Qualcomm Inc.’s competitors say the San Diego firm’s recently signed contract with a Chinese telecom giant won’t hinder the growth of China’s predominant cell phone technology, known as global system for mobile communications, or GSM.
So says Mike Houghton, a spokesman-at-large for the GSM industry in North America.
“This announcement is good for Qualcomm and for CDMA, but is it going to change the tide? No,” said Houghton, who’s based in Alexandria, Va. “I think GSM will still be dominant.”
Houghton was referring to last week’s announcement of Qualcomm’s deal with China United Telecom Corp. (China Unicom), China’s second largest state-owned telecommunications company.
The deal calls for the licensing for the manufacture and sale of Qualcomm’s code division multiple access (CDMA) wireless equipment by Chinese cell phone manufacturers.
“We hope to encourage and demonstrate the advantages of CDMA, and hope the deployment will clearly confirm what we’ve been saying,” said Lou Lupin, senior vice president proprietary rights counsel for Qualcomm.
“GSM has been very successful. It has the benefit of a global reach. The counter balance is it is pretty well recognized that CDMA is a superior technology.”
Faster Data Transfer
CDMA takes information contained in a signal and spreads it over a wide bandwidth.
Lupin believes as wireless operators look more toward wireless, high data rate technology and multimedia, they will choose CDMA.
“If they go to CDMA they will have a very graceful and very economical evolutionary path,” he said.
Indeed, CDMA has come a long way. Five years ago, Qualcomm was the only handset vendor using CDMA. Today, there are 68 licensed CDMA suppliers around the world using it. (Qualcomm recently sold its handset manufacturing division to Kyocera.)
There are now about 42 million CDMA users in the world.
Lupin, who was involved in the China Unicom negotiations, said last week’s deal paves the way for the global spread of CDMA in places like India.
“The China deal could have a lot of influence in a lot of markets,” he said.
To help push CDMA technology in China, China Unicom spent more than $870 million last year to build its CDMA network.
Large GSM Network
Unicom’s rival is China Telecom, which currently claims about 90 percent of the nation’s 40 million mobile phone subscribers, and whose GSM network is 10 times larger than Unicom’s network.
Just last month, Ontario, Canada-based Nortel Networks won $132 million worth of contracts to build and expand GSM networks in six of China’s provinces over the next year.
With nearly 35 million subscribers, China is the largest single GSM market in the world.
By the end of 1999, there were 250 million GSM subscribers around the globe. Houghton pointed out that GSM is in more countries than McDonald’s restaurants.
“One of the big differentiators today is GSM is the one cell phone technology that can be used around the world,” Houghton said.
He said the American GSM Alliance has been very aggressive in creating international roaming agreements, which increased 69 percent in 1999.
“This does not mean that there’s not an opportunity for CDMA,” Houghton said. “Competition is good.”
Indeed it is, Lupin said.
“We’ve got a lot of work to do,” he said. “While this is a milestone agreement, the work required to make the deployment a reality has just begun.”
Lupin said Qualcomm will now seek agreements with Chinese handset manufacturers.
China Unicom also has a lot of work to do, he said.
“They have a very ambitious schedule to build out capacity for 10 million (CDMA) subscribers by the end of the year. That is very ambitious and it will be quite an achievement if they’re successful.”