Motorola to invest $1B in wireless network

SCHAUMBURG, Ill. — Motorola Inc. has announced an ambitious — and expensive — plan to develop a global, wireless Internet access system for use in conjunction with upcoming, third-generation (3G) cellular networks. The company said Wednesday (June 9) that it would invest upwards of $1 billion over the next 10 years, much of that directed toward its technology partner, Sun Microsystems Inc., which will provide software and hardware. But following on the heels of Motorola's high-profile but troubled ventures into satellite-based telephony and Internet access, it remains unclear whether the company has finally found a winning strategy.

"Our objective is for people anywhere to feel like they are connected directly to the Internet, without a wired connection and without requiring dial-up access," said Dan Dautel, vice president of systems technology for Motorola's network solutions sector, the division spearheading the effort. "This is going to open a lot of doors to applications that people haven't even begun to imagine."

The $1 billion budget will also be used to purchase hardware from the Motorola Computer Group, and Dautel would not say how much of the funding will be for Sun products and how much will be directed to the computer group. He sees the project as an extension of existing digital wireless networks, offering broadband network access to the masses with service comparable to current corporate LANs.

The company's networking sector has targeted its development efforts at three main levels. The lowest two tiers in the cellular hierarchy, basestations and call-processing control centers, will use the computer group's hardware, along with the Sun's real-time Chorus operating system, high-availability software utility features and the Java Dynamic Management software kit.

The CompactPCI boards developed by the computer operation, using the PowerPC at the heart of the CPX8216 boards, will be used as the real-time basestation platform. Sun's Netra server platforms will go into the top tier, as the basis for central-office server applications. Those platforms will run Solaris, but will also add high-availability and Java Dynamic Management features.

Jean-Pierre Baudoin, director and general manager of embedded and telecom software at Sun, said at the Supercomm trade show earlier this week that Chorus kernels had been ported to PowerPC before, but that the new contract represented one of the largest embedded uses of the Chorus OS in history. The sheer size of Motorola's efforts ensure that the deal will remain among Sun's most strategic for the real-time field, he added.

Open format

Dautel stressed that the networking sector is developing equipment that will sit just behind the RF transmission and receiving systems in the network, and this effort does not create any new, high-bandwidth wireless formats. "These systems are designed to process the data, and they don't care which wireless technology is used to deliver the data," he said. "This is going to be an open format."

Wayne Sennett, corporate vice president and general manager of the Motorola Computer Group, said the medium-range projections could allow for wireless bandwidth in the range of 384 kbits/second. While this is a significant improvement over the existing analog-modem limit of 56 kbits/s, it would be a big step down from the speeds seen in corporate LANs or offered to home consumers through digital subscriber lines or cable modems, all of which offer bandwidth measured in megabits. "Obviously we plan to push the speeds upwards, depending on the technology that is developed," Sennett said.

Given the existing state of wireless technology and Motorola's rollout schedule, Dautel said the initial deployment would likely use RF formats such as wideband CDMA, or GSM with packet-radio capabilities. This means the system will be constrained by RF capabilities, rather than by the networking sector's products. Current plans call for the network to use only terrestrial basestations.

This project follows Motorola's disappointing forays into both satellite telephone service and wireless Internet access using satellite technology. The satellite-telephony company Iridium LLC — in which Motorola holds a 19 percent stake — announced this week that it would cut prices in an attempt to attract new customers. Iridium has already lost nearly $1 billion since it began offering services in November, and analysts expect losses to continue.

Last May, Motorola said it would abandon its satellite datacom project, Celestri. With an estimated price tag of $12.9 billion, the 288-satellite Celestri network was anticipated to deliver digital bandwidth to PCs or other consumer devices in the range of 155 Mbits/s.

The company announced instead that it would take a 26 percent stake in Teledesic LLC, the so-called "Internet in the Sky" satellite project, for $750 million, and became the project's principal hardware contractor. However, last month Motorola began shifting some of its engineers away from the Teledesic effort and back to Iridium.

Herschel Shosteck, president and chief executive of market-research firm Herschel Shosteck Associates Ltd. (Wheaton, Md.), said Motorola is not likely to ever make money with either Iridium or Teledesic, and that its latest venture into wireless Internet access could be another step down the same expensive path.

"We don't see enough demand for Iridium services to ever support the company's enormous cost structure," he said. "And the problem with Teledesic is similar. By the time those satellites go up, there will be enough wired, broadband service to support whatever demand exists."

While Shosteck sees political forces driving the deployment of 3G wireless networks, he doesn't see very much revenue in the development of wireless data services. "The whole world is moving toward wireless broadband service, mostly because the Europeans and the Japanese don't want to get behind each other, and the United States wants to catch up to both of them," he said. "However, the bottom line is that we don't see a viable market for that, and it's going to be a very painful learning experience."

Robert Rosenberg, president of Insight Research Corp. (Parsippany, N.J.), said that consumer demand for wireless broadband is growing, but much more slowly than for wired services. His research shows consumer spending for satellite and wireless Internet access will swell from $36 million this year to $162 million in 2003. However, that growth rate of 69 percent is significantly lower than demand for DSL lines and cable modems, both of which are projected to top $3.5 billion by 2003.

"Motorola probably wants this to become as robust as what today's wireline networks aspire to be," Rosenberg said. "A major part of mobile communications in the future is going to be taking it beyond just voice traffic."

Shosteck agreed that wireless datacom using an Internet Protocol format will eventually become widespread, but said that it could be as much as a decade before it can be profitable.

"The main question is where is the real demand for this stuff, how much will people pay to use it and how much does it cost to build it?" he said. "A network that only runs at 384 kbits/s is a dubious business proposition, at best. In the short to medium term, this is likely to be a fiscal disaster."

—Additional reporting by Loring Wirbel