But this is still only a tentative step into the wireless future. The technology Cingular is using is known in the industry as - meaning it's halfway between wireless technologies in use today (so-called 2G) and the faster, third-generation networks (dubbed 3G) in the pipeline. If they ever come to fruition, 3G networks will let users connect to the Net at speeds up to 2Mbps -- enough bandwidth to turn cell phones into digital Walkmans and video cameras.
Upgrading to is relatively simple, requiring techies like Ziegler to swap in new hardware and software at switching facilities around the country; services can ride on top of the same airwaves Cingular uses for its present voice networks. And Cingular is introducing in only 30 percent of its markets. The limited implementation lets the company test the waters for broadband wireless before committing to 3G.
The relative simplicity is what makes moving to so attractive. But it also masks a big gamble: By going slow, Cingular risks losing out to the more ambitious plans of its rivals. Three of Cingular's competitors, Verizon Wireless, AT&T and Sprint PCS, have already made high-profile public commitments to 3G; Cingular has not. Which raises the question: Is Cingular hedging its bets - or burying its head?
Cingular was born last October when SBC and BellSouth merged their wireless divisions. The two Baby Bell parents had been in an awkward spot. Established, national long-distance players like AT&T and Sprint were cutting into the wireless market. Meanwhile, in June 2000, Bell Atlantic, GTE and Britain's Vodafone joined forces to create Verizon Wireless, which upon its birth was the country's biggest wireless carrier.
SBC and BellSouth followed suit, joining their respective wireless properties in October 2000 and naming the new entity Cingular. The new carrier inherited million customers from its parents (Cingular currently boasts more than 20 million customers), with a presence in 32 states and yearly revenues of $12 billion; it instantly leapfrogged AT&T Wireless and Sprint to become the country's second-largest wireless carrier. It also inherited some cultural baggage from its parents. Most of Cigualr's 28,000 employees came from SBC or BellSouth; the company's board consists of two BellSouth executives and two SBC executives.
The job of moving Cingular into the future fell to Stephen Carter, the company's dapper, English-bred CEO. A 14-year veteran of SBC, Carter rose through the ranks, eventually landing the top job at SBC Wireless in 1999. He's been in charge of new-technology rollouts before -- and it's clear that being first to market isn't a high priority. At SBC Wireless, he introduced Digital Edge USA, a flat-rate monthly pricing plan for consumers, almost two years after AT&T launched its comparable Digital One Rate plan. Similarly, Carter didn't offer Cingular customers wireless Internet service for cell phones until this April, a year and a half after Sprint PCS.
To Carter, being first to market is less important than convincing customers you've got something they want. "The one thing that I'm absolutely certain about," he says, waving a bottle of Perrier, "is that technology will not be the difference between the winner and the loser. It's going to come down to marketing."
This, after all, is the guy who created an entirely new brand from scratch, in a market dominated by established names like AT&T and Sprint. One month after the Federal Communications Commission approved the joint venture in October, Carter plunked down $200 million for an advertising campaign (insiders confide that the number ended up being even higher). More than 131 million Americans were introduced to Cingular Wireless -- and its ambiguous, X-shaped mascot (named "Jack") -- on Jan. 28, 2001, Super Bowl Sunday, with quirky ads exhorting viewers to "express themselves."
Carter's marketing savvy should come in handy as Cingular rolls out its services. While cell phone users in Japan and Europe have adopted wireless data services, no one knows if Americans will be so eager. Hambrecht analyst Peter Friedland estimates that such services will eventually account for 10 percent to 20 percent of . carrier revenues, but he doesn't think it'll happen for another three or four years. In the meantime, the baby step to gives Cingular a chance to test the broadband market.
It helps that the upgrade is, in Cingular CTO Bill Clift's words, "relatively minor." Cingular's present network is based on a 2G technology known as GSM (global system for mobile communication). [See "You Can't Get There From Here," at left.] The upgrade from GSM to a standard known as GPRS (general packet radio service) is straightforward, requiring little manual labor and no new spectrum. The cost is "very, very small in the bigger scheme of things," says Clift.
Cingular is deploying GPRS only in pockets around the country -- the 30 percent of its national network that's based on GSM. For the other 70 percent, based on a separate technology called TDMA (time division multiple access), from which the GPRS upgrade is more costly, Cingular has made no announcements.
Cingular is also taking a wait-and-see attitude about where it'll go after . From GPRS, the upgrade path to 3G is relatively clear. By contrast, the upgrade from TDMA to 3G requires that Cingular choose between two rival technologies. If and when the company commits to a specific 3G technology, it will also have to commit to the cost. Upgrading to 3G is much more complex than swapping out a few network cards in a switching station. It could require completely rebuilding the carrier's infrastructure, from switching station to relay tower -- a hugely expensive proposition.
Then there are the spectrum rights. While can ride on top of the same airwaves as its immediate predecessors, 3G will require wide new swaths. Those spectrum rights are still up for grabs. [See "Clearing the Air," page 45.] If the auctions in Europe and elsewhere are any measure, Cingular and other carriers will need to shell out billions to get the spectrum. The company claims it's well-financed, thanks to its Bell parents' and its own debt; there are also plans for an IPO once the public markets become more receptive.
Cingular's limited rollouts should provide priceless insights into the demand for next-generation wireless data services. Depending on customer response, Cingular will get a sense of how quickly it needs to move with any 3G plans. It is, in effect, a shrewd hedge. In the meantime, the upgrade also lets the company experiment with new services -- like a micropayment system or for-pay downloadable ring tones -- to see how lucrative wireless data can be.
Of course, if demand for wireless data takes off faster than anticipated this year, Cingular's limited rollout means it risks being late to market. Verizon Wireless and AT&T have both signed contracts with Lucent to procure infrastructure for their migration to 3G. Sprint PCS has also gone public with its plans to transition to 3G, mapping out exactly which technologies it plans to use (CDMA2000) and when to expect them (2004). In the meantime, AT&T, Verizon Wireless and Sprint PCS expect to have services in place in some markets by the end of this year -- but not, most likely, before Cingular.
"We're committed to making sure that when we launch that we give the customers something they actually want, something that's valuable to them," says Carter. In its deliberate fashion, the company clearly feels little pressure to hurry up and make a decision. Carter says the company is waiting until the "market demands or the circumstances seem right."
Carter is fond of quoting British Prime Minister Tony Blair: "I'm very proud of my country's past, but I don't want to live in it." But even as Carter and Cingular lead the charge into the future of wireless networks, they're keeping at least one foot in the past. In an industry so obsessed with the next new thing, that sense of history may not be a bad thing.
You Can't Get There From Here
In the beginning was analog, and cell phone users thought it
was OK. Then came second-generation, or 2G, digital voice networks,
which they thought were better. Now wireless carriers are
upgrading their 2G systems to third-generation, or 3G.
networks capable of carrying broadband data. How they get
from here to there depends largely on which 2G technology
they're using today. Some are facing dead ends. Others will
make an intermediate upgrade to technologies - faster
than 2G, but slower than 3G.
2G Technology Carriers That Use it Technology 3G Technology
CDMA Alitel, Sprint, Verizon 1xRTT CDMA2000
GSM ATT Wireless, Cingular, GPRS, EDGE UMTS/W-CDMA
VoiceStream
TDMA AT&T Wireless, Cingular EDGE UMTS/W-CDMA
Glossary
1xRT First phase of CDMA2000. Overlays
existing CDMA networks; offers peak
data rates of 144Kbps.
CDMA Code division multiple access. In
use today; transmits data at .
CDMA2000 Next-generation CDMA network. Will
require new spectrum; will transmit
data at top speeds of 2Mbps.
EDGE Enhanced data rate for global evolution.
Can be deployed using existing GSM
spectrum; enables data speeds up
to 384Kbps.
GSM Global systems for mobile communications.
In use today; transmits data at 28Kbps.
GPRS General packet radio service. Overlays
GSM spectrum; theoretically enables
data speeds up to 117Kbps.
TDMA Time division multiple access. In
use today; transmits data up to
64Kbps.
UMTS Universal mobile telecommunication
system. Will support data speeds
up to 2Mbps, but will also require
extra spectrum. UMTS is the standard
name for W-CDMA.
W-CDMA Wideband code division multiple access
Source: IDC
Clearing the Air
The Federal Communications
Commission has identified four
separate chunks of radio-wave
spectrum that wireless carriers
might use to carry next-generation
services. But the folks who hold
the rights to those pieces of
spectrum aren't giving them up
without a fight. Here's where the
battles for these airwaves stand.
-- Aaron Pressman
Frequency Owner Auction Date
746-764, 776-794 MHz Television broadcast- , 2001
ers transmitting on
channels 60 through
69
1710-1885 MHz Federal agencies, By Sept. 30, 2002
including the
Pentagon
1895-1910 MHz, Nextwave Telecom Unknown
1975-1990 MHz
2500-2690 MHz School districts Unknown
and Sprint, WorldCom
and other telcos in
some markets.
Frequency The Lowdown
746-764, 776-794 MHz By now, TV stations were supposed
to be transmitting their programs
digitally. The Feds were hoping
that transition would allow the
stations broadcasting channels 60
through 69 to turn in their airwave
rights, which could then be
auctioned off to broadband and
wireless carriers. But the stations
aren't required to do so by law or
regulation, and with digital TV
going nowhere, the stations are
holding on to their rights. This
twice-delayed auction is likely to
be postponed again.
1710-1885 MHz The Clinton administration
identified this block of spectrum
as a good candidate for 3G wireless
service. But the Commerce
Department reported in March that
the military wouldn't be able to
share the airwaves or shift to new
ones anytime in the foreseeable
future. Commerce Secretary Don
Evans still promised wireless
companies that he'd clear some
spectrum, which means the Forest
Service and the Coast Guard, not
the Pentagon, will probably have to
find some new airwaves to use. An
auction by 2002 seems unlikely.
1895-1910 MHz, Wireless carriers thought they'd
1975-1990 MHz won rights to a big swath of fresh
spectrum in January when the FCC
re-auctioned licenses held by
bankrupt carrier Nextwave. But in
late June, a federal appeals court
nixed the re-auction, handing the
airwaves back to Nextwave. The
still-bankrupt carrier says it will
use the licenses to relaunch itself
as a national service provider. If
it doesn't build a network serving
at least one-third of the audience
in its major markets, the rights
revert to the government. Analysts
expect the company to cut a deal
with its bigger rivals and the
government, with Nextwave walking
off with a fat profit and the
auction winners getting the coveted
spectrum.
2500-2690 MHz The FCC had wanted to set aside
this chunk for 3G. But following
strong lobbying by school districts
and the two telecom giants, the
commission changed course. One
reason: Moving the schools to new
spectrum and re-equipping them
could cost as much as $30 billion.
It could also be a public-relations
fiasco; for the moment, at least,
the Bush administration would
rather not be seen taking airwaves
away from inner-city schools and
handing them over to the big
wireless carriers.
Today's Wireless World
Back in 1996, there were more mobile users in the United States than anywhere else. But now America significantly lags behind Western Europe and the Asia-Pacific region. According to researcher Global Mobile, there are now 109 million . wireless subscribers; Western Europe and the Asia-Pacific region each have more than twice that. In the ., Verizon is well ahead of the pack, but Cingular is gaining fast; the company says it added nearly 900,000 subscribers in the first quarter of the year.
David Lake
Top . Wireless Operators
In millions.
Operator Subscribers *
1 Verizon
2 Cingular
3 AT&T Wireless
4 Sprint PCS
5 Alltel
(*)Represents year-end
2000 figures.
Source: Global Mobile,
January 2001
Wireless Subscriber Trend by Region
Asia-Pasific . Western Europe
1990
1995
1997
2000
Note: Table made from line graph
