Cingulosers!
Thursday June 28 05:01 PM EDT
Silicon Insights: Ruling May Sink Cingular
By Andrew Seybold Special to ABCNEWS.com
Can a legal controversy over wireless bandwidth sink Cingular Wireless? Silicon Insights' wireless guru Andy Seybold takes a closer look.
Did American wireless carriers just get hit by a torpedo attack launched by the U.S. Appeals Court?
Listen to Andrew Seybold's report.
The court ruled that the Federal Communications Commission (news - web sites) violated bankruptcy rules when it repossessed Nextwave Communications' wireless spectrum and re-auctioned licenses for those wavelengths for more than $15 billion.
While the agency is likely to appeal the ruling to the Supreme Court, what will be the damage to various wireless carriers if the ruling is upheld?
The volley of torpedoes missed SprintPCS entirely. While the company bought a little part of the spectrum, it will be fine without it. Nextel withdrew from the auction and remains unharmed.
Verizon Wireless suffered minor damage, but it too will be able to repair its wireless ship and sail on into the world of third generation technology. AT&T Wireless took a hit in the bow but should also be able to get back to the harbor without sinking.
Direct Hit
But the ruling scored a direct hit on one U.S. carrier — Cingular Wireless.
Without the spectrum it won at the auction, Cingular, which combines SBC's wireless network with that of BellSouth, is already listing to port.
Many of Cingular's markets are reaching saturation, and without the extra wavelengths, it will have a hard time upgrading to an intermediate network let alone to a true third-generation one. Bailing pumps are not going to help Cingular. The firm needs to get to a dry dock and rebuild its ship, quickly.
Cingular operates its digital network using TDMA technology. In order to move to data capabilities, even at 2.5-generation, it has to implement what is known as GSM/GPRS. But without the new spectrum the company is going to have a real problem: There is no GSM/GPRS cell equipment manufactured in the 800 MHz band yet. This leaves only its 1.9 GHz spectrum, which only covers a small part of the firm's footprint.
I don't believe that Cingular can remain competitive after this impending loss. Already, on the voice side, the company is running out of capacity in several major cities. And without a data play it is at a real disadvantage moving forward.
Since the feds are dragging their feet when it comes to allocating new spectrum for third generation services, the spectrum Cingular purchased in the Nextwave re-auction looked as if it would take care of its spectrum needs — at least in the short term.
What Can They Do?
If I were the CEO of Cingular, I would use the court ruling as an excuse to change horses midstream. The company would have enough spectrum to remain competitive if it were to switch from TDMA/GSM to CDMA2000.
Because CDMA2000 is so much more spectrally efficient to Cingular, the firm could repair the torpedo damage and also gain a competitive advantage over AT&T Wireless, whose wireless technology roadmap resembles the path of a ship trying to out maneuver another torpedo.
Why would this be a good time for Cingular's chief to try and save the ship using this tactic? The answer is that most of the folks at the company know that CDMA2000 is the best answer for their survival in the long run. But they are afraid that admitting it might make them appear as if they had chosen the "wrong" technology in the first place.
The reality is that when they chose TDMA it was a logical choice. However, by today's standards it is no longer the best in digital technology. So, in order to save face, this court decision could be used as justification to migrate to a newer, more efficient technology.
But, if Cingular stays the course I believe the damage done by this torpedo will be enough to sink it, or at least make it an easy takeover target for the survivors.
Andrew Seybold is a consultant and top computer industry analyst. He is considered by many to be the leading authority on the mobile computing industry. He's based in Campbell, Calif. |
