Deciding on Network Architecture for 3G Wireless Services

The demand for high speed data services, such as multimedia and interactive information services, is increasing. Since such data services are a potential source of network service provider profit, third generation (3G) technology is being developed to support them. Further, this emerging wireless network technology will ultimately result in a much more complex network and service environment. With increasing technological complexity and uncertainty wireless network operators require more flexible network architectures to achieve and maintain competitive advantage. However, since the complete replacement of existing wireless network architecture is not practicable, technology choice in the migration of existing networks requires that carrier management examine options available as a strategic decision. To allow strategic analysis of the possible evolution of wireless networks and their architectures—innovation (ITh, Henderson and Clark 1990) and real options (RO, Dixit and Pindyck 1994) theory—are introduced. (1990) examine why some firms are able to leverage innovations. RO allows the linking of strategic planning and financial strategy by determining a value for an uncertain opportunity. Clearly, the potential exists to employ ITh to analyze wireless network technology evolution and architecture, and RO to support strategic decision-making. The principal motivation for this study is to develop a conceptual framework through which wireless network operators can support their strategic decisions concerning next generation network architecture. Accordingly, typical network architecture migration path alternatives, global systems for mobile communications (GSM) and code division multiple access (CDMA) based network scenarios, are examined using ITh. Strategic options for network migration as a means to manage wireless network architecture evolution based on the RO are also discussed.