WSJ -- positive article on KDDI, QCOM, cdma2000
June 18, 2002
NETWORKING
Dark Horse Holds Early Lead In Wireless Standard Race
By H. ASHER BOLANDE and ROBERT A. GUTH
Staff Reporters of THE WALL STREET JOURNAL
TOKYO -- In the race to become the dominant technological standard for high-speed wireless services around the world, the dark-horse contender has taken an early lead.
KDDI Corp., Japan's No. 2 telecom operator, this month said a new service based on technology called cdma2000, from Qualcomm Inc. of the U.S., has attracted a total of 830,000 subscribers since its April 1 launch, and is growing by 10,000 subscriptions a day. That far exceeds the roughly 112,000 subscribers that Japan's dominant mobile carrier, NTT DoCoMo Inc., has signed up during more than eight months of a similar service that uses a rival technology called Universal Mobile Telecommunications System. UMTS has been championed by DoCoMo and many wireless-equipment makers and European wireless operators, and has been expected to quickly become the industrywide standard.
The strong start for cdma2000, however, could help convince more carriers to adopt it over UMTS. That could have broad implications for the wireless industry, which has been hit hard by the slowed growth of existing services.
Both technologies can provide handsets with third-generation, or 3G, high-speed wireless data services, such as music downloads or video-phone calls. In the U.S., backers of cdma2000 include Sprint Corp. PCS Group and Verizon Wireless, a joint venture of Verizon Communications Inc. and Britain's Vodafone Group PLC. AT&T Wireless Services Inc., the mobile-phone business of AT&T Corp., and the VoiceStream unit of Deutsche Telekom AG are in the UMTS camp. In addition, equipment vendors Nokia Corp. and Telefon AB LM Ericsson have invested heavily in UMTS and stand to lose if the technology isn't broadly adopted.
Though it will be years before the outcome of the race is known, the early lead in user numbers goes to the cdma2000 camp. The CDMA Development Group, an industry group backing the technology, last week said the number of cdma2000 subscribers had surpassed 10 million world-wide. So far, UMTS has only DoCoMo's subscribers.
However, some carriers, such as European operators, are bound to UMTS by the terms of their government licenses. And technical issues would make it prohibitively expensive for many operators to switch midstream. What's more, so many of the world's largest operators and equipment vendors have committed so much to the technology that industry wisdom still favors UMTS.
Still, "we see a big trend of operators looking at CDMA as a faster way to get into 3G," says Masood Tariq, the Asian-Pacific president of Nortel Networks Corp., which sells wireless infrastructure for both technologies. Nortel projects the global market for 3G equipment, by revenue, will be split evenly between the two, says Pascal DeBon, Nortel's president of wireless networks. Last year, the company was projecting UMTS would have the larger share.
The shift already appears to be taking place in South Korea, where SK Telecom Co., the country's largest mobile operator, and KTF Co. won spectrum licenses for UMTS 18 months ago, but have quietly delayed plans for building networks based on the technology. Instead, they have rolled out cdma2000 networks and plan to boost the networks' speed in coming months.
In China, the dominant operator, China Mobile, backs UMTS, while No. 2 operator China Unicom Ltd. is committed to cdma2000. Operators in Africa, Eastern Europe and South America are also considering cdma2000, based on cost advantages over UMTS, Nortel's Mr. DeBon says.
The UMTS service in Japan initially was delayed four months by technical glitches. Since DoCoMo launched the service in October, pricey handsets and patchy geographical coverage have stunted its growth. Those troubles stem from the nature of the technology behind UMTS, called Wide-band CDMA, which requires operators to build entirely new networks based on a technology fundamentally alien to existing technologies.
By comparison, cdma2000 is the latest version in a series of planned upgrades to existing networks. That's why KDDI, for instance, was able to cover 54% of Japan's population from day one, says KDDI General Manager Hideo Okinaka. He says KDDI will reach 90% coverage by the year's end.
Although Qualcomm favors cdma2000, it stands to profit from either standard because it owns roughly 80% of the technology patents in cdma2000 and 20% of those in UMTS. Further, the company is busy developing so-called dual-mode chipsets that allow cellphones to access either network type, says Paul Jacobs, president of Qualcomm's wireless and Internet group.
Being in the middle may not be such a bad place in a battle that's just beginning. "CDMA2000 has an advantage of time, probably about 12 months," says Bernd Eylert, the chairman of UMTS Forum, an industry group. "The issue is more a marathon than a short sprint."
Write to H. Asher Bolande at hyam.bolande@wsj.com and Robert A. Guth at rob.guth@wsj.com
Updated June 18, 2002
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