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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Wyätt Gwyön who wrote (6516)	8/14/2001 12:09:43 PM
From: Wyätt Gwyön	of 74559

hi Maurice, sorry for the delay in responding, but let me address some of your points... The economic incentive to build 2G CDMA is spectrum shortage. If they are short of spectrum in Europe to the tune of $100 billion now Maurice, as you well know, the 100BB is a ridiculous overpayment for 3G spectrum in Europe that has put the European carriers on the brink of bankruptcy. heck, the head of DT called the German auction "economic suicide". there is no economic justification there and it won't be repeated in China. from an economic perspective, they are much better building out their already huge GSM network as opposed to greenfielding a new technology with huge infrastructure redundancies. They need at least 1xRTT CDMA to do it. the Korean wall of silence is showing cracks: bwcs.com chosun.com the key point here being that 1x is not a simple upgrade. apparently operators in Korea have done extensive hardware add-ons - yet adding new 1x base stations equaling half of the old IS-95 base is not enough. SK has 4000 IS-95 stations and 2000 1x add-ons... and it's not enough. so much for that "cheap, software-based upgrade". no wonder Verizon is launching only in New Jersey. they can't afford to do a nationwide launch if the Korean example is any guidance. and they can't handle the PR backlash - VZ had the lowest sub growth yet again in 2Q, only 13% y-o-y. what defies belief here is that 1x models actually seem to terminate calls if they switch from 1x coverage to old IS-95 coverage. the phones apparently can't handle the transition. what this means in the North American context is pretty easy to visualize. covering states like California and Texas with 1x blanket is going to be pretty tough. Koreans have kept the lid on these issues. but Verizon is committed to launching this year. they're trying to minimize the damage by limiting the 1x launch to 100 square miles. it's incredible that VZ still hasn't announced a single 1x model. there are about 35 announced GPRS models with detailed specs. really, no matter how you slice it, the idea of CDMA competing with GSM in China sounds hopeless to me. check this out tca.or.jp it describes how J-Phone has nearly caught KDDI in mobile internet subscribers. back in April 2000, KDDI had 1.8 million mobile internet subs versus 1.0 from J-Phone. this means that the 80% mobile internet sub advantage KDDI's CDMA network had over J-Phone's PDC network has been all but wiped out during the intervening months. the Japanese CDMA network is a commercial flop when it comes to attracting mobile data customers - the very reason it was constructed in the first place. this mirrors the disastrous performance of the Australian CDMA networks versus Aussie GSM networks - and Israeli and Hong Kong show the precise same pattern. the conclusion: CDMA has lost head-to-head contests against TDMA-based networks in Japan, Australia, Israel and Hong Kong. expecting success in China contradicts directly the available data on the market dynamics.

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