Everyone loves to save money, which is why I am intrigued by the recent news that the costs of 3G handsets and so-called "smartphone" devices are plummeting and may soon reach the magic under-$100 mark. This will really make consumers jump at the chance to own one of these babies and take it for a spin, right?
Not so fast. While the buzz would seem to indicate that low prices will spark this relatively nascent market, the real reason why there is lethargy in 3G is a lot more complicated and serious than just savings a few bucks.
Verizon Wireless, Sprint PCS and other 3G operators in the U.S. have poured hundreds of millions of dollars into the development of faster 3G networks over the past few years. And they have invested millions more promoting the benefit of 3G services to their current subscribers and potential new customers. Now it's payback time. These four major wireless carriers in the U.S. are currently scrambling to add wireless broadband customers who are willing to pay a premium for faster unwired services.
The problem is that the jump from traditional wide-area wireless and even robust 2.5G services to the 3G fast lane is not happening quickly enough, or at least not exactly according to early plans. In fact, people are spending less time on their cell phones, as compared with previous years, says Sprint. It's not clear if users are talking less and enjoying it more, or talking less and not enjoying the experience at all due to reliability and connection problems.
What's more, many subscribers may now be using 3G services without even knowing about it, which means that cheaper handsets won't necessarily deliver a strong push to the market. There is also quite a bit of competition out there. As of March 2006, there are approximately 194 commercial 3G operators in 84 countries worldwide.
Verizon Wireless may be the carrier with the most to lose, since it started pumping up the column on its service speeds as early as 2001 and began deploying 3G systems in the U.S. a year or two later. As of last year, according to Verizon, the company's high-speed EV-DO service was available in 180 major metropolitan areas, representing a potential user base of 150 million people.
Cingular claims to have the largest all-digital network in the U.S., although it lags in term of 3G developments as compared with Verizon. The company's Broadband/Connect 3G services are currently available in 52 communities across the U.S., and had a potential customer base of 35 million people as of December 2005.
Sprint is the number three wireless carrier in the U.S., although it has been the most aggressive in terms of more video-rich services since the launch of multimedia applications and video services about 18 months ago. The company has since expanded its "Power Vision" data service to more than 215 markets and a potential audience of 150 million people at the end of 2005.
For all its talk and promotions featuring the lovely Catherine Zeta-Jones, T-Mobile is not yet in the 3G game. They may soon be there, however, when they buy up some spectrum via auctions.
What will drive 3G? I think it will be the continued introduction of non-phone devices that make use of higher-speed cellular networks. This includes "purpose-built" handheld devices, tablet PCs and notebooks with embedded 3G chipsets. Some of the carriers are now partnering with mobile computer manufacturers to add cellular wireless capabilities to notebooks and other portable devices. Dell Computer, Inc., Hewlett-Packard Co., Panasonic and Lenovo (IBM ThinkPad) have all announced plans to introduce systems, and demonstrated prototypes that have 3G radios embedded in them.
This is how the 3G connections will be made, and not through cheaper phones.