According to Nokia, the world's largest wireless phone maker, the problem is "minor" and is expected to be fixed before upgraded networks are built. But analysts said the glitch is an embarrassment for Nokia and potentially another setback for the introduction of highly touted third-generation, or 3G, phone networks.
If the glitch is not fixed, handsets in Nokia's popular 2100, 5100 and 6100 phone model series may be unable to connect to the higher-speed systems that carriers such as Sprint PCS and Verizon Wireless plan to launch, Nokia spokeswoman Megan Matthews said Tuesday.
Nokia could not provide the number of handsets affected, but estimated that these models--more than 21 in total--account for one out of every 10 cell phones now being used in the United States, Matthews said.
The company said that its newest generation of phones will not be affected by the glitch. Those phones will ship in 2002.
In October, both Verizon and Sprint plan to offer customers new high-speed, digital phone services--in exchange for higher monthly fees. Long-anticipated 3G services are expected to offer cell phone owners the ability to surf the Web or watch video clips at broadband speeds.
Nokia does not plan to recall phones affected by the glitch. The company is still pursuing a number of solutions, including working with wireless carriers to modify the back-end technology used to build 3G networks.
The problem marks the latest in a string of setbacks suffered by the wireless industry in its prolonged effort to deliver 3G technology.
The industry has suffered from concern in recent months that these 3G networks, which could significantly boost wireless use and profits, could be delayed. Uncertainty about when equipment from Qualcomm and service by Japan's NTT DoCoMo will be ready has fueled the worries.
Even if Nokia fixes the problem, its impact may have a more long-lasting effect on the giant's credibility. Analysts said it's now a question of whether the company will be able to introduce advanced wireless technology within its expected time frame.
"It's a minor problem. But it leads me to believe there is a credibility gap," said Mark Hugh Sam, a technology stock analyst for Dundee Securities in Toronto. Hugh Sam said he has spoken with some of Nokia's and other U.S.-based third-party engineers who discovered the problem.
Nokia "got this wrong. What else are they going to get wrong? They are projecting the arrival of higher-speed phones in the third quarter of 2002. Now I'm doubting that," Hugh Sam said.
But Nokia downplayed the significance of the problem. "It's no big whoop," Nokia's Matthews said.
Representatives from Verizon and Sprint could not be reached for comment Tuesday.
Nokia said it identified the problem during lab testing in recent weeks. Others, including engineers from Lucent Technologies, uncovered the problem as well.
A problem of standards
Nokia's problem involves how the Finnish company interpreted a standard known as CDMA (code division multiple access) when it was doing research on phones nearly a decade ago. CDMA is one of several standards that carriers in North America follow.
In Europe, where Nokia enjoys a huge sales lead over every other handset maker, most carriers use a different standard known as GSM (Global System for Mobile Communications). In fact, some Nokia executives have criticized the CDMA standard, saying it is inferior to GSM--and that's why about 70 percent of the world, including Nokia's home country of Finland, adheres to the GSM standard.
Perry LaForge, executive director of the CDMA Developers Group (CDG), an industry association responsible for the CDMA standard and its development, alleged that Nokia approached the group when it recognized the problem.
Although Nokia asked the group to consider changing the standard, LaForge said, the group hasn't decided if it will consider the proposal. Matthews denied that Nokia ever asked the CDG for the changes.
LaForge said changing the standard is unlikely. "This is a manufacturer's problem," he said. "The standard is fine."