Industry buzz about wireless networking is dominated by discussion of 4G – primarily LTE and WiMAX. Conventional wisdom dictates that technology moves to the next phase in its evolution when the current generation has reached its maximum usefulness. But judging from recent reports in the marketplace, it’s not clear that 3G has fulfilled its promise of broadband on the go at the same speed as we’re used to at the home or office.
|Malhotra: Rural operators ponder whether to skip 3G altogether and wait for 4G or disappoint subscribers who may expect them to keep up with the Tier 1 carriers.|
I’m sold on wireless as the standard method of communication and am excited at the prospect of increasing speeds and capabilities. But I’m concerned that this potential may not be achieved if we continue on a path where end users aren’t satisfied, operators aren’t able to achieve adequate returns and vendors don’t deliver on their claims. Let’s examine the situation from a few different vantage points.
The iPhone has had an indisputably transformative effect on consumer perceptions and usage of mobile communications. I used to chuckle whenever I saw the original iPhone’s ads touting the ability to browse the Internet, a capability that has existed for years. (This doesn’t diminish Apple’s accomplishment as its smartphone rocketed to claim half of all mobile Web usage within 6 months of its introduction.) This product has brought previously techie-only terms such as EDGE and 3G into the mainstream consumer vernacular.
So when reports began to surface within a week of the launch of iPhone 3G that users were having disappointing results connecting to the higher-speed network, it cast a spotlight on the state of network technology.
To be fair, it’s likely that the voices of a few disgruntled customers have overshadowed the otherwise reasonable experience of the majority. Nevertheless, it’s disconcerting to hear that 3G – which started to be deployed in 2002 – was not ready enough for primetime for Apple to use it in the first iPhone, and a year later, it’s not performing consistently.
Whereas the national Tier 1 carriers have all placed their 3G bets and are now planning for 4G, most rural operators are understandably moving more cautiously. They have neither the population density nor the heavy concentrations of tech-savvy users to justify next-generation buildouts in the same manner as their larger competitors.
Many of these operators with whom I have spoken have expressed concern over the unclear path of technology evolution. Vendors are promoting different strategies, culminating – depending on the vendor – in LTE, WiMAX or HSPA+.
Given the thinner cushion rural operators have against adversity, they are faced with the dilemma of either waiting for 4G and skipping 3G altogether, or disappointing customers who may expect them to keep up with the Tier 1 carriers.
TIER 1 OPERATORS
The fact that Tier 1s have for the most part deployed 3G should not make 4G inevitable. It’s well-known that the 3G networks have not met revenue expectations for higher-speed, data-centric applications to offset revenue declines in 2G voice.
The most common data applications continue to be text messaging and e-mail, which do not take advantage of 3G capabilities. Why else would the iPhone be able to make a splash with its variation of applications that were supposedly available years ago? And as the industry continues its drive to commoditize services through all-you-can-eat pricing plans, return on investment becomes ever harder to realize.
WHAT NEEDS TO HAPPEN?
To ensure the wireless industry can satisfy customers and drive profitable revenue growth from network evolution, carriers and vendors need to divert some energy from 4G to ensure that 3G is delivering on its promise. Here are a few ideas:
- Mount an educational campaign for wireless subscribers to set expectations for 3G and to more effectively set the stage for the next generation.
- Differentiate the applications served on the different networks. There is a significant amount of confusion regarding the incremental benefits of UMTS, EV-DO, WiMAX and LTE; the focus needs to move from theoretical performance metrics to applications, as that is ultimately why customers will – or will not – buy services.
- Operators that have yet to make a move to 3G should consider continuing with a 2.5G buildout while having a core ready for 3G and beyond, in a measured approach until the 4G picture clears up.
- Finally, make sure that basic voice or 2G networks are maintained to continually satisfy subscribers. The majority of revenue is still coming from these networks, and the majority of new subscribers added daily worldwide are not using 3G services. As part of this, carriers should slow down the commoditization of 2G services because future returns from 3G and 4G are not likely to offset today’s margin loss as expected.
Malhotra is vice president of marketing for Tecore Networks.