Old WSJ stuff part II
5/15/96 Cellular Goes Digital: New Phone System Primed For Launch
By Quentin Hardy
Staff Reporter of The Wall Street Journal
SAN FRANCISCO --Two of the biggest names in the cellular-telephone business say that an expensive digital technology is finally ready for commercial use, even as questions persist about its viability.
AirTouch Communications said that it will start in the Los Angeles area today commercial service based on the technology, called code division multiple access, or CDMA. The technology, which promises far more capacity and clearer connections than increasingly congested traditional analog cellular systems, is supposed to be a cornerstone of most of the new digital phone services due out in the U.S. in the next few years.
Meanwhile, Motorola Inc. yesterday announced contracts to make or sell CDMA networks in China, Peru and Zambia. with these and other sales, the Schaumburg, Ill., hardware maker said it will have sold a total of 4,000 CDMA cell sites by the end of this year. The sites cost about $200,000 to $300,000 each. In addition, PCS Primeco, a nationwide cellular consortium made up of AirTouch, Bell Atlantic Corp., Nynex Corp. and U S West Media Group are expected to unveil a CDMA system later this year. Motorola, AT&T Corp. and Northern Telecom Ltd. have all invested heavily in CDMA. Total investments in the technology by various corporate backers are in the billions of dollars. AirTouch will target its highest-use customers for the service, which it calls Powerband. PCS Primeco will also adopt the Powerband brand name.
The launch is about a year behind schedule because of glitches and complaints from some analysts and industry executives that Qualcomm Inc., which owns rights to much of the technology, has oversold CDMA's capabilities. In addition, a competing digital system, TDMA, is already established in more than 60 countries in Europe and Asia, and some analysts think it may have an insurmountable lead in the race to become the new standard for cellular systems.
Qualcomm initially predicted that CDMA would allow for cellular systems with as much as 20 times the capacity of traditional analog systems. Actual capacity increases are more like ninefold, AirTouch said. Yet that's a significant advance, and CDMA still holds promise as a mass-market solution to the clogged analog cellular systems.
But the long-awaited AirTouch launch may disappoint some people, since only a few hundred subscribers will be placed on the service over the next several months. That falls far short of initial expectations. The narrow scope of the deployment also gives ammunition to CDMA critics, who say CDMA is unreliable when a large number of users are talking.
Lee Cox, president and chief executive officer of AirTouch's cellular unit, said that targeting high-use customers, who use 10% to 15% of total time on the system in peak periods, would ease the overloaded Los Angeles analog network for a low marketing cost. In terms of total users, however, the initial deployment is too small to determine how well CDMA will work in heavy traffic, analysts said.
There will be 108 million cellular phone customers world-wide by year end, according to research company Dataquest Inc. So far, the largest CDMA market is in Hong Kong, with 20,000 users. Motorola, which makes much of the equipment for the Hong Kong system, said it will have 40,000 subscribers by July. In any case, investors appeared delighted that the CDMA service is finally getting off the ground. Qualcomm's stock rose 3 and 61/64 to close at 48 and 45/64 on the Nasdaq Stock Market
yesterday.
(END) DOW JONES NEWS 05-15-96 |
