3GSM 2005
By John Latta, WAVE
0510 3/11/05
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.
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