Cutting Edge: Third Generation Cellular
Jan. 26, 2001 -- Take a look at your cell phone; then close your eyes.
Imagine: movies, games, chat rooms and services that tell you where the nearest decent Indian restaurant is — not on that thing, with its useless little keyboard and four-line text-only screen, a device that hasn’t changed significantly since the first mobile phones were introduced in 1983.
But with the next generation of wireless phone networks — known as 2.5G, coming at the end of this year — everything will change. By the time third-generation, or 3G, networks are in place in about 2004, wireless communications will mean much more than just phone calls, experts say.
“You can have a clear [video] picture of the person you’re talking to,” said Greg Rhode, who was assistant secretary for communications and information at the Clinton Commerce Department.
“Imagine you’re going to the movies and want to see what movies are showing. Hit a button, and you can actually see the video on your phone ... [then] use that same phone to go to a soda machine and buy a soda,” he said. Buying a soda with your phone is already possible in Finland, where users can dial a number, make their soft drink choice, and a text message relays the information to the machine and bills your cellular account.
Glimpse of the Future
To glimpse the future of cell phones, in fact, one should look to Finland and other countries in Europe and Asia, where a clearer, more advanced picture of the technology is emerging.
The U.S. is years behind the rest of the world in wireless technology. Millions of Japanese already shop, play games and socialize on “I-mode” phones with big color screens. In the United Kingdom, 560 million text messages were sent across the airwaves during the month of August 2000, according to the Mobile Data Association. And the Finns have been shopping on their phones since early 2000. In comparison, Americans will only be sending 68 million text messages per month by 2003, according to International Data Corporation. The U.S. has about four times the population of the U.K.
Technologically, America is already a full generation behind Japan — we’ve got second-generation wireless, while their I-Mode is 2.5G. We won’t have that until 2002. And 3G wireless is coming to Japan this year and Europe next year, but may not appear in the U.S. until 2004.
“Because we don’t use wireless appliances in as advanced a way as other countries do, we are going to fall behind for a little while,” said Jim Carol, CEO of Packet Video, a San Diego-based company building next-generation wireless applications. “We will not dominate it like we did the Internet, no way.”
Experts have said that “wired” phones are much cheaper in the U.S. than elsewhere, so there’s less incentive here to get cell phones. They’ve also said Americans are used to the Internet on computers rather than on mobile phones, that Europe’s café culture is more conducive to on-the-go communications than the U.S.’s comparatively stay-at-home lifestyle, and that the U.S.’s three conflicting wireless systems have led to a more fragmented market here than the more unified GSM standard used throughout much of the world.
Europeans also seem to have nearly unlimited patience for typing out words on cell phone keypads. Americans find that just too hard to do, according to Forrester Research analyst Maribel Dolinov.
“I don’t want to have to type into this thing at all. I don’t want to press the ’8’ key 15 times to type in a letter,” she said.
And where Japan and Europe courted mass appeal with youth-friendly games and social applications, U.S. wireless operators cast their lot with ultimately less successful business applications, according to Mike Walters of Nokia.
The U.S. is trying to catch up with new wireless devices tailored to American tastes. Motorola sold more than 750,000 of its T900 Communicators in their first six months of sale. The T900 is a text-messaging device about the size of a pager, but with a full keyboard. Most are being used by teens, Motorola spokesman Alycia Rican said.
Enter 2.5G
Americans will see major changes in their phones when 2.5G networks come up to speed, Rhode said. (For a rundown of how cell phones work, including the difference between current systems and 2.5G, click here.)
The current phone network requires users to make a call to get online, often entails eating away at their precious cellular plan minutes to stay online, and locks wireless Web surfers to slow speeds that are good for text, but not much else.
But a 2.5G phone will be essentially online all the time without using minutes, and will be able to run services at up to 144 kbps. On a phone-sized screen, that’s good enough for full-motion video, according to Carol.
It also won’t have the little gray screen you’re used to. Cell phone manufacturer Nokia has been designing next-generation devices that look like crosses between cell phones and Palm Pilots, with big color touch screens. You might even just talk to your phone, like with current ‘voice portal’ TellMe, Carol said.
“Why wouldn’t you just have your headset on and say, ‘Restaurants; Video?’” he said.
The Move to 3G
The move to 2.5G seems to be going smoothly, but the switch to third-generation wireless looks to be a much rockier road. Third-generation systems will offer speeds comparable to today’s office networks, and combined with the short-range networking technology Bluetooth, they’ll bring full Net power to portable computers, MP3 players, net radios, or anything else that might be invented by 2004.
“I’m convinced that 3G wireless is going to change the equation of what it takes to access the Internet from buying a couple-thousand-dollar computer … to purchasing a device that costs maybe a couple hundred dollars and has broadband access to it all the time,” Rhode said.
The move to 3G will also merge the U.S.’s three wireless systems with the worldwide GSM system, meaning you’ll be able to use the same device from Texas to Tokyo.
But 3G requires a wider spectrum than existing wireless services, and that’s a major problem. Countries have been auctioning off their spectrum to phone companies for huge sums of money. That creates two kinds of problems: one for countries’ budgets if they don’t get the prices they expect, another for phone companies if they find themselves without enough money left over to build the new networks.
“You have all these companies just spending billions and billions of dollars just to buy the rights to use 3G ... it’s just compounding tremendous amounts of debt,” said Peter Psaras, an analyst with Motley Fool.
Last year’s auctions, primarily in Britain and Germany, netted governments about $100 billion. European wireless companies are already showing cold feet: on Thursday, two of the four candidates in the French 3G auction dropped out.
The huge prices being paid in the spectrum auctions may be passed on to consumers, raising wireless phone rates, Psaras said.
“Can they charge $60 for 3G service to the customer? I think they can,” he said.
The U.S. has an additional problem — all of our potential 3G airwaves are already in use, some by the Defense Department and some by universities.
“If we’re going to have to move someone out, where do they go and how much will it cost?” Rhode asked.
The FCC is struggling with that issue now, and hopes to have a plan for spectrum auctions by July, Rhode said.