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ously led to difficulty in achieving revenue growth and managing profitability. Furthermore, subscriber acquisition costs have climbed dramatically; according to industry reports, Sprint saw acquisition costs go from $285 in the third quarter of 2001 to $395 a year later, and later numbers bear out this continued increase. Like most segments of the industry, wireless faces further consolidation. As I write this section of the book, Sprint and Nextel confirmed this very morning their intent to merge, and others will undoubtedly follow in the wake of the collapsed telecom bubble. Today, six national operators serve 75 percent of the overall market. These players struggle to uniquely address the needs of a wider array of identified market segments including high-volume business users, corporations with large numbers of users looking for deeply discounted pricing plans, extended families looking for deals, kids, and of course, new users. They are also looking for ways to satisfy the demands of prepay customers who are credit-challenged or have not yet established credit. Only recently, Virgin Mobile entered the U.S. market and is already making significant inroads. Virgin is a mobile virtual network operator (MVNO), which means that they own no infrastructure. They buy huge volumes of minutes of use from other carriers at deep discounts and then resell them in prepaid mode, which means that they also have no billing infrastructure to support. The only organization they do support is you guessed it, customer service. What a concept.
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Wireless access technologies have undergone an evolution comprising three generations. First generation systems, which originated in the late 1970s and continued to be developed and deployed throughout the 1980s, were analog and designed to support voice. They were characterized by the use of FDMA technology. In FDMA systems, users are assigned analog frequency pairs (and access to a control channel) over which they send and receive. One frequency serves as a voice transmit channel, the other as a receive channel. The control channel is used for signaling. Second generation systems (2G), which came about in the early 1990s, were all-digital and still primarily voice oriented, although rudimentary data transport was part of the service package. In 2G systems, digital access became the norm through such technologies as TDMA. In TDMA systems, the available frequency is broken into channels as it is in
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Downloaded from Digital Engineering Library @ McGraw-Hill (www.digitalengineeringlibrary.com) Copyright 2004 The McGraw-Hill Companies. All rights reserved. Any use is subject to the Terms of Use as given at the website.
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FDMA, but here the similarity between the two ends. Each channel is shared among a group of users based on a time-division technique that ensures fair and equal access to the available channel pairs. This increases the so-called packing ratio, that is, the number of simultaneous users that the system can support. An offshoot of 2G TDMA systems is 2.5G, the most common of which is Global System for Mobile Communications (GSM). GSM is widely deployed in Europe and other parts of the world (well over 750 million subscribers globally) and goes beyond 2G by offering a suite of user services that enhances the value of the technology. These services include not only voice but also two-way radio, paging, short messaging service (SMS, similar to Instant Messaging), and the incorporation of Smart Card technology that permits the customization of the handset and its features. These services are both popular and lucrative: In Europe, where mobile penetration is nearly 85 percent, more people send and receive SMS/IM text messages via their mobile phones than use the Internet for similar functions. The domestic U.S. market is a challenge, however: In the United States, only 5 percent of the 170 million cellular users send or receive text messages as a result of this and other factors, only 1 percent of the $72.8 billion mobile industry comes from data services, although the number is growing as wireless data applications evolve and penetrate the market. In Europe, however, the story is quite different. Because mobile operators in Europe charge relatively high prices for text messages, the service is enormously lucrative. In response to the game show Big Brother, for example, which invited the viewing audience to actively take part in the outcome of each episode, 5.4 million text message-based votes were cast, generating 1.35 million in revenue. The UKbased service provider mmO2 enjoyed dramatically higher revenues in July 2002 because of the Big Brother message flood. GSM is now present in the United States through Cingular the joint venture wireless provider owned by SBC (60 percent) and Bellsouth (40 percent); AT&T Wireless, which recently sold its wireless holdings to Cingular; and T-Mobile, the only all-GSM network provider in the country. T-Mobile s activity in the Wi-Fi space is equally impressive as they innervate coffee shops all over the world with broadband wireless access. Their activities have an unintended positive consequence: Many of the Wi-Fi service providers use DSL as the backhaul technology to carry customer traffic back to the CO, resulting in increased sales of DSL. Related to GSM is an enhancement called Enhanced Data Rate for Global Evolution (EDGE). Originally developed by Ericsson and called
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Downloaded from Digital Engineering Library @ McGraw-Hill (www.digitalengineeringlibrary.com) Copyright 2004 The McGraw-Hill Companies. All rights reserved. Any use is subject to the Terms of Use as given at the website.
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