My Friend<
Quiten Hardy wrote more trash about Q
update2.wsj.com
Cordless Confusion
No single technology has yet emerged as the standard for
digital phones. So much for compatibility.
By QUENTIN HARDY
After eight years of quasireligious wars over whose system
is better, carriers backing three different standards for
digital cellular phones in the U.S. have networks up and
running. So which is the winner?
"We don't think there is a clear winner," says David Poticny,
vice president of systems engineering at Lucent Technologies Inc.,
the giant AT&T Corp. spinoff that makes equipment for all three
technologies. "For a fully configured network, over time the
infrastructure costs will be about the same."
Bummer. If that's true, it means manufacturers have spent extra
billions of dollars developing technologies that aren't much
different, an effort that has put the U.S. several years behind
Europe in rolling out digital phones and services. Now the American
consumer will be contending for years with three or more digital-phone
standards that are incompatible. Although the carriers are expected
to each have national systems within five years, their customers
won't be able to buy a service from one and then switch to another
without buying an expensive new phone.
The fragmentation of the market also prevents equipment makers and
service providers from achieving greater economies of scale that could
drive down price faster. The development of enhanced services could
also be delayed, as third-party suppliers struggle to modify applications
to run on three systems.
"As a manufacturer, I'd rather there be just one [standard]," says Mr.
Poticny. "But we've more or less given up on that."
Continental Divide
Since 1992, Europe has had one digital phone standard, the Global
System for Mobile Communications, known as GSM. As a digital
system, it offered better voice quality than older analog systems
and the ability to link to other digital systems, such as paging and
fax services or, just recently, the Internet. Carriers also favored it
because it could carry up to two to three times the traffic of analog
systems, and one standard would allow the same digital phone to be
used anywhere in Europe. It became a runaway hit, attracting 40
million subscribers in five years.
Some carriers have formed a GSM partnership in the U.S., led by
Pacific Bell Mobile Services and BellSouth Mobility Inc., units of
SBC Communications Inc. of San Antonio and BellSouth Corp. of
Atlanta, respectively. But the majority of American carriers and
equipment makers rejected GSM, figuring they could develop
promising technologies that would have much more capacity to
carry conversations at the same or lower infrastructure cost as GSM.
The Standards Battle
While GSM is the standard world-wide
(subscribers in thousands)
----1996.....1997.....1998......1999......2000
GSM..33,303..67,306...107,100...156,946...212,759
CDMA....800...7,046....21,024....41,889....71,574
CDMA is expected to outrun digital competitors in North America
(subscribers in thousands)
..........1996.......1997....1998.....1999.....2000
CDMA........40......2,487...9,310...19,217...32,096
TDMA.....2,337......5,248..11,788...19,421...28,936
GSM........393.....1,1820...2,646....4,507....6,263
Analog..43,838.....49,095..50,444...47,200...41,100
Source: Dataquest Inc.
One standard to emerge, called U.S. TDMA, or time division
multiple access, is a cousin of GSM. Both slice conversations into
millisecond bursts, then fit them between one another so they can
share a single channel. TDMA is backed in this country by the
largest cellular provider, AT&T's Wireless Services unit, and also
by SBC and BellSouth. (The companies are backing various
standards because they acquired companies that were working on
those standards.)
A later challenger, and now the putative favorite in the U.S., is a
technology called code division multiple access, developed by
Qualcomm Inc. of San Diego. CDMA chops a digital conversation
into bits, sprays them across a slice of spectrum and then reassembles
them on the other side. Theoretically, lots of different conversations
can be sent over the same channel in different bits, as long as powerful
microprocessors can recognize, sort out and reassemble the signals.
Bold Claims
Two big consortiums, Sprint PCS and PrimeCo Personal Comm. L.P.,
are building CDMA networks, as are several other big carriers.
(Sprint PCS is a partnership of Sprint Corp., Kansas City, Mo., and
three cable companies; PrimeCo is a partnership of two Baby Bell
companies and AirTouch Communications Inc., San Francisco.) The
consortiums were lured to the technology by claims by Irwin Jacobs,
Qualcomm's co-founder and a legendary inventor, that CDMA could
cram 20 to 40 times as many calls into a channel as regular analog
cellular-phone service, which has been offered in this country for the
past 14 years and has attracted more than 45 million subscribers. Heated
disputes have broken out over those claims, so heated that Yankee Group,
a big consulting and market-research firm in Boston, publicly chided both
sides for "unprofessional" conduct. It now appears that CDMA's capacity
edge over GSM and TDMA is far narrower than Mr. Jacobs originally
asserted. GSM can carry up to three times the traffic of analog channels,
TDMA is being tweaked to run at five to seven times,and CDMA at six
to 10 times. But CDMA networks are about twice as expensive to build,
at least for now.
"If you break a network down into the cost of individual voice channels,
GSM is $6,000 a channel, and TDMA is $6,500," according to Clint
McClellan, a researcher at Dataquest Inc. in San Jose, Calif. CDMA
is $11,000 or $13,000 a voice channel, he says, although the cost
of CDMA systems will drop as the technology matures.
Some analysts think the free-for-all is still worthwhile.
"It's heresy to say this, but at the end of the day having three standards
is not such a bad thing," says Iain Gillott, an analyst for International
Data Corp. in Framingham, Mass. "You see people trying very hard to
get their networks up and to get better quality. It's survival of the fittest."
One-Way Competition
But cellular-phone providers compete fiercely inn Europe, too. They
just do it on one standard, with interoperable handsets and equipment,
sort of like personal-computer makers in the U.S. competing on
Microsoft Corp.'s software standard. The European subscriber can
dump one GSM carrier for another at any time, without paying a
penalty or losing access to favorite services or applications. At the
same time, operators can mix or match handsets and infrastructure
equipment from many suppliers, getting a better deal.
The U.S market is indeed a competitive jungle, with price wars
breaking out in the markets just being entered by the digital carriers.
While a local wireless call might have cost 40 cents a minute last year,
Sprint is now charging 11 cents a minute in some markets, and
PowerTel Inc., a GSM carrier in the South, about 10 cents a minute in
most of its markets. Right now, TDMA has an early lead with AT&T's
backing. About one million of AT&T's seven million customers are on
TDMA networks. The GSM Alliance claimed 600,000 subscribers at
the end of July, including 200,000 in Jun and July alone.
Warring Camps
Largest U.S. providers of cellular-phone service for the three principal
digital standards TDMA
What It Is: Time Division Multiple Access ? Digital calls are sliced into
tiny bits, shuffled together with other calls and reassembled. This fits
more calls over a slice of airwave than traditional analog transmission.
Providers: AT&T Wireless Services, SBC Comm.Inc., BellSouth Corp.
GSM
What It Is: Global System for Mobile Communication -- A calling
network first deployed in Europe, it employs TDMA technology but
differs in network configuration.
Providers*: Pacific Bell Mobile Services, BellSouth Mobility Inc.,
Aerial Communications Inc., Omnipoint Corp., Western
Wireless Corp., Powertel Inc., Microcel Telecommunications Inc.
CDMA
What it is: Code Division Multiple Access -- Calls are chopped up,
tagged by their power level, sprayed over airwaves along with other
CDMA calls and then reassembled by receivers that recognize the
original power level.
Providers: Sprint PCS, PrimeCo Personal Communications LP,
GTE Mobilenet, Bell Atlantic Nynex Mobile, AirTouch
Communications Inc., NextWave Telecom Inc.
*Members of the GSM Alliance, covering most of the U.S. and Canada
Source: Company reports
The biggest CDMA carriers, Sprint PCS and PrimeCo, have several
hundred thousand subscribers between them, but have struggled to
get the extra capacity promised by Qualcomm's technology. Al Kurtz,
chief operating officer at Sprint PCS, says Sprint's $3.1 billion
CDMA system is getting "better than six" times the capacity of
analog, but "performance is still not where we want it."
The news delights CDMA foes. "I make no bones about it, this is
comforting to me," says Nick Kauser, chief technology officer at
AT&T Wireless. "For a long time, if you spoke out against
Qualcomm, you were sued or denounced." Now that rival systems
are out of the laboratory and actually operating, "the myths are
dispelled," he says. "In some places, theirs works better. In some
places, ours does."
Urban Edge?
CDMA's biggest advantage seems to be in densely populated
urban areas, where its capacity edge truly matters. Competitors
assert that as use of CDMA networks increases, the CDMA
carriers have to install too many base stations for directing
traffic in so-called cells, or geographical areas. That investment
makes more sense in urban sectors than in some spread-out suburbs.
But CDMA supporters say it's just a matter of time before CDMA
technology prevails. They argue that CDMA's design is inherently
superior to the others because it makes the most efficient use of the
airwaves to send messages, and that innovations in microchip
technology will quickly drive down the price of CDMA base stations
and handsets. Eventually, CDMA carriers will be able to offer lower
prices to subscribers than will the rival camps, they say.
"If I was in TDMA, I'd be worried," says Lowell McAdam, chief
operating officer for PrimeCo, which expects to pay about $1.6
billion for its nationwide CDMA network. "I don't think they'll
have enough customers to hold their market up."
Analysts generally side with CDMA carriers about the future, not so
much because of their technology claims but because they outnumber
the other camps. AT&T is expected to lose share in the face of
marketing pushes from Sprint, PrimeCo and others.
Dataquest expects the CDMA carriers to have 36% of the U.S. market
in the year 2001, compared with 32% for TDMA, 5% for GSM and
26% for analog. That compares with current levels of 4% for CDMA,
9% for TDMA, 2% for GSM and 85% for analog.
CDMA technology also seems to have a long-term advantage in its
suitability for a new emerging technology called wireless local loop
that provides wireless links to homes and businesses rather than
mobile users. Its proponents say it will also be used eventually for
very-high-speed, or wideband, networks for transmitting video and
Internet multimedia files, as well as voice.
At any rate, the U.S. standards war is being exported. China, for
example, has recently signed agreements to buy both CDMA and
GSM systems. Canada's Northern Telecom Ltd. has announced it
will manufacture both CDMA and TDMA equipment in Brazil for
the local market. Interest groups for one or another standard have
recently campaigned in Malaysia, India and Australia.
And in Japan, which has been using a digital standard of its own
design, most of the major manufacturers are working on an extra-
powerful CDMA standard that may prove, once and for all, the
strongest promise about CDMA. The new form of CDMA, called
broadband CDMA, uses advanced Internet technology to deliver
data at very high rates -- the kind that make wireless video possible.
"Our fundamental belief is that there is a bigger and bigger demand
for data pipes," says Mr. Poticny.
--Mr. Hardy is a staff reporter in The Wall Street
Journal's San Francisco bureau. |
