AT&T Wireless taps the brakes on 3G rollout

Experts say lack of customer demand is primary reason for go-slow approach.

AT&T Wireless is reeling in its original 3G deployment plans in a move that will result in slower technology upgrades and a more watchful eye from one of its key investors.

The wireless carrier recently revealed that it only will have full 3G support in four markets - San Francisco, San Diego, Seattle and Dallas - by the end of 2004. The company's original plan was to have full 3G support in 13 markets by June 2004.

While AT&T Wireless is slowing its 3G support, the time frame is not expected to make a big difference to customers, says Rodger Entner, analyst at The Yankee Group. Many users are just getting into wireless mobile data services and these same users are not clamoring for higher speeds, he says.

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AT&T Wireless is reeling in its original 3G deployment plans in a move that will result in slower technology upgrades and a more watchful eye from one of its key investors.

The wireless carrier recently revealed that it only will have full 3G support in four markets - San Francisco, San Diego, Seattle and Dallas - by the end of 2004. The company's original plan was to have full 3G support in 13 markets by June 2004.

While AT&T Wireless is slowing its 3G support, the time frame is not expected to make a big difference to customers, says Rodger Entner, analyst at The Yankee Group. Many users are just getting into wireless mobile data services and these same users are not clamoring for higher speeds, he says.

"A lot of carriers are now hesitant because the true business case for 3G hasn't been made yet," Entner says.

Under the new plan, AT&T Wireless might switch to several alternative markets if the carrier has deployment issues in Dallas or San Diego.

Full 3G support for AT&T Wireless means upgrading its network to Wideband Code Division Multiple Access (WCDMA) technology, also called Universal Mobile Telecommunications System.

The International Telecommunication Union says that 3G wireless networks support mobile data rates of up to 128K bit/sec, stationary data rates of 384K bit/sec and fixed data rates of 2M bit/sec.

AT&T Wireless altered its plans primarily for two reasons: lack of market demand for full 3G and the move toward more conservative network investments.

"We looked at the current industry environment and decided it was smarter for us to slow down deployment," says Rod Nelson, CTO at AT&T Wireless. "What we expected for market take-up for faster data has turned out to be somewhat unrealistic. Expectations around a lot of things in technology were unrealistic. . . . The market is developing nicely, but not as fast as we projected."

AT&T Wireless also is "waiting to see how 2.5G, [General Packet Radio Service (GPRS)] continues to do in the market in 2003," says Scott Ellison, an analyst at IDC.

AT&T Wireless can meet its customer's needs with GPRS and Enhanced Data Rates for Global Evolution (EDGE), which is coming next year, Nelson says. "We don't need to imprudently rush to next-generation technology," he says.

The new plan is based on a revised agreement between AT&T Wireless and investor NTT DoCoMo, which owns 16% of the carrier. The agreement stipulates that if AT&T Wireless does not meet its 3G upgrade plans, NTT DoCoMo could turn in its investment, in the form of stock, for a $10 billion payout. The new deal includes a second board seat for an NTT executive and the creation of a committee staffed by NTT and AT&T Wireless employees to oversee the carrier's 3G upgrades.

The current AT&T Wireless network, typically called 2.5G, is based on GSM/GPRS, which supports data transmissions of 30K to 40K bit/sec.

"There is an expectation that 2.5G networks will have longer life spans in the market than perhaps initially expected," Ellison says.