The end of pure cellular data networks?

Has cellular technology hit a brick wall? Is 3G the last cellular-only service that will be offered to the public? Impossible, you say. Technology never stands still. Well, that’s what you think.

There is a force even mightier than the power of innovation and invention. The one force that can stop technological progress is — drum roll, please — money.

The carriers are worried. As Ken Dulaney, vice president for mobile and wireless at Gartner Research, says, “Data is fundamental to new revenues” for the carriers. However, there are other technologies that threaten new revenue streams. In particular, cellular carriers are concerned that WiMAX will become pervasive and encroach on 3G data services.

Intel, for example, is already pushing for 802.16e, the mobile follow-on to next year’s rollout of WiMAX fixed wireless coverage. Fixed coverage is intended for use by wire-line carriers such as AT&T as a backhaul solution, reducing the last-mile fees they currently have to pay to the ILECs (Incumbent Local Exchange Carriers).

As WiMAX becomes standardized, the economies of scale will also make it the solution of choice for MANs (metropolitan area networks). On the other hand, Mobile WiMAX, or 802.16e, has yet to be ratified as a standard.

In one sense, Intel’s enthusiasm is all about first-mover advantage. Whereas Intel is pushing mobile WiMAX, which it can incorporate into its next-generation notebook chip sets, the notebook manufacturers are already contemplating incorporating internal cellular cards. Whoever gets there first may have an unstoppable usage advantage.

The OEMs see an opportunity to do a little revenue-sharing with the carriers. According to Dulaney, Sony has already announced its intention to do so, Dell is considering it, and IBM plans to as well.

The carriers, meanwhile, are rubbing their hands in glee. Obviously, built-in cellular data hardware would tie corporate customers to a single wireless carrier provider and its services.

For the record, Gartner argues this is a bad idea, for the same reason the carriers want it so bad. Plus, Gartner believes the cost is too high and that mobile users usually wait until they get to a hotspot or connect to broadband in their hotel room. And of course the BlackBerry is finally taking off. Add it all up and the need for internal cellular cards in laptops is minimal, Dulaney says.

So the question is, with revenues not coming in as fast as expected for data services on cell phones and with the life sentence the carriers have been given — paying licensing fees to Qualcomm for CDMA — does continuing to upgrade WANs through cellular improvements make sense?

There is another way. The foundation of 4G data service may well be a combination of WiMAX and cellular.

Dulaney says that what we might see is a mesh network offered by the major wireless carriers, based on WiMAX. Not only is WiMAX a less costly infrastructure to lay out, but — and here’s the real beauty of this hybrid architecture — it will allow the carriers to offer not only data but VoIP as well.

Of course, until the dust settles and there is some platform consolidation among the carriers, there will be no winners, only losers — including corporate users, hardware manufacturers, and the carriers themselves.

Stay tuned. Things should get interesting.