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3G still has the potential to thrive

Even as telecoms start deploying fourth-generation wireless connectivity, third-generation technologies can profitably fill a niche for some providers.

CHICAGO -- As the first shots are fired in the fourth-generation (4G) wars, which will pit LTE (Long Term Evolution) against WiMax, third-generation (3G) wireless networks may still have several years of life left in them, particularly in rural, underserved areas, Gartner analyst Robin Simpson told attendees at Gartner's Wireless and Mobile Summit in Chicago on Monday.

"Many countries have this challenge of universal service, of bringing Internet out everywhere," Simpson said. Many have banked on advanced wireless technologies, particularly WiMax, to serve as a broadband delivery platform, he said, but 3G's strengths, particularly when deployed on a lower spectrum, are perfectly suited to rural areas -- signals remain strong over long distances, with the lower user density mitigating the reduced throughput.

"It helps answer this concern of the digital divide," Simpson said.

Australia had its ambitious plans for universal WiMax coverage scuttled, he said, as one enterprise struck the market first by building out older, more proven 3G wireless technologies.

Why couldn't WiMax compete? Simpson said telecoms had done a poor job developing a business case for faster speeds. More bandwidth is always appreciated, but there have been few successful strategies that made the extra investment needed to support higher-end services pay back the steep costs. In fact, Simpson said, the universal WiMax deployment plan relied not only on the premise that it would be the only universal service offering, but that the government would subsidize it to the tune of $1 billion. Then, overnight, the supporting ruling political party lost to a party whose new government was looking to cut unnecessary infrastructure costs.

By contrast, Simpson said, the deployment costs of covering rural Australia in a 3G network were minimal: Telstra, the company that offers the service, simply had to upgrade its towers rather than build out any new ones. Because the towers were serving a dispersed customer base and were operating in the 850 MHz spectrum, each tower's range was expanded to cover a radius of up to 200 kilometers.

And though the implementation costs were minimal, the ongoing maintenance of a 3G network compared to a 2G network was actually reduced by about 75% because of simplified management and other savings, he said.

While telecoms couldn't break even with WiMax without heavy subsidies, with 3G they were able to find a way not only to stay relevant but to carve out an incredible niche and charge a premium for it (wireless data rates in rural areas are three times that of urban areas). Simpson said 3G's situational strengths could be exported by clever operators.

"This applies to the United States, to Canada, to any country with a lot of area to cover," he said.

Simpson said WiMax has not been completely shut out of Australia, and that for the foreseeable future most developed countries would see a healthy mix of about half a dozen wireless technologies. Remote Australian mining towns, for example, are small and far-removed enough to make physical investment prohibitive, while their density brings 3G speeds down to a point where the older technologies cannot act as a broadband replacement. In these locations, Simpson said, WiMax is often used as a backhaul technology, with Wi-Fi access points deployed as the last-mile solution.

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