WIRELESS BROADBAND: HIGH SPEED GOES MOBILE April 2006
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1 WIRELESS BROADBAND: HIGH SPEED GOES MOBILE April 2006 Over the past decade, the astounding growth in mobile phone penetration and the deployment of innovative technologies has fundamentally changed the way business is conducted, families communicate, and governments provide essential services. A phone is a phone is a phone unless it is a wireless phone. A wireless phone is a product of a competitive industry: competitive choices in providers, products and services. While cell phones were a novelty item for most Americans 15 years ago, today it s a given that you can travel away from your desk or home for short and long periods of time and still close a business deal in one city while in route to a trade show presentation in another; check on your children using instant messaging; be alerted to severe weather conditions and confirm your flight reservations home, all in a matter of minutes and all on your mobile phone. A wireless phone is about delivering voice, data, music, games, the Internet, news and sports via text and video without wires, cables or cords. Broadband on the go is enhancing the connectivity transformation initiated by mobile voice communication. The fully converged wireless network of tomorrow will permit consumers to access voice, video, and an extraordinary array of data services at home, at work, in cafes, and on travel. The wireless platform offers a solution that overcomes some of the technological and economic challenges inherent in any wired environment, extending the reach of broadband technologies to traditionally underserved communities, including rural areas and less affluent urban markets. Mobility, however, is the factor that separates wireless from other broadband services, and mobility is the primary reason wireless broadband utilization has the potential to grow at unprecedented rates. According to recent reports by analysts, 41% of all Internet users or 56 million Americans, use devices that are capable of accessing the Internet wirelessly. By June 2005, half of all US wireless customers had phones capable of browsing the Internet and one-third of all US wireless customers were using wireless data applications. The volume of mobile data transmissions is staggering with 7.3 billion messages sent in the month of June 2005, up 154% from the number of messages sent in June The chart below summarizes the capabilities of the various third generation wireless technologies: th Street, NW Suite 600 Washington, DC Main Fax
2 Technology Standard Usage Speed Range Availability in US 3G CDMA 1xRTT 3G WAN kbps 1-5 miles Today WCDMA/UMTS 3G WAN up to 2 mbps 1-5 miles Today 1xEV-DO 3G WAN up to 2.4 mbps 1-5 miles Today Technology Standard Usage Speed Range Availability in US 3G GSM GPRS 2.5G WAN kbps 1-5 miles Today EDGE 2.5G WAN up to 348 kbps 1-5 miles Today UMTS 3G WAN 220 to 320 kbps 1-5 miles Today UMTS/HSDPA 3G WAN 550 to 1100 kbps 1-5 miles Today Technology Standard Usage Speed Range Availability in US Broadband Wireless Access WiFi a,g LAN Up to 54 mbps 300 feet Today FLASH-OFDM 3G WAN mbps 1-5 miles Today WiMax d,e LAN mbps 4-6 miles Today MBWA WAN Peak data rates per user > 1 mbps THE DELIVERY OF MOBILE BROADBAND up to 70 miles In Development Wireless broadband permits mobile phone users to bring the world to the user wherever the user might be. In 2005, the amount of mobile services and applications brought to the market was significant in both its breadth and depth. In December 2005, Cingular introduced its 3G service called BroadbandConnect, which is available today to approximately 35 million people in 52 communities. BroadbandConnect utilizes Universal Mobile Telecommunications System (UMTS) with High Speed Downlink Packet Access (HSDPA), which offers average speeds in the Kbps range as well as voice and data simultaneously using its EDGE network for backward compatibility. BroadbandConnect is available in Austin, Baltimore, Boston, Chicago, Dallas, Houston, Las Vegas, Phoenix, Portland, Salt Lake City, San Diego, San Francisco, San Jose, Seattle, Tacoma, and Washington, D.C. Cingular plans to extend the reach of the new service to all major markets by the end of In locations where BroadbandConnect is not available, Cingular's EDGE service, which covers some 13,000 cities and towns and offers speeds up to 135 Kbps, fills out the coverage area. Verizon Wireless EV-DO is available to 150 million people in over 170 cities. Verizon Wireless has deployed an advanced wireless network utilizing CDMA2000 1xEV-DO ( Evolution-Data Only ) technology in a number of cities, and hopes to
3 offer third generation service in areas that comprise half the country s population by year end. Verizon Wireless EV-DO has typical download speeds of kbps with peak speeds of up to 2 mbps, and typical upstream speeds of kbps. These high speeds enable the provision of Verizon Wireless V CAST (e.g., music videos and 3D games) service. T-Mobile s high-speed wireless broadband Internet service pivots on public Wi-Fi locations such as coffeehouses, books and music stores, retail outlets, airports, and airline clubs. The service allows customers to access the Internet and their corporate Intranet via a Wi-Fi b wireless network. Today, T-Mobile HotSpot customers have access to the world's largest public Wi-Fi network. Sprint plans to upgrade its Power Vision network based on the new, faster version of EV-DO, and expand service from 191 U.S. markets to more than 260. The upgrade will boost Sprint s service from the current 400 Kbps to about 700 Kbps. Deployment is not limited to the nationwide wireless providers. Alaska Communications Systems, Dobson Cellular, Midwest Wireless, and U.S. Cellular, are just a few offering the advanced technology choice. Alaska Communications Systems has deployed EV-DO mobile broadband Internet service in every market where it offers mobile voice services, including Anchorage, Fairbanks, and Juneau. Through roaming agreements, ACS customers can also access their data applications when traveling in the Lower 48 states and Hawaii. Dobson Cellular Systems provides data services in 16 states and 65 markets through its Signalink package, which features wireless Internet, text messaging, picture phone technology, ringtones and video games. Midwest Wireless Clearwave Mobile delivers an always-on network capable of delivering data at speeds faster than dial-up service (up to 70kbps). Cellular South has converted its network to CDMA- 1X digital technology, which has enabled the company to support its two main Easyedge suite of data services phone download applications and picturing messaging. The company has also been conducting EV-DO trials over the last year, assessing the technical and business case for the technology. The ability to surf the Internet, download heavy files and work remotely is also a focus of laptop manufacturers as they embed wireless access in their product, further signaling the acceptance of all things mobile. Lenovo is equipping its Thinkpads with chips to access Verizon Wireless' Evolution Data Optimized (EVDO) network. Dell and Hewlett-Packard are also embedding in their own laptops technology compatible with data networks operated by Cingular and Verizon. The laptops will have built-in, immediate high-speed internet access without the need for additional hardware.
4 MOBILE ENTERTAINMENT AND APPLICATIONS New technology is enabling a rapidly expanding menu of mobile entertainment. M:Metrics reported that in September of 2005 almost 40 million wireless customers were equipped with multimedia phones and that pent-up demand for multimedia content was on the verge of being unleashed. According to the Yankee Group, mobile TV generated $16 million in revenue in 2004 and is predicted to become an $800 million business in The year 2005 has already demonstrated that there will be robust competition in the mobile TV arena. Sprint and Cingular subscribers have access to service with MobiTV which offers 28 channels to over 500,000 subscribers. Wireless Tower operator Crown Castle has announced plans to offer mobile TV in the top 300 U.S. markets using GHz that it purchased in the 2003 FCC auction. New York City and Pittsburgh are expected to be the first markets offering Crown Castle s Modeo service later this year. Sprint Nextel has a service called MSpot that will stream full-length films to a subscriber s phone. Qualcomm s MediaFlo allows cell phones to pick up satellite television. The ability to listen to your favorite music, view your favorite video content, and find needed information and services anywhere and anytime on your wireless phone is also trending upward as more and more applications are being rolled out. In January of 2006, Verizon Wireless unveiled its VCAST Music service giving customer the ability to pick from 500,000 titles in January and over a million in the spring. For titles, Verizon Wireless has deals with Warner Music Group, EMI Music, Universal and Sony/BMG, plus indie provider the Orchard. VZW has a deal with Microsoft that will allow downloads from a PC to a wireless device. Motorola recently announced that it will offer iradio service later in 2006, a pay radio service that will carry 400 channels. Motorola currently has five types of iradio compatible phones. In late 2005, Google launched satellite mapping and driving direction software compatible with Cingular, T-Mobile and Sprint phones. Motorola has also partnered with Google to run Google searches as well as with Eastman Kodak to provide cameras that use Kodak s imaging sensor technology.
5 Yahoo Go Mobile is close to launching in the U.S. services that provide for a suite of information, communications and entertainment. MVNO s such as Mobile ESPN, Amp d Mobile and Disney Mobile are creating unique identities by offering customized content to their wireless customers. Sprint has joined forces with Comcast, TimeWarner, Cox Communication and Advance/Newhouse Communications to develop a range of wireless-based products. It is envisioned that cable customers will be able to program their DVRs using cellphones and also download recorded content for playback on their wireless phone. The MSOs have agreed to provide video content to Sprint s TV service. OBSTACLES TO CONTINUED GROWTH Policymakers have consistently recognized wireless broadband service as an important facilities-based platform providing a robust, viable competitor to cable modem and DSL services that will spur competition, reduce prices and increase consumer choices. For wireless carriers to realize this potential, however, they need a stable regulatory environment that relies primarily on market forces and avoids government intrusion into new and evolving services. There are a number of issues that need to be addressed to encourage the rollout of wireless broadband: National Regulatory Approach. Wireless broadband services operate without regard to geographic boundaries. A balkanized regulatory framework will burden this nascent industry and impede the heretofore-rapid development and deployment of the newest and most innovative technologies and services to rural and urban consumers alike. The competitive marketplace is providing the incentives necessary to spur deployment of broadband services while ensuring consumer protection. As evidence, the industry has cumulatively spent more than $174 billion on capital investments since its inception $13 billion in just the first six months of In the name of consumer protection, however, more and more states are seeking to regulate the activities of wireless carriers, including billing, advertising, and establishment of rate elements. Applying 51 different and conflicting regulatory regimes to the wireless industry will disassemble the very engine driving the nationwide rollout of wireless broadband and will compromise the most effective means of promoting consumer welfare a single national policy that relies on market forces to guide the growth of the wireless marketplace. Depreciation of cell-site equipment. The wireless telecommunications industry was in its infancy in 1986 when depreciation rules were last reformed and its assets were not assigned to specific asset classes in the Modified Accelerated Cost
6 Recovery System. Over the past decade, wireless companies and the IRS have wasted significant resources disputing the proper depreciation treatment of wireless cell site equipment. Given the rapid technological change and advances in the wireless industry, the maximum recovery period that should be applied to wireless telecommunications equipment is five years. Instead, the IRS takes the position that the cost of the industry s computer-based cell site equipment should be recovered over 10 years or longer. This misclassification of wireless assets significantly increases the cost of capital investment in the nation s wireless network and imposes an inequitable level of taxation on the wireless industry compared to other industries utilizing assets that have properly defined class lives. Discriminatory taxation. More than a third of the states currently impose double-digit taxation on the wireless industry. Many of these state taxes have their origins in the monopoly telecommunications era and are levied at rates significantly higher (up to 21%) than consumption taxes on other goods and services (approximately 7%). Not only does this practice raise significant equity issues, it suppresses demand for wireless services. Although state officials often express their desire to expand the availability of wireless broadband infrastructure, excessive taxation works against states economic development interests by discouraging investment in wireless networks. Tower siting/zoning obstacles. In 1996, Congress directed states and localities not to create barriers to telecommunications entry through burdensome antenna siting rules and excessive fees for use of rights-of-way. Municipalities, however, continue to unlawfully deny permits for towers and to issue discriminatory zoning decisions. Notwithstanding the authority given the FCC in the 1996 Telecommunications Act, the FCC has been reluctant to preempt these state and local actions. The resulting delay and costs associated with court litigation has the potential to disrupt the rapid expansion of wireless broadband.
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