The 3G Sky Isn't Falling

Carl Weinschenk

Several reports suggest that 3G isn't rolling out as quickly or as or successfully in Europe as common wisdom said it would. That should be troublesome to carriers and vendors who have bet the ranch on 3G in the U.S., since Europe tends to run ahead of the States on these issues.

 

In the U.S., the situation seems to be more positive, though there are some danger signs. Carriers appear to be moving aggressively. For instance, T-Mobile recently said that it would spend $2.66 billion on its 3G rollout. The carrier, among many others, recently pledged a tremendous amount of money in the Federal Communications Commissions (FCC) advanced wireless spectrum auction. While this spectrum can be used for a number of platforms, 3G clearly is high on the priority list.

 

Indications are that the main reason 3G is moving more slowly than anticipated in Europe is high prices. That's not great, but it's far better than lack of demand. (It's always possible to lower prices; it's far harder to create consumer interest.) The second reason for the slow progress is that improving technology is making older technologies -- 2G and 2.5G -- more robust and attractive at their lower price points.

 

The sky -- or the radio waves within it -- may not be falling for U.S. 3G, however. Neither pricing or the surprising resiliency of older platforms likely will be factors that impact the fate of 3G over here. First of all, 3G is by no means a failure in Europe. Markets simply move in unpredictable and sometimes frustratingly slow ways. And while Europe can provide a hint of what may happen in the States, the two are separate and distinct markets.

 

The vast differences between the telecommunications landscape in the U.S. and Europe mean that the biggest factors slowing 3G in Europe -- high prices -- may simply not be as big a factor here. Cellular players in the United States will be pushed hard by emerging WiMax services. This will force carriers to keep their prices low. Services will be priced to move and probably will, albeit with lower margins. Compare this to the European landscape, which largely was created before WiMax was a factor.


 

Problems encountered by 3G in Europe won't necessarily be experienced by carriers and vendors in the United States. If problems do occur -- and they probably will -- they will be due to other issues.



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