DUBLIN, Ireland-High license costs and fierce competition have further increased the pressure on European third-generation (3G) operators to quickly roll out their networks. But while this rush to market will create opportunities for companies other than the current dominant cellular infrastructure vendors Nokia and Ericsson, the market is unlikely to seriously fragment.
Vendors that are recognized more for their fixed-line expertise have secured some impressive 3G infrastructure wins-NTL with Orange in the United Kingdom, for example. Moreover, Marconi’s recent purchase of APT, a 3G mobile-phone base station and mast development and acquisition company, and the GSM-to-3G network evolution strategy designed to enable operators to deploy “islands” of broadband service being promoted by Tellabs are proof traditional fixed-line vendors are looking seriously at next-generation wireless technology.
At the end of last year, Dan Gardiner, a U.K.-based analyst for Ovum, said the shift from circuit to Internet Protocol (IP) technology “creates opportunities for vendors such as Cisco and 3Com” in an infrastructure market that will become “increasingly competitive.”
But Mark Davis-Jones, an infrastructure analyst with Salomon Smith Barney in London, described the pickings on offer to new entrants as “the crumbs from the table,” and said the “second-generation” market leaders will continue to be the main vendors. “The GSM migration path is an important consideration for any third-generation operator, and this is an enormous advantage for Nokia and Ericsson and a major disadvantage for companies such as Lucent,” he said.
Most contracts awarded to date have fallen to the established players, such as Ericsson, which has won 3G contracts with Vodafone in the United Kingdom, Alands Mobiltelefon and Finnish 2G in Finland, and Andala and possibly TIM/Wind/Ipse in Italy, along with Mexico’s Telcel.
In addition, Nortel has won contracts with U.K. operator BT Cellnet and Bouygues Telecom in France. Nokia has secured 3G wins with Japan Telecom, M1 and StarHub in Singapore, Korea’s SK Telecom, possibly Blu or Ipse in Italy, and Sonofon in Denmark.
Ericsson unsurprisingly agrees with the view that experience in the GSM world is vital for any company looking to build a 3G network. “The successful companies will be those who have experience because these networks will be rolled out much more quickly than before,” said UMTS Marketing Director Steve Walker.
“You also need a comprehensive knowledge of mobility from both a GSM and 3G perspective, because all incumbent operator 3G networks will be built on top of GSM infrastructure with dual-mode capability and roaming between the two networks. Companies cannot come into the 3G market and underestimate how much of an obstacle their lack of GSM knowledge will be, because the networks are built on the same core platform.
“Particularly in the early years where roaming between GSM and UMTS will be extremely commercially important, operators need suppliers who understand both technologies.”
This view is shared by U.K.-based Datamonitor analyst Berena Salzmann, who has said the winners in the device market will not necessarily be those first to market but those that provide high quality of service.
Where Nokia and Ericsson might have a clear advantage is they manufacture both network infrastructure and terminals, which should in theory reduce the “time to market” for an operator, although a handset shortage initially delayed the introduction of Wireless Application Protocol (WAP) services in many European markets. Walker admitted, however, this is nothing to stop a Cisco or 3Com from buying the expertise required to develop 3G infrastructure, and ironically, the pressure on operators to quickly roll out their networks will also create openings for other vendors. Operators will also select different vendors to differentiate themselves from their competitors.
“Because there are so many contracts to be filled in a short space of time, there will be opportunities for new entrants and Lucent (which has a 3G strategic alliance with Australian operator One.Tel), Siemens, Alcatel-which suffered a blow in late August when partner Anthill was eliminated from the Italian UMTS competition-and Nortel have the financial clout to take a share of this business,” said Davis-Jones.
