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  1. 1. 3G & Bluetooth Hot Spots For Opportunities White Paper OVERVIEW This paper presents the case for implementing Bluetooth wireless data networking in applications where 3G is not yet available, cost prohibitive, or unsuited to the operating environment. The status of 3G networks is reviewed and the major issues faced by wireless data service providers planning to implement 3G networks are discussed. Finally, current opportunities to implement Bluetooth solutions as a substitute or complement to 3G and 2.5G networks are presented. 3G WIRELESS DATA NETWORKING The Promise 3G networks will enable data rates of up to 2 Mbps, making possible a myriad of new applications that require more bandwidth than is now available. With 3G, real time video, streamed music, and large amounts of data will be transmitted to and from wireless devices in seconds. 3G will also provide a common standard which will overcome the existing problems with incompatible cellular-system standards. Europe has experienced significant advantages from its common GSM standard. Now the whole world is expected to benefit from global economies of scale with a 3G 3G & Bluetooth 1
  2. 2. standard. Lower costs as well as faster development and deployment of new products and services are anticipated.1 And 3G’s "always on" connectivity circumvents the long connection times currently experienced on 2G wireless networks.2 The Growth Both the enterprise and the consumer marketplaces are expected to be eager adopters of wireless data services. Carriers and investors are rushing to be at the head of the pack of service providers for this market. Indeed, as reported by Red Herring, approximately 75 carriers have already contracted with equipment vendors to build 3G networks in more than 30 countries.3 Analysts are predicting an upswing in investments in wireless services in 2002, with increases through 2004, to correspond with the significant capital investments carriers will be making as they upgrade their 2.5G networks to 3G. Growth rates of over 20 percent for wireless subscribers are forecasted to continue through 2003.4 According to research conducted by Lehman Brothers, one of the primary drivers of growth in enterprise markets is the desire for continuously available access to corporate data while employees are away from the office. Consumer market growth will be fueled by entertainment, games, and applications providing local content such as traffic information and directions. Figure 1 Mobile data subscriber growth 160 enterprise 140 consumer 120 100 Millions of US Data Subscribers 80 60 40 20 0 2000 Q1 2002 Q1 2004 Q1 2006 Q1 2008 Q1 Source: Lehman Brothers, 3G: Inside the Numbers It is predicted that wireless data subscribers could grow from roughly 2.8 million in 2000 to 18.4 million in 2002, with nearly 160 million subscribers in 2008, in the United States alone. 5 IDC research indicates the American mobile workforce will grow to 47 million by 2003.6 In a Network World 500 survey (May 7, 2001), over 85% of 500 of the top U.S. IT managers and network executives indicated that wireless access is likely to become a top priority within the next 12 months. And 44% of the companies surveyed currently employ handheld devices to access data through the corporate network. Lehman Brothers analysts expect dramatic growth in mobile access to corporate data via PDA-like devices once faster, wireless data networks are in place. 7 The Obstacles Of course, the worldwide deployment of 3G networks is not without obstacles. There is a lack of additional radio spectrum available for 3G carriers, and as FCC Chairman Michael Powell has said, the demand for wireless spectrum "is going to forever outstrip supply."8 For those carriers who have not already secured significant spectrum through government auctions, this scarcity (and its associated price spike) may delay widespread availability of faster data speeds. Financial 3G & Bluetooth 2
  3. 3. considerations also pose a substantial hurdle. In addition to the soaring cost of spectrum, carriers must make considerable investments to build their network infrastructure with no expectation of a return on their investment in the near future—and in a climate of declining financial markets. Technical obstacles are also present. 3G, as opposed to being a single, unified standard, is really a patchwork of interoperable standards. Europe, which is a little ahead of the United States in widespread 3G deployment due to its previous implementation of the GSM standard, has been struggling with competing versions of the 3G "standard," as each provider has its own version and, naturally, each wants its version to be adopted. Not only is it a complicated standard to define, but also the regulatory framework surrounding 3G is not clear.9 3G ISSUES FOR WIRELESS DATA SERVICE PROVIDERS Infrastructure Costs The migration from existing networks to 3G is a complex undertaking, usually involving interim steps—the so-called 2.5G networks—to finally deliver a multifunctional, high-speed 3G network. Although the standard offers clear advantages, 3G deployment is very risky because of the capital investment required before actual market demand. 10 According to Lehman Brothers' report, "construction of the data pipe may be the most expensive of the elements of the 3G upgrade, but it is far from the only one"11 Refer to Figure 2 below. For each migration path, the resulting network's expected data rate is provided along with the estimated cost per Point of Presence (POP) to complete the migration. In the study, a standard average cell radius of 2.2 Km was used in POP calculations. The least expensive base station, for a GSM/GPRS network, delivering only 20-40 Kbps, was estimated to be $27,000 (or $1 to $2 per POP).12 Sprint PCS has estimated its full network deployment will cost $2.4 billion, with each of its 3 phases of CDMA migration costing $700 million - $800 million.13 Estimating overall costs has become more difficult as spectrum prices have soared in both Europe and the United States. Verizon recently spent $8.8 billion on spectrum— with $4.4 billion of that on one city.14 In response to the Figure 2 lack of available spectrum, the U.S. Air Force has said it would offer its portion of Universal Migration Path Data Rate Cost per POP Mobile Telecommunications System (UMTS) spectrum for $3.2 GSM to GPRS 20-40 $1.00 - $2.00 billion. However, Washington FCC Kbps Chairman Michael Powell believes the demand for wireless spectrum TDMA to EDGE 50 - 380 $3.00 - $4.00 "is going to forever outstrip Kbps supply," and is unlikely to force the CDMA to CDMA 2000 1x 144-307 $3.50 - $4.50 Defense Department to release Kbps any more of their reserved spectrum for 3G use.15 GSM/GPRS net to W-CDMA 2 Mbps $8.00 - $12.00 (3G) CDMA to W-CDMA 2 Mbps $10.00 - $13.00 (3G) 3G & Bluetooth 3
  4. 4. Technology Delays The complexity of 3G networks creates major challenges for service providers. According to Lehman Brothers, "network integration difficulties, required improvements in the handset, challenges in establishing service levels and high equipment costs are likely to push broad commercial deployments of W-CDMA from 2002, as European operators initially suggested, into at least the late 2003/2004 timeframe." A related article by Wired magazine predicts 3G services will not be available in the United States for another three years.16 The lack of handsets to support 3G services poses one of the biggest potential delays. There is typically a delay between the existence of a network service and the availability of phones to support the service. A Nokia spokesperson indicated handsets must be subjected to interoperability tests on the 3G networks to ensure all the equipment is compatible before the handsets will be put on the market.17 Software problems delayed industry leader NTT DoCoMo's previously announced 3G services for Japan from May to October of this year. More recently, company executives have announced that Japan-wide 3G services are another three years away, with initial services to be available only in Tokyo. The delay in deployment translates to delays in revenue. DoCoMo management has indicated that since subscribers will resist a service that is not widely available throughout Japan, they do not expect to cover their expenses for installing the system infrastructure for 3 or 4 years.18 Europe, too, has been hit with delays in 3G rollout as a result of high spectrum costs, lack of handsets, and controversy over the 3G standard. The reality is that "widely available and commercially viable 3G service is a lot further off than the initial hype indicated."19 High Power Requirements Consumers attempting to use 3G networks will find themselves constrained by power requirements. 3G networks will have the ability to support high-speed data transfer and applications that require color displays. Current handset batteries can support a maximum of one hour of 144 Kbps interactive media, not including any voice time.20 Color screens require three to four times the power of a monochrome display.21 Advanced 3G functions will all be competing for very limited power resources. New battery technology is required and networks and wireless solutions will have to be designed to use the scant available power efficiently. Quality of Service DATE RATES Unfortunately, consumers are unlikely to enjoy the theoretical data rates of 2.5 and 3G networks. Factors affecting the actual speeds include hardware limitations, variability of radio connections and the restrictions of shared spectrum. Managing customer expectations for a consistent level and quality of service will make network design all the more challenging, and delivering a consistent service level may require lower across the board speeds. As well, the use of legacy equipment in the networks to minimize costs on both the carrier and consumer side (i.e. using older network and handset equipment) may restrict the realized speeds.22 For example, the theoretical data rate of GPRS, a 2.5G network, is 115 Kbps, but expectations for initial service levels are in the 20 - 40 Kbps range. Speeds will also be limited in areas of high user density and interference. These areas, or "hot spots," will have to be predicted by network designers to ensure minimum service levels are maintained. Only users standing close to a base station are likely to realize data rates approximating the theoretical limit. As summarized by Lehman Brothers, "A number of factors can lead to slower quality of service. Users will realize varying levels of service depending on their location within a cell, how fast they are moving, the number of concurrent users, and 3G & Bluetooth 4
  5. 5. how much noise and radio interference is present. Given these issues, few users are likely to achieve peak data rates in normal environmental conditions."23 CELL SIZE As mentioned above, to benefit from the optimum data rates of the network, users must be located close to a base station. Thus the only way to guarantee consistently high data rates would be to have small cell sizes. Since additional base stations drive the network infrastructure cost up significantly, this is not always economically feasible. It is becoming increasingly difficult to find locations for new base stations and negotiating the required zoning changes can be a lengthy and effort-intensive process.24 INDOOR SERVICE 3G networks depend on radio connections. Many things, including line of sight barriers, affect the quality of these radio connections. Indoor signals tend to be degraded as the radio signals outside are deflected by the building itself. This limits the usefulness and reliability of 3G networks in indoor areas where users of wireless data services often congregate - transportation hubs such as train stations and airports, corporate office buildings, convention centers, hotel lobbies, trade shows, shopping malls, cafes and restaurants. Service providers may have to look to other means to ensure reliable, high quality service levels for these indoor applications. THE BLUETOOTH SOLUTION The Bluetooth Opportunity Problems with 3G networks, such as poor Bluetooth applications should rapidly indoor performance, provide a significant expand in the consumer market over the opportunity for Bluetooth networks. It is an next 18 months… several factors, ideal solution for hot spots and indoor including decreasing semiconductor coverage, keeping the costs down and service prices, increased rollout of Bluetooth- levels up. And Bluetooth networks can provide enabled devices, and finalization of the high-speed wireless data transfer today. This interoperability standard should drive offers a significant window of opportunity for adoption. early providers of wireless data services. Bluetooth is likely to be complementary The Bluetooth Advantage to the traditional wireless carriers. Bluetooth offers short-range Bluetooth delivers 3G speeds today, outpacing connectivity, likely in an indoor mobile communications technologies in environment, with a limited number of flexibility, data rates, and indoor coverage. It devices. We believe the customer has a tremendous advantage over other overlap with traditional wireless wireless networking approaches because it is operators, who offer long-range much less expensive to implement. The connectivity with signals that do not Bluetooth chip set itself is economical. Current penetrate buildings well, will be costs are in the range of $15 but are forecast minimal. to drop to $5 by late 2002.25 As well, -Lehman Brothers Bluetooth operates in a range of radio spectrum that is open and available, avoiding the substantial costs of 3G spectrum. As concluded in Lehman Brothers’ 3G report, "We see Bluetooth becoming an embedded solution in a broad range of wireless devices by 2003."26 Bluetooth penetration in wireless devices such as mobile phones or PDAs has been forecast to reach 90% -95% by 2005.27 3G & Bluetooth 5
  6. 6. The technology operates at speeds of up to 723 Kbps. The frequency-hopping scheme specified in the Bluetooth standard minimizes interference, maintaining high service levels even in areas of high user density (hot spots). The transmission "hops" 1600 times per second among 79 RF channels, thus avoiding problems of interference on a particular channel. Figure 3 Bluetooth 3G Bandwidth (Mbps) 1 2 Spectrum 2.4 GHz - 2.4835 GHz 155MHz Cost Wireless airtime is based on a Equivalent to current airtimes fixed asset cost, shared among (or more, due to the need to users, but use of the frequency recoup investment), plus is free monthly fees Range of Devices Phones, computers, PDAs, MP3 Phone handsets, developing players, domestic appliances into multimedia devices and toys Timing Increasing through 2001 Starting in 2002, but only allowing high-bandwidth and high user density over large areas in 2004 Source: Arthur Andersen, Bluetooth: treading on 3G territory? Bluetooth also operates indoors effectively and is not subject to line of site problems within its range of 10 to 100 meter distances. Because the Bluetooth specification provides for efficient power management, Bluetooth is the obvious choice for connecting "power-starved handheld devices" such as mobile phones and PDAs over short distances."28 The Bluetooth Applications While initial applications were focused on cable replacement in personal devices, the real magic of Bluetooth lies in the concept of a Personal Area Network (PAN) and ad hoc connectivity. Through Bluetooth's Discovery Service, PAN devices are capable of spontaneously joining into a network as they Figure 4 approach each other. This occurs only while the devices are Home reduce costs for 3G in close proximity; the devices leave the network as they are airtime removed from proximity. Office provide Internet access Building on Bluetooth's basic function of cable-free Shops enable point-of-sale collaboration among personal devices, the technology has transactions and been extended to provide flexible wireless Internet access as push advertising well. Creative new applications employing Bluetooth High Density deliver customized Information information in technology are being announced with increasing regularity. Areas locations such as Arthur Andersen believes Bluetooth lends itself to certain airports, train scenarios as illustrated in Figure 429 stations, festivals, exhibitions and Applications already in the market include: conventions Stationary provide Internet • In-store applications for POS transactions and directed Access access in cafes, advertising libraries, video arcades • Hotel and airline check-in • Vending machine purchases via mobile phones and Source: Arthur Andersen, Bluetooth: Treading on 3G Territory? wireless Windows devices • Image transfer from digital camera to a mobile phone or the Internet. 3G & Bluetooth 6
  7. 7. Bluetooth is particularly suited to enable wireless data applications for point-of-sale transaction processing, information services and machine-to-machine communications.30 Andersen analysts have suggested exciting applications for each of these categories: TRANSACTIONS Point-of-sale transactions are an obvious application for Bluetooth technology since the distance is short range. The Bluetooth server can provide added value by broadcasting information on products and services, prices and promotions, store layout and directions. INFORMATION SERVICES Bluetooth's capability for ad hoc connectivity opens the door to applications for information distribution: Location-specific advertising—audio, video or text—could be sent to restaurant and store patrons with Bluetooth devices. Intelligent road signs could give directions to other Bluetooth-enabled devices. Bluetooth enabled ATMs and vending machines could be detected by personal Bluetooth devices when they are within a radius of 100 meters. MACHINE-TO-MACHINE Machine-to-machine communication is a Bluetooth specialty. Memory chips stored in cards could be read and transmitted from one Bluetooth device to another. This has tremendous implications for the development of applications involving loyalty programs, membership cards, passports, security access cards, medical insurance cards, and driver's licenses. Another area of opportunity is the remote control of corporate assets, or telemetry. Asset monitoring, stock control, fleet management and security could all be enabled with Bluetooth technology. In addition to making wireless data applications available now, Bluetooth's strength in operating in indoor environments creates new revenue opportunities. Service providers for indoor applications—such as owners of shopping malls, department stores, airports, train stations, convention centers, hotels, coffee shops and restaurants—may also derive revenue from "rent" charged to users of Bluetooth Internet access points or other Bluetooth-enabled devices in their locations. Arthur Andersen sees huge opportunities for portal developers creating local Bluetooth portals and for content providers delivering location specific information.1 3G & Bluetooth 7
  8. 8. Implementing a Bluetooth network is something that’s possible today. As Figure 5 below indicates, many Bluetooth-enabled products and Bluetooth development tools are widely available in the marketplace. With widespread industry backing by such heavyweights as Ericsson, Nokia, Intel, Toshiba, IBM, 3COM, Motorola, Lucent, and Microsoft, market demand and acceptance of additional products for Bluetooth networking are in rapid expansion. Figure 5. Bluetooth Products Available Now Product Category Manufacturer / Model Availability Network & Internet WIDCOMM BlueGate 2100 network access point Worldwide Access Points Red-M 1000AP access point Worldwide PC and PDA Products IBM/TDK UltraPort module for Think Pad PCs US and Europe Fujitsu-Siemens laptop computer (Lifebook) Europe Fujitsu "ipoint" PC controller Japan Fujitsu Bluetooth v.92 Modem Japan Fujitsu laptop computer Japan Sony Vaio laptop computer Japan Sony v.92 modem Japan 3Com PC card US Xircom PCMCIA card US Motorola PCMCIA card US NEC laptop computer (Biblo) Japan Brain Boxes PCMCIA Bluetooth card Worldwide Brain Boxes CompactFlash Card for PDA Worldwide Cell Phones Ericsson T39M tri-band phone Worldwide Ericsson R520M tri-band cell phone Worldwide Nokia connectivity pack for 6210 cell phone Worldwide Motorola Timeport 270 North America Headsets Ericsson Bluetooth Headset HBH-15 a 2nd generation Available in retail stores product in October, 2001 Plantronics M1000 Worldwide Development Kits WIDCOMM BlueConnect Development Kit Worldwide WIDCOMM BTW Development Kit Worldwide WIDCOMM Network Access Development Kit Worldwide Peripherals Canon Digital Camera Worldwide 3G & Bluetooth 8
  9. 9. CONCLUSION 3G networks will eventually enable data rates of up to 2 Mbps, making possible a whole set of new applications that require more bandwidth than is currently available. Both the enterprise and the consumer marketplaces are expected to be eager adopters of wireless data services. However, the worldwide deployment of 3G networks is not without obstacles. Delays in realizing the promise of 3G are being caused by high infrastructure costs, a lack of available spectrum, and technical problems including interference, poor indoor coverage, and a lack of 3G handsets. 3G obstacles and delays create significant opportunities for implementing Bluetooth technology. Bluetooth enables current development of high-speed wireless data transfer applications. It is the ideal technology for implementing short-range wireless data networks today, delivering quality indoor and hot spot coverage along with rapid data transfer—all for a relatively low capital cost. WIDCOMM Inc. 9645 Scranton Rd. Suite 205 San Diego, CA 92121 Toll-free: 1.866.WIDCOMM (1.866.943.2666) Copyright © 2001 WIDCOMM, Inc. All rights reserved. 3G & Bluetooth 9
  10. 10. References 1 Third Generation X, by Benoit Faucon, Red Herring Magazine, April, 2000 2 3G: Inside the Numbers, An Analysis of Next-Generation Wireless Network Migration Strategies and Costs, Lehman Brothers, June 19, 2001 3 Progress to 3G, An Infrastructure Report, www.redherring.com, August, 2001 4 Wireless Firms Embark on Enterprising Mission, by Lee Bruno, www.redherring.com, July 15, 2001 5 3G: Inside the Numbers, An Analysis of Next-Generation Wireless Network Migration Strategies and Costs, Lehman Brothers, June 19, 2001 6 Ibid 7 Ibid 8 U.S. 3G Spectrum Pricetag Soars, By Elisa Batista, www.wired.com, June 13, 2001 9 Wired Europe Asks, 3G or Not 3G?, by Matt Hilburn, www.redherring.com, Jan. 30, 2001 10 Third Generation X, by Benoit Faucon, Red Herring Magazine, April issue, 2000 11 3G: Inside the Numbers, An Analysis of Next-Generation Wireless Network Migration Strategies and Costs, Lehman Brothers, June 19, 2001 12 3G: Inside the Numbers, An Analysis of Next-Generation Wireless Network Migration Strategies and Costs, Lehman Brothers, June 19, 2001 13 Ibid 14 U.S. 3G Spectrum Pricetag Soars, By Elisa Batista, www.wired.com, June 13, 2001 15 Ibid 16 New Cell "Standard" Isn't Really, by Elisa Batista, www.wired.com, June 14, 2001 17 3G Calls, But Who Can Answer? By Elisa Batista, www.wired.com, April 6, 2001 18 3G Stands for 3-Year Glitch, by Elisa Batista, www.wired.com, May 23, 2001 19 Europe Asks, 3G or Not 3G?, by Matt Hilburn, www.wired.com, Jan. 30, 2001 20 3G: Inside the Numbers, An Analysis of Next-Generation Wireless Network Migration Strategies and Costs, Lehman Brothers, June 19, 2001 21 Ibid 22 Ibid 23 Ibid 24 Ibid 25 Ibid 26 Ibid 27 Ibid 28 Ibid 29 Arthur Andersen, Bluetooth: treading on 3G terrirtory? 30 Ibid 3G & Bluetooth 10