Tero
Just to remind you how new the CDMA mkt really is:
CDMA finally has its day in the sun
Conference message: 'It works. It is real.'
By JOHN MULQUEEN
January 6, 1997
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CDMA is not only alive, it is thriving.
That message was repeated so often during the first North American CDMA Regional Conference in Los Angeles last month that even industry executives grew tired of hearing it--and the defensive mind-set behind it.
"I have been listening to people say for three days that CDMA works," said Larry Paulson, president of Nokia Products Corp., Atlanta, a handset manufacturer. "We have got to get beyond that."
Still, the need to reassert the legitimacy of Code-Division Multiple Access technology was understandable, given the abuse critics have heaped on not only the technology, but its inventor, Qualcomm Inc. chairman Irwin Jacobs.
Also targeted have been the carriers that have chosen CDMA over Global System for Mobile Communications (GSM), Time-Division Multiple Access (TDMA) and other digital technologies.
"CDMA is here. It works. It is real," Mr. Paulson said.
An essential element to CDMA's success, the technology's supporters and critics agree, will be commitments from companies like Mr. Paulson's, to supply the handsets. Nokia said it plans to introduce several new models this year, as does Lucent Technologies Inc., Oki America Inc., Motorola Inc. and Samsung Electronics America Inc.
Sony Electronics Inc., one of the vendors already supplying CDMA phones, is gearing up to mass-produce them. A joint venture between Sony and Qualcomm will give the companies the capacity to make 3 million handsets annually, according to Paul Jacobs, Qualcomm's senior vice president.
Meeting needs
Industry observers noted that without the capacity to mass-produce handsets, the projected growth in demand for CDMA will go unmet.
According to several industry executives, there are now about 1 million users on CDMA networks around the world. In South Korea, demand for CDMA is growing rapidly because the government has adopted it as a national standard. And in Hong Kong, there are about 60,000 subscribers on Hutchinson Telecom munications Ltd.'s networkthere. CDMA networks in the United States and Canada are still in start-up mode, though.
During the next three years, CDMA usage is expected to mushroom, said John Ledahl, director of wireless programs for Dataquest Inc., a San Jose, Calif., research company. Dataquest has predicted that the number of CDMA users will grow to almost 60 million by the year 2000.
"CDMA clearly is the best technology today," Mr. Ledahl said.
But if CDMA is to challenge more entrenched technologies, Mr. Ledahl said, improvements must be made in the vocoder (the algorithm used for encoding speech), intelligent network features and wireless data that CDMA employs. These developments will force "the other standards--the North American TDMA and GSM--to improve by the competition," he said.
The prospect of CDMA prevailing over other technologies is a far cry from the tone and tenor of discussions about CDMA during the past several years.
In fact, widespread industry squabbling continues over whetherCDMA will work at all. And that discussion has spilled over from the industry into technology publications, and even into the general consumer business press. More significantly, the debate has migrated to the courts, where Qualcomm, Oki and Ericsson Inc. are suing each other over patent infringement claims relative to their respective digital wireless products.
Ericsson, which dominates the world GSM equipment market, refuses to manufacture or sell CDMA equipment for a variety of reasons.
But several speakers at the conference said they believe this is a mistake, since other vendors have decided to support all of the various standards. Lucent Technologies Inc., Motorola Inc. and Northern Telecom Inc., for instance, all make and sell both TDMA and CDMA equipment.
Indeed, Lucent claims to be the dominant CDMA vendor. Scott Ericsson, Lucent's marketing vice preside nt, said that the company, spun off from AT&T last year, holds 60 percent of the PCS and cellular CDMA contracts awarded from around the world.
Lucent also has aggressively pursued contracts that include vendor-financing packages, whereby Lucent in effect underwrites the cost of building the network. Directing this sort of financial strength at the construction of carrier networks should prove to be a competitive edge for Lucent in soliciting new business, analysts said.
One company Lucent is supplying equipment to is NextWave Telecom Inc., the San Diego start-up that was the highest bidder for PCS licenses in the FCC's C-block spectrum auction last year. NextWave said it plans to build a nationwide carriers' carrier network, and that it has already sold 10 billion minutes of use to MCI Communications Corp. and smaller amounts to other carriers.
Allen Salmasi, NextWave's chairman, said his company will try to revive its dormant initial public sto ck offering early this year, market conditions permitting. If that is not possible, NextWave will have to rely on private equity funding and vendor financing for its expansion, Mr. Salmasi said. He noted, though, that the company has already raised $500 million from private sources and $1.2 billion in equipment financing.
Despite CDMA's potential, some companies are taking steps to minimize the margin for error. Representatives of Northern Telecom Inc., which along with Lucent is helping to finance the construction of the Sprint PCS network, said last month that it is reducing its risk in that venture by syndicating $1.1 billion of its $1.3 billion in credit through a group of banks.
Sprint PCS, meanwhile, has had to delay launching its service in some cities because of a problem with network management software from Nortel. Keith Paglusch, vice president of network and engineering and operations for Sprint PCS, said the service should be operating in all of the company 's markets by the middle of the year.
Last month, Sprint PCS had said that service had become available in several markets.
What's ahead
Dataquest's Mr. Ledahl said that the industry should be looking to the next set of challenges, including high-speed broadband wireless local loop and wireless data. Carriers that ignore data will lose out, he said.
Most of the speakers at the conference said that networks will support 9.6-kilobits-per-second and 14.4-Kbps data initially, but that it will be several years before higher-speed, packet-switched data is offered.
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John Mulqueen is CommunicationsWeek's business editor.
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