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August 10, 1998
Qualcomm rules wireless
By George Gilder
I recently traveled to San Diego,
California, to visit Qualcomm
Corp. This cellular telephony
innovator has been rising to the
forefront of the industry on the
crest of its development of Code
Division Multiple Access (CDMA) technology.
Following a year with 12 months' revenues
through March of over $2.2 billion, Qualcomm
has just achieved a moment of triumph so stunning
that most analysts have failed to recognize it at all.
In January the European Telecom Standards
Institute (ETSI) endorsed CDMA as the next
generation of GSM (Global System Mobile). This
is an amazing upset. Fervent apostles of Time
Division Multiple Access (TDMA), the GSM folks
command the dominant global standard in cellular
telephony, with some 85 million users. They have
viewed CDMA as an insidious American scam put
over in the U.S. by pseudoscientific hype from
Qualcomm. Even in the U.S., CDMA skeptic Bill
Frezza accused the two key Qualcomm
luminaries, Irwin Jacobs and Andrew Viterbi, of
wild mendacity for their casual forecast that the
digital CDMA technology might ultimately improve
on analog by a factor of 20 to 40. The general
implication was that these guys should be in jail
for felonious offenses against the laws of physics.
I wanted to find out what Qualcomm planned for
an encore, particularly with regard to Internet
data. Owner of Eudora, Qualcomm is a leading
E-mail company; I wanted to get my E-mail
through my CDMA cell phone.
A look at CDMA
The world's entire voice and low-speed data
telecom system is moving toward CDMA.
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I arrived at Qualcomm's offices in La Jolla, just
north of San Diego, a little early and a little
groggy, without cell phone or computer. Looking
for an emergency latte, I was shunted off to what
I was told was a CDMA museum and was pleased
to discover that the "museum" was manned by
two old Qualcomm hands who happened to be
heroes of the history of spread-spectrum radio.
One was David Clapp, who worked under Klein
Gilhousen, architect of the first CDMA prototypes
in 1989. The other was Phil Karn, who had
written key papers on spectral efficiency and
channel access for spread-spectrum radios and
had engineered the inclusion of a TCP-IP Internet
protocol stack in every Qualcomm phone way
back in antediluvian 1991.
This was a crucial moment in the history of cellular
data. Largely as a result of Karn's prescience and
the receptivity of his bosses, Gilhousen and
Qualcomm, phones will soon be able to link
directly to the Net from a laptop without a
modem.
Karn went to the Cellular Telephone Industry
Association (CTIA) in 1993 in an effort to get this
capability standardized. But he discovered to his
surprise that telephone people like modems. They
actively resist their replacement with direct digital
connections. As one AT&T official put it: "We
don't like where this Internet is leading." He
explained that it gave too much control to users,
which, from the point of view of a centrally
controlled national network, it did.
Qualcomm's new CDMAOne scheme, called 95B,
fulfills Karn's early vision, with burst rates for data
of up to 115 kilobits per second, flexible bonding
of channels and "always-on" capability with
negligible power drain. This will come late this
year, followed by a 95-HDR (High Data Rate)
innovation which will ultimately accommodate
megabit transmissions. Jacobs predicts that a
major use for 95B will be wireless fax over IP.
Like all CDMA, the data-oriented phones degrade
gracefully with congestion and can use any
available capacity, even in contiguous cells. By
contrast, TDMA breaks up the spectrum into time
and frequency slots and cannot readily offer
bandwidth on demand or adapt to conditions in
the channel. Unused time and frequency slots are
not readily available to anyone else on the
network.
For many such reasons, the Europeans decided to
go for spread spectrum. They call it Wideband
CDMA (W-CDMA) to differentiate it from the new
CDMA Develpment Group's CDMA 2000
standard, which they dismiss as a "narrowband"
contrivance. But guess what? The new European
standard includes soft handoffs, rake receivers
and closed-loop power controls, all patented
Qualcomm developments at the heart of the
IS-95 standard. The key part of CDMA 2000
rejected by the GSM consortium is a chip rate, or
spreading factor, of 3.686 megahertz. This rate is
compatible with the existing 1.25 megahertz
channels of IS-95 systems now being deployed in
some 32 countries, including the U.S., Japan,
India, Korea, Thailand and most of Latin
America. The European standard will be based
on an incompatible spreading factor. Rolling out in
Japan this summer will be a nationwide $6 billion
CDMA system using IS-95 from a partnership
between Toyota and DDI, the latter known as that
country's MCI for its entrepreneurial éclat and
stock market stardom.
The bottom line is that Qualcomm has won. For
all its global dominance, GSM TDMA is becoming a
legacy system. Of course, the GSM group would
like to see Qualcomm's CDMA similarly become
an incompatible legacy. But it won't happen. With
130 CDMA patents issued, 400 pending and 55
licensed equipment vendors, Qualcomm now
commands much of the intellectual property,
design skills and engineering experience for the
acknowledged new worldwide standard for
wireless telecommunications.
In much of the world, where copper wires are
routinely exhumed and sold as scrap, wireless will
mean not only mobile but also wireless local loop.
Qualcomm has wireless local loop trials and
deployments in Brazil, India, China, Indonesia, the
Philippines, Poland, Russia, Bangladesh and
several African countries.
In late May, Qualcomm announced that, with its
partner Grupo Pegaso, it beat out AT&T (the
U.S.' last-ditch TDMA proponent) to bring
wireless PCS to Mexico nationwide, with a stress
on wireless local loop and a rollout planned in
major cities for the first quarter of 1999. The
Qualcomm group bid $285 million, or $3 per
potential subscriber, about a third of the U.S.
average cost for a country with only 10% wireline
telephone penetration.
In short, the world's entire voice and low-speed
data telecom system is moving toward CDMA. It
will take a while. But if you are an investor, you
might as well go with the flow.
George Gilder is editor and publisher of the Gilder
Technology Report (www.gildertech.com), from which
this column is adapted.
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