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Data on the Move

December 23, 2003

By Peter W. Huber

In most of the rest of the world wireless data already accounts for a substantial share of the revenues earned by wireless carriers. By this measure, according to a recent Merrill Lynch study, U.S. wireless service ranks last in the word.

The cell phone came of age in the 1990S--that was the decade of wireless voice, the decade that took the U.S., roughly speaking, from zero to 150 million wireless customers. Now beginning: the decade of wireless data.

On wired networks, data traffic overtook voice years ago. Data accounts for more than three-quarters of the traffic on the backbone fiber-optic networks, and a corresponding share of the minutes of use on ordinary dial-up phone lines. When phone lines are upgraded to add high-speed data capabilities on top of voice, the DSL data channel provides more than 1 megahertz of capacity on the copper wire, as compared with the 0.004 megahertz used for voice. And households that sign up for the broadband data services use them much more heavily than their voice lines.

It will be a huge challenge to build out a wireless broadband infrastructure to match wireline's. Spectrum is the biggest issue. A typical cable operator currently assigns 8 megahertz of spectrum inside its wire to provide high-speed cable modem service to between 50 and 500 homes. One wireless carrier in New York City, by contrast, currently has access to well under 50 megahertz to provide both voice and data service to everyone in the shadow of each cell tower--as many as 10,000 people on the move.

In most of the rest of the world wireless data already accounts for a substantial share of the revenues earned by wireless carriers. By this measure, according to a recent Merrill Lynch study, U.S. wireless service ranks last in the world. But that is an artifact of U.S. regulatory history. European and Asian carriers have been allowed to own 80 to 90 megahertz of spectrum--enough to build out voice services with room to spare for wireless data. Until the beginning of this year, by contrast, U.S. carriers were capped at 55 megahertz. So carriers overseas got a big jump on deploying data-capable network hardware. European wireless customers are exchanging 30 billion e-mails a year, 20 times as many as U.S. wireless customers.

Even the European and Asian markets are still in their infancy, however. The voracious demand for bandwidth in wireline networks comes from hardware on the desktop, and it has taken an extra decade to make that hardware light, compact and cheap enough to belong in every pocket and purse. But the hardware is there now, and it will soon be in the dashboard of every car as well, and in almost everything else of any consequence that moves. And anything that moves has to use a wireless network, if it is to use a network at all.

U.S. wireless carriers are now in a race to build the new data infrastructure. Wi-Fi providers like T-Mobile are deploy-ing wireless nodes in Starbucks and airport lounges; if you've purchased a new laptop recently, it is amazingly easy to establish a high-speed connection in such places simply by clicking your browser and entering a credit card number. Verizon recently announced the rollout of a high-speed wireless data service in San Diego and Washington, D.C. AT&T plans to deploy a competing service in four cities next year. Cingular is testing a third technology. And as I discussed in a prior column (Oct. 14, 2002), digital broadcast technologies are now drawing television and radio transmitters into the game, as well.

Everyone will tell you that the bubble burst at the end, but it didn't, not really--investors who bet on the transformative power of the desktop and the wired Internet early in the 1990s prospered, not because they were smart enough to get out at the top, but because they were smart enough to get in at the beginning and stay in for the whole ride. Same with those who invested in the first decade of the wireless revolution and stuck with it. There's another decade of the same, and more, ahead.

Original Source:



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