advanced wireless service spectrum auction scheduled for this summer. The smallest of the national carriers faces significant spectrum hurdles before it can roll out 3G, but analysts say the operator can’t afford to be left in the dust. Its parent company, Deutsche Telekom AG, has allotted T-Mobile USA about $2 billion for spectrum purchases. Neville Ray, senior vice president of engineering operations at T-Mobile USA, said the carrier already has been running 3G tests. If the auction goes T-Mobile USA’s way, Ray indicated that the carrier anticipates rolling out 3G services by the end of 2006 or early 2007.
Despite all the excitement, it remains to be seen how quickly subscribers will adopt 3G services as access becomes more widely available. Voice is still the foundation for the vast majority of carriers’ revenue, with less than 10 percent coming from data services.
Andy Castonguay, senior analyst with the Yankee Group, said in a recent report that handset portfolios and simple pricing will be crucial to the successful sale of services, but that carriers need to be wary of overestimating the demand for 3G content. The Yankee Group predicts that the 3G market will go from about 580,000 subscribers at the end of 2005 to 28 million users by 2008.
However, the industry research firm noted that “content usage so far has failed to live up to expectations,” and cites cost, interface complexity and “over-hyped data in previous releases” as factors in the slow uptake by consumers.
Dale Gonzalez, chief technology officer of mobile applications company Air2Web, says that as exciting as it is to see a high-speed network springing up, he’ll know that 3G has really taken off “when the letters themselves are completely forgotten” and people begin using new terms (in the same way that Google has turned into a verb) to describe how they’re using mobile broadband services on their phones.
“We may well be looking at the birth of the most important technological breakthrough since the personal computer,” he said.
Other vendors who depend on the carriers’ 3G aspirations also are seeing promise in 2006. ThinkEquity Partners L.L.C. has predicted that the adoption of 3G handsets “should begin to ramp up in earnest this year” as customers begin replacing older handsets with mobile broadband-capable devices. When Alltel Corp. reported its fourth-quarter results, company officials noted that download traffic doubled on 3G phones as compared with other handsets, although data only accounts for about 5 percent of Alltel’s total average revenue per user.
After years of predictions that 3G would take off, Entner said 2006 may finally be the time when those predictions pan out.
“For the mobile Internet to really be useful, you have to have the right network with the right devices and the right applications,” Entner said. “We now have the right network. We’re getting to the right devices and we’re also slowly getting to the right applications.”
Entner added that simply making phones able to access a “mini-Internet” doesn’t take full advantage of mobile broadband, and warned that customers are unlikely to use mobile broadband unless they are also satisfied with voice service. However, he said, 3G “is beginning to gel.”
