***3GSM 2005
By John Latta
Cannes, France
February 14 – 15, 2005
It only takes a trek to Europe to realize that the US lives in
its own cloistered cellular world. As the US cellular industry
still struggles with coverage and quality, Europe has passed
these issues many years ago. As Europe demonstrates improved
services, data rates and global reach, Verizon gets hit with a
class action suit, or an attempt at one in California, because
it disables Bluetooth on phones for external connectivity. It
is not hard to realize why WiMAX is a feeble attempt to assert
wireless leadership but the reality is that the European’s are
miles or should we say kilometers ahead.
Bordering on one of the “worst conference” experiences has to
be 3GSM in Cannes, France. The best analogy is holding CES in
Rehoboth, Maryland. All that changes next year as this event
moves to Barcelona, Spain. But in spite of the fact that some
of the tent booths are on sand as this event “spills” to the
beach, this is the place to be. The conference schedule is
packed and all the major players are here. This is a global
market and both the booths and attendees reflect that also.
The industry is beaming after the telecommunications slow down
as now it is looking up. Last year GSM subscribers topped 1B
and this year was the largest subscriber growth ever at 300m.
There is now 27% world penetration. Last year 16 new countries
were added to the GSM fold. 3G is also a success story with
19m WCDMA subscribers. But just as important HSDPA is
beginning and this will take the industry to new capabilities
in terms of bandwidth and latency.
Ericsson – Blazing New Trails in Connectivity
Hakan Eriksson, SVP and GM for R&D and CTO, Ericsson spoke to
the future of the wireless industry. In something of a
surprise he described the need for the cellular industry to
move to a triple play. That is, voice, data and television.
The video triple play for the office implies video
conferencing. Hakan was not as bullish for this on the
cellular network as he was with the unicasting of video to
mobile terminals. All of this is enabled by improving
technology. He described the 3G era in two phases – before
HSDPA and with HSDPA. The technology overview showed HSDPA in
the 14Mb/s range but its major advantage is lower latency
which they quote as 75ms. Considerable stress was placed on
the design of networks which specifically reduce latency – in
many respects, this is more important than bandwidth in
delivering the triple play services. Ericsson has been doing
demos of HSDPA since October 2004 and has had the uplink demo
(HSUPA) recently. The specification for HSDPA (High Speed
Downlink Packet Access), known as Release 5 has been out since
2002. The uplink specification, HSUPA (High Speed Uplink
Packet Access), called Release 6, came out at the end of 2004.
The next major advance will come with “Super 3G” which has yet
to be named. This has as the objective 100Mb/s down, 50Mb/s up
and 10ms latency. The schedule for this has a Study Item
period from the end of 2004 to mid 2006 and then a transition
to with Work Item period from mid-2006 to mid 2007 when the
detailed specifications will be released.
802.16 was acknowledged in the presentation as a niche product
which only goes to 15Mb/s to households. 802.16e was dismissed
as limited in its mobility and lack of handoff capability.
Note that later, Neil Ransom CTO of Alcatel, stated that
within Alcatel the number one supplier of ADSL, they have
looked carefully at the business model of WiMAX. It is their
assessment that the costs, including CPE, will prohibit it
from serving any but rural areas that are not otherwise served
by ADSL or cable. Bottom line WiMAX will just be too expensive
to compete with already established broadband access
technologies.
Trolltech – Linux on a Roll
Trolltech Software provides a software development environment
for Linux based phones. At 3GSM they announced 50 vendors
making cell phones with Linux. The WAVE probed about the
market dynamics for Linux.
There is a significant cost advantage for using Linux –
about $5/phone. The other major advantage is the OEM/ODMs
can custom tailor the phone look and feel. This is hard
to do with other operating systems due to the high cost
of the source code license.
Much of the movement in Linux use is in China but this
comes from the PRC mandates to use Linux. However, once
the phones are in place with Linux this provides a
significant market advantage to the OEM/ODM. Thus,
companies such as Ningbo Bird see the opportunity in
providing low cost phones to the market outside of China.
There is a close parallel with the success that Huawei
Technologies has had in the telecommunications equipment
market. Once these companies establish their technical
competence, and also as a low cost provider, they become
a strong international competitor. Another company
developing Linux phones for China is Motorola.
The value of the hardware reference design is that it
addresses the “dirty work” of getting all the components
of the phone to work with Linux. Companies in this area
include: Intel, Motorola, TI and Samsung. When asked who
was the leader the response was definitive – Samsung.
Once the hardware reference design is completed then
innovation is possible by customizing the phone with
Linux. In the case of the Samsung K2 phone this took much
longer than expected – 15 months.
Two other companies expected to lead in Linux based
phones are Panasonic and LG.
The real competition for Linux is Microsoft and Nokia
each with their own OS’s for the phone.
More on Linux
newlc is a cell phone developer in France. The WAVE Report
spoke to its CEO about Linux, which is one of several
operating systems that they support.
Motorola is one of the largest supporters of Linux. They
will have 10 phones out which use it.
Philips is another supporter of Linux.
MontaVisa has the Mobil Linux effort which is supporting
a number of developments in this area.
It is expected that NTT DoCoMo will be releasing Linux
phones which are made by NEC and Panasonic.
70% of the work of creating a phone for Linux is
addressed when the reference design is complete. Thus,
reference designs are very important.
Is the Notebook the Next Cell Phone Terminal?
Novatel Wireless is headquartered in San Diego. They claim to
be the leading supplier of PC Card modems for notebooks. The
U630 supports UMTS (Europe and RTW) and the V620 supports EVDO
(US). As we discussed their PC Card modem we asked – what
about embedding this technology into the notebooks?
In 6 months the supply of low cost notebooks as a part of
the service offering of carriers will emerge. Right now
two carriers, assumed in Europe, are pushing this.
Novatel Wireless has created a module which integrates
into the MB on the notebook. It is felt that this market
will emerge in a significant way in 2006.
When asked how the carriers would offer this the response
was as a long term contract – 1 year minimum, with a full
featured OS, assumed Windows, and not a stripped down
notebook. The reason this has now become viable is that
data costs on the carriers are continuing to fall along
with the notebook prices. Thus, providing notebooks with
the service contract is one way to open up the market to
additional market segments, assumed SME and consumers,
and to lower churn.
The modules for data connectivity are complex and it has
taken many years to develop. One of the reasons is that
in Europe, due to the many countries, has made roaming a
critical requirement. Only now has Novatel accomplished
this. In contrast the US market for cellular and
especially cellular data is very fragmented.
Another example of Novatel’s Wireless technology was shown in
the booth with its Ovation. This is a UMTS broadband terminal
for the home. It then disseminates the data in the home via
802.11b/g. It is claimed that this has gotten a very good
response from the carriers. This “3G Multimedia Application
Console” goes right to the heart of the ADSL business. It also
is a spear into WiMAX.
Sierra Wireless – AirCard 850 – HSDPA for Notebooks
Earlier, Novatel Wireless was described with their U630
supports UMTS (Europe and RTW) and the V620 supports EVDO (US)
products. Then we saw the next generation of these PC Card
based products in the Sierra Wireless booth. One came away
with the realization that HSDPA is getting real. Trials in
2005 and the likelihood of deployments in 2006. This is a
mobile product that makes possible T-1 to a notebook. While
our discussions with Novatel Wireless opened up the planning
of the carriers to offer notebooks with this technology
embedded we did not get this from Sierra Wireless. They
consider it is too early to consider embedding HSDPA into
notebooks. Sierra Wireless does have modules to be embedded
but that have not done this yet in HSDPA.
Pushing the Cell Phone as a Platform
IXI Mobil is taking an interesting direction to the role of
the cell phone. This is based on using the phone as a gateway.
The network supporting the gateway is Bluetooth which forms a
PAN or BAN. Their first product is the successful
AT&T/Cingular Ogo. This is a small inexpensive messaging
device which is connected to the WWAN via the cell phone. But
the connection between the Ogo and the cell phone is
Bluetooth. IXI Mobil’s product is their OS called IXI-Connect.
Companion devices, as examples only, include: messaging,
watches, cameras, MP3 players and health monitoring devices.
Shown in the booth was WiPOQ from Sanyo. This is a stylish
messaging device.
They even have a publication called PMG World – for Personal
Mobil Gateway. It is like a slick magazine.
Motorola
Motorola had more Bluetooth headsets in the booth of any cell
phone company. Motorola was making a fashion statement with
its Bluetooth products. These got a lot of attention.
Burton Jacket is clothing which serves as the control
center for an iPod and Bluetooth enabled phone. Speakers
a built into the collar.
Burton Beanie is a head cap which supports a Bluetooth
headset.
Oakley Razrwire sunglasses with Bluetooth headset as a
part of the frame of the sunglasses.
Bluetooth card kit HF820 BT which is the only one at the
show with a DSP. This can be carried from car to car.
Scooter helmut which has Bluetooth as part of the helmut
including a microphone boom that extends to the mouth.
This does not have a DSP and Motorola claims the audio
quality is good to 55mph.
Cellular Market Dynamics – As seen at 3GSM
At the WAVE Report we have spoken many times about the need to
understand market dynamics first and then apply that
understanding to assessing and scoping markets. Earlier we
outlined what key individuals in the industry are saying. Now,
with a bit more information, we are able to expand on the
developing landscape of cellular and the state of the
industry.
In advanced countries penetration is cited above 100%
with many individuals carrying more than one phone. In
less developed countries growth is still possible but
this is about the supply of infrastructure equipment and
early phones in poor countries. In this case, these are
very low cost phones. China fits this case because of the
huge potential market but the average revenue per phone
(ARPU) is low. Thus, the growth engine in the existing
markets is either adding more phones or increasing the
(ARPU).
3G, based on W-CDMA in the GSM world, is finally coming
to market. But increasing the ARPU based on voice is
unrealistic. Siemens presented data that showed the ARPU
has stabilize at less than 30 euros per month and
unlikely to change (Western Europe). But data is likely
to grow to an additional 15 euros on top of voice. The
challenge is to find the sources of that growth.
Yesterday this gave rise to the triple play scenario
where all forms of content could be used as “data” to
drive usage. One example was cited with the “3” service
in Austria that is netting 60 euros/month.
In this struggle to increase income, the cellular
industry is turning to a new customer – the enterprise.
It is for this reason that Research in Motion (RIM) is in
their sights. At the Nokia booth we saw tools for the
Nokia OS to extend Web Services to the Series 60
Developer Platform. It would be possible for a large
enterprise to write a custom application, at no cost for
the tool kit, to extend enterprise applications to cell
phones which use this OS – of which many of the new ones
will.
Another approach is to support convergence. That is a
nice word in this context to say that the operators are
going after the wireline business. With rates up to
1.4Mb/s and doing wireless redistribution in the home the
wireless carriers can decimate the home wired phone
market. In the US we would call this WLL and label it
fanciful but the Europe the prospect is real.
Thus, the operators are faced with the challenge of
growing the top line and in market areas where they have
not been before. In Japan, NTT DoCoMo has been a leader
in its experimentation in the market. Marco de Benedetti,
CEO of TIM (mobile of telecom Italia) said it well with
the sound bite:
In our first 10 years we cut the wire to the phone
In our second 10 years we cut the wire to the PC
The catch word is VAS – value added services. Put in
another way - more services we can charge for and the
customer will pay for. Yet, as NTT DoCoMo stated, they
are going down the difficult path of fixed price all you
can use path. For many customers, especially business
customers, this is what is desired.
Just as 3G with UTMS is entering the market, HSPDA is
emerging. Ericsson will trial this in the Isle of Mann in
Q2 2005 and many see 2005 the year of first deployments.
Nortel plans on a major roll out in Europe with mmO2 in
2005 and beyond.
All of this has to be seen in the context of the GSM
world. We saw samples of this in our reporting from IST
Mobil & Wireless Communications Summit. This is a small
club with difficult entry conditions. They pride
themselves with the fact that there are only a few
providers of equipment. In general, US based companies
have not been leaders in GSM. Important players include
Motorola and TI who have a history of integrating with
other geographies. But the cost of entry is high – for
example, Freescale cited that the cost to develop a
baseband processor is $100m and this does not include all
of the product support costs.
All of this upside is counterbalanced by the often stated
situation – we cannot get enough 3G terminals, i.e., cell
phones. At the same time the operators are demanding
unique signatures and service support in the phones. In
fact, Elektrobit told us if a customer wanted a 3G phone,
even based on their reference designs, it would not be
possible by the holiday buying season this year.
The massive size of this market is also driving
commodization in the cell phones. Our show floor scan
indicates much of this is from China. While the
commodization of the PC was driven out of Taiwan we have
seen only one Taiwanese company in this space. Here at
3GSM the names which come up are: Ningbo Bird, AMOI
Electronics and dbtel (Taiwan). This is also very
consistent with the push to use Linux and the need to
supply a worldwide market with very low cost basic
phones.
An important factor supporting this trend are the phone
reference designs. There is a close parallel with the
role that the original IBM PC played and currently what
Intel does to define many of the PC components and how
they work together. In the cell phone market Freescale,
Samsung, Broadcom and others are the source of designs.
At 3GSM many of the booths are focused on how an
exhibiting company pushes the envelope in enabling these
VAS. Be it multimedia, content, gaming, security, push to
talk, imaging, enterprise applications or direct
broadcast television the role that the future phone is
radically changing. Back office functions of web site
access restrictions and integrated billing are here. If
one word can capture the essence of the booth space at
3GSM it is the “future” of the industry. This is all
consistent with the market dynamics discussed here.
WAVE Comments
Europe is different when it comes to the cell phone market. It
is a technology leader. It has set the world standard. This is
a factor in its world competitiveness. In spite of Bell Labs
and Motorola having developed the original cellular
technology, it is sad that US companies are largely bit
players today. Yes, there are pockets of expertise but these
are specific technologies and not at the system level. When it
comes to infrastructure for cellular Europe is ahead and the
Chinese are coming on strong. Thus, there was much to learn
from 3GSM.
With HSDPA and HSUPA the cell phone is finally a credible high
speed access device. Then comes the hard part – what to do
with the bandwidth? We were pleasantly surprised with the
concepts of the Personal Mobil Gateway. This is not dissimilar
to the mobile network concepts in the automobile – the moving
network with many nodes in the car. The same can apply to the
individual with PAN and BAN.
Closely related to the issue above is what to do with data –
seen by many as the driver behind bandwidth consumption and
thus income. Yet, we came away with the impression that this
misses the point.
But over all we were disappointed that more innovation was not
evident in the application of data or more importantly where
the value proposition is based on user segmentation and use.
Mobile bits are expensive. We heard comments that some users
are paying $2 to move a cell phone camera picture. Thus,
critically missing is any discussion on end user cost. Somehow
lost in all this excitement about the technology is that
markets are defined by the movement of money and that price
elasticity has a significant role.
The basic issue is that the cellular access platform is
closed. As the bandwidth increases, the prospect of many other
uses increases some of which are in direct competition with
the carrier. Further, if the terminal device goes beyond the
cell phone, such as the notebook, the options significantly
increase. What this points to is that the carriers may not be
able to define valuable services as effectively as 3rd parties
can.
The closed platform debate centers around the issue: will the
operators enable this if they do not get a cut of the revenue
stream? Thus, the future of how bandwidth is used, from a user
perspective, could well hinge on the openness or closed nature
of the platform.
Wave Issue 0510 3/11/05 Article 1-01