New Cellphone Fad? No, Not 3G
With Market Still Not Sold
On Innovative Handsets,
Providers Push an Upgrade
By REBECCA BUCKMAN
Staff Reporter of THE WALL STREET JOURNAL
June 17, 2005
SINGAPORE -- Plenty of consumers still aren't sold on fancy "third generation," or 3G, cellular phones, devices that let them watch TV and send video messages on the go.
Now, the world's phone companies are pushing an even more sophisticated technology that most people may not really need: "high-speed downlink packet access," or HSDPA.
At the CommunicAsia trade show here this week, that ungainly abbreviation easily rolled off the tongues of executives from companies such as Korea's Samsung Electronics Co. and Telefon AB L.M. Ericsson of Sweden.
Samsung Vice President Hung Song discussed a range of technologies that go "beyond 3G." So did executives of Ericsson, who said HSDPA will provide faster download speeds than current 3G systems, allowing people to surf the Web and watch videos of much higher quality on their phones.
Hakan Eriksson, Ericsson's chief technology officer, said the new technology lets people beam Internet content to their phones at as much as 14 megabits a second compared with 3G's top speed of 384 kilobits a second. That is more than 30 times as fast. Average HSDPA speeds would likely be much slower, though, at about two-to-four megabits a second, Mr. Eriksson added.
Ericsson is hoping to roll out HSDPA later this year. One of its first customers will be the U.S.'s Cingular Wireless, a venture of BellSouth Corp. and SBC Communications Inc.
Mr. Eriksson implied that installing HSDPA won't be that complicated, or expensive, for phone operators. "This is just a software upgrade of the [3G cellular] base station," he said in an interview.
Still, even tech visionaries like Apple Computer Inc. co-founder Steve Wozniak, in Singapore this week speaking at a related technology conference, seem unmoved by the latest phone gizmos.
"I'm not going to be interested in television and other Internet services in a small screen on my cellphone," he said.
Trying to combine the functions of televisions and phones in one device, he said, generally "doesn't work well."
Indeed, plenty of operators don't even believe they are ready for 3G. In China, the world's biggest mobile-phone market, the government continues to hold back on issuing official 3G licenses. Government officials say they are mindful that 3G hasn't been a big financial success for companies that have rolled it out in Europe and other parts of Asia.
Hong Kong's Hutchison Whampoa Ltd., which has been pushing 3G in several big markets outside the U.S., said in March that more than three-quarters of its 3G revenue still came from traditional voice services and not the data-intensive services that generate more money for the company. Hutchison needs that extra cash to offset the billions of dollars it has invested in rolling out 3G, which is still unprofitable for the company.
Much of the push for cutting-edge, post-3G technologies like HSDPA is simply coming from "vendors trying to sell more equipment to the [phone] carriers," said Sandy Shen, an analyst with research firm Gartner in Shanghai. "In terms of market demand, I don't see where we're quite there yet."
However, super-fast phone connections could eventually be popular in developed countries where executives could even use the technology on laptops, she said.
Ericsson Chief Executive Carl-Henric Svanberg, meantime, said here Wednesday that his company had a record number of orders last year for more-traditional 2G phone equipment, which is still popular despite all the hype over 3G and more advanced phone systems.
"People take time to adopt these new services and technologies," noted Samsung's Mr. Song.
Companies like Samsung are betting heavily that phone users will continue to demand the latest and greatest in new gadgetry.
At the Singapore trade show, Samsung showed off one phone that boasts a powerful, seven-megapixel camera. Other models use a special technology called "digital multimedia broadcasting" to allow people to watch live television on phones outfitted with special, mini-TV screens. Some screens swing up and out from the back of the phone, like an instrument in a Swiss-army knife.
Samsung executives say they are developing new phones for the mid-to-high end of the market, instead of bare-bones, low-cost handsets that might be more popular in poorer countries.
Motorola Inc., on the other hand, this week unveiled four phones it said were designed for "mass market consumers." One, the C117 model, was made as part of a special industry program to develop cheaper handsets for less-developed markets.
Motorola said in February that some of the handsets it was making through the program would cost less than $40. This week, Motorola said it intended to sell some of those handsets in China, where many people live in rural villages and presumably don't need features like video-conferencing and digital cameras.
Samsung, too, may have to go downscale if it wants to win in China and other poorer, populous countries. "Lots of the [subscriber] growth, lots of the volume, is coming from this low-end segment," says Gartner's Ms. Shen.
--Jessica Tan contributed to this article.
Write to Rebecca Buckman at rebecca.buckman@wsj.com
