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Finally it starts:
3G services will be introduced soon

By Peter Reinisch, Vice President Marketing Communication, Siemens Information and Communication Mobile Networks

3G networks based on GSM evolution, i.e. using W-CDMA technology, are going to be deployed in a greater scale right during this year. As we have seen some operators have started UMTS operations already, but are offering a few services only due to the still existing shortage of terminals and because of the whole situation in the mobile market. Investments from the operators in network installations are very low to date also due to the bad economic situation world-wide. This in turn also leads to a severe cutback from manufacturers side who are also cautiously viewing the market not wanting to move too much ahead and risking to loose money in a currently stagnating market.

What is the reason behind the situation at hand?
After a real booming market with growth rates of 50 to 100 % per year, everybody wanted to profit from a seemingly never-ending success. And operators and manufacturers as well were looking forward to even speed up the introduction of new technologies into the mobile market. The hype of the Third Generation Mobile Networks was born and fostered at any cost. All over the world analysts, journalists and regulators praised the new golden age of mobile communication to come. But as the economic problems all over the world became evident, it influenced the mobile business, too. And as it became known that many operators had problems with their financing – mainly some of those who had paid heavy money for 3G licenses – the analysts started to predict a rather grim picture. As a consequence the confidence in the mobile market was sinking rapidly and mobile operators stopped investing.

How does the current situation influence the introduction of 3G services?

In order to understand the implications, one has to have a look at the basic needs for a 3G/UMTS introduction.

What does 3G/UMTS require?
  • new network infrastructure
  • new sites for antennas (partly)
  • new frequency spectrum
  • additional license fees
  • a new generation of terminals

New network infrastructure means quite some investment for operators. Although the new technology offers many advantages and most of the operators are anyhow looking for a packet-switched core network technology or have it introduced already by installing GPRS, it needs an extended understanding for operation and maintenance.

New sites mean new overcoming a lot of bureaucratic hurdles during the site acquisition phase and finally to obtain all necessary permissions. As people are more and more becoming environment-conscious this also turns into a more psychological approach to gain acceptance.

The new frequency spectrum in the 2.1 GHz range offers more capacity for the operators, which is widely welcome for many networks. But the higher capacity comes at the costs of new license fees, which were exorbitant in some of the European countries.

And, as always with new technologies there is the availability of new terminals that can handle the new services and also should be compatible with existing GSM/GPRS networks. As usual, this takes some time – many people tend to forget how this has been some 10 years before when GSM started.

But what can operators gain introducing 3G/UMTS right now?
As discussed before of course new capacity enables operators to offer better and new services to their customers – for voice calls as well as for data transmission. And, of course, finally a number of services can be introduced which will need higher data rates e.g. like video transmission, enhanced MMS and email and Internet access in a way which was not possible up to date. If an operator looks at his market and customers carefully and determines the kind of services, which could be deployed successfully, he has a real chance to gain market share and keep his customers, getting them to make use of more services and in turn increasing his ARPU.

What about EDGE?
In the last two years a new technology discussion has started. As an initiative from an American operator (AT&T Wireless) and a number of manufactures under the umbrella of the Global mobile Suppliers Association (GSA) a number of EDGE Operators’ Fora across the world were conducted. The idea was to inform about a technology which could help to speed-up the introduction of 3G services world-wide. The main advantage of EDGE is that it uses as its basis the already in many hundreds of networks installed GPRS technology but uses a different modulation scheme to free capacity and enhance transmission speed.

What does EDGE require?
  • small change in infrastructure – if any
  • operates often only with new software downloaded
  • only small incremental costs for infrastructure
  • no addition frequency spectrum

As the first operator to announce introduction of EDGE, in the US, AT&T Wireless calculated the incremental costs to upgrade their GSM/GPRS network towards EDGE with only 10% of the initial network investment. Since their network with GPRS base stations is quite new, the introduction of EDGE is more or less a software upgrade. First calls with EDGE handsets were already conducted successfully by end of 2002.

If an operator has base stations in his network which are not EDGE-prepared already then there has to be a change of a few boards only to make the switch to the new technology. But this can be done in less than 5 minutes as manufacturers have proven.

The advantage of EDGE lies in the fact that it works within the existing frequency spectrum GSM operators already use. There is no need to introduce new sites to gain coverage. And there are no new license fees. So operators can with a very moderate investment upgrade their networks. The data rates of EDGE have been proven to be around 100 kbit/s which is sufficient for most applications.

3G/UMTS and EDGE – competitors or complimentary technologies?
Let us have a look at the situation of operators today. We can distinguish mainly two scenarios:

Scenario 1:

  • An operator has got a 3G license and has to fulfil the license conditions concerning coverage (population/area).
  • Economically it makes sense to install W-CDMA at the hot spots in the cities or other points of heavy traffic where 3G services will get enough customers to produce the necessary return of investment as well as profit for the operator.
  • EDGE could be deployed at the rural areas so that nearly all 3G services can be offered area-covering (the then lower speed of max. 100 kbit/s compared to 384 kbit/s of W-CDMA will mostly go unnoticed for the user).

Scenario 2

  • An operator has not obtained a 3G license. In order to keep his market share he can offer nearly all services with EDGE – he might use a different pricing model to take into account the somewhat lower speed of 100 kbit/s.

Both scenarios reflect very much the situation we do find in the mobile world today. There is no question of replacing one technology with the other. EDGE is – as well as W-CDMA – part of 3GPP standardization for IMT-2000 and therefore a real 3G technology. Its strength lies in the fact that with very little investment it can complement W-CDMA deployment in any country to roll-out 3G services at a much faster pace as was believed to be possible.

In the meantime, a lot of operators world-wide have announced the deployment of EDGE in addition to their W-CDMA plans. Terminals will be on the market during the course of this year and they will be fully compatible with GSM/GPRS. We will see networks up und running also by end of this year.

Are 3G/UMTS and EDGE helping to bring the mobile market back to shape?
Yes, definitely there is a good chance that both technologies will help operators to start quickly now and introduce new services, which will satisfy customer needs and generate new sources of revenue for the operators. This in turn will lead to more investment and will encourage manufacturers to become more pro-active again and bring new terminals, modules to the market, which can handle both technologies.

The chance is there to bring the mobile market back into a reasonable growth scenario – it is now the close cooperation between operators and vendors to make sure the market accepts the possibilities of a shining new mobile world.

For more information, please contact:
Peter Reinisch: peter.reinisch@siemens.com

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