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Monday, December 4, 2000To Market, to Market: Rivals Deploy Standards for 3G
By Brad Spurgeon International Herald Tribune
WHILE the major players in third-generation mobile telecommunications agree that the battle against each other's technology is over, the war for deployment is just beginning, and Asia has emerged as the biggest battlefield.Although companies are busy acquiring third-generation licenses, still to be decided by many national regulators and mobile-phone operators is which of five different standards they will use to implement the technology. Their choices in the coming months and years should not greatly affect cell-phone users, but they will help determine winners and losers behind the scenes.
In Asia, the backers of today's dominant standards are busy building beachheads. Asia already has 105 million of the world's 380 million GSM subscribers, the biggest among current standards, and in CDMA, the other big standard, Asia has 33.5 million of 71 million total subscribers.
The CDMA side has a head start in Asia. Its technology, called cdma2000, was deployed in South Korea in October, and the same month China confirmed a commitment to build a CDMA network. CDMA stands for code division multiple access and describes technology for using the airwaves.
But GSM's proponents, who back the competing standard called W-CDMA, believe strength lies in numbers. ''If I was going to be un-nice, I might describe it as the last great hope that they have to try to establish a big island of coverage,'' said James Healy, chairman of the GSM Association, of CDMA backers' efforts in Asia.
On Thursday, GSM got a boost when NTT DoCoMo Inc., Japan's biggest wireless carrier, bought 16 percent of the AT&T Wireless Group, which agreed to adopt the W-CDMA standard being developed by the Japanese company.
The CDMA side claims that both standards could suffer if deployment of cdma2000 doesn't happen fast. ''Our concerns,'' said Christine Trimble, a spokesperson at Qualcomm Inc., the San Diego-based company that licenses CDMA, ''are that W-CDMA may be delayed or not work well and thus the upgrading of the whole world to CDMA, whichever flavor, might be delayed where cdma2000 is not selected.''
Mr. Healy compared it to a choice between supporting IBM-compatible personal computers or the Apple family of computers. He would rather be with the bigger market, the GSM pack.
The stakes are huge among companies peddling the technologies. The GSM Association quotes industry reports that forecast 1 billion 3G subscribers by 2010, accounting for $548 billion or 66 percent of total cellular-service revenue. And each handset represents royalties and license fees paid to the companies behind the technology, networks and infrastructure.
Whereas GSM and its W-CDMA technology were developed internationally in conjunction with mobile-phone manufacturers, telecommunications operators and government agencies, cdma2000 is the sole property of Qualcomm.
But Qualcomm will benefit from any version of CDMA adopted. Irwin Jacobs, Qualcomm's founder and chief executive, developed CDMA based on an old military communications system, and it came into service in areas of the United States and Asia in the mid- and late-1990s, after GSM was already widespread in Europe.
Technically speaking, GSM is a time-division system and CDMA is a code-division system Ñ meaning that each radio signal receives a code rather than a time slot. Cdma2000 needs only a 1.25-megahertz frequency channel, rather than the 5 MHz needed by W-CDMA, which is important to operators who must make best use of their expensive airwave real estate.
Mr. Jacobs argues that cdma2000 can better handle the high-burst data rates that come with the broadband, high-speed Internet function for which both technologies have been designed. With data rates of up to 2,400 kilobits per second, the third generation was created to allow enough bandwidth for data Ñ in the form of games, graphics and video conferencing Ñ to be transferred by telephone handsets and personal digital assistants.
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THE International Telecommunication Union, based in Geneva, has been working on developing the third-generation standards since 1985, and last year it sanctioned the five access technologies, primarily cdma2000, W-CDMA and TD-CDMA. The other two are UWC-136, which will likely be prevalent in North America, and DECT.
Both GSM and another standard called US-TDMA, with 55 million subscribers worldwide, are likely to move to W-CDMA, so that is where most analysts see the future heading.
In Asia, the battle for standards has been a long and fluctuating one. China Unicom Ltd., the country's second-largest state-owned telecommunications company, finally confirmed in October that it would build a CDMA network. Jim Takach, director of advanced programs of the CDMA Development Group, said that he expected China to begin using the technology in the first quarter of 2001.
But the deal with China was a long time coming, with discussions going back to 1992, according to Mr. Jacobs, and it was put on hold much of this year until confirmation in October.
The situation is not unique to China. In October, SK Telecom Co. in South Korea began a version of cdma2000. Then, it said that it would apply for a 3G license under the W-CDMA banner.
The Korean government has indicated that it will award the licenses later this month. The terrain will begin to be defined a little more clearly in other countries in Asia over the next few months as third-generation licenses are awarded in Hong Kong, Taiwan, Singapore and Malaysia.
To be positioned in the shifting winds, telecom companies are starting to be prepared for all contingencies. The network companies, like Ericsson AB, Nortel Networks Corp. and Lucent Technologies Inc., as well as the network operators are adopting multiple standards, Mr. Takach said. ''All of them are doing all technologies now,'' he said. ''The operators are no longer technologically aligned as much.''
''We have a network operator in Singapore who has both a CDMA and a GSM network,'' said Mark Smith, communications director of the GSM Association. ''We're talking to each other, and we are developing ways of roaming on each other's technologies to the benefit of the consumer.''
Likewise, cell-phone handsets will begin to incorporate multiple standards, bringing the global goal of universal roaming even closer. ''The industry will be keen to serve the customer,'' said Bernd Eylert, chairman of the UMTS Forum, ''with handsets that can do all these access technologies together.''
One of the biggest steps toward a unified cellular phone world was taken when Japan decided three years ago to change to CDMA despite already having its own successful system called PDC, but which was used only in Japan.
KDDI, Japan's No. 2 operator, is expected to convert to cdma2000, and market-leading DoCoMo is scheduled to launch a W-CDMA system in May. Although they'll be split between standards, it will be the first time that Japan will be on a system that the rest of the world is using.
''I think the world thirsts for a standard which will help customers utilize a single technology wherever they roam,'' said David James, president of BSI Corp., a consulting company that specializes in doing business in Asia. ''And they all want what they think will be the best and most affordable for them.''
Mr. Eylert agreed that, while all of the technologies will be present in Asia to begin with, one eventually might dominate.