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CDMA WAITING CONTINUES ON

Code Division Multiple Access has been touted as a success story in Seoul, South Korea and in Hong Kong. Many U.S. personal communications services licensees have based their access technology decision on CDMA’s reported superior performance, high capacity and low cost. Many analysts put such a claim in the “smoke and mirrors” category, saying it’s all part of a grand public-relations machine, and that Asian problems have been suppressed. Part 2 of RCR’s investigation focuses on the analysts’ take on the situation.

WASHINGTON-According to Allen Salmasi, a former Qualcomm Inc. principal who now serves as chairman and chief executive officer of C-block PCS winner NextWave Personal Communications Inc., “exhaustive testing has demonstrated that CDMA is a highly robust technology, providing up to 10 or more times the capacity of other wireless technologies while providing coverage with half the number of base stations.” NextWave plans to deploy CDMA in all 56 of its markets, beginning sometime next year.

But have these tests reaped results? Charles Biderman, president of Santa Rosa, Calif.-based Market TrimTabs newsletter, told his hedge-fund and money-manager subscribers on May 6 that “the Hong Kong CDMA commercialization is nothing more than a ploy by 30-percent-Motorola-owned Hutchison to keep its additional spectrum,” and that the service is receiving more bad press than its operator cares to admit.

According to a translation of the April 29 Hong Kong Apple Daily newspaper, one Hutchison subscriber complained numerous times about a defective CDMA handset made by American manufacturer Qualcomm. A Hutchison repairman said the phones had been defective from the start, and that Qualcomm had not taken Hong Kong’s environment into consideration when it crafted the handsets. In Biderman’s estimation, however, the fault lies not in the handset but in Motorola Inc.’s infrastructure itself.

Shinsegi Telecomm Inc., a Samsung-built CDMA system currently operating in Seoul by a joint venture that includes AirTouch Communications Inc. and SBC Communications Inc. is “performing better than we expected at this point in its life cycle,” said one source; however, the level of service Koreans will tolerate is much below what an American consumer would accept. Some 5,000 subscribers are using Shinsegi today, but the pent-up demand for the service is 20,000-customers strong; the carrier hopes to have 250,000 on line within a year. Once again, the handsets are a problem but not from an engineering standpoint. They just aren’t available.

In addition, not many complaints have come in about the network itself, but company principals say this could be a Korean cultural thing-Koreans tend to be patient and tolerant of mistakes.

Members of the joint venture had hoped a viable CDMA system would be up and running in the United States by now as an example to follow. “Shinsegi is treading uncharted waters,” RCR was told. “Two years ago, when we got our license, we were leery about deploying an untested CDMA system. We’re out here by ourselves now. We have no backup system. If we go down, there is nothing for subscribers to use. Our competition has dual-mode phones and can go between CDMA and analog. It’s a little scary.”

Bill Frezza, an independent engineer/analyst/columnist who still spends three days per month with former employer Ericsson Inc., believes the CDMA phenomenon is a creature of Qualcomm’s public relations juggernaut. “There is strong linking in this game between investors and manufacturers. The stock is managed by the news, and bad earnings can be spun by a `major fire drill’ to get prices up and credibility back.”

According to Frezza, who monitors a continuing CDMA debate on his World Wide Web site, early CDMA systems have been cursed. Promises of increased capacity went down the tubes, he said, when AirTouch had to retrofit all of its cell sites, instead of just a third of them as had been anticipated, to ensure coverage in Los Angeles.

Frezza also has a problem with Qualcomm’s (and others’) handset availability. “Qualcomm keeps announcing new orders, but it hasn’t been filling them,” he said. “Bell Atlantic Nynex Mobile has been promised 1,000 phones but it still only has 300. Sprint announced a million-dollar Qualcomm order, but when will it be filled? It also ordered units from Samsung, but those won’t be delivered until sometime late next year. How can Sprint put 25 markets on line by the end of the year with no handsets?

“CDMA is the result of Korean industrial-policy money, put there because its manufacturers missed the boat in cellular,” he continued. “They were willing to pay anything for C-block licenses. They want to use the United States as a stage to set worldwide standards, at any cost. Then they can sell more equipment.”

Many large licensees made the CDMA decision because of available vendor financing, something they are unlikely to get if they choose TDMA or GSM. Smaller C-block winners also are leaning toward the technology in hopes of partnering with larger A- and B-block winners. “For smaller guys to go CDMA is crazy,” Frezza said. “They are acting as pawns. They should have gone PCS-1900.”

Switch-maker Lucent Technologies Inc. committed $3 billion in financing to Sprint and PrimeCo Personal Communications LP, TrimTabs’ Biderman said. Terms of the contract require no payments for three years, and if Lucent doesn’t perform, it could be liable for penalties. During a CDMA panel discussion at the Cellular Telecommunications Industry Association annual meeting last March, Lucent spokesmen told attendees that “1996 was going to be the year of mass deployment and the globalization of CDMA.” The manufacturer claimed to have 14 systems up and running that month, moving to 21 in May and 50 or 60 by year’s end. It has fallen behind in these predictions.

Washington, D.C., Sprint partner American Personal Communications has built a successful GSM system that has signed more than 50,000 customers since Thanksgiving. It probably will add a CDMA overlay once all the bugs are worked out, but company engineers feel no burning need to go for it right away.

Another CDMA problem area is the 8-kilobit vocoder. Some engineers say it drags voice quality down and only results in a 3: 1 channel split. The 13-kilobit vocoder is preferable-perhaps providing a 8: 1 split-but it is not widely available yet. Even AirTouch admits that customers are waiting for the better model. Agreeing in part with Frezza, one technician said, “If you don’t get extreme capacity advantages, why would you go with such an expensive system?”

Are some PCS executives into CDMA so deeply that they can’t change course, even if they wanted to? AirTouch and NextWave officers deny it, but others agree that “too many careers are on the line. You can’t back away from it. It’s like holding the alligator’s jaws shut-if you let go, you’re dead. Top execs also don’t want to admit to a failure on their watch.”

Another CDMA-watcher told RCR, “[Qualcomm’s] Irwin Jacobs is a great technical guy from MIT who has preached this for so long that he can’t go back. He’s managed to deflect all criticism. It’s always going to be `tomorrow,’ but tomorrow never comes.”

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