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EDGE will happen

Mobile networks play hop, skip and jump

Mobile phone technologies used to be mapped out clearly. GSM, HSCSD, GPRS, EDGE and UMTS, but most networks are playing hop, skip and jump. They've skipped HSCSD, will they jump over EDGE? Simon Rockman, publisher of What Mobile, thinks this would be a mistake.

Like most mobile phone acronyms EDGE is as meaningless spelt out as it is when presented in its compact form. Enhanced Data for GSM environments, so EDFG, but not as catchy. EDGE takes mobile phone data speeds and triples them. You need to be very careful with such things: memory capacities and processor speeds have grown at a rate which always astounds, but bandwidth, and particularly mobile bandwidth, consistently disappoints.

Mobile data ran at 9600 bps in 1995 and today, for the vast majority of people, it still does. Every new technology which is presented with a high data rate ends up being much, much slower. GPRS was originally touted as being capable of 171kbps. We've seen a ceiling of 48kbps to receive and 24kbps to transmit. Third generation, originally touted at 2048kbs, is now being promoted at 384kbps best case 64kbps most of the time. Taking the 48kbps and tripling it to 144kbps suddenly starts to look very powerful.

How will the world take to that power? It's a question I've been asking the major decision makers in the mobile phone industry for the last six months.

Close to the Edge

"Will EDGE happen?" - a question that seems to demand a binary answer and yet results in fuzzy logic. The most common answer from handset manufacturers is: "If our customers want it we will make it". But if their customers wanted a phone with bright pink spots they would make that too.

A second answer is that the people who want EDGE are those who don't have a 3G licence. Which is to say France's Bouygues Telecom.

My opinion is that EDGE will happen. The networks want 3G, but they can't have it. They have spent their billions on licences and need to use that to make the money back. They will develop the systems, technologies and services to generate extra revenue. Gambling, gaming and pornography. Watch the video streamed horse race and bet on it. Play backgammon with a bloke in Boston, or text message with a girl in Amsterdam. All from the back of the bus.

But the networks won't have the infrastructure, there won't be the 3G systems to deliver these services and so they will resort to EDGE. It's expensive but better than waiting another five years to see the income streams they need. To a company with a 3G licence it is a brave decision. It's admitting to the banks and shareholders that the £6bn piece of paper isn't worth anything just yet. It's a statement O2 isn't prepared to make. The O2 line is that EDGE isn't necessary, 3G will be here soon enough to deliver the services. It's a fanciful view.

History has shown that technology takes a long time to roll out. O2 announced GPRS in the summer of 2000 and started trials in November 2000.

Today the consumer service is still only WAP access, unless you are a corporate customer you can't use it to pick up your email. Vodafone and Orange both have full GPRS. Vodafone has had press briefings but Orange deems it a soft launch, if you ask they will tell you that it is available, there is nothing aimed at selling it. GPRS is a year late. GPRS is quite a simple upgrade, just think how late 3G is going to be, a system which needs horribly expensive handsets, tens of thousands of new base stations, many of them in the face of anti-mobile campaigners and an untried business model.

It's not a technology problem, it is a business case problem, as John Thode, vice president and general manager of 3G products of Motorola, points out.

Traditionally, handset manufacturers make the running with technology, committing huge resources to get it working in the hope of making a sale. The leading company making the headway and helping the networks does this in the hope that the networks will commit to their handsets. And then they hope the networks won't switch when something else comes along. It's "The hen contributed to the breakfast, the pig was committed" school of business.

In the future Motorola doesn't want to be the pig. It wants to see ongoing commitment from the network - otherwise it won't develop the handsets. Or at least it says it won't: the new Motorola A820 sounds pretty close to production.

Whither 3G?
Ask Chris Hall of Manx Telecom when the number of 3G subscribers he has will overtake the number of GSM ones and he has to think. Manx telecom is the best possible case for 3G. There was no licence fee to recover. Inhabitants of the Isle of Man pay a maximum of 18% tax which attracts many of the wealthiest people in the country. O2, NEC and Siemens are building the network to learn about the technology. It's got huge advantages over most of the world. Yet Chris Hall doesn't see a rapid take up of his third generation phones. When pushed, the bullish and enthusiastic man predicts it will take six years for number of 3G subscribers to match the number of GSM subscribers on the island.

This does not bode well for the rest of the world where there are significant financial and logistical hurdles. If the leading 3G site in Europe reaches 3G mass market status only in 2008, the vast majority of the world is looking at well into the next decade. The protestations of those who have spent billions on third generation are starting to sound like the readers who write to car magazines when their new car has just had a bad review. The Orange view that we will look back at £5bn and think it cheap sounds hollow.

I think that EDGE will happen at GSM frequencies and I think we will see GSM use the 2.4GHz spectrum of 3G. The networks, faced with the need to roll out their new services and the lack of 3G infrastructure or handsets, will look to see a return on their 3G expenditure. To call it an 'investment' is flattery.

Mexican stand-off
The networks will say to the government: "We can't sell all the services we need to pay for our licences in our 900MHz and 1800MHz spectrum, can we use the 3G frequencies for GSM". And the Government will say: "No, that wasn't the terms of the licence." So Vodafone will point to 650 redundancies, O2 to 1900 redundancies and say: "OK, how many more cuts do you want us to make." And the government will say: "Oh, OK, we suppose that you have paid for that spectrum so you can do what you want with it."

So will EDGE fill the gap? Keith Woolcock of Nomura looks to another technology. He thinks that wireless networks are the way forward, that 802.11 which gives a comfortable 2Mbs, if not the future, will fill the gap between 9.6kbps and 384kbps. But the CTO of Ericsson points out that to cover the area filled by one GSM cell you need 10,000 802.11 cells.

Worse, hand-off isn't so well sorted and perhaps the final problem is that while 802.11 looks attractive as a technical solution there is no billing mechanism. Which means there's no relationship between the users and the customers. You can't look to the mobile phone networks to install 802.11 when they are committed to 3G. The best billing model is Starbucks - all the bytes you want as long as you buy our coffee. It's fine for them (and after all Wrigleys chewing gum turned into a business empire after being started as a free gift with flour). But no-one is going to drink that much coffee.

Perhaps the most compelling argument that 3G will not be late and that EDGE will not fill the gap comes from Ed Moore, the CTO of Carphone Warehouse. He points out that the GSM networks are between six and eight years old. All technology starts to creak after time. They also have around 10 million customers paying around £20 a month. If you start to add new technology on top of these old foundations you stand a good chance of breaking the system, and then you start to imperil that revenue stream. If EDGE broke one network for just a day the cost would be far more than the cost of losing approaching a million pounds for that day's calls. Customers would deem it as unreliable and migrate to rivals. Market share would dive. So EDGE looks risky.

It's a compelling argument, but the networks have been here before: they understand how to roll out new technologies and they don't have to imperil the whole network at once. What's more, networks are now multinational, they can try it in one territory and see if it works, and if it does, what that does to call revenue before trying elsewhere.

The final views on why EDGE will happen come from Motorola and Nokia. Motorola once had the strategy of: "We build it and hope they will com." That is dead, yet Ron Garriques waved the unannounced T720 at me and revealed: "This is our first EDGE phone." He expects them to do more. Motorola is particularly good at this kind of technology, it is the leader in GPRS and is the only company which has the PBCCH technology which is necessary to charge for data by the type of packet, so horoscopes can be cheaper than stock prices.

It's something the networks really want and are sacrificing because other handset manufacturers, especially Nokia, cannot do it. But Annsi Vanjoki of Nokia also believes in EDGE. And Not to the detriment of 3G. He presents a compelling argument irrespective of when 3G happens. The world wants more bandwidth. People playing games, playing with themselves or gambling don't care about the acronyms necessary for their pleasures: they want the services.

Vanjoki believes that all the technologies will succeed in parallel. As we become a more wired, wireless world the need for bandwidth will be insatiable, we'll need EDGE not as a stepping stone to 3G but as a supplement, a way to make use of radio spectrum to deliver the revenue the networks need.

Spectrum is usually portrayed as a finite resource, but it isn't. We've seen technology improve to cope with much higher and lower frequencies and to make more use of the space with faster processors and smarter programmers improving compression, EDGE is just another part of that picture. The people who say it is a stepping stone to 3G, and in particular a stepping stone we can jump over, are missing the point.

Of course time will tell who is right, the US networks which are adopting GSM 1900 and 850 are ordering EDGE, but the US is a long way behind the rest of the world in mobile phones. It isn't really a matter of who is right and who is wrong, but of who is most right. By betting on all horses Nokia and Motorola know they will win and I would say that O2 has been most wrong.

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