3G or WLANs?
Another NewsByte by Nicki Hayes, May 29, 2001
In a week that saw Ericsson and Nokia rallying to discredit recent reports that 3G is under threat from
cheaper wireless LAN (WLAN) technologies, Nicki Hayes, WDN’s European correspondent, questions
the 3G/WLAN debate.
Several reports from the likes of Nomura and Merrill Lynch have recently drawn attention to the alleged
threat that WLANs pose to 3G operators. They claim that cheap WLAN networks could divert business
from the cash-strapped 3G operators. Coming at a time when NTT DoCoMo and BT have announced large
scale delays in their 3G rollouts, the market is, understandably, even more nervous than usual. But what
chance do WLANs really have of ousting the fledgling 3G from its nest?
According to Merrill Lynch, 3G operators have a total debt of $650bn, a staggering $100bn of which
belongs to Europe’s 3G operators. The late rollout of 3G services is doing these operators no favors. So,
news that the convergence of 2.5G and WLAN technologies looks set to deliver 3G benefits at a
substantially lower cost must be pretty alarming.
But, according to those in the know, this is a real possibility:
“The cost/benefit analysis and therefore business case for 3G appears to be eroding. If 2.5G can deliver
always-on, 9.6 Kbps packet-switched cellular system for a $3bn upgrade cost [in Europe], the $250bn
needed for an always-on, 1Mbps, packet-switched 3G cellular system looks like it could become the next
high definition TV - a neat technology with no customers,” according to Merrill Lynch.
From a purely cost/benefit viewpoint they have a point, but from the technology and market perspective the
implementation of such convergence seems unlikely. To begin with 3G offers wide-area mobility and
coverage (each base station typically covers a 5-10 mile radius and a single wide-area cell is typically
equivalent to 10,000 WLAN cells). In contrast WLAN offers mobility and coverage across shorter
distances (typically less then 150 feet). In short, the two technologies address different market needs and
are more likely to share the nest than compete for it. It would be like expecting mobile networks to loose
market share to landlines now that cordless phones allow you to wonder a short distance from their base
stations. While WLANs offers many benefits, at a local level, they will never match the benefits of wireless
access to the internet’s global network, nor were they ever intended to.
This local/global aspect aside, there’s also the question of different air interfaces - Bluetooth and some of
the WLAN technologies share the 2.4GHz band. 3G does not. This brings us to the problem of access.
Unless wireless device manufacturers rush to develop devices that unite 2.5G and WLAN technologies and
that combine these air interfaces, such convergence will never happen. Going back to the previous
analogy, it would be like expecting to access mobile networks using your cordless phone at home. And
given that such manufacturers are key stakeholders in 3G they’re unlikely to sabotage their core business
for the sake of immediate, short-term gain, especially when the core business has such huge long-term
potential. Indeed, both Ericsson and Nokia have dismissed the notion that WLANs offer a threat to
operators this week.
Even so, WLANs look set to become widely adopted. Offering a range of productivity, convenience and
cost advantages over traditional wired networks they definitely have their place. Many key players in
sectors including education, finance, healthcare, hospitality, warehousing, retail and warehousing are
already benefiting from such advantages. WDN would be interested to hear their opinions on the 3G/
About the author:
Nicki Hayes is a freelance writer and corporate communications consultant specialising in business to business internet issues. She has contributed editorial to a number of publications including Unstrung.com, Guardian Online, Financial Times, Banking & Financial Training, eAI Journal and Secure Computing. Nicki is also the European correspondent for The Wireless Developer Network. Nicki is based in Dublin, Ireland and also has a base in Cambridge, UK. Through her consultancy, Hayes-Singh Associates, she has access to a number of technical writers and PR consultants throughout Ireland and the UK.
About the WirelessDevNet (www.wirelessdevnet.com):
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