"WIRELESS" INTERNET: What the 3G Challenge Means for U.S. Competitiveness

"Why 3G?"

Imagine you are out doing some errands on a weekend evening and want to get together with some friends for a movie and dinner. If it's a Saturday night, the chances are once you get to the theater there will be long lines, sold out shows for the movie you want to see, and a bunch of other movies playing of which you've never heard.

But you have an advantage over others. You pull out your new cell phone with its enhanced screen, which happens to double as your personal digital device. Using the snazzy wireless device, you not only can check the listing of all the movies at the theater, you can view clips from the movies as well. Using this same device, you select the movie you want to see, buy the tickets online, and then use the instant messaging function to let your friends who are meeting you know which movie you have selected.

Also, since you know that the restaurant across the street is going to be busy after the movie, you make reservations for you and your friends. After the show, once you and your friends get to the restaurant, you call up on your wireless phone the restaurant's discount coupon and pay for dinner - avoiding using cash or a credit card. Welcome to the world of Third Generation wireless (3G) - where high-speed, broadband mobility meets the Internet.

Currently, it's difficult to even imagine the implications for electronic commerce in economies that develop broadband mobile access to the Internet and data services that make the above scenario possible. With 3G, the possibilities for wireless applications are numerous. For instance, imagine calling up a map in your car, conducting a video conference over wireless phones, checking e-mails, and browsing the web - all without wires.

The availability of 3G services is going to have a profound affect on electronic commerce. In terms of international competitiveness, the 3G race has gotten off to a staggering start. The U.S. is in one lane continuing to analyze the need for additional spectrum to complement our current cellular and PCS spectrum usages. Japan is in another lane and is expected to rollout its 3G services in May 2001. And several other Asian and European countries are well on their way toward implementing 3G as they have already issued licenses and will be rolling out 3G services throughout the coming year.

Mobile broadband wireless Internet access has become a key economic component for Asian and European countries and many of those nations are on the cusp of driving the next wave of the Internet revolution: mobile commerce ("m-commerce"). The advent of mobile broadband communications is not only going to change dramatically the number of people who are accessing and using the Internet, but will change the content of the Internet.

Currently, Americans account for approximately one out of every three Internet users around the world. As a result, most Internet content is generated in the United States, and America's policy priorities for the Internet play a significant role in the global debate over the future of telecommunications and information policy.

That is about to change because Asia and Europe are on the verge of surpassing the U.S., which currently has the most wireless users (approximately 112 million) and Internet users in the world, in these areas because of their head start in developing 3G services. Already, Asia and Europe are leading the world when it comes to wireless Internet. The remarkable success of Japan's DoCoMo service, known as I-mode, has provided a glimpse of what wireless Internet access is going to mean for electronic commerce in the future.

More than 80 percent of all the wireless Internet users in the world are in Asia. Once 3G services are fully deployed in Japan, Korea, China, Hong Kong, and Malaysia, Internet penetration in the Asian region is expected to soar - making China, not the U.S., the largest wireless and Internet market in the world. Moreover, within the next two years, Asia as a whole may far surpass the United States with respect to the number of Internet and wireless users. China could have more Internet and wireless users than any other nation, and when combined with other Asian countries such as Japan and Korea, it will become a major force in the two revolutions shaping the new economy: the Internet and wireless technologies.

Currently, the United States is still reviewing the requirements for additional spectrum for 3G, and is far from offering the types of services on the scale that will be offered abroad.

One of the most significant high-tech issues facing the U.S. is to maintain our global leadership role with respect to the next generation of wireless services. Third generation wireless is more than one of the most pressing telecommunications issues of our time. It has major significance for the future of America's global competitiveness and ability to protect our traditions of free speech and market principles with respect to the Internet.

The Europeans and Asians view 3G development as their opportunity to surpass the United States' previous dominance in telecommunications and electronic commerce. Their lead on 3G and current generation wireless web access has given their manufacturers a significant advantage in shaping the communications technologies of tomorrow, and consequently, is shaping the nature of electronic commerce and Internet content.

Following the U.S. delegation's success at the World Radio Conference (WRC-2000) in Instanbul, Turkey in May 2000, the National Telecommunications and Information Administration (NTIA) began an aggressive initiative to implement the WRC-2000 recommendations - jump starting the United States' efforts to develop 3G. The world-wide conference selected spectrum in the 800/900 MHz band (now being used for cellular and other mobile services), the 1700 MHz band (largely used by the U.S. Department of Defense), and the 2500 MHz band(used by commercial users for instructional TV and wireless data providers), as candidates for a new service called IMT-2000 - which is called 3G in the United States.

The goal of the Department of Commerce's initiative is to ensure that the U.S. maintains its world leadership in telecommunications and electronic commerce as wireless broadband access becomes the dominant means through which competition in the new economy will play out around the world.

NTIA's leadership resulted in a Presidential Directive Memorandum instructing the Commerce Department (through NTIA) to lead an inter-agency process, and calling on the Defense Department (DoD) and the Federal Communications Commission (FCC) to work with U.S. industry to develop 3G wireless services. The process is focused on studying the engineering characteristics of two of the spectrum bands proposed at the WRC for 3G, assessing the spectrum needs for 3G development, and ensuring sufficient spectrum allocation for 3G development.

A critically important element of this process is to find ways to accommodate the needs of incumbent users. The U.S. faces unique challenges in allocating spectrum for 3G because of the fact that there is no un-encumbered spectrum (e.g., the 3G bands identified by the WRC are already occupied in the United States). Therefore, it is critically important that any decision to share or reallocate spectrum be worked out cooperatively with the affected incumbent(s). The Administration's process ensures that incumbents will be treated fairly, and the Administration has done a great job in keeping government agencies, including the Department of Defense, and industry at the table - establishing a high level of confidence in the process. Moreover, the process must be driven not only by the goal of allocating sufficient spectrum, but also by the need to address the issues of the incumbent users. The success of the process is dependent on this realization.

The process has established aggressive time frames to achieve these goals. In accordance with the Presidential directive, NTIA and the FCC have issued initial reports under the two agencies' respective jurisdictions, on two of the candidate bands chosen by the WRC. NTIA performed its assessment of the spectrum band currently being used by the Department of Defense, and the FCC conducted its assessment of the commercial band.

The FCC's notice of proposed rule making (NPRM), which was released for comment in early January 2001, provides the first regulatory step in the reallocation process. This NPRM provides all stakeholders with an opportunity to give guidance and input into the allocation decisions that will be completed by July 2001.

Under the time frame established in the 3G spectrum plan, as developed by the Department of Commerce under the Presidential directive, NTIA and the FCC will issue final reports on their respective candidate bands by March 2001, and the two agencies will make final decisions for reallocation for 3G and other advanced wireless services by July 2001. These dates must be met in order for the spectrum to be auctioned and licenses awarded by September 2002.

While the United States' action plan is ambitious, the U.S. will remain two years behind many Asian and European countries on 3G services, even if the plan is completed on time. Nonetheless, any delay in the time frames for which the final reports are due (March 2001) and the allocation decisions are made (July 2001), may significantly affect the United States' ability to compete in the 3G race. The market value of existing spectrum allocations, which are yet to be auctioned (such as segments in the 1700 MHz and 2110 MHz bands), will be largely determined by the decisions made under the 3G initiative outlined above.

Certainly, expanded Internet access is going to change societies around the world. We are already experiencing this in the United States as the Internet has become a major driving force in our economic expansion - offering new opportunities in education, healthcare, and commerce. The Internet will significantly change Asia and Europe as more people come on-line through the use of third generation wireless services.

In summary, the Internet is going wireless, and the United States must continue to be aggressive in the 3G race if we are going to effective in shaping future policies and maintaining our global leadership position. It is important that policymakers, industry leaders, and Americans understand this fact. And, this is what is driving the Administration's historic efforts to develop 3G. The race is still in the early stages, but we are going to have to pick up the pace if we wish to remain competitive.

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