I had a lot of feedback from people who agreed, but also a few arguing the case for CDMA. None argued as convincingly as Maurice Winn. I've posted the email he sent me in response to the column and have added some follow up thoughts of my own...
Peter, thanks for your articles which I usually enjoy reading. This one looked to me like a hook, line and sinker swallowing of the GSM Guild's line that the world is abandoning CDMA2000 in favour of the W-CDMA realm.
I have been a follower of things CDMA since 1991, and a shareholder in QUALCOMM since 1994.
In February 1996 I arranged a meeting with QUALCOMM, in
conversation for about half an hour on the merits of CDMA vs other options.
Telecom changed their minds on TDMA and introduced CDMA2000 a couple of years later.
At that time, W-CDMA was not available and Telecom did not have a GSM infrastructure foundation. It would have been a big shift to GSM and a subsequent wait for 4 or 5 years for W-CDMA to develop. Vodafone was already well-established, so Telecom would have been coming from behind in a big way, with no advantages, and not part of the huge Vodafone group with huge purchasing power.
With CDMA2000, Telecom had an upgrade path to 1xEV-DO and subsequent
improvements ahead of Vodafone. They didn't use their advantage due to duopoly pricing and typical telecom company ideas on charging a few people a lot of money for little usage, rather than charging a lot of people a little money for a lot of usage.
As you know, Telecom is a dyed in the wool high price merchant, so they let their advantage slip. They still have advantage in that Vodafone's cost of coverage for 2GHz W-CDMA is huge compared with Telecom's 800MHz CDMA2000 coverage. Vodafone could be ruined by Telecom if Telecom would slash and burn prices and put the network technologies to the test.
Vodafone is the one that needs to change their network plans from 2GHz to 900MHz. Telecom bought 2GHz spectrum for 3G, but they won't be using it. It's redundant. 800MHz is just fine and Telecom has capacity in 800MHz. Radio propagation at 800MHz is much greater for a given signal than at 2GHz, so far fewer base stations are needed to provide the same coverage.
Vodafone's 3G coverage is pathetic. Telecom can roll out in 800MHz far cheaper than can Vodafone at 2GHz.
You focused mainly on handset technology. You are quite right that economies of scale are vital in handset production and costs. But once up to a large enough number of devices, higher volume doesn't make much difference. CDMA2000 is now at huge volumes too. And what matters is not total worldwide sales of CDMA2000 vs W-CDMA but individual market share for phone makers. A company could specialize in CDMA2000 and have excellent economies of scale compared with Nokia, which has little market share in CDMA2000 and is one of many in W-CDMA.
Royalties are often mentioned as being a major problem in CDMA [of either variety]. But CDMA2000 royalties are 4% [overall though some are 7% such as Huawei export, and some are lower], and W-CDMA royalties are about 12% because many contributors squabble over them and want a piece of the action.
So, CDMA2000 inherently has lower costs for handsets. Many commentators claim [wrongly in my opinion] that QUALCOMM's royalty is a hindrance to adoption of CDMA in either version. Over a 2 year total ownership cost, $8 [4% on a US$200 wholesale price] is trivial for a subscriber who will spend something like $1500 including minutes and data. Even 12% = $24 isn't a big deal compared with $1500.
CDMA2000 technology is ahead of W-CDMA too, so speeds are much better and getting faster, faster. W-CDMA/HSDPA is catching up, slowly.
If you have a look at CDMA2000 devices which are now available, there are swarms of them. The CDMA Development Group shows a lot of them. Here's just one:
Economies of scale are now applicable to EV-DO devices as much as W-CDMA devices and GPRS devices.
Roaming overseas with W-CDMA is more problematic than with GSM. For a start, coverage is poor. And it isn't simply a matter as popping in a SIM and connecting to another network. W-CDMA is a can of worms. Handsets and networks have to match in greater detail than with GSM, in which getting the frequency right was all that mattered and multi-band handsets resolved that.
Telstra had a bunch of technologies and has decided to ditch them and go with W-CDMA, which might or might not be a good strategy. It is not a slam dunk. Nor a no brainer. It would not be a good idea for Telecom to copy Telstra and Vodafone.
I am not a Telecom fan and have ditched them in frustration for all but twisted pair over which we have a home phone and over which Slingshot provides us ADSL. I do have a Telecom cellphone. Our daughter was in tears of frustration on the phone telling Telecom to cancel their phone line and internet service, being passed from person
to person [5 on the last call]. Telecom annoys me a LOT and has been remarkably hopeless in competing with Vodafone/Bellsouth. But at least they have got a good system and technological trajectory to the future with their CDMA2000 network in 800MHz.
It would be a big blunder for Telecom to switch to W-CDMA. Selling multimode, multiband handsets enabling customers to do what they like on any network would be a better strategy. The best strategy for Telecom would be to conduct a price war against Vodafone while Vodafone is limited on coverage in 3G, and lacking speed. I don't
mean tinkering with a cent or two a minute, I mean so cheap that the network is fully loaded.
There are other issues, such as the case against Nokia by QUALCOMM for illegally using QUALCOMM technology in upgrading GSM to GPRS and EDGE. If Nokia is stopped from doing that, you might find that a lot of the GSM advantage is based on theft rather than good technology. QUALCOMM did NOT license their technology for GSM/GPRS/EDGE technology when the device doesn't included CDMA/W-CDMA.
For over a decade, the GSM Guild has lied about W-CDMA development. They continue to do so. They used to claim that QUALCOMM had no techology in W-CDMA, but L M Ericsson caved in 1999 and the GSM Guild accepted that, after all, maybe QUALCOMM does have some rights in W-CDMA.
Now they are whining about royalties although QUALCOMM charges only 5% [approximately] for a supersonic amazing magical technology which was alleged by a Stanford physics professor to breach the laws of physics and therefore wouldn't work, but which not only works, but delivers 20 times as many bits per second per bandwidth as GSM at a fraction of the price, bundled with BREW, gpsOne and other software which also does amazing things. GSM charges 16% for an obsolete voice-only technology [without QUALCOMM's technology enabling upgrade to GPRS/EDGE]. W-CDMA charges 12%.
Previous mistakes are history. What matters is where to from here. I think Telecom would make a much bigger blunder than their AAPT purchase by ditching CDMA2000 in favour of W-CDMA. It's no skin off my nose either way [other than more economic destruction in NZ which is not a good thing]. Telecom was hopeless to let Vodafone turn
Bellsouth's failed GSM into a huge success.
I'd like to see a mobile cyberphone data and minutes price war. Telecom would win it. A move to W-CDMA by Telecom would cost them a fortune to no good effect.
Some operators are moving from CDMA2000 to W-CDMA [such as Telstra], but others are moving from the GSM realm to CDMA2000 EV-DO.
KDDI's CDMA2000 in
I have been trying for years to offer some competition to Telecom/Vodafone and offered to buy some 890MHz spectrum in Y2K from the government to start a city-only low-priced CDMA2000 service [the government sold it cheaply to Vodafone - by the time the auction was conducted, I wasn't in a position to bid as much as I had previously offered]. I'm still working on various ideas. I had tried to get Globalstar here too, but Globalstar wouldn't agree to my plans [in 1999]. I was a director of Globalstar
There is a
Thanks again for your efforts, keep up the good work.MY RESPONSE:
Thanks to Maurice for his well thought-out case for CDMA. I would add...
- While it could be argued that Telecom staying with CDMA gives it a point of difference from its arch rival Vodafone, we need only look across the Tasman to see that this point of difference was not enough to keep Telstra in the CDMA camp. It is faced with three major GSM/3G network operators - Optus, Vodafone and Hutchison 3G. Telstra itself has GSM and CDMA networks. It has decided to shut down its CDMA network and follow the same technology path as its rivals. The business case is more daunting for Telecom as it has no GSM network, but it has sites reserved for a switch in technology, which wouldn't be as expensive as you'd expect.
- The roaming issue is going to get worse not better with Telstra's CDMA closure. Going to Australia will be a frustrating experience for Telecom customers and Vodafone will be pushing hard to exploit Telecom's weakness by offering competitive trans-Tasman roaming deals. Anyone who travels, even infrequently, is better off signing up with Vodafone. Also, despite the CDMA operators being less numerous than their GSM rivals, they haven't been able to band together to ensure good data roaming in all CDMA countries. Telecom data roaming in Australia is very good, but outside of Australia it's virtually non-existant.
- Handsets shouldn't be underestimated as a major selling point, particularly in the consumer market. What 3GSM showed was that, more than ever, handset design is leading the developments in the mobile market. The iPhone has generated a new wave of interest in this area and the iPod is an example of hardware that has driven the growth of an industry - in its case, digital music downloads. The CDMA world misses out on the best handsets made in the world because the manufacturers can't make them economically to a subset of customers. I don't see most CDMA phones becoming worldmode phones, so those who need to roam will be forced to buy an ever smaller subset of handsets. It just doesn't make sense for the consumer.
Telecom is in an even worse bind. It's CDMA handset orders are so puny relative to other operators, that it can't afford to buy the handsets that Vodafone offer - ie: Motorola RAZR line, the Blackberry, the high-end LG models. The situation is not going to improve markedly.
- Most of the most progressive content deals are being struck by GSM operators who have the leverage to negotiate better deals because of their size. Better handsets and better services equal a better choice for the consumers. CDMA operators have to compete on price and the quality of the EV-DO mobile data technology. However, advances in HSPA technology and th emigration to LTE will reduce the CDMA carriers' advantage in mobile data.
- Qualcomm has a major stake in 3G technologies and the evolution of HSPA so is more than hedging its bets. It believes the GSM migration will be integral to its business in the longterm.