Europe's wireless industry is on the brink of disaster
European telecom ventures have spent more than $100 billion on licenses for 3G wireless networks. Now some want their money back. They say they paid too much. That may be true: Spectrum auctions in the U.K. and Germany garnered winning bids totaling $35 billion and $46 billion, respectively. But license winners have been less than candid about their sudden change of heart.
The real problem is that Europe's Universal Mobile Telecommunications System (UMTS) operators have committed to a technology that isn't ready: Wideband Code Division Multiple Access (W-CDMA). W-CDMA is touted as superior to Qualcomm's CDMA2000, the CDMA technology used by U.S. operators such as Verizon Wireless and Sprint PCS.
The first commercial W-CDMA services were to be launched this month in Japan and the U.K. This had been widely reported as proof that W-CDMA was ahead of CDMA2000. Now that the first two W-CDMA launches have been postponed, perhaps the industry will notice CDMA2000 has been in commercial service in Korea since late last year.
In the face of a lengthy W-CDMA delay, Europe's 3G operators have three main options: deploy a 2.5G technology known as general packet radio service (GPRS) as an interim solution; convince their governments to relax license payment terms and simply wait; or switch to CDMA2000.
The first option would let UMTS operators begin acquiring customers right away. And they would have good company: AT&T Wireless also has decided to deploy GPRS as a first step toward W-CDMA. Even though a second software upgrade will let CDMA2000 users communicate at roughly 150K bit/sec - about five times faster than GPRS - the slower GPRS could prove fast enough.
The one hitch for UMTS operators: Europe's existing 2G operators, which use the popular global system for mobile communications (GSM) standard, have already begun deploying GPRS. This is also why the second option - convince governments to relax payment schedules and just wait - is a bad idea. It gives GSM operators more time to enhance their networks, making UMTS a tougher sell.
The last option - switch to CDMA2000 - makes the most business sense. It would let UMTS operators begin deploying networks immediately based on proven technology. It would also facilitate roaming between Europe and countries that don't support GSM, such as Korea and Japan. And it would be less expensive, because CDMA2000 is based on hardware that is already in volume production.
The problem is that Europe has benefited greatly from the success of its home-grown wireless technology. It would be extremely difficult for a UMTS operator to break ranks and switch to CDMA2000.
But history suggests that when countries deny users better solutions just to protect domestic suppliers, the users and suppliers end up losing.
Brodsky is president of Datacomm Research of Chesterfield, Mo. He can be reached at ibrodsky@datacommresearch.com.
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Brodsky is president of Datacomm Research, a Chesterfield, Mo., consultancy. He can be reached at ibrodsky@datacommresearch.com.
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