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Mid-term Report

By Harnek Minhas

Slowly but surely, CDMA has been able to progress from being seen as a 'North American' wireless standard to a technology of choice globally. cdmaOne has seen extraordinary growth in terms of system deployment and number of subscribers and, according to Julian Herbert, managing director, EMC Cellular and PCS Database, a leading market intelligence and forecasting outfit: "EMC is forecasting upwards of 45 million CDMA subscribers worldwide at the end of 1999, excluding WLL customers. This will represent a doubling of CDMA customer numbers in 1999. Also EMC expects North America to be the dominant country in terms of CDMA customer numbers, by mid 2000. By the end of this year, the USA and Canada between them will have in the region of 18 million CDMA subscribers," adds Herbert.

In fact, recent indications are that the figure is coming close already. During the first six months of the year, the United States and Canada increased 205 percent by adding seven million subscribers. With almost two million subscribers, the Caribbean and Latin American regions experienced a 1167 percent increase.

More recently, the CDMA Development Group reported that global subscriber growth increased 171 percent from June 1998 to June 1999, adding that cdmaOne now reaches nearly 35 million people globally.

Not surprisingly, the CDG is bullish about the prospects for the rest of 1999. Perry LaForge, executive director of the CDG, remarked recently that "we expect to reach our goal of 50 million subscribers by the year's end.''

CDMA is making significant inroads into all markets where there is open competition with the obvious exception of Europe. "GSM will continue to be the world's dominant cellular technology over the next five or six years," says Herbert. "IS-95 CDMA, however, will make significant inroads into this position, through growing acceptance in Asia-Pacific, led by Japan, Korea and notably China, and in the Americas, particularly the US, Brazil and Argentina. These are regions where there are 800MHz legacy systems. The gaps in the world map will remain Europe and Africa, where 900MHz legacy systems are predominant, for whatever reason," says Herbert.

Footprint
With the entry of cdmaOne into China, the CDMA footprint now covers almost the entire Asian continent. Telstra in Australia and Telecom New Zealand in New Zealand have also announced plans to deploy cdmaOne networks continuing the rapid progress and global expansion of cdmaOne, which is now commercially available from 72 global wireless operators in 29 countries, with more than 35 countries expected live by the end of 2000.

In North America, cdmaOne is already the leading digital wireless technology of choice. A shade over 55 percent of North American digital wireless operators have chosen to deploy cdmaOne networks.

But, while user numbers grow, the number of operators is expected to fall. With the recent takeover of AirTouch by Vodafone of UK, a GSM carrier, the US wireless market is witnessing a consolidation of sorts. After dissolving their PrimeCo partnership, both Bell Atlantic Mobile and Vodafone AirTouch, as the newly formed group is called, are back talking to each other about a new joint venture incorporating their separate networks on the West coast and the East coast of the US.

Similarly, earlier this year, Sprint Inc bought out the other partners in its wireless business and floated its wireless business on the stock exchange as a separate company, Sprint PCS. Ever since its debut on the stock exchange Sprint PCS, a predominantly cdmaOne carrier, has rewarded its investors handsomely with the stock close to tripling in value in less than six months.

Similar consolidation has also been witnessed among GSM carriers in the U.S. According to Richard Siber, associate partner, Telecom Practice at Andersen Consulting: "We will witness more consolidation amongst the wireless operators in North America. The benefits of creating a single company with ubiquitous footprint and a common brand are enormous. Also merging together helps carriers achieve economies of scale in terms of negotiating infrastructure and handset supply contracts, and leads to a dramatic saving in costs."

The consolidation wave has also swept across Canada, where the regional grouping of 11 provincial operators under the umbrella Mobility Canada has also undergone consolidation. Mobility Canada has now split itself into two competing camps, led by Telus Mobility formed after the merger of BC Tel and Telus, the regional operators in the provinces of British Columbia and Alberta in Western Canada, and Bell Mobility representing the provincial operators in Central and Atlantic Canada.

Bell Mobility with cdmaOne networks in Quebec and Ontario is one of the largest wireless operators in Canada. The company initially deployed a digital TDMA network that went live in November 1993. Faced with continuing problems with capacity and voice quality, the company chose to deploy cdmaOne systems for its PCS licence in 1997 and had approximately 283,000 cdmaOne subscribers out of a total of 1.6 million subscribers at the end of Q2 99.

Mobility Canada members decided on deploying cdmaOne systems and cdmaOne is the dominant technology of choice in Canada with two out of the four nationwide carriers deploying cdmaOne systems. Another nationwide carrier, ClearNet, has also deployed a cdmaOne network. The PCS licences in Canada were issued by Industry Canada to licencees on a fixed licence fee basis and not in an auction like the US. This ensured that the operators were not saddled with enormous debts in servicing the licence fee requirements and as such the Canadian wireless operators have survived the high costs of building out new networks. The Canadian wireless industry currently serves approximately 6.1 million wireless subscribers (Q2 99 figures).

Ian Angus, president of Angus Telemanagement Group, a leading telecom consultancy in Canada notes: "The Canadian wireless market is poised for exponential growth. We are now approaching the 20 percent wireless penetration level and with four wireless operators in place in most of the markets across Canada, we should see penetration levels double in the next five years.

"One reason the penetration of wireless in Canada is lower than say the US or Europe is because the Canadian landmass is so huge that it is practically impossible to build out a wireless network covering the entire population. The fact that digital PCS services arrived in Canada in 1997 a full three years after Europe is another reason for the low penetration," adds Angus. "But the Canadian system of issuing licences to qualified bidders has been hailed as a success and in comparison to the US where a number of C-Block bidders are facing bankruptcy our system has ensured timely rollout of digital networks and services," says Angus.

Dr Irwin Jacobs, chairman and CEO of Qualcomm points out that the position of CDMA as the technology of the future has also been enhanced by the recent decisions on the evolution to 3G standards. " Just about everyone in the wireless world has decided that the best way to move into the next generation in terms of the wireless networks of the future is through the use of CDMA. The wireless industry is now clearly well settled in moving toward a single CDMA 3G standard. Within this single standard there may be three different modes depending on the needs and requirements of particular vendor and carrier". In terms of the data capabilities of cdmaOne, says Dr Jacobs, "it provides the best evolutionary roadmap to 3G."

HDR solution
By the end of this year we will see [IS-95B] systems deployed in Korea and Japan and capable of transmitting data up to 115.2 kbps. Moving further into the direction of 3G, cdmaOne networks of today will be able to evolve into what is now termed as 1xRTT CDMA2000 and ultimately 3xRTT CDMA2000 with up to 2Mbps data-transmitting capabilities. For carriers who want a dedicated data channel for handling data, the High Data Rate (HDR) solution will be commercially available soon and operators can deploy HDR by dedicating a 1.25 MHz channel that will be able to support data rates of up to 2.4 Mbps.

Ericsson's decision to settle its disputes with Qualcomm and endorse CDMA-a milestone event-is a further boost.

All this is very welcome news to operators who have been waiting for clarity to emerge on the much-touted capabilities of the future 3G wireless networks. "We believe that in the next two to four years, we will be taking wireless services to where they have never gone. Our belief is that voice will still be the 'killer app' for some time to come in terms of revenue generation. But by providing enhanced services with full multimedia capability we believe that the successive improvements in cdmaOne will usher us into an era of increased customer satisfaction.

With reduced cost, increased capacity and wireless Internet capability, we are eagerly awaiting the arrival of 1xRTT systems,'' says Craig Farrill, chief technology officer for the newly formed Vodafone AirTouch plc. "With the expected arrival of wireless Internet there is going to be dramatic change in how the wireless businesses evolve. We will witness the same sort of activities that are taking place in the wired world with a host of content providers emerging as key players. For the service provider, there will be an opportunity to provide a basket of services. cdmaOne and its evolution path will ensure a step-by-step move into this world,'' adds Dave Poticny, vice president, Wireless Strategy.

However, does the average wireless customer really care about technology and standards? "The consumer worldwide wants transparency and does not want to get hung up in our industry debates. Most are more interested in coverage, quality of service and of course price. How we deliver it is not really their concern,'' adds Richard Siber.

While so much is being said about 3G and the applications that we will soon be able to deliver wirelessly, one thing is pretty certain. Wireless is witnessing an exponential growth in terms of number of subscribers-to such an extent that wireless penetration will quite possibly overtake wireline penetration sometime in the middle of the next decade. It will be an extraordinary achievement and cdmaOne, now firmly established in North America and beyond, will be a major part of it.