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3G Network Architecture: Far in Advance of Demand

by dylan brooks
July/August 2001

The recent shift in the industry’s outlook from next-generation networks to modest infrastructure investments makes financial sense–and begs questions. Will pending CDMA2000 1X deployments in the United States precede actual demand for high data rates? Do any current indicators reflect that demand? What’s the upshot for return on investment calculations?

Whether pending CDMA2000 1X networks by Sprint PCS and Verizon represent 3G networks is moot. Jupiter holds these are 2.5G networks; the carriers claim 3G. Regardless, these deployments will exhibit elements of next-generation networks, including persistent connections. More importantly, Jupiter research calls into question whether these networks will precede actual demand for data rates and levels of use predicted by industry.

Jupiter holds that current, measurable broadband PC preferences are solid indicators of important 3G needs. In a recent Jupiter survey, 59 percent of online consumers identified persistent connections as one of the most appealing characteristics of broadband connections–slightly more appealing than fast downloads or quicker page loading. Persistent connections will become the main data benefit of the next-generation wireless network evolution. For most carriers, packet data networks such as GPRS will suffice to serve consumers’ near-term data needs.

These network enhancements will certainly improve the end-user experience in deployed markets. But to what degree will consumers take advantage of these expanded services?

When considering further high-speed network investment, carriers tend to rely on supporting models for data usage not reflected among today’s broadband PC households. Qualcomm recently modeled an increase in wireless user demand for data from less than one megabyte per month per user in 2001 to more than 200 megabytes per month per user by 2006.

Accessing e-mail attachments and corporate virtual private network, or VPN, applications may drive usage along with multimedia consumer applications. But data demands from wireless devices will not grow to match those of today’s broadband user, whose average currently stands at less than 100 megabytes per month.

Wireless users will increase usage of many utility applications because of persistent packet data connections, but the continued superiority of the PC as the primary Internet appliance will preclude high data consumption in the mobile environment.

Jupiter believes that few solution providers can demonstrate that clients currently are or soon will realize additional revenues as a result of capex spending, though many are trying to present case studies of positive ROI. Some companies will justify wireless investments by pointing to cost savings or enhanced productivity, rather than increased revenue. With the exception of a few, largely blue-collar spot applications, however, it will take more than a year for these companies to realize cost savings, and productivity gains may remain ephemeral. Jupiter encourages companies to treat wireless as a research and development expense in 2001 and 2002, and not as a significant revenue generator or cost saver.

Dylan Brooks is a researcher with Jupiter Media Metrix. Colleagues Seamus McAteer, Peter Sargent and Zia Daniell Wigder contributed to this report.