IS-95 CDMA Becomes A World Standard
Over the past two years, IS-95 CDMA has moved beyond the borders of North America to play a major role in the international wireless market. It already accounts for mobile infrastructure contracts or trials in areas as diverse as Hong Kong, Zambia and Israel, and now even European resistance may be weakening.
In the light of the rapid expansion of GSM outwards from its European home and into Asia Pacific and North America, many believed that IS-95 CDMA would never become a world standard. These sentiments could be heard throughout 1993, 1994, 1995 and even into 1996. Europeans, in particular, predicted that if it ever got off the ground at all, IS-95 would only be a North American standard and would not sell in the international market.
As the last eighteen months have shown, the doubters have been proved wrong. According to Motorola, during 1996 IS-95 accounted for US$5.7bn in orders, amounting to 28% of all mobile infrastructure contracts awarded world-wide. This compares with US$10.4bn (50% of the total) in the case of GSM; US$2.1bn (10%) in the case of AMPS and TACS; and US$2.6bn (12%) spread across the other remaining standards including PDC, IS-136 TDMA and NMT.
TRULY GLOBAL NOW
It may have taken some time to get here but there can be no doubt that IS-95 CDMA is now a leading global wireless standard. The first commercial launch anywhere in the world was by Hutchison Telecom in Hong Kong at the end of 1995. Pushed by Motorola, the system supplier to Hutchison, the first launch was deliberately made at around the time of the ITU's Telecom '95 exhibition in Geneva. This was done in order to stress IS-95's claim to a market position not just in the United States, where it was developed, but in the international market.
The Hong Kong launch was quickly followed in the early part of last year by commercial launches in Korea. Hutchison now has more than 80,000 IS-95 customers in Hong Kong. In Korea there are now well over a million IS-95 phones in service, split between Shinsegi Telecom (in which AirTouch International has a stake) and the recently renamed SK Telecom, formerly Korea Mobile Telecom.
It is in Asia Pacific that the list of operators choosing IS-95 is growing most impressively. Operators in Singapore, Thailand, the Philippines, Indonesia, Japan and China have all made concrete commitments to join Korea and Hong Kong in rolling it out. Some will open commercial service before the end of this year. Others don't expect to launch until the first half of 1998. Either way, they are concrete commitments backed up by signed contracts with suppliers. These roll outs are going to happen.
The Japanese telecomms industry's acceptance of IS-95 has been essential to its rise as an international standard. More than a dozen Japanese manufacturers are now committed to the standard, ranging from NEC on the infrastructure side to Sony in the terminal market and Kyocera at the test equipment end.
Whilst Japanese manufacturers have been committed to IS-95 for a number of years, it wasn't until this year that some of Japan's regulatory authorities and operators finally gave the formal go-ahead for extensive service deployment in Japan itself.
At the end of February, a high level advisory panel to the Ministry of Post and Telecommunications recommended that Japan should adopt IS-95 as a national standard. At the end of March, operators DDI and IDO announced a staggering US$3bn commitment which takes in deployment of 1,500 cell sites by 1999 concentrated in Tokyo, Nagoya and Osaka, and named Motorola as their prime system supplier.
AUSTRALIA COULD BE NEXT
Asia Pacific is clearly going to be a huge market for IS-95 now. With the Australian government looking to clear the 800MHz spectrum band of existing analogue services, there now seems to be a good chance that Australia too will opt for IS-95. Apart from mobile applications, IS-95 appears well suited to some wireless local loop applications in Asia Pacific. India's telecomms authorities have been particularly taken with IS-95's low power requirements in a country with a notoriously poor national power infrastructure. The opening of India's first IS-95 wireless local loop systems to commercial services are expected within the next eighteen months.
South America is more finely balanced. With digital migration paths required for analogue AMPS systems operating at 800MHz, the choice is a straightforward one between IS-136 TDMA and IS-95 CDMA. The single biggest obstacle to a clean sweep for IS-95 in South America is Ericsson. The Swedish giant is extremely well positioned as a cellular system supplier in most of these markets going back a number of years.
Despite the growing importance of IS-95 as a world standard, Ericsson is still not prepared to support it. Hence in South America Ericsson is trying to persuade its many analogue customers to migrate to TDMA rather than IS-95 CDMA. The likelihood is that both the rival systems will be deployed in South America. Just what share will go to the CDMA camp will depend in large part on how effectively Ericsson can persuade customers to opt for TDMA. But IS-95 will certainly have a strong position in South America in general, and in the massive Brazilian market in particular.
EUROPE IS AN UNKNOWN
Europe remains something of an unknown. Some of the European Union's more Euro- protectionist elements are doing their damnedest to keep IS-95 out. With flourishing GSM networks operating at 900MHz and 1.8GHz, the window of opportunity for IS-95 does in any case seem limited for mobile applications. Motorola's leading lights are nevertheless upbeat in their public pronouncements, insisting that there are both wireless local loop and mobile opportunities for IS-95 in Europe. One of Motorola's wireless local loop trials of IS-95 in Poland has delivered very encouraging results and has attracted a great deal of attention from a number of neighbouring eastern European countries.
With their strong support for GSM, it was always going to be difficult to get European manufacturers to support IS-95. Nevertheless Siemens and Nokia are now firmly on board as handset manufacturers. At the end of last year, Alcatel also came on board, signing an agreement with Motorola for the joint marketing of IS-95 systems infrastructure world-wide. Under the agreement, Alcatel has developed a comprehensive IS-95 switching platform for Motorola's base station products.
FRENCH AND GERMAN CONVERTS?
Although many of them swore that IS-95 would never get off the ground, some European operators are now having to look at it very closely. Germany's T-Mobil has been undertaking a trial of Motorola kit in Munster. France Telecom is also believed to be bidding for cellular licences in Brazil with a view to using IS-95 as a network technology if it wins. There may be only a very slim chance of France Telecom and T-Mobil deploying IS-95 CDMA in France and Germany but both companies are clear on the need to have a competence in the technology in order to grow their portfolios of world-wide wireless operating interests.
Elsewhere, Korea's SK Telecom is bidding in Brazil with a view to using IS-95. With more experience of handling large numbers of CDMA subscribers than any other operator in the world, SK Telecom is now intent on becoming an international operator-a sort of Asian Vodafone-offering support, expertise and capital to other operators which are rolling out IS-95.
Among the big manufacturers, it is undoubtedly Motorola that has done most to push IS-95 internationally. Motorola bent over backwards to secure the first commercial launch in Hong Kong in time for the ITU's Telecom 95 exhibition. The company has been at the forefront of efforts to sell the technology in Asia Pacific and South America as well as in Africa and the Middle East. In addition to making most of the early running, Motorola also takes the single largest part of the credit for opening up the key Japanese and Chinese markets. Unique among infrastructure suppliers, Motorola has a contract to supply IDO and DDI in Japan and an agreement to begin manufacturing CDMA systems locally in China. Motorola's roll-call of international orders now takes in Hong Kong, Korea, Singapore, Japan, China, Thailand and Peru. Besides Germany and Poland, Motorola kit is also being used for trials in Israel, Nigeria, Yemen, Zaire and Zambia.
LUCENT FIGHTS BACK
Although it allowed Motorola to make much of the early running in the international market, Lucent has been building up a worldwide CDMA order book of its own in the last six months. Shinsegi has committed to buy US$71m worth of Lucent's kit for its Korean roll-out. Total Access Communications (TAC) of Thailand has placed an order worth US$40m. Piltel of the Philippines has committed to a US$23m order for a 33 cell site system that should be up and running in June. Indonesia's Komselindo has also contracted Lucent to supply a US$105m network that will take in more than 300 base stations.
While Motorola and Lucent battle it out in the international market, Nortel has yet to make an impression. This may be because it has been slower than its rivals in coming to market with IS-95. It may also be because its wireless division is experiencing huge growth of a kind few would have thought possible just two or three years ago. Either way, Nortel has won a lot of IS-95 business in North America but it has yet to announce any contract wins on the international market.
Most of the equipment business to date has gone to North American vendors. Notably on the infrastructure side, only LG, Daewoo and Samsung among Asian infrastructure suppliers have won any orders and they are for their home market in Korea. NEC now has CDMA base stations commercially available and can expect to do well in Japan. NEC should also do well if, as expected, a number of Brazilian operators opt for CDMA. In Brazil, NEC has the largest share of the AMPS infrastructure market. Some of the Korean infrastructure vendors have taken equity stakes in NextWave Telecom Inc., the C-Block PCS licensee in the United States. But their chances of winning CDMA orders on the back of that will depend on whether NextWave can pay enough of the debt which it still owes the U.S. government in the form of PCS licence fees.
Asian suppliers look a lot better placed in the terminal market. Sony has acquired a leadership position in CDMA handsets, courtesy of its joint venture with Qualcomm. They have now shipped over a million handsets. Samsung and OKI are also in at the opening of the market and can hope to grow their handset brands in line with the growth of IS-95 world-wide. The acceptance of IS-95 in Japan is creating a platform for a new alliance in international telecommunications, one which brings together Japan and the United States in a major way for the first time. Japanese industry proved singularly unsuccessful in developing PDC for the international market and has learnt that more open and collaborative methods are a necessary pre-condition for success on the international market.
Japan's adoption of IS-95 provides a new platform for evolution of CDMA systems worldwide. In the development of standards for Third Generation systems based on the ITU's IMT-2000 FPLMTS programme, Japanese and U.S. industry are working together to develop common wideband CDMA solutions which would build on narrowband IS-95.
The outcome of this cooperation could serve to ensure that the most important Third Generation systems offering wireless data rates of up to 2Mbit/s will be based on Third Generation wideband CDMA air interfaces. IS-95 CDMA has arrived. It is no longer a question of whether it will become an international standard. It is only a question of just how big it is going to be.