3G faces threat from ultra-cheap technology

date: 11th March 2001, source by: sunday-times.co.uk

THIRD-GENERATION mobile phones have had a troubled birth. The licence costs have left many telecommunications companies heavily indebted, struggling to afford the cost of building new networks and facing delays in the roll-out of their high-speed data services.

Now a new threat has appeared - a wireless technology that is much faster than 3G and can handle many of the same applications, but which appears to be considerably cheaper. Instead of requiring new mobile networks costing billions of pounds, the technology can work from base-station transmitters for the home that cost just $250 (£170).

The wireless technology, clumsily christened "802.11", is rapidly being adopted in America, particularly in "tech towns" such as Boston, San Francisco and Seattle. Base stations are being installed in cafes, hotels and airports, allowing anyone within about 100 yards to connect a laptop or digital organiser to the internet via a high-speed connection.

With data speeds of up to 11 megabits per second, 802.11 networks are up to 200 times faster than conventional dial-up modems - and much faster than the promised speed of 3G services. Consequently, surfing the internet is much quicker.

Nick Denton of Moreover.com, a London-based searchengine company, spends a lot of time in San Francisco. He said the 802.11 technology had noticeably taken off in the past few weeks. "It's reached lift-off on the west coast," he said. "It's 100 times the speed of 3G, and all it costs is $100 for a card to enable your laptop, and $200 to $300 for the transmitters."

Greg Murphy, chief operating officer of AirWave, one of a number of companies looking to build a network of access points, estimates there are already 1m American users of 802.11. "It's just really getting to the point where people are paying a lot of attention to it," he said.

As it is a data-only technology, Murphy said AirWave sees 802.11 "not as a replacement for 3G so much as a complement".

However, he believes consumers will be reluctant to give up the streaming-video and other high-speed services that will be possible with 802.11. He said: "People are going to want the speeds they can achieve in their office and home. They're going to be dependent on the type of applications that demand that type of [high-speed] access."

Ali Pourtaheri, founder and chief executive of UbiNetics, a Cambridge wireless-technology firm, said: "Generally speaking, it's a very competitive solution compared with 3G."

There is an important obstacle to the adoption of 802.11 in Europe. The technology uses radio spectrum that is free and unlicensed in America, which greatly improves its economics. In Europe, regulators have not decided how the relevant spectrum will be allocated.

Barry Nolan, vice-president of marketing at Parthus, an Irish technology firm, said 802.11 had other problems. It requires a lot of power, which poses particular difficulties for personal digital assistants.

Nolan added that the 2.4 GHz frequency used by 802.11 was close to the frequency of water. He believes this may mean the technology will not work in the rain. But AirWave's Murphy dismisses this. "It certainly does work in the rain," he said. "But if there's a very powerful microwave in the area, that can cause problems."

The telecoms industry is estimated to have spent $100 billion acquiring 3G licences. It is thought firms will have to spend a similar sum to build the new networks they will need.

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