AT&T Wireless stakes claim to 3G

As expected, AT&T Wireless rolled out 3G wireless services to customers in four markets, becoming the first wireless operator to turn up the higher speed service in the U.S.

It’s not much but it’s a start.

As expected, AT&T Wireless rolled out 3G wireless services to customers in four markets, becoming the first wireless operator to turn up the higher speed service in the U.S.

But’s AT&T’s deployment footprint – Detroit, Phoenix, San Francisco and Seattle initially, and then Dallas and San Diego eventually – is a drastic cutback from the 13 markets it planned to tap by mid-2004. AT&T Wireless announced in early 2003 that it was scaling back its 3G plans dues to lack of demand and a shift in investment priorities.

Still, last week’s rollout of the 220K bit/sec to 320K bit/sec Wideband Code Division Multiple Access (WCDMA) service is a step in the right direction for users needing higher speed throughput for delivery of data-intensive business applications – like streaming audio and video – to their handsets. WCDMA is also known as Universal Mobile Telecommunications System (UMTS).

Previous to 3G, AT&T Wireless’ highest data rates were 130K bit/sec through Enhanced Data Rates for Global Evolution (EDGE) technology enhancements to its 30K to 40K bit/sec GSM network. Cingular, which is acquiring AT&T Wireless, is also going 3G via WCDMA, and has issued RFPs to vendors for the equipment to support the 3G services next year.

But 3G may not be fast enough. Competitors Verizon Wireless and Sprint are or plan on supporting higher data rates through an alternative CDMA technology called Evolution Data Optimized, or EV-DO. EV-DO will support speeds from 300K bit/sec to 500K bit/sec, maxing out at 2.4M bit/sec.

Verizon Wireless has already begun turning up EV-DO in San Diego and Washington, D.C., and plans to extend the service to 1/3 of its 40 million U.S. subscribers by year-end.

Sprint announced intentions to support EV-DO at last month’s Supercomm trade show. Sprint is investing $1 billion in the technology and will roll it out in select markets later this year.

And there’s more leapfrogging to come: Cingular and AT&T Wireless may surpass Verizon Wireless and Sprint when they go beyond WCDMA to High Speed Downlink Packet Access (HSDPA), which offers data rates up to 14.4M bit/sec.

HSDPA is still in the testing stage, according to AT&T Wireless.

AT&T Wireless is offering 3G at $25 per month on top of a voice plan for consumers. For business customers it costs $80 per month in addition to a voice plan.

Perhaps at this price, demand may germinate. But analyst say there is no significant pent-up demand in the U.S. for 3G; that’s why AT&T Wireless scaled back its initial plans to roll it out in 13 cities by now.

Indeed, AT&T Wireless turned up 3G in order to fulfill a $10 billion obligation to NTT DoCoMo, which owns 16% of the carrier. An agreement between the two stipulated that if AT&T Wireless does not meet its 3G upgrade plans, NTT DoCoMo could turn in its investment for a $10 billion payout.

“It was cheaper for them to do this than not to,” says Yankee Group’s Keith Mallinson.

Another issue is backward compatibility between AT&T Wireless’s WCDMA and EDGE devices – there is none. Instead, customers get a free EDGE card when they sign up for service. They can fall back to 100K to 115K bit/sec of national service when they venture out of the four 3G cities.

Phones, however, are backward compatible with the much slower, 40K bit/sec General Packet Radio Service, AT&T Wireless says.