An interesting read from over 10 years ago.
[cleaning out my cache]
Business Week, August 20, 1990
August 20, 1990
SECTION: TOP OF THE NEWS; Number 3174; Pg. 40
LENGTH: 845 words
HEADLINE: BOLTING FROM THE CELLULAR HERD
BYLINE: Larry Armstrong in Los Angeles, with Lois Therrien in Chicago and Peter Coy in New York
HIGHLIGHT:
An uproar as Nynex and Ameritech opt for a maverick technology
BODY:
It wasn't supposed to happen like this. Facing a capacity crunch in its big urban markets, the cellular phone industry knew it needed new technologies to keep growing. Its trade group, the Cellular Telecommunications Industry Assn., had endorsed a digital technology that, beginning in 1991, would allow for three to six times as many subscribers. All that remained was for suppliers, including Motorola Inc. and American Telephone & Telegraph Co., to start building transmitters and phones.
Then, on Aug. 2, two of the largest cellular operators, Nynex Mobile Communications Co. and Ameritech Mobile Communications Inc., upset those neatly laid plans: They announced plans to adopt a more ambitious digital system developed by Qualcomm Inc., a $ 31 million San Diego-based upstart whose founders made their mark by inventing scrambling techniques for pay-TV. Privately held Qualcomm's cellular technology, which many industry experts thought would take another decade to perfect, could accommodate 10 to 20 times as many subscribers as current systems handle. The last-minute appearance of a rival technology caught the cellular industry off guard and is causing fits at the CTIA. The group has spent the past two years rallying the U. S. industry around its system. Now, even if the industry agreed to switch -- an unlikely event given the investments that Motorola and others are making in the original technology -- it could suffer from delays. ''Our problem here is that our larger markets, and some of our medium-size markets, can't wait,'' says Robert W. Maher, president of CTIA. ''They need something in 1991.''
Despite the support from two giant network operators, questions remain about the viability of Qualcomm's digital system. It was tested last year in San Diego and this February in New York, but the trial involved only two vans driving back and forth between two adjacent cells. The critical electronic switching system, which captures and routes the calls, hasn't been developed yet. AT&T has agreed to build a switch for a Nynex Qualcomm system -- in addition to switches for the CTIA format. Before the cellular industry decided on a digital standard, Qualcomm had not put forth its technology, which is variously called CDMA, for code division multiple access, or spread spectrum (diagram). It works by spreading all signals across the same broad frequency spectrum and assigning a unique code to each. The dispersed signals are pulled out of the background noise by a receiver that knows the code. Although the technique was first developed in World War II to protect radio communications, until now its complexity has limited its use to expensive military gear. ''The industry considered that it was too far away, and perhaps wouldn't even work,'' says Qualcomm founder and CEO Irwin M. Jacobs. In early 1989, the CTIA adopted time division multiple access (TDMA), which works by interspersing tiny bits of data from many calls on one channel. Before TDMA got the nod, Motorola and AT&T had lobbied for a third digital scheme called FDMA (frequency division multiple access).
HARD TO IGNORE. ''Qualcomm has taken a very expensive, hard-to-implement military system and brought it to the point where it's commercially viable,'' says Keith W. Kaczmarek, director of advanced technology for PacTel Cellular in Irvine, Calif. PacTel, which hosted Qualcomm's demonstration in San Diego last November, has not yet announced plans for a CDMA service. Ameritech plans call for field trials of the Qualcomm system later this year and installation in Chicago by 1992.
''Tests have proven to some doubters, ourselves included, that the technology works,'' says Dennis M. Rucker, director of planning and technology development at Ameritech. Nynex says that it will use TDMA for regular cellular phones but will use Qualcomm's technology to build a combination handheld telephone/pager service for New York City by the end of next year.
Support by such major customers is hard for equipment makers to ignore. While affirming its commitment to TDMA, Motorola says it will consider making CDMA gear if a market develops. The $ 9.6 billion electronics giant has already built CDMA military gear.
If the cellular industry does split over which digital standard to use, the result could be a confusing array of cellular systems and phones. That might make traveling from city to city with one phone impossible -- or force consumers to buy more expensive hardware that works in multiple cellular systems. ''I think you'll see the industry migrate quickly through TDMA and on to CDMA in the most densely populated urban markets,'' says Clifford A. Bean, director of mobile telecommunications consulting at Arthur D. Little Inc. ''But in smaller markets, TDMA will be cheaper to deploy and may be all they need.''
That's an unhappy prospect for an industry that has grown quickly by adopting standards. In fact, in the view of many cellular industry officials, this may be one time when a technological breakthrough came a bit too soon.
URL: businessweek.com
GRAPHIC: Illustration, HOW CDMA WORKS Data: Qualcomm Inc. RAY VELLA/BW |
