All, Cabi Speaks,;>
An Introduction to 3G
Third Gen: What's Behind The Ballyhoo?
Once a vital concept in engineers' imaginations, the vision for wireless of tomorrow now is mired in global politics and corporate
bickering.
By Caron Carlson
WASHINGTON--According to legend, it all started back in the mid-1980s, when two telecom technologists were sitting in a restaurant in Geneva. On cocktail
napkins, they scribbled their visions for worldwide communications in the 21st century. The two--Mike Callendar, who now heads the International
Telecommunication Union's task group on third-generation wireless, and a now-retired colleague--were sketching the outline for a global system of 3G wireless
networks.
"It was over lunch on a Sunday at the end of a two-and-a-half-week conference," Callendar recalled. "What really started this were the handheld cell phones. Some
of us decided that [those phones] would go everywhere."
Today, the vision, unanimously viewed as worthy and noble, comes up against the harder realities of industrial competition, standards jealousy and international trade.
Beneath the technology muscle-flexing, economic nationalism and political hype, the quest to achieve the 3G ideal boils down to two issues.
"This is all about business and meeting consumer needs," said William Plummer, vice president for government and industry affairs at Nokia Corp., which builds
equipment for all three digital standards. "Everyone has their own specific business decisions to make within the context of meeting the goals of IMT-2000."
Third-generation technology was initially intended to establish objectives for future land mobile telecommunications systems, identify suitable frequency bands and
determine a set of required characteristics and the degree of compatibility desired for those systems.
In the 13 years since the International Telecommunication Union launched the 3G project, it seeped out of the dry, dispassionate world of engineering and spilled into
the sloppy realms of politics, public opinion and international trade.
While ITU's objectives remained unchanged, the importance for manufacturers and operators ballooned. Three second-generation digital radio transmission
technologies--code division multiple access, global system for mobile communications and time division multiple access--took global root. The debate turned to
business questions, such as how to protect imbedded investment and expand market share.
Carriers remained on the periphery of the debate until recently, mostly because standards-setting is the historic purview of manufacturers, and many operators are still
building second-generation networks. When operators did find their voice, they spoke primarily via carrier/manufacturer coalitions: the CDMA Development Group,
North American GSM Alliance and the Universal Wireless Communications Consortium for TDMA interests.
After Europe submitted a wideband CDMA standard intended for GSM operators in January--a move that surprised many--it became clear to carriers using
Qualcomm Inc.'s cdmaOne equipment that much of the world might eventually use a CDMA standard incompatible with theirs, igniting fears of isolation. GSM
backers "want to make it as difficult as possible for competitors with cdmaOne to convert to wideband for the next generation," said Perry LaForge, executive
director for CDG. The GSM crowd will "do nothing that will create further momentum for carriers using cdmaOne."
GSM carriers countered that harmonization would have an adverse impact on them, while non-harmonization would leave everyone free to pursue their own business
strategies. "There has been more robust competition in the United States with free-market choice than in Europe," said Don Warkentin, chairman of the GSM
Alliance and CEO of Aerial Communications Inc. "The U.S. government should stay the course."
Distilled to its essence, the critical 3G question is whether the ITU should approve the separate CDMA-based radio transmission technologies and, as a result, prod
networks to proceed along separate tracks, or press for a harmonization of the proposals. The question is vital to Qualcomm Inc., the San Diego manufacturer that
first commercialized CDMA. While most of the other major manufacturers build more than one of the entrenched technologies, Qualcomm concentrates on CDMA,
and CDMA license royalties reportedly will comprise 4.1 percent of the company's sales this fiscal year. According to Credit Suisse First Boston, an investment
advisor that has been bearish on Qualcomm, the company's royalty revenues for the June quarter were $47 million, higher than the $35 million the manufacturer
initially predicted for analysts. Conservatively estimating, Credit Suisse said September quarter royalties were $40 million, and total royalties for the fiscal year ended
September will be about $183.9 million though Qualcomm says this figure may also include license fees.
"Licensing is the bit of gold in their entire business," said Marc Cabi, director of the firm's technology group. "Qualcomm is operating at below break even levels on
infrastructure compared to the average industry margin percentage in the high teens, and [Qualcomm] has a 3 percent margin in the handset business compared to the
average industry margin of 9-11 percent."
LaForge insists CDMA carriers' interests in 3G are independent of the manufacturer's, "even though it's easy to put the spin on Qualcomm as the evil empire." (See
related story on page 6.)
Scraping away rhetoric
There are as many opinions about the precise goals of ITU's 3G project, known as IMT-2000, as there are stakeholders in the debate. The harmonization vs.
non-harmonization debate cannot be understood without first peeling back several layers of misleading rhetoric.
First, 3G is not, and never was, an effort to establish one, single, global radio transmission technology. After 12 years of work, the ITU in April 1997 issued a
circular spelling out its goals: high-data rate communications with universal coverage and handsets capable of seamless roaming between multiple networks. The ITU
also asked the parties involved to minimize the number of radio interfaces.
The international, intergovernmental project in no way altered long-established national and regional approaches to standards setting. Europe extended its 2G
strategy of harmonization and submitted one 3G proposal--W-CDMA--and the United States extended its 2G strategy of multiple competing standards and
submitted four proposals, including the Qualcomm-built cdma2000.
"We have philosophical differences with some around the world, and in particular with the European Union," FCC Chairman William Kennard said prior to the
opening of the ITU plenipotentiary meeting in Minneapolis this month.
U.S. participation in IMT-2000, contrary to some claims, was not pursued to capitulate to the European preference for standards harmonization, but rather to
encourage greater competition. We're "in the ITU game to see if we can maintain to some extent the U.S. marketplace approach," said Henry Straube, FCC
engineering advisor. "If you don't play in the game, you lose."
As further evidence that 3G is not about creating a single standard, all parties to the debate generally agree that at least one TDMA-based standard will be included
in ITU's 3G family.
Second, the harmonization vs. non-harmonization debate is not about global roaming. ITU and its members seek universal communications coverage and seamless
roaming, but these goals will not necessarily be achieved by converging W-CDMA and cdma2000. Many questions remain outstanding regarding spectrum
allocations for 3G around the world, and some manufacturers, including Motorola, doubt global roaming will be possible without a global spectrum allocation. Most
manufacturers and carriers are pressing for ITU to designate more spectrum than originally planned. Dozens of vested parties submitted their views to the FCC last
month, and many are eyeing spectrum at channels 60-69, recently reallocated from UHF TV and adjacent to the existing U.S. cellular band.
Since the inception of IMT-2000, other technologies such as mobile satellite services, have evolved with the potential to fulfill the quest for global roaming. Also,
Motorola and Nokia Corp. released a paper this fall claiming that roaming among incompatible CDMA-based systems can be achieved via multimode handsets with
negligible cost.
Third, the debate over harmonization is not about arriving at the "best" technology for consumers. 3G is not the Holy Grail but a technological iteration. The United
States remains committed to the premise that the marketplace knows best. When the government has interfered in standards-setting, its success has been limited at
best (see sidebar below). Further, eminently qualified engineers in both camps disagree on the technological merits of each proposal.
Paradox paves the path
The goals of the stakeholders in the 3G debate are the same goals that propelled the wireless industry to become the competitive powerhouse it is today: Maximize
market share and profits.
Most parties agree that convergence is a noble ideal. It must be pursued without forcing companies to sacrifice their competitive self-interests, however. "Market
forces will drive convergence where it makes sense," said Greg Williams, UWCC chairman and vice president of wireless systems for SBC Communications Inc.
UWCC and the GSM Alliance, in joining forces last month to combat pressure for harmonization, announced redoubled efforts to converge aspects of the TDMA
and GSM networks.
When corporate decision making came face-to-face with the unprecedented, intergovernmental 3G project, however, a paradox emerged. The U.S. government, the
historic champion of market-driven technology solutions, was pressured by a U.S. standards developer to advocate a particular technology path--harmonization--at
the ITU. Conversely, Europe, the one-standard wonder, was free to encourage the ITU to include a multiplicity of standards.
Opponents of harmonization decry Qualcomm for raising issues in the standards process. "If you have trade concerns, bring them up," said Plummer, formerly a
foreign service officer posted in the Office of the Undersecretary for Economic and Business Affairs. "But linking them with the convergence of any particular
standard is government getting involved in business decisions of companies."
CDMA backers are "turning the U.S. government and agencies into a sales ... and marketing machine," said John Giere, vice president for public affairs at Ericsson
Inc.
But for U.S. policy-makers, 3G standards-setting and European market entry cannot be entirely separated. The United States continues to support market-driven
technologies, but that support rests on the assumption that markets are open. "We have the encumbrance of having to support our earlier technologies," Straube said.
"It's a matter of trying to stay in the game."
Pending legislation in the European Parliament exacerbated tensions last month. A "common position" adopted by the Council of the European Parliament Sept. 24
on coordinating the introduction of 3G systems throughout Europe aggravated Qualcomm's fears that it would be shut out of European telecom forever.
To further aggravate the debate, Qualcomm's competitive spirit runs deeper than its basic capitalist urge for expansion. The battle, for Qualcomm, is territorial not
only in the sense of geography but in the sense of heritage. Qualcomm tamed the CDMA wilderness when nobody else would venture into it, and the company is
now fighting for its past as well as its future.
"We pioneered CDMA technology at considerable cost, investing hundreds of millions of dollars in R & D, at a time when very few people thought it would work in
a commercial setting," said William Bold, vice president of government relations at Qualcomm. "We believed it would. We feel we've been proven right ... It's been
nearly universally chosen as the technology of choice for the third generation. That's an incredible vindication ..."
Because Qualcomm assumes that the European market will remain closed to its equipment in the 3G environment, the campaign to ensure that cdma2000 is
converged into Europe's choice for 3G becomes all the more important. If it cannot sell its equipment in Europe, Qualcomm hopes to receive continuing royalties for
the CDMA systems deployed there.
The same concerns extend to other markets, particularly in the developing world, where predominant technologies have not yet been established.
The dispute over CDMA intellectual property rights reached a crescendo this month when Qualcomm wrote to the ITU, claiming essential IPRs for all
CDMA-based RTTs under consideration and refusing to license any on ITU terms except for cdma2000. However, Ericsson, the one major manufacturer that is not
licensed by Qualcomm, maintains it can move forward without licenses from Qualcomm.
A long-running face-off between Ericsson and Qualcomm, distorted far out of proportion with the historic standards-setting process, leaves much of the rest of the
industry stuck in the middle. "I feel like Henry Kissinger a lot with Ericsson and Qualcomm," said Matt Desch, CEO for Nortel Wireless Networks. "... We all know
how to respect each others' IPRs. We've been doing it for 100 years."
Eventually, the industry will reach a compromise somewhere between the divergent business interests of individual companies and the original 3G ideal. Right about
that time, two telecom executives will be sitting in a bar dreaming up visions for the fourth-generation of wireless communications.
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