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Monday, October 07, 2002

ANOTHER CDMA NUT DENOUNCES GSM AND GETS IT WRONG A self-described former Qualcomm handset designer -Steven Den Beste - has published an essay on his accurately-named USS Clueless blog declaring victory for American CDMA over European GSM. It’s getting much attention on the Web so here comes my deconstruction. Den Beste’s comments in italics, mine following.

“Qualcomm is the company which invented CDMA, and made it practical, and made it into a market success, and it now dominates the American market, where Verizon and Sprint both use it."

CDMA doesn’t dominate the American market, although it is the leading digital platform. In my book, you don't dominate if you have less than half the market and your opponents (TDMA-GSM) are essentially united. GSM and TDMA together have a greater market share across the region. . And globally, GSM continues to increase its market share over CDMA.

“There are two other nationwide cellular systems: AT&T currently uses IS-136 TDMA, which is obsolete and has no upgrade path. Cingular uses GSM, a more sophisticated form of TDMA from Europe.”

Actually, AT&T and another TDMA carrier, Dobsons, are upgrading their networks to GSM and EDGE, while just 35% of Cingular’s network is GSM – the rest is TDMA.

“And right now I'm basking in the evil glow of a major case of schadenfreude.”

Bully for you!

“GSM also included a very powerful set of features above that, and included some interesting features not directly associated with the RF link, such as a personality module which contained a customer's phone number and billing information that could be moved to another phone any time the customer wished to. (That particular featured turned out to be a decidedly mixed blessing. While that ability was very convenient for legitimate customers, it was also a magnet for thieves and frauds.)”

A personality module? It actually has a real name, a subscriber identity module. The CDMA operators held out against it for years because they feared it would lead to churn, but China Unicom’s insistence that they be able to use SIMs in their CDMA phones led to its grudging adoption. SIMs aren’t a magnet for thieves.. they can be switched off with one call to an operator and, besides, the GSM phones have separate IMEI identity codes which enables their detection when stolen. SIMs allow users to buy new handsets without losing their personalized settings. A benefit!

“In Europe, various governments decided that they (the Europeans) had designed the ultimate digital cellular system, and they passed laws making it illegal to deploy anything except GSM, whose primary supporters/suppliers were Nokia, Ericsson, Siemens and Alcatel.”

At that stage they had invented the only digital system! GSM debuted in 1992, while the first CDMA networks didn’t go commercial until 1995. You can’t criticize them for not adopting something that didn’t exist when they formed the policy back in the late 1980s.

“GSM was the very best propeller-driven fighter money could buy, but CDMA was a jet engine, and ultimately TDMA could not compete. The fundamental weakness of TDMA at the RF layer could not be compensated for at any layer higher than that, no matter how well designed it was. GSM/TDMA was a dead end, and to create 3G, Europe's electronics companies were going to have to swallow their pride and admit that Qualcomm had been right all along.”

Yeah, sure they have adopted W-CDMA as opposed to a TDMA-based platform for their 3G standard, although two TDMA standards are accepted as official 3G IMT-2000 platforms. But it’s wrong to accept CDMA's alleged superiority as a black-and-white comparison. Check this release on the ways that GSM can be optimized to approach CDMA capacities.

Then, regarding DoCoMo's WCDMA handset recalls Captain Clueless says:

“DoCoMo's name is mud in Japan now; they may never fully recover.”

That’s why they were the number one carrier for signups in Japan just last month, with over half the net adds, while KDDI (the CDMA1X carrier) is really growing only through cannibilization of its cdmaOne and TDMA base.

“CDMA2K, on the other hand, is real and it works now. And it works pretty damned well. (In Japan, half the handsets have cameras in them and their users send each other pictures.)”

Again, the camera phones work over the PDC (TDMA) standard. They are not a CDMA innovation – J-Phone pioneered the service over a PDC (TDMA) network. DoCoMo followed with its own PDC service.

“I confess to a deep feeling of satisfaction about this on a personal level, primarily because of all the horseshit I put up with from GSM fans over the years when they talked about how superior the European approach to this was.”

So is your argument based on an intellectual or technical premise, or just a purely xenophobic, emotional one?

“GSM has many features which are marvelous, but they can eventually be grafted onto IS-95 and CDMA2K, because they're all implemented at high protocol levels or don't have anything to do with the RF link.”

Not quite. Seamless and comprehensive international roaming is impossible with cdmaOne and CDMA1X because it simply isn’t offered in many countries and lacks a numbering plan that is set up to deal with it.

“What they're (European CDMA licensees) now discovering is that Qualcomm didn't patent everything it knows about making CDMA work, and that it's a really difficult problem. (Damned straight it is. We know a hell of a lot we're not telling. It's pretty straightforward to make it work badly and unreliably, using a lot of battery power. Making it work well on low power is damned tough, and that knowledge is not for sale.)”

Charming way to treat your licensee customers. Handicap them! And Americans wonder why Qualcomm is so hated and why Europeans and Japanese felt the need to create WCDMA in the first place!

“The superiority of CDMA over any TDMA-based system was decided by millions of cell phone users who voted with their wallets.”

Again, TDMA and GSM have a combined market share that is roughly equal to that of CDMA in North America!

“Europe emphasized cooperation over competition, consensus and agreement over "let's try it and see what happens". It was viewed as important that there be compatibility over the whole continent, and to achieve that they outlawed competition. In the US, we valued competition, and ironically we not only ended up with compatibility over the whole continent but got that compatibility with a superior system which emerged out of competition.”

Compatibility? American operators deploy a hotch-potch of cdmaOne, CDMA1X, GSM, TDMA, GPRS, AMPS and iDEN networks - none of which offer a truly national service on the level of say Telstra's 96% CDMA coverage in Australia. Users complain bitterly about service standards. International roaming is a joke. Most of the operators lose money. It ain’t superior!

“Despite claims to the contrary, Europe passed those laws in part precisely because the standard which was being protected was European and most of the equipment which would be used was homegrown. Part of why those laws were passed was to lock out the US. (Some American companies made GSM equipment, but they never had much market share in Europe.) In the US, everyone was free to compete, and for quite a while the largest seller of handsets here was Nokia. GSM was deployed here and attempted to compete against CDMA on a level playing field, and got handed its ass.”

GSM was only initially deployed by the small PCS operators who went on to amalgate and form the core of Voicestream and latterly, Cingular Wireless. AT&T Wireless is only just launching GSM. It is too early to write it off.

“GSM fans will point out that GSM is more broadly deployed elsewhere in the world than IS- 95. They'll be careful not to point out the extent to which bribery played a role in that. (Things like "If you choose GSM over CDMA, we'll build a factory there" which is how GSM mostly won in Brazil.)”

At last count, GSM was deployed in 181 countries – with Japan and South Korea the notable exceptions. (Korea, of course, banned GSM). Ericsson and Nokia did not open factories in more than a tiny percentage of those places. GSM is more widely deployed because:
1) European vendors have always been more export-oriented than American vendors and thus have better carrier and technical regulator relationships abroad. The two globalised US vendors – Motorola and Nortel – aren’t inherently anti-GSM – they, too, have to pay royalties on CDMA.
2) GSM had a three-year headstart, and was more mature on things such as call dropouts, billing standards and so on in the mid-90s when most countries licensed 2G networks.
3) GSM has better economies of scale – it is six times larger as a market than CDMA.
4) Qualcomm has hopeless international marketing skills..barely has a presence in most countries, fights ministers and licensees in public in its biggest market (South Korea), outsources much of its corporate relations to a PR firm (Burson Marsteller)
5) CDMA can compete against GSM in many markets (Latin America, Asia). But look at CDMA’s track record in Singapore, Thailand, Australia and Hong Kong. It doesn’t compete effectively because the retail channel and consumers prefer premium handset brands such as Nokia over cheap/unknown brands such as Samsung, LG. GSM's superior economies of scale means its handsets tend to benefit from superior pricing and form factors.

“The Europeans can't make WCDMA work reliably.”

Neither could the Americans make cdmaOne work reliably in its early days. The Motorola-supplied Hutchison CDMA network in Hong Kong experienced call dropouts some ten times greater than GSM competitors as recently as 1997. All PCS deployments (cdmaOne and GSM) were inferior to 800/900 MHz deployments in their first years. These issues were fixed. It would be churlish to think the combined might of the European and Japanese cellular industry can’t fix any initial teething problems.

“The [European] "center" chose GSM/TDMA to be the winner; America decided to let the market figure out the winner, and it didn't turn out to be GSM/TDMA.”

Hmm.. didn’t Qualcomm receive direct US government subsidies? How’s Leap Wireless doing? Is Sprint PCS in your share portfolio? And the US government has never ever truly gone into bat for CDMA internationally? Come on!

Our friend goes on to say that Europe is centralizing more and more of its power in Brussels and links this to the predicted failure of W-CDMA. Right. Think DoCoMo takes its orders from Brussels? Even Qualcomm is making warm noises about supporting W-CDMA. Unfortunately, those with emotional and personal attachments to their former employers don’t see things the same way.

UPDATE: Australian CDMA dropouts twice that of GSM, says the Australian

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