Word: 3g
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Michel Bon, chairman of France Telecom, is chatting by cell phone about 3G, a wireless technology on which he has wagered his career and his business. Suddenly, his voice starts to fade and become unclear. Then he disconnects completely. "I'm sorry," Bon says in his French-inflected English when he rings back a minute later. "My mobile, despite it is an Orange, I can say is not always perfect." France Telecom, of course, owns the lion's share of Orange...
...want to understand why the European telecom industry is throwing more than $230 billion into upgrading to 3G - shorthand for third generation - look no further than Bon's occasionally dodgy telephone. (Not that the handsets linked up to BT Cellnet or Vodafone are any better.) Though mobiles have come a long way since the days when Gordon Gekko stood on the beach talking to a brick, you still wouldn't make a call on one if a landline was available. And if voice services are skimming the edge of adequacy, that's still more than anyone could...
...Enter 3G, which is set to launch in most of Europe by 2003. Running on a new network standard called the Universal Mobile Telecommunications System, or UMTS, 3G devices will have more bandwidth, which will enable faster data transmission. Not only does UMTS help solve the capacity problem for voice, it will allow "always on" Internet access and, eventually, even video and color graphics through your handset. So for consumers, 3G could be seriously cool...
...telecom operators and their investors, on the other hand, it looks more like a financial disaster. Bon's France Telecom has increased its debt to a staggering $55 billion in large part to pay for 3G. Likewise, Deutsche Telekom now owes $50 billion, and British Telecom $43 billion. (It's not all 3G; these firms have also been on acquisition sprees.) And here's the scariest part: there's no guarantee that 3G will...
...these giant gambles," says Ken Binmore, a University College London economist who helped design the British auction. "If 3G is worth anything, it is going to be worth immense amounts, but who knows if it will be worth anything?" Binmore - who is delighted with how the auction turned out for British taxpayers - adds that the telecom operators understood this risk going in. If anything, the technological prospects for 3G were even more doubtful a year ago. The big difference between then and now isn't the technology. It's the NASDAQ...