Repercussions from the EDGE

Calling his own announcement that Cingular Wireless (www.cingular.com) would migrate its networks to EDGE technology “the most well-known secret in corporate America,” CEO Stephen Carter explained what the move would mean to a gathering of industry experts, press and analysts in New York earlier this week.

The upgrade will put in place a wireless packet data system capable of transmitting information at peak rates of 384kb/s. The total migration will be finished by 2003, the company said. But key components of the upgrade actually began in August, when Cingular launched GPRS in the Seattle market. GSM will be overlaid in markets served by Cingular TDMA and analog networks; Cingular already employs GSM technology in California, Washington, Nevada, South Carolina, North Carolina, Eastern Tennessee and Coastal Georgia.

Ericsson (www.ericsson.com), Nokia (www.nokia.com) and Siemens (www.siemens.com) will provide infrastructure for the upgrade, and will develop GSM/TDMA dual-mode handsets; they also will supply 850MHz/1900MHz GSM handsets for the upgrade.

Overall, Cingular estimates the upgrade will cost $3 billion, or between $18 and $19 per POP.

By choosing a GSM-based technology, Cingular has perhaps tipped the scales in the GSM-CDMA debate that has raged within the wireless industry for years.

“Cingular’s decision will allow the faster adoption of GSM at the 850MHz band,” said Bob Waldman, Salomon Smith Barney analyst (www.salomonsmithbarney.com).

Waldman concluded that because both AT&T Wireless (www.attws.com) and Rogers Wireless (www.rogerswireless.ca) are overlaying their TDMA networks with GSM/GPRS, the additional activity from Cingular in that regard would increase economies of scale for infrastructure and handsets in the coming year.

Cingular’s recent network-sharing agreement with VoiceStream (www.voicestream.com) is closely tied to its EDGE announcement. Phil Marshall, Yankee Group (www.yankeegroup.com) senior analyst, said both announcements could have broader implications for North American carriers.

“The implementation of EDGE as (Cingular’s) 3G solution is really representative of the fact that they don’t have sufficient radio spectrum to implement Wideband CDMA, and that they see a compelling business case in the EDGE technology and the capabilities that it offers,” Marshall said.

Cingular’s business case for migration to EDGE may rely partly on further network-sharing arrangements, which would increase spectral efficiency for all carriers involved.

“Basically, they had to do that overlay in New York (with VoiceStream),” Marshall said. “Cingular only has 10MHz of spectrum there. Without additional initiatives, it will be particularly challenging for them to achieve their entire migration path without degrading network performance for incumbent subscribers.”

Marshall said he would not rule out a Cingular/AT&T network-sharing deal in the future.

“At the moment, Cingular is really testing the water. It’s not a major network-sharing agreement they’ve established,” he said. “But it's one which will enable them to have sufficient spectrum to migrate toward GSM...To a large extent, I see the VoiceStream/Cingular sharing agreement as a glorified roaming agreement. They have created an entity, but it’s sharing the resources in much the same way you would in a bilateral roaming agreement.”

Alluding to the industry’s constant debate on the comparative spectral efficiency of GSM vs. CDMA, Cingular issued somewhat of a challenge during its announcement.

Bill Clift, Cingular Wireless CTO, said EDGE would greatly increase network capacity. “Unlike what you may be hearing from other camps, or in San Diego later this week... the economics are clearly tipping toward EDGE,” Clift said, alluding to the CDMA Americas Congress, held in San Diego Oct. 31-Nov. 2. “(EDGE) data speeds are compelling and compare very well to any 3G technology in a similar environment.”

Clift also said those who compare 1XRTT to GSM don’t take into account GSM improvements such as adaptive multirate vocoders and frequency-hopping strategies.

But at a basic level, Marshall said a carrier using one air interface technology achieves greater spectral efficiency than one using overlays of multiple air interfaces.

“If we take a pure-play CDMA operator like Sprint PCS (www.sprintpcs.com), they’re only using on average 1.6 carriers, which for them is about 5MHz of spectrum on average throughout their markets, and in hot spots closer to 10MHz,” he said. “A single technology is certainly more spectrally efficient than an implementation such as AT&T or Cingular, where they’re using multiple technologies.”

Although some industry experts may disagree, spectrum is not everything.

Cingular’s evolution path via from GPRS and GSM to EDGE will allow the carrier to deploy handsets capable of near-seamless global roaming before most of the other top 10 carriers in the United States. Nextel (www.nextel.com) currently offers the Motorola i2000 World Phone (www.motorola.com), which operates on both iDEN and GSM networks. CDMA carriers don’t currently offer a similar product.

“The technical capabilities are only part of the overall equation,” Marshall said. “It becomes a compromise between the technical capabilities of your nominated technology as well as the global market penetration of that technology. And certainly, GSM has much greater market penetration from a global standpoint, as well as economies of scale and greater roaming possibilities.”

Although handsets capable of operating on TDMA, GSM 850MHz and 1900 MHz networks is a step in the right direction, the first handsets, Marshall said, are likely to be heavier, larger, battery-draining and costlier than models currently available to CDMA subscribers. But the market will spur handset improvements.

“To date, with the challenges in providing multimode devices, the need for network infrastructure for roaming has been pretty important,” Marshall said. “I can see a future where the compatibility between operators’ networks will be potentially derived more from developments in handsets than building out entire networks.”