Your Turn:
3G rolling, but pricey

by andrew seybold
February 4, 2002

Verizon Wireless, Sprint PCS, U.S. Cellular and Leap Wireless International Inc. are upgrading their CDMA wireless networks to enable packet-data services with speeds of up to 153 kilobits per second. These carriers will roll out their system upgrades in different ways. Sprint PCS, for example, has stated that it will turn on its entire system mid-year, while Verizon Wireless already is turning on its system, but only in selected areas.

Last Monday, Verizon announced it would offer service on the East Coast, in areas on the West Coast, including Silicon Valley, and in Salt Lake City in time for the Olympics. In the beginning, phones and PC cards will support the data portion of the network so those of us who have been waiting for faster wireless data speeds should be able to jump on the Verizon Wireless network and see how well CDMA2000 1X really works. I have tried the Verizon system in Philadelphia and can report that I experienced data speeds of more than 100 kbps, but the network was not yet commercial so I was the only one on the system.

My test drive included in-hotel access, sitting on a park bench and driving around the city at speeds between 20 and 60 mph. In all instances, the network performed flawlessly. But in order to understand what average users can expect on a day-to-day basis, we can look to South Korea where three CDMA2000 1X networks have been running for more than a year with more than 4 million users. The actual data speeds are in the 60 to 80 kbps range–not the 144 kbps ideal but still faster than the 30 to 50 kbps that GPRS operators, including AT&T Wireless, Cingular
Wireless and VoiceStream Wireless Corp., currently provide.

Some industry observers may think that Verizon should have turned on its entire network at once, but managing where and when data services are rolled out makes a lot of sense to me. By turning on only portions, Verizon can get the bugs out (there will be bugs). Since a full 85 percent of all mobility workers remain within their region, turning on only portions should not be a problem.

But while Verizon may be excited about the actual launch, and beating Sprint PCS to the punch, I am dismayed over the pricing it has announced. The first customers for this system will be laptop users who are expected to pay $30 per month, plus minutes of use deducted from their pool of voice minutes. (No minutes will be charged until mid-March, however, so it is an all-you-can-eat come-on). Laptop users who don’t travel all of the time or need wireless data every day still will have to pay $30 per month for the option of using their existing network minutes for data instead of voice. With pricing like this, it is unlikely that a significant number of wireless data users will sign up for the service.

Cingular Interactive, Motient Corp., Palm and Research In Motion Ltd. have learned over the years that flat-rate pricing is what sells wireless data. Voice operators don’t understand this model and believe that users will pay a premium for wireless data services. I think they’ll figure it out, but I hope they won’t have driven away all of those who really want to use these services.

I will be watching Verizon closely. If it doesn’t go after the corporate market and provide quick and easy ways for these users to connect to their own data behind the corporate firewall, it will miss the mark. At least for the next few years, wireless data is not about the consumer; it is about corporate access to corporate resources. Even the wireless voice folks should understand this. Wireless voice started out as a business service, and it took several years for consumers to start using wireless phones. It took years for the price per minute to reach a point where growth really took off. If the voice folks believe this trend will be repeated with wireless data, they will find out quickly that they are wrong.

Many consumers already have low-cost Internet access at work or at home. The value proposition is in providing them with time-critical information while they are mobile, not in wirelessly enabling the desktop Internet experience. Will they pay for these services? Yes. Will they pay a heavy premium for them? No way!

I welcome Verizon’s entry into the REAL wireless data market, but I hope the carrier realizes two things: First, income from wireless data will be incremental to voice income for many years. Second, users are not going to pay a high premium for data. We don’t have years to get the pricing model correct–we have months. [WIM]

Andrew Seybold heads the Andrew Seybold Group, a consulting firm specializing in connected mobility, and is editor in chief of Forbes/Andrew Seybold’s Wireless Outlook.