Mobile Convergence On the Horizon

July 2005
By Henry S. Kenyon

Editor’s Note: This is a revised version of the article that appeared in the July 2005 issue of SIGNAL.

In the next two years, several third-generation (3G) wireless technologies will enter the North American market. Already being rolled out in Europe, these applications will allow mobile devices, such as this Motorola handheld, to access video, television and music services.

New capabilities rolling out in Europe will soon cross the Atlantic.

The North American wireless market is poised for the introduction of next-generation applications that deliver sophisticated multimedia and data products to handheld devices. Within the next 24 months, a variety of third-generation technologies services will become available, allowing consumers and enterprises to conduct business and to access data more efficiently.

The ongoing migration of mobile telecommunications and data systems to more advanced software and equipment is driving these developments. The burgeoning robust infrastructure that supports these new technologies and the increase in the number of wireless hot spots are key factors behind this growth, explains Brent Iadarola, mobile communications industry analyst, Frost and Sullivan, San Antonio. 

According to Iadarola, the total U.S. market penetration of mobile products and services is about 60 percent of the population. Wireless data applications users represent roughly 10 to 15 percent of this total, he says. These numbers contrast with the European market, where mobile systems combined enjoy a 75-percent penetration rate.

One reason for this contrast is that the European market is about 12 to 18 months ahead of North America in rolling out next-generation wireless technologies. Iadarola notes that the United States has two main wireless technologies migrating toward third-generation (3G) applications: code division multiple access (CDMA) and global system mobile (GSM). The carriers using these technologies are Verizon and Sprint, which deploy CDMA-based systems, and T-Mobile and Cingular, which use GSM.

A third wireless technology, called the integrated digital enhanced network (iDEN), also is available. Nextel uses this proprietary system. But because of Nextel’s merger with Sprint, iDEN customers will soon transition to CDMA-based systems as iDEN does not have a clear migration path to 3G applications, Iadarola says.

Iadarola describes most of the North American wireless market as at the 2.5G level in terms of its evolution toward 3G. For GSM users, the technology is migrating to general packet radio service (GPRS) and then to the enhanced data GSM environment (EDGE) capability, which he considers a true 3G system capable of providing streaming video and other multimedia applications. CDMA is migrating to CDMA 1X, which now is being introduced nationwide. Like GPRS, CDMA 1X is a 2.5G to 2.7G technology that is more capable than CDMA but not quite a full 3G system. This will eventually migrate to evolution/data only (EVDO), which is full 3G. He adds that the major carriers are upgrading their wireless base stations to accommodate EDGE and EVDO when they enter the market.

Increasing wireless penetration across all segments of the North American market requires three elements, Iadarola explains. The first involves migrating existing network technologies to true 3G systems. The second concerns wireless devices. Manufacturers must develop and market handheld products that are capable of operating on the new networks. The final part of the equation involves developing applications that will be valuable to both commercial and enterprise users. “When these three elements come together, that’s when we’ll really see traction in terms of data adoption [services] rates. This is beginning to happen. Over the next six months, we are going to see mobile data penetration rates in the U.S. pick up significantly just because those elements are coming together. We finally have the infrastructure deployed on the network side,” he says.

An important part of this changing landscape is the migration to full 3G technologies. For example, GSM carriers are beginning to use GPRS, which claims to deliver data rates of 100 kilobits per second. However, Iadarola notes that actual data speeds and throughput under normal operating conditions are usually in the range of 20 to 40 kilobits per second. GPRS will be replaced by EDGE, which promises data rates up to 300 kilobits per second and more sophisticated mobile applications such as streaming video services. “You will have the ability to browse the Internet on a wireless laptop device in a wide area network [WAN] environment and have access to applications that you would have on your desktop computer,” he says.

However, U.S. GSM carriers lag behind CDMA-based providers in getting 3G technologies to market, according to Iadarola. Verizon and Sprint are now rolling out CDMA 1X across North America. Like GPRS, CDMA 1X claims operating speeds of 144 kilobits per second, but its actual speed is around 56 kilobits per second, making it comparable to a standard dial-up connection. This technology will migrate to EVDO, which is a data-only environment that professes speeds up to 300 kilobits per second. “You would basically have similar data speeds and throughput that you would get from a cable modem or DSL [digital subscriber line] in a WAN environment,” Iadarola maintains.

But developing a viable business model for these new technologies presents wireless carriers with a challenge. One issue is pricing. Iadarola explains that consumers currently pay about $80 to $100 per month for unlimited wireless access. These service costs have less impact on large enterprises, but they still can affect the bottom lines of small and mid-size businesses trying to purchase mobile devices and services for their employees.

Less expensive options are available. Iadarola points out that besides wireless laptops, manufacturers are marketing a variety of personal digital assistants (PDAs) and cellular telephones that are reasonably priced. For example, Nextel offers PDAs and cellular telephones operating Java 2 Micro Edition applications such as text messaging, Lotus Notes and Microsoft Exchange. These devices are not as sophisticated as laptops or handheld computers, but they allow users to access e-mail and company networks remotely.

The growth of enterprise-level applications illustrates another difference between the U.S. and European wireless markets. In Europe, the consumer segment drives growth, whereas in North America enterprises are pushing for these services. “In terms of total numbers, there are more consumer adopters of mobile data in the U.S. But you see more of a push with mobile enterprise [services] in the U.S., whereas in Europe it’s really a consumer market,” Iadarola says.

Consumer-driven applications such as text messaging and musical ring tones for mobile devices are very popular in Europe, but they are not as prevalent in U.S. business markets. The popular services in the United States are mobile office technologies such as remote e-mail access and fleet management applications.

Iadarola predicts that in the next 18 to 24 months several advanced wireless services now available in Europe will appear in North America. On the consumer side, this may include mobile video services. He adds that Sprint already is beginning to provide a streaming video capability to its customers. Other services include mobile music and television. Some of these features also can be customized for enterprise use, but the major upcoming applications that will interest businesses include mobile office tools, field service and sales force automation.

Besides the migration of CDMA and GSM technologies to 3G, another factor in the growth of the wireless market is the integration of wireless fidelity (WiFi) and worldwide interoperability for microwave access (WiMAX) technologies. Iadarola believes that this merger will lead to mobile devices that stay connected while roaming in and out of both WiFi and WAN networks. He maintains that WiMAX is basically WiFi with expanded coverage capabilities, but it will allow handheld devices to access the growing number of wireless hot spots in urban areas.

This new environment is creating additional worries for carriers. Accurate billing and quality of service are major concerns because many different companies can operate in a hot spot’s unlicensed spectrum. He notes that users’ constant jumping in and out of hot spots creates problems for carriers attempting to achieve ubiquitous coverage or consistent billing. For this hot-spot-based business model to work, he predicts that a greater density of carrier-provided sites will be necessary.

The growing numbers of hot spots also help the carriers avoid bandwidth overcapacity on their networks. When users access hot spots, they are shunted off the carrier’s WAN, reducing pressure on the system. Because hot spots are linked to the Internet through T-1 or digital subscriber line connections, their backhaul capability saves bandwidth across the local network. Hot spots also provide faster connection speeds for wireless users. Iadarola explains that these nodes use the Institute of Electrical and Electronics Engineers 802.11 standards, allowing connection speeds significantly higher than 3G technologies operating on a WAN.

Yet despite the advantages hot spots provide, bandwidth capacity continues to be an issue for the major carriers. “If you have someone sitting in the back yard with an EVDO card downloading MP3 files, he or she is going to jam up the entire base station. That’s going to be a problem, and that’s why [the carriers] are pricing everything so high right now. Because a lot of carriers have issues related to capacity at the radio-access-network level, they need to do some work before they can let everyone in,” he says.

Reliability is another issue affecting the market. North American consumers expect the same level of service from mobile data applications that they get from voice services, Iadarola observes. Quality-of-service problems can turn customers away. He adds that this is especially true for enterprise customers relying on mission-critical applications.

The timing of a technology’s deployment is another important factor that affects customer confidence. Carriers often are faced with a business decision either to be the first to deploy a new system or to wait until any infrastructure or quality-of- service issues have been resolved. Firms that move first have the advantage of capturing market share, but they also may suffer from any flaws in the new application. Providers that wait until all of the technology’s problems are solved may be at a disadvantage entering a market, but they can deploy more mature systems. “That’s the decision the carriers and service providers have to make,” he says.

Even when all of the infrastructure and system issues with a technology are worked out, its replacement looms on the horizon. Iadarola explains that carriers are involved in a constant cycle of deploying new applications, solving any network issues and planning for upcoming services to roll out.

Security continues to be a key concern for enterprises considering mobile networking technologies. Iadarola notes that in Frost and Sullivan surveys of government and commercial customers, security is ranked among the top three considerations consistently. Organizations are apprehensive about adopting wireless networking technologies because of a lack of uniform standards. He adds that security features can exist at the device level or in the network itself, but there is little uniformity in their application. Until the industry finds its way, many organizations will decline to use wireless networks. “The industry is still in its infancy in terms of addressing a lot of the mobile security in WANs. It is even more so with local area network security,” he says.


Web Resources
Frost and Sullivan:
Institute of Electrical and Electronics Engineers:
CDMA Development Group:
GSM World: