Holding Pattern

It's not time to go 3g quite yet.

Put your plans for 3G wireless phone applications on the back burner. Any chance that the military would let its 1,700MHz band be auctioned off for 3G networks crumbled along with the World Trade Center. And that's a blessing in disguise for wireless carriers and users, says Rudy Baca, a global wireless analyst for Precursor Group in Washington, DC. Unlike their overseas competitors, U.S. providers won't have to spend billions in a band rush. U.S. customers won't need new $500 to $600 handsets to run 3G applications that aren't exactly mission-critical. ("NTT Docomo's killer apps are Hello Kitty ring tones and mobile karaoke," notes Baca.)

Network providers currently face increasing costs and falling per-capita revenues from a still rapidly growing base of users. Not surprising, their customers experienced more service problems that took longer to solve in 2001 compared to the year before, reports J.D. Power and Associates.

Expect a 3G-enabling bandwidth auction sometime in 2004, says Baca, and network rollouts in 2006, when applications will be compelling enough to get customers to buy up. Meanwhile, a more sympathetic FCC is likely to let large American operators buy smaller ones and consolidate second-generation networks into all-digital 2.5G networks. In an uncertain economy, that's a safer development target for entrepreneurs.

Mike Hogan is Entrepreneur's technology editor.

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This article was originally published in the February 2002 print edition of Entrepreneur with the headline: Bandleader.

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