3G Wireless on the Move

Today's announcement by Verizon Wireless that the company will purchase $5 billion worth of wireless software and equipment from Lucent Technologies is part of the leading wireless operator's plan to roll out 3G services sometime later this year. Coupled with Sprint's announcement of its upcoming 3G network last week, it looks like high-speed wireless services may be available sooner than we thought.

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By Chris Rugaber (TMF Chris)
March 19, 2001

Despite all the gloom and doom regarding the telecom industry and the economy overall, this week promises to see plenty of old-fashioned futuristic hype emanate from a wireless conference in Las Vegas sponsored by the Cellular Telecommunications Industry Association (CTIA), an industry trade group.

Several companies have already given a preview of the big news they plan to discuss during the conference. Today it was Verizon Wireless' turn, as the company announced a $5 billion contract with Lucent Technologies (NYSE: LU) for software, switching centers, base stations, and other equipment for its third-generation, or "3G," network, which the company says it will roll out later this year.

Verizon's announcement comes on the heels of last week's news from Sprint PCS (NYSE: PCS) announcing that it too would unveil a 3G network by later this year. Both companies, for whatever it's worth, claim that they will be first.

Third-generation networks are expected to provide much faster rates of wireless data transmission, enabling greater downloads of information from the Internet, including sound and video files.

Bit by bit
Regardless of the dueling press releases over who will be first to introduce 3G in the U.S., both companies will implement their high-speed networks gradually. Sprint, for example, plans to provide download speeds of 144 Kilobits per second (Kbps) later this year in selected markets. This is a tenfold increase from current speeds of around 14.4 Kbps, and compares well to the average home dial-up modem speed of 56Kbps, but is much slower than the original promise of 3G. The company hopes to have the 144K speed available in all its U.S. markets by the summer of 2002, then plans to increase transmission speeds to 2.14 megabits per second (Mbps) by the end of 2003.

So far Verizon Wireless, the nation's largest mobile telecom operator, hasn't released as detailed a schedule, though it is also likely to work in stages. The company, which is co-owned by Verizon (NYSE: VZ) and the U.K.'s Vodafone (NYSE: VOD), expects to double its voice capacity and increase its data transmission speed by 10 times thanks to Lucent's equipment. Its initial transmission speeds will probably be similar to Sprint's.

Other winners: Qualcomm, Lucent?
In fact, both companies refer to doubling their voice capacity and increasing data speed tenfold, probably because both are using Lucent equipment. (Sprint also counts Nortel Networks (NYSE: NT) as an infrastructure provider.) Today's agreement with Verizon represents an important win for struggling Lucent, whose booth at CTIA's conference this week sounds like it will be a busy place: Both Verizon and Sprint plan to demonstrate their high-speed capabilities there.

In addition, both Sprint and Verizon's networks use the CDMA wireless transmission protocol developed by Qualcomm (Nasdaq: QCOM), and both are claiming their transition to 3G will be quicker and less expensive than other carriers' as a result. Since Qualcomm's 3G CDMA2000 technology is backwards-compatible with current equipment, Verizon and Sprint expect to spend less upgrading their network hardware than those carriers that are forced to switch protocols for 3G transmission.

The two companies are certainly moving faster than some of their competitors, and are introducing their rudimentary 3G networks earlier than most observers expected. However, they will face competition from the data service known as i-mode that AT&T Wireless (NYSE: AWE) is planning to roll out in conjunction with its partner, NTT DoCoMo.

While it's not yet clear that consumers will flock to a wireless provider just because they are touting high-speed data services, clearly the race is on to develop 3G. Both Verizon and Sprint hope to attract more subscribers, and to bill their customers for greater data usage, resulting in higher per-subscriber fees (assuming they don't continue with flat-rate billing). Will they be able to pull it off? It looks like we may find out a little sooner than we thought.

Chris Rugaber does not own shares in any of the companies mentioned above, though he almost pretended to when Qualcomm went nuts in 1999. The Motley Fool is investors writing for investors.

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