3G Wireless.-A Wrecked Paraphernalia



Third Generation or 3G Wireless was introduced in 2002 in Europe, America, Japan and other parts of the World simultaneously. It is yet to get more that 5% of the market share of the worldwide mobile market. In Japan it has a mere 5% penetration in spite of the hype that has been built on 3G.For another two years it is not going to provide global coverage. Even in most developed countries it is still not offered Nationally, wherever 3G coverage is given it is not purely 3G. Coverage. The mobile switches between different technologies like 2G/2.5G in various regions of a country. It is now more than 4 years since 3G was offered, why has 3G not come up as promised. To analyze the deployment and failure of 3G so far let us understand what factors are inhibiting the adoption of 3G in a big way and why 3G has not been able to stand ground till now and that too even when people have started talking about 4G.



The wireless landscape in 2006

Ø Several competing infrastructures: GPRS, WLANs, 3G + dark-horses

Ø Both large WLAN operators and 1000s of local hot-spot operators. WLAN clearinghouses offer global roaming access. Built-in WLANs in Laptops and hand-helds

Ø Mobile operators operating in extreme price pressure but still dominant in handling end user relation (billing, roaming, seamless mobility etc.)

Ø Emerging new technologies with potential for breakthrough by 2010

Ø A continuous suite of terminals from voice-only ear-phones, handsets,

handhelds, & lap-tops etc.



History of 3G

The term 3G was coined at academic conferences around 1990. Then 3G meant everything beyond GSM

One 3G vision was mobility by wireless plus personal phone-numbers, following the Individual globally at closest fixed line. Later the "1G", "2G", "3G" and even "4G" terminology was captured by equipment vendors in the mid 90s for selling UMTS to the market and regulators.



On arrival, 3G was hidden from users in a 2G/3G offer



Right Now Pure 3G operators have:

Ø No user base

Ø No trusted Brand

Ø No complete network

Ø Dependent on unfavorable deals with incumbent GSM operators



Users :

Ø Already GSM customers (phone number, voice mail, trusted Brand etc.)

Ø High-end users already using GPRS

Ø Expected the 151 country global coverage of GSM and at least national GPRS coverage

Ø 3G only offers service in cities.

Ø Pure 3G is seen as a step down from GSM

Ø 3G was hidden from the users in a branded GSM/GPRS/3G combination offer.

Ø To offer 2G/3G service, pure 3G operators have to strike unfavourable deals for network access with 2G operators

Ø Handsets are GSM/GPRS/3G

Ø Incumbent operators target existing user base with 2G®2.5G®3G migration offers

Ø Pure 3G operators TRY to strike deals with 2G operators to offer geographical coverage.

Ø Pure 3G operators unable to secure deals for access to the 2G networks



User habits:

Two separate markets "mobile on the move" and "semi-mobile Net access" exist.



"Mobile on the move" (GPRS/3G)

Applications: Voice, SMS/E-mail, stock quotes, movie tickets, weather, time-tables, driving directions, bank accounts, yellow pages, delayed flights etc.

High mobility need, works on low bandwidth

(i-Mode operates on 9.6 Kbit)



"Semi-mobile Net access" (WLAN)

Lap-Top or PDA download of e-mail and files. Voice

probably not included

Sitting still, low mobility, high bandwidth need



The Race: 3G Verses 2G/2.5G/WLAN



Technology Drivers for mobility and Reach

The Scientific argument is that there is a trade-off between mobility in bandwidth and geographical reach

Mobility & Reach are related to:

Ø handset size

Ø battery time

Ø usage in fast moving vehicles

Ø geographical coverage



Drivers for the wireless industry are:

Ø Microprocessor performance increase (Moore's law limitation)

Ø Battery performance increase (a much slower exponential curve than Moore's Law) (batteries are the big bottleneck)

Ø Air interfaces with increasingly better spectral efficiency*

(Better processor performance makes new more computationally intensive air interfaces viable. Shannons Law puts an upper limit on spectral efficiency as we understand it today and we are gradually getting closer to this limit but innovations as smart antennas will push spectral efficiency further)

Ø Better processor performance/power consumption ratio

Ø Handset display power consumption efficiency



These drivers sum to a continuous performance increase in wireless. Exponential growth (slower or faster) is the normal case and shows up in all technologies and industries.



Ø Better performance makes it possible to move upwards on the trade-off curve of "bandwidth-mobility"

Ø Larger investments in wireless base-stations can also move the curve upwards



At fixed performance level, moving the trade-off curve upwards can also be achieved by:

Ø Larger investments in physical infrastructure (more base-stations)

Ø Higher transmitter power (causing higher radiation)

Ø Economics of Scale + the experience curve gives falling equipment prices Logaritmic diagram gives a straight line for product price fall.(The global user base today is in the 100s of millions)



New handsets and infrastructures will quickly move down the learning & volume curve and hence give low prices. As electronic equipment becomes very cheap, maintenance, service and physical infrastructures as masts, buildings and cables will become the dominant part of costs. And the prices will get standardized at a point.



It has been seen that Standardization freezes performance at a certain technological level and performance jumps when a new standard is fixed which also demands a total infrastructure changeover



The Rule-of-thumb

New infrastructure must offer at least 10 times better performance to replace old large installed base (This rule-of-thumb comes from Andrew Groove at Intel in his book "Only The Paranoid Survive" and has not been properly verified)



Ø 3G performance jump is not large enough to justify infrastructure replacement

Ø 3G offers only 3–4 times better spectral efficiency than 2.5G

Ø 3G bandwidth only 2–10 times better than 2.5G

Ø GPRS gives better geographical coverage than 3G

Ø 3G offers better bandwidth but coverage is more important for the consumers

Ø 3G networks not even close to offering the coverage of GPRS

Ø GPRS, a software upgrade on the GSM networks will probably always offer better global coverage than 3G.

Ø WLANs offer better bandwidth than 3G

Ø WLANs are already here with a large installed base on many company lap-tops

Ø It is possible to cover hot-spots and city centers at low cost for WLAN Service Providers

Ø WLAN base stations cost very less

Ø WLAN equipment market is already being adopted at a large scale

Ø 3G only adds performance in a small part of the trade-off diagram if compared to GPRS together with WLANs



Emerging dark-horse technologies further undermining segments of the 3G market are

Ø Airships and other HAP (High Altitude Platforms) over large cities working as platforms for broadband wireless

Ø In Digital Terrestrial TV (DVB-T), one channel set aside for data transfer gives a capacity of 38 Mbit. Very good coverage in countries adopting DVB-T. Can be used in fast moving cars. Few masts give low scalability

Ø Optical wireless is using lasers in free air to solve the last mile problem, very low mobility. Almost infinite bandwidth

Ø Satellite projects for offering broadband internet access globally. Very high latency and low mobility.



Will pure 3G operators survive ?



History lesson: Swedish generation shifts in analogue mobile



Analogue NMT 450 ® analogue NMT 900

NMT 450 had full national coverage when NMT 900 arrived. NMT 900 was targeted at yuppies with urban coverage, pocket sized handsets and lower tariffs. Coverage was important, urban NMT 450 users resisted giving up a rural coverage they actually seldom used NMT 900 had to invest in national coverage before take-off



Analogue NMT 900 ® Digital GSM

Coverage and quality was important. With NMT only operational in the Nordics, Pan-European was the selling point, GSM did not take off until a significant Swedish national coverage was reached

Coverage is important for mobile services



The "3G Business Case" – profitable only in best case scenarios



Ø Financial analysis shows the 3G Business case ROI very dependent on:

Ø Very high 3G penetration (e.g. diagram)

Ø Operator market share

Ø Population density

Ø Being an incumbent

Ø The $ 320 billion 3G investment in Europe is extreme in size – and business risk.

Ø GPRS upgrades cost 5 % of 3G



Physical 3G investments in Europe

Ø $150 billion paid for 3G licences + handset subsidies and marketing costs.A very large and high risk investment



Ø GPRS upgrade of 2G networks cost 5% of 3G investment. An alternative with less capacity than 3G but much lower business risk

Ø 3G network investment (cost/operator) 3 billion $

Ø GPRS upgrading of a GSM network (cost/operator) 0.1 billion $

(source: Merrill Lynch)



Ø Upgrade Cost per Subscriber (US$)

Ø W-CDMA 300

Ø GPRS 10

(source: Morgan Stanley )



3G Business will be short of a break-even in 2010 as 4G arrives



The Question to ponder is:

"Does the Remaining World have to go through the painful

Evolution of 3G or just leapfrog from 2G/2.5G to 4G."