Commentary: Wireless evolution

By Lisa Pierce, Vice President

Verizon Wireless' announcement Thursday concerning future nationwide Evolution-Data Optimized, or EV-DO, service proves that competition is alive and well and benefiting customers. In our opinion, the decision was heavily influenced by the aggressive strategies of both Sprint PCS and AT&T Wireless.

The market for U.S. GPRS (Global Packet Radio Service) and 1XRTT (2.5G) mobile services will grow from an estimated $290 million in fiscal year 2003 to more than $1.5 billion by year-end 2006. On an annualized run rate, 2.5G revenue will exceed $550 million for fiscal year 2003 and $2.2 billion for 2006.

Major service-related drivers fueling rapid growth include coverage, price, guaranteed service availability and performance. Other service-related factors include close working

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Continued improvement in critical infrastructure components--such as the better price and performance of mobile devices and the proliferation of third-party integrators--will also be necessary for the success of 2.5G and higher-bandwidth mobile services. The most critical driver is the customer base itself; the operating philosophies of many organizations and their IT departments will evolve, as they begin to appreciate both the revenue and cost-savings benefits that accrue from targeted, deep deployment of this technology.

Since various providers' strategies about the deployment of 2.5G services differ widely, customers should not automatically assume that their favored 2G (that is, digital voice) providers offer comparably strong 2.5G services. Data coverage and support, especially on the enterprise side, varies by provider. Depending upon particular needs, clients should be open to buying from multiple 2.5G providers, favoring those with strong coverage and roaming relationships with landline data and Wi-Fi services.

As competition accelerates--the Verizon Wireless announcement is likely to bring near-term responses from competitors--the market will consolidate. Additionally, market leadership can change. Therefore, business customers should avoid long-term contractual commitments.

© 2004, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.