2.5G Will Be Fine, Thank You

3G services are not coming soon. Decide for yourself if analysts are correct in assessing demand for advanced wireless services -- and plan your development and infrastructure expenditures accordingly.
By Ed Sutherland

I was watching an old "Laverne & Shirley" episode on cable the other night and realized I'd tuned into the future of third-generation (3G) wireless services.

Almost daily there is a headline about a delay, glitch, or new report casting doubt on the future of high-speed always-on third-generation mobile networks slated to replace today's awkward second-generation (2G) wireless systems. Such doubts have given rise to comparisons with another much-vaunted but little wanted leap in technology: High-Definition Television (HDTV).

HDTV produces gorgeous life-like images with CD-quality sound. In the lab, it was a wondrous innovation. But few homes have HDTV because the technology required you to replace your current set with a more expensive one. As a result, few sets were built and little programming created.

3G is costing operators billions of dollars to prepare the needed infrastructure. In Europe, operators will spend $200 billion to build the networks, yet can expect just $7.3 billion in wireless spending by 2005. A recent Jupiter Media Metrix report warns that wireless users will have to double their spending and operators will have to boost subscription rates by 5 percent each year to make the venture profitable.

To get from current 2G networks to 3G services, wireless operators are adopting an intermediate step known as 2.5G. 2.5G will give subscribers a taste of always-on, high-speed wireless access without requiring that service providers undergo the system-wide upgrades demanded by full-throttle 3G. This intermediate step also serves as a breather for an industry exhausted from outrageous spectrum bidding wars and a flagging economy.

Just as with HDTV, experts agree there is little demand for 3G. "The 3G technology that everybody has been waiting for is about as anticipated as the sinfully expensive conversion to HDTV," said Richard LeBlanc at a recent Wireless Strategy 2001 conference.

Multimedia, the keystone application always mentioned along with 3G, simply won't happen.

2.5 Is The Answer
"The reality is that 3G networks will not deliver, nor is there pent-up demand for, the interactive multimedia applications that would require data rates in excess of 384 Kbps," said David Kerr, vice president of wireless services at Strategy Analytics.

"People have overestimated the potential of 3G," says Nobuyuki Idei, Sony Corp. chairman. "In the short term you have to be realistic. The 2G and 2.5G will meet most of the needs of users."

When cable saw lack of interest both in consumers and programmers over HDTV, they began offering their own version of 2.5G -- digital cable. Digital cable gives subscribers a plethora of new programming, crystal-clear signals and CD sound without needing a new set.

A Merrill Lynch study this spring predicted 2.5G would be the likely choice for cell phones over the next few years. With European 2.5G systems costing $3 billion compared to $250 billion for 3G, the "business case for 3G appears to be eroding," said the study. 3G "looks like it could become the next HDTV -- a neat technology with no customers," said Merrill Lynch.

At first, 2.5G was meant to be a stop-gap measure giving operators time to roll out 3G networks. Then the intermediate technology was viewed as a "rest-stop" while operators financially exhausted from costly 3G license bidding recouped some of their expenses. Now, 2.5G (either GPRS, EDGE, or CDMA2000 technologies) is seen as a legitimate alternative to 3G.

3G shouldn't be completely abandoned. At its core are features all wireless users will welcome -- faster access speeds and always-on availability. Luckily for both consumer and operator, 2.5G can be implemented now at a fraction of the price of 3G.

Ed Sutherland is a New York-based editor and journalist who writes for M-CommerceTimes, an internet.com site. For more of his writing samples, click here.

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