Grahame Lynch addresses "the Qualcomm-CDMA 1X lobby"
>> Commentary: About That So-Called 3G Market
August 22, 2002
Grahame Lynch
America's Network Weekly
americasnetwork.com
It’s certainly been a good year for the Qualcomm-CDMA 1X lobby, with than 11 million shipments of handsets to date, easily exceeding the levels of other 2.5G and 3G platforms such as GPRS and W-CDMA. And now the plaudits are coming thick and fast.
Morgan Stanley released a 10-page research report recently that led with the statement that CDMA 1X operators are "ahead of the game" and in the "best position thanks to lower cost for network upgrade, better capacity and speed and affordable and attractive handsets."
One of the report’s strongest claims is that a CDMA 1x upgrade is three to four times cheaper than a W-CDMA network.
The CDMA Development Group dutifully amplified the message, highlighting the Morgan report’s comments that it based its comparisons on Asia because "all 2.5G and 3G technologies such as W-CDMA, CDMA 1x and GPRS co-exist in the Asian marketplace".
Logical flaw alert!
What "Asian marketplace?"
Is that like the Martian marketplace or the Earth marketplace? On closer examination, we find that the Morgan Stanley report actually considered just three Asian markets – Japan, South Korea and Hong Kong.
Notwithstanding the fact they have atypically high incomes and relatively small geographical sizes and are thus hardly representative of greater Asia, there is another issue here. The three nominated standards do not co-exist in these three markets. GPRS is offered only in Hong Kong, while W-CDMA is offered only in Japan. They really cannot be compared as true competitors as of yet – at least, not in the same sense as CDMA and GSM, which co-exist in many markets.
Indeed, if we are to look at the greater Asian marketplace we find some interesting things. Nine out of 11 Southeast Asian countries have not even licensed 3G as of yet. The most widely deployed packet-switched wireless platform in Asia is not CDMA 1X or GPRS but PHS (PAS) that continues to enjoy strong growth in markets such as Taiwan, China and Thailand.
Indeed, Vietnam has just decided to adopt PHS in preference to CDMA, citing its ... ahem… cost advantages. The Morgan Stanley report doesn’t even mention PHS (not 2.5G or 3G enough it seems).
Unfortunately the report is also flawed in other respects. It says that GSM/TDMA operators face more challenges than CDMA operators in upgrading to 2.5G and 3G because of the relative cost advantages of 1X infrastructure and handsets. Fine.
But this doesn’t take account of the reality that TDMA and GSM operators are generally more profitable to date than CDMA networks because of their historical and current cost advantages and economies of scale. It also neglects the reality that GSM operators make a lot more money out of wireless data than CDMA operators do – 24 billion short messages a month worldwide are carried on GSM networks while the CDMA crowd don’t even publish figures because they are so negligible.
DoCoMo currently generates 25% of its ARPU from data services on its extremely 2G and unfashionable PDC network. SK Telecom, despite its credentials as the world’s leading 1x operator, derives barely 3% to 4% of its ARPU from 1X-enabled data services.
None of this is to deny the achievements of CDMA 1x. It had proved to be very successful in Korea and Japan – much more so than GPRS which would be lucky to number 10 million users globally.
But over the longer term it would be churlish to ignore the sleeping giant that is the worldwide GSM subscriber base of 684 million and rising. There are hardly any GSM operators – Telstra and Unicom perhaps being two exceptions – that are considering adopting a CDMA 1X interface for their next-generation networks. Almost all of them are quite happy to sit back and rake in the billions from international roaming and short messaging, while playing around half-heartedly with GPRS and letting narrowband data applications build up enough sales to make any upgrade as economically painless as possible.
When the GSM operator and subscriber base does begin to move, it will endow GPRS and W-CDMA with economies of scale that CDMA 1x can only dream of – locked as it is into a relatively finite number of markets.
A final note on definitions. There is still some doubt as to whether CDMA 1x in its most widely deployed forms actually constitutes a legitimate 3G technology. Some observers – admittedly many of who have a vested interest – question whether the real-world 1X speeds of 40 kbps to 60 kbps are fast enough to be counted as something more advanced than GPRS or PHS. After all, the ITU specifies that 3G must work at a minimum speed of 144 kbps – something which neither CDMA 1x nor W-CDMA currently do in a real-world environment, although a higher-speed variant of 1X called EV does operate at the required 3G speed. <<
Note: Grahame Lynch has recently authored a book:
"Bandwidth Bubble Bust: The Rise and Fall of the Global Telecom Industry"
amazon.com
Editorial Reviews: Book Description
A detailed look at the rise and fall of the global telecom bubble, from a world-leading industry commentator.
Telecommunications was the star industry in the world economy until 2000. But the collapse of NASDAQ wiped hundreds of billions of dollars in value from telecom stocks, heralding a wave of lay-offs and bankruptcies. In this essential book, Grahame Lynch argues that the bandwidth bubble bust was caused by more than irrational exuberance--it was the result of a whole range of causes including distorted government regulation, erroneous assumptions about the reality of the Internet and blind faith in global market opportunities. Bandwidth Bubble Bust strives to get behind recent telecom hype and the current backlash, employing a careful consideration of empirical evidence and case studies in industry failure dating back to 1993. <<
I haven't read it, haven't ordered it, but it is on my wish list.
- Eric - |
