The Hindu Business Line : Different strokes at play

If 3G has hurt Europe, shouldn't Asia and North America too be hurting? Not necessarily, it appears. Migration to a new technology can leave some in tears and some in a mood of celebration. Catch up on the 3G paradox.

IS the third generation mobile technology turning out to be an unmitigated disaster? Are the unending woes of the European players making a transition from second generation mobile telephony to the third generation (also called 3G) also being experienced by other players across the globe? At first glance, yes..........but, on closer scrutiny, No !!!!.

Surprisingly, Europe, which has been the hotbed for mobile technology innovations, is not exerting its devastating influence over the rest of the world. Parts of Asia and North America have been making a slow transition to 3G and are actually thriving with a growing subscriber base and relatively entrenched CDMA technology.

Different migration paths

You may wonder, how is that possible? To comprehend this marked divergence from trends in Europe, it is necessary to spell out the evolution, transition and the migration path chosen by players/operators from 2G to 3G networks. In order to achieve greater uniformity in the plethora of wireless standards prevalent across the globe, the International Telecommunications Union (ITU) (as a standard-setting body) structured the migration path for 3G. After considerable deliberations spanning several years, ITU created two wireless standards — W-CDMA (Wide band Code Division Multiple Access) and cdma2000 for adoption by different countries across the globe.

Players, specially in Europe, employing the GSM (Global Standard for Mobile) standard decided to choose the migration path to W-CDMA (with <147,1,0>GPRS-General Packet Radio Services serving as the 2.5G stage in the transition to 3G). As the GSM players had to make a full transition from the circuit-switched network to packet-switched network, the capex requirements for infrastructure and network deployment were expected to be significantly higher than those employing the CDMA route. As we pointed out in eWorld of September 4, 2002, (Running out of gas) across Europe, massive overbidding for 3G licences, huge capex requirements and low demand for 3G type of services have forced leading European players to roll back their grand 3G plans recently.

In sharp contrast, players using the CDMA technology have chosen the transition path to cdma 2000 (1X and eventually to 3X -basically indicating speeds for network access). In this case of cdma2000 -1X and 3X represent two stages in network evolution for multimedia access. As the existing CDMA technology is already a packet-based technology with better spectrum efficiency, the capex requirements for infrastructure are slated to be lower for cdma2000 (1X) vis-a-vis W-CDMA.

In turn, lower network costs and better handset compatibility are likely to translate into lower tariffs and handset costs. The early adopters of this technology are from Asia, with South Korea (which had adopted the CDMA standard) leading the movement.

North America, which is strong in CDMA adoption, has been late to this 3G transition party. But it is slowly, but surely following the South Korean example and progressing toward cdma2000.

Shift in 3G focus

In South Korea: Over the past six months or so, the focus of 3G has been shifting from W-CDMA services and accelerating towards cdma2000 (1X). The launch of the W-CDMA network by NTT DoCoMo of Japan called FOMA ( Freedom of Multimedia Access) in mid-2001 has witnessed slower subscriber uptake than expected.

This was expected to be mitigated by NTT DoCoMo through the wider deployment of i-mode services outside Japan, specially in Europe. But even that has turned out to be a disappointment, to a large extent.

However, South Korea is making giant strides into the cdma2000 (1X) arena. All the three South Korean mobile telecom majors, SK Telecom, KT FreeTel and LG Telecom, have invested in cdma 2000(1X) over the past year and are making progress towards commercial deployment of cdma2000(1X-EV-DO-data only) networks.

To a large extent, cdma2000 networks have succeeded as the South Korean population is technologically savvy and online gaming (just like entertainment in Japan) is a killer application in the country.

As of July 2002, there were 15 million subscribers for cdma2000, out of around 127 million CDMA subscribers worldwide. The cdma 2000 subscriber is still a very small number, but they accounted for 99 per cent of the 3G market. According to the CDMA development group, the cdma2000 subscriber base is growing by around 1.8 million subscribers every month, and South Korea is literally blazing the trail.

Players in Japan who have had no historical baggage of GSM or CDMA technology have chosen to travel down different 3G migration paths.

Unlike NTT DoCoMo, KDDI of Japan has employed the cdma2000 technology and has captured nearly 1.7 million customers in the last six months and has ambitious growth plans for the future.

.....Moving towards North America and other countries: As Europe falls by the wayside, with only Vodafone and Hutchison Whampoa leading the W-CDMA race, players in North America using CDMA technology are embarking firmly on the Cdma2000 (1X) migration path.

Among US players, Verizon Wireless, Sprint PCS and Alltel will be early adopters of cdma2000 technology with the launch planned this year. Even TDMA (time division multiple access) players in the US such as BellSouth International and US Cellular are moving down the cdma2000 migration path.

And apart from Korea and the US, the other regions which are making rapid strides in the cdma2000 path are the Latin American countries such as Brazil, Chile and Venezuela.

In Asia, countries such as Thailand, Vietnam and India are seriously travelling down the cdma2000 path. And players in New Zealand and Australia are also keeping their options open.

A final word

There is no doubt that these are early days in the growth canvas of cdma2000. It is also obvious that the growth opportunities for cdma2000 in the multimedia and data applications market are as limited as they are for W-CDMA players. At this stage, we are really talking about keeping 3G alive and the need to detach ourselves from the wild and fancy subscriber projections is imperative.

For that matter, considering the sharp reverses suffered by 3G in Europe recently, it may be even counterproductive to debate over whether W-CDMA or cdma2000 will emerge as a dominant 3G technology medium in the long term. All that can be said at this point is that cdma2000 will possibly remain on the ascendant for the next couple of years. That is till the W-CDMA players (with enormous clout) restructure and emerge with a new 3G growth strategy. Whether that will happen at all remains a million-dollar question.

maverick@thehindu.co.in

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