3G or Not 3G?

By Tim Kridel

Verizon Wireless just launched its '3G' service. At least that's what the company and most journalists
say.
So it's finally here: Third-generation wireless made its U.S. debut Jan. 28, when Verizon Wireless turned on its
Express Network service in select East and West Coast markets. "The premier Verizon Wireless network,
already the most advanced in the nation, just took another giant step ahead of its competitors," Verizon Wireless
CTO Dick Lynch said in a press release.

I'm betting that plenty of eyes are rolling in GSM strongholds from Atlanta to Seattle. Indeed, on Jan. 21, AT&T
Wireless spokesman Ritch Blasi e-mailed journalists, including me, a two-part column that appeared on
TheStreet.com. In "That Qualcomm Mystique," Tero Kuittinen ripped into Qualcomm and its carrier customers
for hyping CDMA and its next-generation, "3G" version, called 1XRTT.

"Overpromising and underdelivering are organic to Qualcomm," wrote Kuittinen, who likened the company to
P.T. Barnum. "A year ago, Verizon claimed it would launch 1xRTT models in 2001 at data speeds of more than
100 Kbps. Recently, the operator admitted that the launch is delayed to 2002 and that top speeds will be 40 to
60 Kbps. Remarkably, there's been almost no media critique of this."

Kuittinen is right, although at the risk of tooting our own horn, The Net Economy has noted for more than a year
that GPRS and 1XRTT each would deliver only a fraction of their maximum data rates when they launched.

Alas, Blasi's preemptive strike apparently fell on deaf ears. One example: Although The New York Times put
quote marks around "third-generation" early on in a Jan. 28 article about the Express Network, most readers
probably still came away with the sense that Verizon Wireless had beaten rivals to the punch.

"The differences between the third-generation services from Verizon Wireless and the two-and-a-half generation
technology offered by AT&T Wireless and Cingular are minimal, especially where connection speeds are
concerned," the Times wrote. "Still, Verizon Wireless is the first to make such services available in a large part
of its territory. About 20 percent of its customers will have access to the service this week."

Yes and no. Although Verizon Wireless is the first U.S. carrier to launch 1XRTT in this many areas,
VoiceStream's GPRS service has been available in all of its markets since late 2001. Ultimately, which carrier
was first depends on your definition of 3G.

Will the real 3G please stand up?

In theory, 1XRTT can support data rates as high as 144 Kbps. Verizon Wireless says that the Express Network
will "consistently deliver between 40 and 60 Kbps," while Sprint PCS expects to offer an average of about 65
Kbps. Based on the reviews that I've seen, most U.S. GPRS services currently deliver between 20 Kbps and 40
Kbps, depending on factors such as signal strength and the design of the phones and modems. From that
standpoint, Verizon Wireless' service is indeed faster, but calling it a "giant step ahead" seems like a stretch.

So just what is 3G? Judging by the press releases and press coverage over the past year, 3G is whatever you
want it to be. In other words, it's a catch-all term that's been rendered meaningless. Until recently, 3G was
synonymous with 2 Mbps, which the International Telecommunications Union says is the minimum that a
technology has to provide to a stationary user to be considered 3G. Under the ITU's definition, the absolute
minimum is 144 Kbps, and that's acceptable only when the user is in a car or train. In theory, both GPRS and
1XRTT can hit 144 Kbps, but it's questionable whether the networks and initial crop of devices can hand a fast-
moving user from cell to cell and still maintain the full data rate.

Third generation apparently now encompasses any mobile wireless technology that can muster at least 40
Kbps, although GPRS backers rarely call their technology "2.5G." The argument usually is that a 2.5G service
can be upgraded to 2 Mbps, but that's like saying a new Volkswagen Beetle can go 150 mph — if you spend
another $750 to add a nitrous oxide kit.
If analog was 1G and digital (PCS) is 2G, then you could argue that 1XRTT and GPRS are 3G because their
support of packet data marks another major evolutionary step. Perhaps, but if packet data is the yardstick that
distinguishes 3G from 2G, then CDPD and iDEN also are 3G — and have been for years.

Nit-picking? Perhaps, but whenever you hear "3G," it's worth peeking under the hood. After all, if a carrier says it
expects a significant share of its revenue to come from services that need a megabit or more to run reliably, and
their technology can muster only a fraction of that bandwidth, it won't be pretty when hype meets reality. Touting
low-bandwidth technologies as 3G also might be a sign that the industry is attempting to ratchet down
expectations that now can't be met. We'll see if that tactic flies with investors.

It's convenient to argue that most consumers probably don't care about data rates and whether a service is 3G
or isn't. Perhaps it's true that they're more concerned about the applications than whether one service delivers
them a second or two faster than another. After all, haven't consumers bought the line that this or that carrier
has a "nationwide" network?

Apparently not. Just last week, the National Advertising Division of the Council of Better Business called Nextel
on the carpet for its claim that its service "works around the world." A Nextel customer complained to the NAD,
the ad industry's self-regulatory group, that he felt misled when he couldn't make a call from five of seven
counties in Utah. Nextel argued that its ads aren't misleading because they note that the service is available in
"over 75 countries," and the NAD agreed.

Expect plenty of asterisks in ads for next-gen wireless data.