3G handsets to dominate global market: Study

By Mickey Alam Khan

November 30, 2007

David Chamberlain, principal analyst for wireless at In-Stat

New research claims that third-generation handsets offering bandwidth for audio, video, pictures and graphics is on its way to worldwide dominance, garnering a 40 percent share of all mobile phones sold by 2012.

Less than one-fourth of the 1.1 billion mobile phones expected to sell in the current period are 3G, according to market researcher In-Stat. However, more than half of the handsets sold next year in the United States will be 3G phones operating on CDMA-EV and UMTS networks.

“The phone experience is becoming more and more like the PC experience every day,” said David Chamberlain, principal analyst for wireless at In-Stat, Scottsdale, AZ. “However, it's important to remember the cell phones are very different and have much more limited capabilities.

“Companies that want to make the leap to mobile need to understand that it is a very different world from a technology standpoint and from the perspective of dealing with mobile operators who are very much in control of the handsets that are on their systems,” he said.

Worldwide handset revenues are expected to touch $165 billion by 2012, per In-Stat’s 2007 Global Handset Market Forecast study. The company does not expect fourth-generation network handsets to launch in any significant numbers by that year.

In-Stat research also shows that low-cost and really affordable handsets will lower the average selling price over the next five years, pushing down overall revenue.

Indeed, consumer and competitive pressure has already forced Verizon Wireless, the nation’s No. 2 wireless carrier, to make its network compatible next year to any mobile phone. AT&T, Sprint Nextel and T-Mobile also plan to open their networks.

GSM vs. CDMA

But there is little doubt that the market for 3G handsets has been spurred worldwide.

“The mobile operators who have already committed to deployments are now building and growing their networks,” Mr. Chamberlain said. “Right now, it's a matter of customers finding 3G service compelling enough and the pricing of handsets and service attractive enough.

“There might be further growth if other countries release spectrum for 3G,” he said. “For example, India and China have not yet set their national policies on 3G yet.”

Most users worldwide are on the second-generation GSM network. AT&T and T-Mobile are GSM operators in the U.S.

Alltel, Sprint and Verizon in the U.S., KDDI in Japan, China Unicom and most South Korean mobile operators use CDMA technology. CDMA use is also widespread in India and Latin America, although it is virtually absent in Western Europe.

CDMA worldwide accounts for only about 30 percent of the world’s handsets and GSM the rest, Mr. Chamberlain said. CDMA’s version of 3G is called EV-DO, or Evolution-Data Only.

Meanwhile, AT&T has started rolling out its 3G networks called UMTS or W-CDMA. The telecoms giant has already upgraded the network for higher speeds using a technology called HSDPA, or high-speed download packet access.

“With the HSDPA upgrade, UMTS networks can nearly match the speed of CDMA-based 3G networks operated by Sprint and Verizon,” Mr. Chamberlain said.

“UMTS is the 3G network used in Europe,” he said.

Interestingly, the notion of 3G is not entirely clear to consumers. Many consider ever lower-speed handset versions to be 3G. Second-generation standards such as CDMA and GSM are focused on voice service with the addition of text messaging. 3G will deliver more bandwidth and thus richer content.

“3G, as it was initially envisioned in the late ’90s, was expected to provide the bandwidth for mobile video and other value-added services that would overcome the problems of declining voice revenues,” Mr. Chamberlain said.