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Emerging Technology Report #37: December 25, 2002

U.S. Finally Making Up Ground in Next-Generation Wireless

Global Emerging Technology Institute

During 2002, the U.S. made significant gains in attempts to upgrade its mobile wireless networks as debt-laden companies moved forward with introducing high-speed data and high-quality voice systems that have led to the simultaneous introduction of much better "smart" handsets and telecoms-capable PDAs.

Mobile phones in the U.S. can now access the internet via much more advanced handsets at speeds billed well above 100Kbps, though actual speeds are usually 30-70Kbps tops. All of the major carriers have rolled out national high-speed data access networks, most offering nationwide coverage. The number of devices that can be used on these networks is slowly growing and becoming more and more advanced. This is in stark contrast to what the market had to offer 1-2 years ago before these networks were up and running. What is changing the potential of great subscriber growth rates and related revenues are advances in technology that have already been part and parcel of Japanese, South Korean and, to a certain extent, European mobile wireless systems.

As was expected, the growth in the subscriber base has grown in parallel with the types of services offered on high-speed networks which have, in turn, led to better handsets with more advanced technology. High-definition color screens, which have been around in Japan for a very long time, are making handsets more attractive to potential users. Newer more advanced handsets can easily handle e-mail, the sending of photos, and the playing of games. The number of advanced applications will increase as wireless bandwidth continues to increase. U.S. wireless carriers will now need to compete in a greater number of areas as opposed to only voice quality, customer service and pricing. Geographic availability of the faster networks and selecting devices to be used to access them will be very important as the carriers compete. Unlike Japan, there are many more competitors in the U.S. market. Sprint PCS and Verizon Wireless operate the faster CDMA systems while AT&T (with financial support from NTT Docomo), Cingular and Voicestream (now T-Mobile) maintain GSM/GPRS systems that support global roaming. The devices that have been produced to operate on these networks are approaching what you expect to see in Japan and Japanese companies make several of them. For example, the Kyocera 7135, which utilizes a Palm OS, has been lauded for its integrated phone/PDA design. This phone's data capabilities are based on Qualcomm's CDMA2000 1xRTT spec that is theoretically capable of 153kbps. One great feature that it boasts is a high-quality 65,000-color touch screen. The model also features GPS technology for E-911. The Handspring Treo, another Palm OS PDA phone which operates on Sprint's next-generation networks is not as good as the Kyocera, but is a step above typical handsets available in the U.S. Clearly, Japanese and Asian (namely Taiwanese) manufacturers are making the most significant contribution by providing arguably the best handsets in terms of functionality and technology. The main challenger to the Palm OS is Microsoft. MS supports the Microsoft Windows Powered Smartphone, a full-featured mobile phone handset with PIM capabilities. In addition to the Smartphone, MS has also launched a Pocket PC Phone Edition that is the heart of such remarkable multi-functional handsets as the T-Mobile Pocket PC Phone Edition (the first product to be based on the aforementioned new MS pocket edition software). This phone runs on T-Mobile's GSM/GPRS networks and a similar looking phone, known as the Siemens SX56, is offered through AT&T. HTC of Taiwan manufactures these phones. The key to the expected success of such Pocket PC phones is the careful integration of wireless voice and data with the Pocket PC's existing suite of tools and offers a convenient SD card port for expanded memory capabilities. The voice quality on the T-Mobile is excellent. Thera by Audiovox (Toshiba) is another model in this category.

Technology is leading the U.S. market from simple, Jurassic-styled plain vanilla mono-chromed screen cell phones with bad reception to multi-functional PDA's with phones and fast internet access. The extremely pessimistic "sentimentality" toward the viability of 3G in the U.S. and, to a certain extent, in Europe, was primarily a cultural phenomenon. People in the U.S. could not take the fact that the country was so far behind the curve in next-generation wireless compared to overseas markets, especially in comparison with Japan and Asia. So, the country's competitive spirit led western writers to continuously downgrade 3G's chances for success in the U.S. as they ignored the simple fact that there was no serious hardware on the market that would interest users and give them incentives to pay for more advanced applications. That is now not the case and as the market for next-generation services matures, and the hardware is made to cater to it, subscriber growth will boom. The growth will not only be derived from such applications as gaming and instant messaging, either. It will go well beyond that in the U.S., and experience substantial growth in the business application area, especially as Pocket PC OS devices proliferate and the mobile wireless handset is transformed into a surrogate desktop/laptop computer that also happens to house telecommunications capabilities. The next-generation high-speed networks will demand the application of new technologies in order to overcome some of the technical hurdles that will arise, including the need for more efficient wireless CPUs, longer-lasting power sources, and input technologies, to name a few. As each technical hurdle is overcome, another expansion in the mobile wireless market will take place.

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