The “gsm Vs. Cdma” Myth

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Exploring the Great Myths of Wireless

Jeffrey K. Belk

Senior Vice President, Marketing

QUALCOMM Incorporated

Jbelk1@qualcomm.com

12/2003

There has been an entire industry based on the “conflict” between GSM and CDMA. In a market where there is uncertainty, lots of folks at lots of companies need to find information. They read articles, they read white papers, they attend conferences and conventions. From the mid-‘90s onwards, for those folks in the technology world, and especially those folks involved in the wireless industry, the terms “GSM,” “CDMA” and “3G” were surefire means for generating controversy and discussion.

But the world has moved on. In the telecoms industry, it has become painfully clear over the last few years that hype and imaginative stories do not build revenues. Dueling PowerPoint™ presentations of “my theoretical peak rate is faster than your theoretical peak rate” do not add new customers or bring new and innovative applications and services to the marketplace. Execution does. And that is where conventional wisdom breaks down. And why the “Gs” concept and “GSM vs. CDMA” are no longer useful parts of a meaningful technology discussion for the wireless industry.

Recently, I was in a meeting with one of the world’s leading technology industry analyst firms. The company was giving its view of the wireless landscape, and we were reviewing its global wireless forecasts by technology. Its forecasts, going back to 2002 and out through 2007, were neatly boiled down to two technologies – GSM and CDMA.

This led me to ask a few questions:

“CDMA2000 has been deployed on dozens of networks globally. Where are your CDMA2000 numbers? WCDMA/UMTS is being deployed around the world. Where are your WCDMA/UMTS numbers?”

This led the presenter into a spirited defense of his company’s forecasting methodology, which, for the reasons I describe below, is fundamentally flawed. And flawed in a manner that many, or even most, folks looking at the wireless industry clearly recognize. I kept on probing. Finally, after about 20 minutes of probing, the analyst gave in and acknowledged the methodology of the forecast was defined by his firm’s largest customers. Not by market realities.

Hmm. Well it seems to me that to avoid the problem described above, we must begin by defining some terms in the context of the pre-3G world. This will help us understand how the wireless world has evolved, and how some of the nomenclature needs to move on. For Wireless Industry Veterans (you know yourselves, you bear the scars), feel free to skip this part, but I still go through the descriptions below with innumerable journalists around the world, especially folks from the IT world, who were blissfully able to stay on the sidelines for many years.

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In the U.S., what is now known as the “digital migration” began in earnest. Much of the incentive for the operators to migrate to digital came from the need to expand voice capacity. At first in a trickle, then by the millions, then by tens of millions, users moved to digital wireless services. Many were migrating from their analog phones; others, who had been on the sidelines, were enticed for the first time into getting a phone and service by the advances listed above. But here is the punch line (supported by research that I personally funded when I headed marketing for QUALCOMM’s handset business, and supported by every other research report that we bought and every other article that we read). And I gotta go with all caps here:

NOT ONE OF THE TENS OF MILLIONS OF USERS THAT MIGRATED FROM AN ANALOG PHONE TO A DIGITAL PHONE IN THE MID TO LATE '90s SAID TO THEIR FRIENDS OR COLLEAGUES, “GEE, I GOTTA DUMP MY 1G PHONE FOR A NEW 2G PHONE.”

Why? ‘Cause the “Gs,” as we know them today, did not exist in the mind of the consumer or business wireless user. Why? Because the industry had not created the “Gs” yet. Consumer and business users made decisions at the margin to shift from analog service to digital service because one or more of the reasons listed above created a compelling reason to shift/churn/buy a new phone. The devices were different. The services were different. The economics to the operator were fundamentally different, allowing innovation in service plans and segmentation. New manufacturer entrants and growing phone volumes increased operator choice and handset selection.

OK, here’s another key point to remember, relevant to the 3G discussions around the world: Near ubiquitous coverage in the U.S. was achieved via the analog wireless networks. This was independent of whether the wireless operator ultimately migrated to GSM, TDMA or cdmaOne. So, that meant that the majority of the TDMA and cdmaOne devices sold in the U.S. in the late '90s were dual mode devices. This meant that on a TDMA network, such as Cingular (then Bell South) or AT&T Wireless, the phones would operate on TDMA in digital coverage areas, and in analog in areas that were not covered by digital. For Verizon Wireless (then Airtouch, U.S. West, Bell Atlantic Nynex Mobile, GTE, etc.), same thing. In Verizon’s ever growing digital coverage area, the phones would be operating in cdmaOne, and in rural areas, the existing analog standard. Sprint PCS was a bit different because it was a new entrant. So it built its network from the very beginning to be all digital, and had broad digital coverage from day one. But even Sprint offered many models of dual mode phones, so its customers, via Sprint’s roaming agreements, could use the phones in rural areas not covered at that time by its PCS network.

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So the industry invented “Gs” and all the wireless technology holy wars at the end of the '90s ensued. But I’m going to ignore the industry debate, and focus on the consumer and enterprise user, circa 2001. By 2001, the Great 3G Debate was at its height. In February 2001, Irwin Jacobs, our CEO and chairman, was pilloried in the global press because he said that WCDMA (UMTS) would take until 2004 for the technology to mature and begin large-scale roll-outs. He said (I’m paraphrasing here): “I hope I am wrong, but all technologies take a certain amount of time to mature, and it will take until 2004 for all the technical issues to be resolved and broad deployment to begin.” Vendors around the world responded (paraphrasing again): “QUALCOMM does not know what it is talking about, we’ll have WCDMA (UMTS) commercialized with millions of users around the world by the end of 2001.” But the industry debate then, as now, is irrelevant. Adoption and revenues are not driven by press releases, interviews, white papers or PowerPoint presentations; they are driven by real execution, and the products and services that real consumers and businesses pay for.

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Several years into “2.5G” GPRS, things still have not changed much, regardless of what the press releases claim.

Bottom line: When people began migrating en masse to digital technologies, they did not do it for reasons of alphabet soup; they did not do it for reasons of claimed capabilities (except for the early adopters); they purchased and migrated to digital for a fundamentally better experience than had on the phones they were replacing. And, around the world, the compelling advantage of digital wide area wireless networks caused hundreds of millions of people to purchase their first (and then second, third, etc.), wireless phone. So the operators were compelled to migrate their subscribers to more efficient digital networks.

Great_Myths_of_Wireless_JBelk.pdf