The Race Is On

If you mention the initials CDMA to a TDMA provider, you had better brace yourself for an earful. Talk about the growing GSM subscriber base, and you will be inundated with CDMA and TDMA growth figures. The CDMA Development Group (CDG), the North American GSM Alliance and the Universal Wireless Communications Consortium (UWCC) are strong lobbyists for their technologies, placing phrases such as "world standard," "dominant technology" and "clear-cut standard of choice" in their campaign materials.

Lately, however, the question has not been "Who is winning the race?" but "Why is the race still on?"

Most U.S. carriers either have chosen a standard or have a good idea of which technology they will choose, and consumers are reputed to be indifferent when it comes to digital technology. What's more, all three parties agree that there never will be one standard in North America. Who, then, is paying attention to the hoopla?

The Voters Until now, you might have been told over and over again not to promote your technology to subscribers because they already are overwhelmed with information about wireless communications; they don't need to be confused with more initials. But Perry LaForge, CDG executive director, said at some point that way of thinking will change. Right now, he said, marketing people in the industry say that customers don't care about which technology a carrier uses, and it's the technology people who want to push the technology issues.

LaForge, who said he is more a businessperson than a technology guru, begs to differ. He considers that view of the world too simplistic, and while it may serve carriers well for now, he said they are not making some important points that they could be making.

"I think at some point, consumers will want to know. There has been no effort to educate them, so no wonder they know nothing about digital technology," he said. "As a buyer of technology, I can tell you most consumers want to know a little bit about what they are getting, but that is the marketers' choice."

While he is not in the business of marketing to the end user, LaForge has noted that some carriers' marketing materials already describe everything about their technology, right up to its actual name. The ads say "It gives you increased voice quality," or "It gives you the most coverage across North America," but they do not mention the technology's name, he said.

Dennis Garlington, a business consultant in convergence technologies and principal of Dalby Emprise, said he believes each digital standard has an advantage over the other two. For instance, CDMA carriers, with the 13kb vocoder, may want to focus on the technology's superior voice quality. GSM, on the other hand, may want to play up the fact that it is the world standard, he said.

"I believe U.S. customers are first and foremost impressed by voice quality, second by cost," he said. "Then they are going to look for features they need and a device that is not too terribly confusing to provide them."

LaForge predicted that over the next year, operators will begin to differentiate themselves from the competition by their technology. Although they might not slam the competition in their advertising campaigns, they probably will describe what their technology does better than the others.

"The Yankee Group said that in the next nine months, you will see more pressure on differentiation of service," LaForge said. "The carriers have all tried pushing the pricing plan, but now they are thinking, 'How else can we differentiate ourselves from the competition?' I think some of the easy stuff has been used. You will see them pushing the harder stuff."

Leo Nikkari, UWCC vice president of strategy and programs, said that individual operators and vendors should provide simpler documentation to salespeople about the benefits of their technology, but in the process they should not resort to negative campaigning.

"We don't want to get into mudslinging or a technical discussion, and we don't want to get into an advertising war," he said. "I think the TDMA carriers may just assume everyone knows the wonderful things TDMA can do. That's just naive. We've got to learn to explain things a little bit better and spend more time better communicating the benefits of our technology."

Some GSM carriers already are promoting their technology actively, both in their advertising and in other materials, said Mike Houghton, GSM North America spokesperson. The GSM Alliance has created a branding policy where the operators can inscribe a logo on their literature and packaging, so customers would associate GSM with terms such as quality, reliability, state-of-the-art or leading edge.

"Technology is the engine that runs our networks," he said. "People may not care what's under the hood, but they do want to be assured it will deliver reliable, high-quality service at reasonable prices."

He added that although carriers look to promote technologies to advance their service, the bottom line is that carriers' primary concern is providing economical, efficient, reliable and excellent customer service. If they don't meet those market requirements, customers will go elsewhere, he said.

"Customers don't buy acronyms; they buy a product or service that fits their needs," he said. "The challenge of marketers is to weave technological advantage into their service and value messages."

Non-Partisan Carriers There is a second reason that all three groups are still pushing their technology so hard. Contrary to popular belief, some North American operators have not yet committed to a technology. LaForge said the CDG wants to make sure it has a support network for those smaller companies and is actively organizing efforts to assist them.

"By having good neighbors, we can improve roaming arrangements and ensure our quality of service all over North America," he said. "That is why we support smaller operators as well."

Chris Pearson, UWCC marketing director, said the D-, E- and F-block license holders still are making decisions about which way to go. He said some, such as Indus, Mercury and TeleCorp, already have joined the UWCC, but there are several carriers throughout North America, especially smaller carriers in the rural areas, that have analog networks and are trying to choose their standards. The UWCC, CDG and GSM Alliance each hopes to educate them and ensure they have all the necessary facts about each technology.

According to Houghton, GSM North American operators have still another reason: national presence. The GSM Alliance was established to create a North American network and develop seamless wireless communications for customers, whether at home, away or abroad.

"The Alliance's collaborative efforts focus on serving the wireless customer most efficiently by concentrating on such areas as roaming, customer care, national distribution and data communications," he said.

LaForge brought up the fact that there are hundreds of countries outside of the United States that have no idea which technology would best serve their needs. By publicizing the advantages of their technologies, CDMA, GSM and TDMA carriers can be sure they each get a fair shot at having their technology up and running worldwide.

"Wide-scale use drives economies of scale," he said. "The clear factor that assists everyone in their technology is if they have wider scale use. That facilitates roaming. On the international front, we want to have a footprint in every country around the world. That being said, we need to promote CDMA to allow roaming on an international basis."

Pearson said last year many governments in South America decided to deregulate their countries' telecommunications marketplaces. He explained that often when deregulation occurs, new spectrum is auctioned, and operators once again begin the decision-making process about which technologies merit deployment.

Nikkari added the UWCC has planned a public relations program that will include its operating members discussing TDMA with overseas carriers.

"We will talk about how efficiently we can put up these networks, how quickly we can put them up," he said. "We will discuss the immediate revenue stream. We think we have the best economics in the industry for digital migration from AMPS and digital changeout or deployment of a brand new system, and we are selling those points."

La Forge said that for the CDG, 1997 was a year for changing the world's perception of CDMA. A couple years ago, he said, he would go to places around the world, and people would not know that any carriers had selected CDMA or that it was even working.

"They had been told by manufacturers that don't have CDMA that it was a miserable failure and that they shouldn't have even considered it," he said. "They were always very surprised when I had an operator sitting next to me that said they had experienced quite the opposite. It was always frustrating to me that in many parts of the world, people had not heard what was actually taking place."

A large portion of each group's work also is dedicated toward advancing its technology, which is another important reason to work with other carriers in the form of an alliance or development group. The GSM family of standards is supported by international service providers and manufacturers, Houghton said.

"As a group, we have set the standard for others to follow," he said. "By improving the technology and future-proofing it, GSM is in a constant state of evolution, for example tri-band phones and UMTS."

The UWCC has been working to improve TDMA's voice quality, resulting in a new vocoder. Similarly, the CDG is looking to double its 64kb data so that carriers can have higher-speed data in a fixed environment with existing systems. Their second-generation systems will do everything up to the point of future third-generation systems, LaForge said.

All three groups agree that no single technology will be the sole standard in North America.

"I think everyone will de-emphasize the belief that one technology is going to be the technology of the future, or that the world is going to end up with CDMA, GSM or IS-136," Pearson said. "The reality is that all three are very much going to be survivors. They are very much going to be good quality systems."

Counting the Ballots Across the board, worldwide PCS growth in 1997 was phenomenal. In July 1997, the UWCC estimated about 4 million TDMA subscribers in North America and 8 million worldwide, Nikkari said. At the end of 1996, there were not even 4 million subscribers worldwide, so the base has more than doubled over the last year.

The CDMA subscriber base exceeded all expectations with more than 1.5 million estimated subscribers in North America after only 18 months of commercialization. In addition, the CDG announced that CDMA, which is only two years old commercially, is continuing its rapid worldwide growth with the number of global subscribers at 7.8 million. CDMA systems now are in more than 25 countries around the world.

"I projected at the end of 1996 that in one year, at the end of 1997, we wouldn't top more than 5 million subscribers worldwide, and we actually got to 7.8 million, so the growth was even higher than we had anticipated," LaForge said.

Of 24 U.S. companies that have committed to GSM, 14 have digital service up and running in 700 cities, with more than 1.5 million subscribers in the United States. At the end of 1997, the GSM Alliance reported a worldwide customer base of 66 million in 110 countries, Houghton said. In the last eight months alone, GSM has added more than 1 million customers in the United States.

"It took the entire U.S. cellular industry more than four years to add as many subscribers as GSM has added in last eight months," he said. "We figure we add 2 million new customers around the world a month, which is one new subscriber every second."

Digital: A Multiple Party System Houghton added that while GSM improves every time another country chooses the technology as its standard, he likes the fact that CDMA, GSM and TDMA compete against one another in North America.

"It's an advantage to have multiple technologies because it offers carriers competitive choices, and that's a benefit to the consumer because it drives down cost and increases innovation," he said. "The three groups are trying to promote their specific technologies, but by being competitive, it will help improve digital in the long run. Having multiple standards is a good thing."

The growth in all three areas of digital has brought down prices in cellular, as well, he said, so wireless subscribers have reaped cost benefits in several ways. Almost all PCS carriers have practically doubled their total number of subscribers in the last quarter because of pricing and service incentives. As a result, cellular prices have dropped, and cellular carriers have offered no-contract incentives or programs where the first minute of every call is free.

"The smart cellular companies are starting to pay much more attention to churn, too, because if you don't gratify the customer, they have more than one choice," Houghton said.

Houghton believes that PCS has brought about an important evolutionary shift in wireless customers' buying habits. Now more than buying for safety and security reasons, people are looking to wireless to increase personal productivity and help improve the quality of their lives.

"Technological innovations stir marketing, pricing and service innovation," he said. "I think we can expect some exciting and aggressive positioning in the year ahead as this competitive marketplace continues to expand."

In some markets, competition among carriers with the same technology is prevalent. For example, in Chicago, PrimeCo Personal Communications and Ameritech Cellular Services offer CDMA, while AT&T Wireless and Southwestern Bell Mobile Systems have the TDMA offering. CDMA is running in all of the top 30 U.S. markets, except for Memphis/Jackson. Of the 29 that have CDMA, 18 have more than one CDMA carrier.

Twenty-nine of the top 30 markets also offer TDMA, and 12 of those 29 have more than one TDMA carrier. Nikkari said in 1998, even more markets will show multiple TDMA carriers.

Competition in the wireless industry is tough any way you look at it. It's important that your company's loyalty to its chosen technology does not get lost in its own marketing efforts. With so many voters still undecided, supporting your digital standard's platform only can help you offer better service in the end.

Dennis Garlington, Dalby Emprise business con-sultant in convergence technologies, spent eight months trying to compare and contrast the features of CDMA, GSM and TDMA. From the three standards, he found 135, and he reported on 107 that he thought applied to consumers.

"There is very little difference in the total number of features anticipated by each of the three standards," he said. "The people writing these standards have great imaginations; they are genuine champions of the industry, and they are frustrated to see only 25 or 30 implemented in today's systems. Even when the WIN standards are finished, carriers won't implement these features while they're growing 70-plus percent each year. That leaves the door wide open for the wireless data and Internet people to steal the value-added services business."