one more blast from the past
Where is George today?
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Qualcomm Set To Get Support Of Key Group
By QUENTIN HARDY And LESLIE CAULEY
5 June 1995
Staff Reporters of THE WALL STREET JOURNAL
Qualcomm Inc. appears to be close to winning a major endorsement
for its promising but commercially unproven technology from PCS
PrimeCo, a group planning to build a nationwide wireless network.
Qualcomm's technology, called code division multiple access or
CDMA, may offer wireless operators up to 10 times as much capacity
per channel as the current analog systems, and perhaps three times
the capacity of a competing digital standard called time division
multiple access, or TDMA. Such an advantage could allow CDMA
operators to offer cheaper services than competitors.
But while it has worked in limited tests, CDMA hasn't
been proven in a commercial wireless network with thousands
of users. In recent months, skeptics have asserted that
CDMA is too complex and that Qualcomm won't meet delivery
deadlines of companies eager to build so-called personal
communications services, or PCS, networks. Those companies
won PCS auctions in March that require them to pay the
federal government $7.7 billion for their frequencies.
They want to start operations as soon as possible.
But an official familiar with PrimeCo's plans said the
group is negotiating a billion-dollar contract that is likely
to go to either AT&T Corp. or Northern Telecom Inc., using
Qualcomm's technology. Qualcomm will receive significant
royalties for use of its technology. PrimeCo comprises
Nynex Corp., Bell Atlantic Corp., U S West Inc., and AirTouch
Communications. It paid $1.1 billion for PCS licenses in 11
metropolitan areas and has said it wants to offer services
within 18 months.
A PrimeCo executive acknowledged that CDMA "is the
technology of choice" and said negotiations are under way with
the industry's top equipment vendors to buy gear based on that
standard. The executive said he is hopeful that PrimeCo will
have signed contracts in hand by week's end.
Harvey White, Qualcomm's president, declined to comment
yesterday. Friday, Qualcomm's stock jumped 10.6%, or $2.6875,
to $28 in Nasdaq Stock Market trading. But the shares have
essentially stagnated for the past 18 months and are well off
their high of about $43 a share reached in the fall of 1993,
when enthusiasm for CDMA was at its peak.
Indeed, winning PrimeCo's endorsement would be a major
seal of approval for Qualcomm, whose technology has no
commercial validation. CDMA essentially assigns a digital
signature to a phone call, allowing system operators to send
many calls down a single channel, and to reuse their assigned
frequencies in every cell area. Analog operators currently
have to divide frequencies into several channels, assign one
call to each channel and avoid using the same frequencies
in adjoining cell areas because of interference problems.
TDMA assigns time slots to callers, so several can use a
single channel at one time, but it doesn't allow as much
frequency reuse as CDMA.
CDMA promoters assert the technology , combined with
smaller cell areas and more-advanced base stations, will
be so efficient that the price of a cellular call eventually
will be only slightly more than a telephone call on a wired
network. But without commercial production of handsets and
infrastructure equipment, network operators can't be sure
the technology will work or equipment prices will be acceptable.
Meanwhile, TDMA systems have been installed in many other
countries and are a proven technology.
The main issue at PrimeCo is believed to be the prices
being offered by AT&T, Northern Telecom and other bidders.
Another major stumbling block is delivery schedules. PrimeCo
wants equipment delivered by mid-1996, even though most
CDMA-based gear isn't expected to hit the market until 1997.
PrimeCo's hard-nosed chief executive officer, George Schmitt,
Is asking for lower prices and indemnities if the vendors
fail to deliver. Before coming to PrimeCo, Mr. Schmitt
supervised installation of a TDMA system in Germany for
AirTouch and a German partner.
The stakes are high. Whichever technical standard
PrimeCo adopts, the four companies are likely to follow it
in upgrading their existing analog cellular systems to
digital, apart from the PCS network. Adopting one technical
standard would make sense given that one major goal of the
group is to establish a seamless national wireless footprint.
So PrimeCo's decision will lead to large contracts for winning
vendors and could influence the two other big PCS licencees,
AT&T and Wireless Co., which is a group comprising
Sprint Corp., Tele-Communications Inc., Cox Enterprises Inc.
and Comcast Carp.
All four companies already have declared their intention
to go the CDMA route with their existing systems. But Pacific
Telesis Group's mobile unit is backing TDMA, and AT&T's McCaw
Cellular Communications unit, the nation's biggest cellular
operator, has deployed TDMA.
Qualcomm's president, Mr. White, said his company's
technology has the edge. "If you look at the U.S. cellular
industry," Mr. White said, "10 or 11 of the leading 14
carriers have indicated they're going to use CDMA in the
lower band [ existing cellular systems]. It's the dominant
technology. We're very optimistic that CDMA will become a
dominant technology for the higher bands [PCS systems] in
the long run."
He added, "we're optimistic. But until people place
their bets in the form of purchase orders, you have to wait
and see."
-Julie Chao contributed to this article. |
