GSM-CDMA Conflict May Be Overhyped, Analysts Say
Reports of CDMA’s demise are greatly exaggerated, said analysts reacting to comments by Siemens executive Christoph Catselitz, head of that firm’s mobile networks business. He told Finnish business daily Taloussanomat the N. American market eventually will embrace GSM to synch up with the rest of the world. Catselitz cited active movement to GSM in Latin America. GSM has 1.6 billion-2 billion users worldwide, but CDMA, designed by Qualcomm, has a strong foothold in the U.S. and N. America, they said. Some even said CDMA would be the emergent technology.
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Europe-based Catselitz was unavailable for follow-up, but a Siemens spokesman said GSM is just too big to resist. “It’s a critical mass thing,” the spokesman said. “The globe has almost 2 billion subscribers, which is just a massive number. The largest carrier in the U.S., Cingular, is already there.” He admitted Siemens’ vested interest in GSM. “We have more than 35 3G contracts with carriers around the world,” he said. “Obviously, that’s going to motivate [Catselitz]” to make a case for GSM,” according to the spokesman. But Siemens thinks the market is simply too ripe for there to be any doubt about GSM’s long-term success, he said.
“Maybe his comments helped increase Siemens’ stock price,” said Alexander Resources analyst Jerry Kaufman. Otherwise, it’s hard to see why Catselitz would have made them, Kaufman said. The data speak for themselves, he said: Verizon has 44 million subscribers, Sprint has 25 million, Alltel has 9 million, and U.S. Cellular has 5 million. That’s over 1/2 the U.S. market, he said, and that doesn’t take into account Sprint affiliates, Nextel - - which isn’t CDMA, “but who knows,” Kaufman said -- or tiny CDMA carriers. No carrier has indicated it’s moving to GSM, while GSM carriers worldwide are actually moving to WCDMA radios on the IMT 2000 standard.
Others see a shared N. American market as the likeliest scenario. “To claim that one of the 2 technologies will go away is preposterous,” said Ovum analyst Roger Entner: “Half of the U.S. wireless users are using CDMA and will continue doing so and the other half are either already on GSM or will be on GSM.” CDMA’s advantage is that “you have a one year technology head- start,” meaning CDMA subscribers can use the same services as wideband CDMA (an upgrade path for GSM) customers, but a year earlier, Entner said. CDMA is also more spectrally efficient, he said.
Global use of GSM technology is unlikely to be in the technology’s favor in the “self-contained” U.S., Entner said. “Only 5% of Americans have a passport,” he said: “The only people who are really adamant in having a solution for the rest of the world are high-level business travelers. But the CDMA carriers have dual-mode solutions for that.”
GSM saves providers and their customers money, according to a Cingular spokesman. Cingular started migrating to GSM from TDMA in 2001. “We looked at everything when we switched but you can’t only look at costs of” switching, he said: “GSM is a world standard and its equipment and infrastructure is more economical. You can also use one device to travel around the world.” Cingular has roaming pacts for voice service with carriers in 190-plus nations. “From a technology perspective, GSM is one of the most advanced wireless technologies in the world and has a very easy migration path to move to 3G services and beyond,” the Cingular spokesman said. Entner demurred: “For Cingular to upgrade from GSM to wideband CDMA, they have to put a whole new network, while CDMA folks simply have to add channel cards.” Cingular launched wideband CDMA in 16 markets 2 weeks ago.
Both technologies represent good standards, and CDMA had a big head start in the U.S., coming as it did from Qualcomm, said Shorline Research analyst Tim Scannell. GSM probably will boost its near-term share thanks to wide international service and a perception that it’s more reliable. “It’s hard to say if it really is” more reliable or that GSM’s ubiquity outside the U.S. simply makes the technology seem better, he said. Either way, gains by GSM in the U.S. probably will be mirrored by market gains internationally by CDMA, Scannell said. “It’s hard to say” which one will win the long-haul battle, or even if one will win at all, he said. Much will depend on which standard’s carriers best meet user demand for next-generation services like video, he said.
Capital costs could keep carriers “locked” to a certain standard if the market tide were to “turn suddenly one way or another,” Scannell said, but most carriers aren’t concerned with fighting that battle. He said their main concern is “phantom enemies” like muni Wi-Fi that they perceive as the real threats, a point he said Verizon’s recent anti-hotspot ad campaign illustrates. The real technology battles will happen once next generation services build a community of users, he said: “It’s going to come down to numbers.”