3G's Latest Snafu: Hellacious Handsets

When Europe's costly networks are finished, the phones may not be ready

They were machines to die for. As prototypes for third-generation mobile phones emerged in the late 1990s, the only question was whose phone would be coolest. These handsets would not only handle e-mail, snap pictures, and send spreadsheets, they would videoconference and download music faster than they could play it. Sure, the telcos were taking on risk by spending billions on new high-speed mobile networks. But once customers got their hands on these irresistible handsets, the nascent industry would soar, right?

Not exactly. In fact, instead of energizing the mobile Internet, the new handsets may slow it down. Europe's phone companies are facing the possibility that when they finish their costly networks, within the next 12 to 18 months, the handsets may not be ready. Chances are, those that emerge will be far simpler machines than the dreamy fin-de-siècle prototypes. What's more, the manufacturers are struggling even to ensure that the new handsets will be able to communicate with each other.

MOVING TARGET. Why the alarm? Quite simply, the entire telecom industry is wrestling with a technology bear. The 3G handsets, on which Europe has wagered much of its tech future, are by far the most complex consumer electronics devices ever designed. To succeed, they must combine the wealth of applications available on a computer with the roving versatility of a mobile phone. The trick is to wedge all of this into a sleek little machine equipped with multiple radio bands and days and days of battery life--and it must sell at an affordable price. If that weren't enough, dependable handsets must be available in as little as a year, when the networks will start going live in Europe.

The pressure to come up with 3G handsets in a hurry is pushing much of the industry, from Finland's Nokia Corp. to Japan's NTT DoCoMo, to join forces. They all see just what a rocky road they're traveling. In Lund, Sweden, engineers at Ericsson have been working on the technology since 1993. Each year it gets harder. Why? Nearly a decade ago, customers would have gladly put up with a computer-phone the size of a ham hock and the most rudimentary e-mail service. Now, they aren't likely to make concessions. The new handsets must be an e-mail machine as slick as the BlackBerry, as well as an organizer that can match the Palm or Microsoft Corp.'s Pocket PCs. And all these applications must work seamlessly with a state-of-the-art phone. "It has to work every time, it has to be quick," says Tord Wingren, president of Ericsson mobile platforms in Lund. "If this happens, we'll see people do all sorts of new things in wireless."

Easier said than done. Traditionally, cellular phones have specialized in one kind of data: voice. The new handsets must be able to juggle music, video, and e-mail, as well as voice. This is a task the desktop computer is ill-equipped for, yet 3G phones must do it on the run, bouncing radio signals from one base station to another. And unlike the PC, which can take a few seconds to digest difficult assignments, a 3G handset must establish firm priorities: For instance, while it can let graphics for an online horoscope dribble in slowly, voice traffic must be instantaneous.

Then there's the question of size. "If it doesn't fit into a pocket," says Bill Bauer, director of access at Palm Computing, "people won't carry it around." But to communicate with new phones and old, the 3G handsets must run on at least three radio bands. That consumes space and juice. The computer-like applications require plenty of power, too.

Like any startup technology, the first 3G phones will likely be hefty, with a price tag to match. Full-featured devices "will be like bricks," warns Kramran Kordi, 3G business development manager of UbiNetics Ltd., a Cambridge (England) test-equipment company. And prices will likely hover at $1,000. Experts predict it will take at least three years and a couple of generations of 3G phones before developers can ferret out the crucial applications and bake them onto mass-produced silicon chips. That will help drive down costs and power consumption.

Engineers at Ericsson's lab in Lund and elsewhere must deal with an even thornier problem. Compared to a standard computer connection, a mobile hookup is full of digital dirt: There's 1 error for every 100 bits, as opposed to 1 in a billion for cable. Software in the handset must be able to interpret these errors, masking some and sending out queries to iron out others.

As a result of these limitations, many of the early 3G handsets may be specialized machines. For a taste of what is to come, take a look at Nokia's new 5510 phone. Pitched at kids, the device offers none of the power-hungry business tools adults crave but instead focuses on voice, messaging, and music playbacks. Meanwhile, the Sony-Ericsson joint venture is hurrying to put together 3G devices outfitted for video games, a segment that's the rage in Japan.

GROUNDBREAKER. In fact, Japan is proving to be a major laboratory for the industry. Market leader DoCoMo launched a service based on a preliminary 3G standard in October. Japanese manufacturers also are far ahead in color screens, miniaturization, and power management. And the job's easier in Japan because DoCoMo's phones only have to communicate with one network. This frees the Japanese--for now--from a big headache facing the rest of the world: getting the handsets to work with multiple networks and standards. Indeed, it's the continual testing that has slowed down the rollout of 2.5G. This intermediate mobile wireless system has just debuted in Europe, a full year behind schedule.

To cut down on 3G delays, the industry is banding together. In recent months, a host of manufacturers have moved to license their long-secret standards. And on Nov. 12, industry leader Nokia--which previously appeared determined to go it alone--announced plans to license its own 3G software. Two days later, in Toyko, Nokia Chairman Jorma Ollila and DoCoMo President Keiji Tachikawa unveiled plans to work together on an open architecture. The key holdout for now is Microsoft, which is pushing its own Windows software for the mobile Internet.

With most industry leaders getting behind open global standards, the need for exhaustive testing may diminish. That should pave the way for quicker releases and perhaps a broader offering of handsets. Still, Kordi, for one, believes 3G won't start to reach industrial scale--and lower prices--until 2004. By then he sees consumers buying 30 million 3G machines annually, which amounts to only about 8% of this year's global handset sales.

The frantic race for 3G could provide an extra payoff. If the phonemakers manage to come up with tiny computers that meet high standards of speed, size, reliability, and power consumption, they'll be positioned as powers not only in 3G but in the broader world of computing. Let's not get ahead of ourselves, though. The task now is to put together miracle machines in a hurry for a wireless industry that's bet the ranch on 3G.

By Stephen Baker in Lund, Sweden

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