Tom, It's was dated (April/97) material on Ericisson's persistance with TDMA. The excerpt uncovers a possible reason for ERICY's success in China. Who knows? If you are interested., I have pasted the complete article here.
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As a new cellular phone technology catches on in the U.S., Ericsson sticks stubbornly to an older system. Why?
TDMA or bust
By Nikhil Hutheesing
WHEN RIVALS BRANDISH a new technology before an industry leader, the leader can either adopt the idea and risk loss of its customer base, or reject the idea and risk obsolescence. LM Ericsson, the world's dominant maker of wireless equipment, had to make such a choice for its U.S. market in wireless telecommunications gear. It chose rejection and the risk of becoming a dinosaur.
There are two basic ways to go digital in wireless. Ericsson's way, already in place in cellular systems in Europe, has its roots in technology that developed 30 years ago. The newer, rival method promises better efficiencies but is not as well tested. Besides, Ericsson has made a huge R&D investment in the older technology and would be playing catch-up if it switched methods now.
The Ericsson technology is known as time division multiple access, or TDMA. It digitizes voice and compresses it so that up to eight conversations can be crammed onto a single radio frequency. TDMA boils down each conversation into bursts assigned to particular slivers of time, then reassembles the pieces at the receiving end.
The TDMA digital technology, as well as Ericsson's older analog technologies, has served the company well. Since 1990 its sales have more than doubled, to $18 billion for 1996. Almost all of the growth has come from its mobile telephone equipment business: switches and base stations for the cellular phone carriers, plus handsets for the users. It now has 40% of the world market in cellular equipment and 30% of the U.S. market, says Neil Barton, an analyst with Merrill Lynch in London.
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ÿMuch of that came out of the hide of Motorola, which as recently as 1995 had a 22% share of the world market.
Along the way Ericsson has played rough. Ericsson is accused of winning contracts for telecommunications equipment with bribes in Greece, Iran, Italy, Zimbabwe and other countries. Ericsson's reply: All the accusations ultimately stem from one disgruntled Middle Eastern businessman who failed in an effort to help Ericsson land some financing, and who ended up in a payment dispute with the company. Still, several cases against Ericsson are proceeding: The Malaysian government, according to the Financial Times, is investigating whether Ericsson bypassed legal procedures for selling telecommunications equipment to Telekom Malaysia.
In the U.S. the fight is cleaner but just as vicious. Here, the competition says Ericsson's TDMA technology is pass‚. The future, they say, belongs to a newer technology: code division multiple access, or CDMA, which squeezes more conversations into a given slice of the radio spectrum. San Diego-based Qualcomm, which introduced CDMA, says it's more than twice as efficient as an Ericsson TDMA system.
Motorola, Northern Telecom and Lucent, among others, have licensed Qualcomm's CDMA technology for use in the base stations and switches they manufacture. These companies in turn are boosting demand by helping the cellular carriers finance the equipment they need to make the transition to CDMA. Sprint, Ameritech and other carriers are paying off these vendor loans, which already exceed $6 billion, out of their cellular fees.
PCS PrimeCo, a conglomeration including Bell Atlantic, Nynex, U S West and AirTouch, launched Qualcomm's digital system in 15 cities around the U.S. in November.
But Ericsson has in its corner the biggest U.S. cellular phone company of all, AT&T. The long distance giant has already spent hundreds of millions of dollars on Ericsson equipment and will probably spend another $1 billion by year-end 2000. That's not peanuts, says Lars Ramqvist, Ericsson's chief executive, adding that the U.S. is the only market in the world where TDMA faces a serious threat from CDMA.
Key question: Will CDMA really provide the twentyfold compression its proponents claim without degradation of sound quality? That won't be known until the airwaves are filled with CDMA calls. Ericsson says Qualcomm's numbers are inflated-that CDMA can transmit voice just six to ten times as densely as analog. That's roughly equivalent to what Ericsson's TDMA can do.
As for data transmission, not yet a large part of the cellular business but potentially a very important one, Ericsson claims superiority for TDMA. Alan Haase, Ericsson's director of product marketing, boasts that his equipment can transmit data and video at 64,000 bits per second over the air. CDMA today transmits data at just 14,400 bits per second.
A Qualcomm spokesman retorts that the TDMA technology Haase cites is still experimental-and that CDMA engineers are also working on a 64,000-bit-per-second system.
Bo Hedfors, the president of Ericsson's U.S. subsidiary, says: "If a customer wants CDMA equipment, we will deny that request." A mistake? Not if TDMA can gain a market share advantage over CDMA, much as IBM did in its war against Apple. However, once the IBM format gained a slight edge in the marketplace, it all but exterminated the rival. It didn't matter that for years Apple had the technically superior operating system. ÿ |
