CINGULAR ATTACHES BILLIONS TO ITS EDGE COMMITMENT

Decision to go GSM/EDGE route will be costly and complicated

Cingular Wireless' billion-dollar contracts with Ericsson, Nokia and Siemens to build its high-speed mobile network are some of the largest those vendors have seen. But despite Cingular's considerable commitment to GSM/EDGE, it is unclear whether the carrier has bet its money on the right technology.

“It is interesting that Cingular is willing to pay $3 to $4 billion to get to EDGE even though EDGE and CDMA 1X — which Sprint PCS will spend only $800 million to get to — will be similar,” said Pat Comack, telecom analyst for Guzman & Co.

Cingular, led by CEO Stephen Carter, maintains it will cost between $2.6 to $2.8 billion to overlay its TDMA network with a GSM platform, which eventually will be transitioned to GPRS and then EDGE. After reports surfaced that the deal could be worth between $3 billion and $4 billion, Nokia and Ericsson confirmed their contracts are worth more than $1 billion. Siemens is expected to win more than $500 million.

Still, Cingular's expenditures have caught the industry's attention because of the carrier's difficult migration path, said Robin Hearn, senior analyst for Ovum. “At least with 1X here and WCDMA in Europe, operators had a migratory road-map that was more simple,” Hearn said. “What Cingular is trying to do is different in concept and practice because of the split between TDMA and GSM subscribers. CDMA operators can get further in their upgrade path by spending less.”

But Angel Ruiz, president of Ericsson's North American division, believes it makes sense for Cingular to go GSM because the carrier has maintained Pacific Bell's GSM-based network for almost five years.

“There is a lot of speculation as to what technology is better… this will be more spectrally efficient than if they were to go to a totally new technology,” Ruiz said.

Indeed, if Cingular had chosen to transition from GSM/TDMA to CDMA, the upfront capital costs likely would have been enormous. And because there are a lot more GSM carriers in the world than CDMA carriers, economies of scale mean Cingular will save on handset costs by choosing GSM, Comack said.

Both EDGE and CDMA 1X are by many considered third-generation technology and are expected to reach average speeds of 64 kb/s. EDGE promises a maximum speed of 384 kb/s, and 1X will reach up to 144 kb/s.

But Cingular's transition from TDMA to GSM, GPRS and EDGE entails additional hardware and software, whereas the migration to 3G 1X is very simple, said Tom Crook, director of technology research and development for Sprint PCS, which is transitioning to CDMA. Currently, Sprint PCS is transitioning its network by going into its existing base stations and turning up 1X cards with little additional hardware or new spectrum, he said. “This migration to 3G 1X has been an easy decision. It gives us increased voice capacity, and we get peak speeds of 144 kb/s for data as well,” Crook said.

Sprint PCS will upgrade beyond that to EV-DV but does not expect to need much more than software upgrades even then. GSM-based Cingular, AT&T Wireless and VoiceStream Wireless — all of which have confirmed they will transition to EDGE — will need additional spectrum to proceed with WCDMA.