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Home / Technology

Telecom ahead in race for 3G

8 Jul, 2002 08:07 AM4 mins to read

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By PETER GRIFFIN

Telecom was criticised for throwing its weight behind the CDMA mobile standard, but industry sources now say it made the right bet, winning a faster and cheaper route to 3G.

The mobile standards debate has flared again as CDMA network operators in Asia gain the upper hand on European
adopters of the rival GSM standard in terms of returns on investment and average revenue per user.

Launching its CDMA1X network last month, Telecom has taken a lead from Asian operators such as South Korea's SK Telecom and Japan's KDDI, moving to faster data speeds (up to 153 kilobits per second) ahead of rival Vodafone, which is yet to announce its evolutionary path but is likely to take the wideband CDMA (WCDMA) route.

The global mobile giant is taking part in WCDMA fixed wireless modem trials with Walker Wireless, and has an option to take an equity stake in the company if the Auckland-based trials prove successful.

Marshall Towe, the head of Qualcomm's Southeast Asian operations, said operators such as Telecom faced lower capital expenditure requirements with CDMA upgrades.

"CDMA2000 is an evolutionary upgrade to 3G versus the green field roll out Hutchison, Optus and Vodafone will have to undertake [with WCDMA].

"It will be cheaper to roll out an upgraded CDMA2000 network at 800MHz versus a new 2100MHz WCDMA network."

The cost savings would come from lower maintenance costs and the ability for much of the existing infrastructure to be re-used, said Towe. And because CDMA operated at a lower frequency, coverage was better, meaning fewer mobile base stations were required.

However, analyst group IDC says WCDMA is better suited to city areas where calls are expected to be at higher density, making it suitable for Europe.

A technology called EDGE (enhanced data rates for GSM evolution) will eventually be used by WCDMA network operators for areas where population density is lower.

EDGE, an extension of GPRS, will allow GSM operators to use existing radio spectrum to offer multimedia IP-based at maximum speeds of up to 384kbps. Towe said Qualcomm held patents for both CDMA and WCDMA technologies and therefore extracted royalties from handset manufacturers using its chips.

But while the company received roughly the same royalties whether CDMA or WCDMA handsets were sold, the faster time to market for CDMA meant that was the standard it was pushing.

Hutchison last year indicated it wanted to be a pure-3G player when it offloaded its GSM customer base to rival Optus for $53 million.

Geographically, Telstra controls the second-biggest CDMA network in the world behind that of China Unicom's. It has yet to reveal its 3G migration path but is believed to be settling on an upgrade to CDMA1X, following in the footsteps of Telecom.

UBS Warburg telecoms analyst Paul Richardson, estimates Telstra would have to spend around A$1 billion ($1.15 billion) to upgrade its network to WCDMA, a process that would take about nine months and reach only main cities at first.

Improving the network to offer higher-speed CDMA services, however, would cost between A$300 million and A$400 million.

Richardson said that whichever route Telstra took to 3G, the telco was expected to stay within its capital expenditure budget of A$3.5 billion for this financial year.

Eventually mobile manufacturers will offer dual-mode chipsets leading to mobile phones that connect to a range of network types. In March, Qualcomm demonstrated wireless WCDMA/UMTS and GSM calls from one handset.

Despite the advances, which threaten to end the mobile standards debate for good, there are doubts over the ability to produce dual-mode handsets cheaply enough.

Telstra Mobile's group manager of core products and platforms, Greg Young, said he had yet to come across a manufacturer that planned to offer multi-mode handsets.

Whichever road the mobile operators take to 3G, developers will have to come up with attractive applications to generate revenue streams justifying the investment in infrastructure.

Sydney-based telecoms analyst Paul Budde said the technology debate was largely irrelevant because few applications had widespread appeal.

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