FREEWIRE

CDMA: Blazing A Trail Of Broken Dreams

by Bill Frezza

One year ago I took Qualcomm to task for the fantastic claims its executivesand investment bankers were making about the capabilities of Code DivisionMultiple Access (CDMA) digital cellular technology. (See "Succumbingto Techno-Seduction," April 1, 1995, page 39 or http://techweb.cmp.com/nwc/604/604frezza.html .) Now that a few commercial CDMA systemsare on the air, I thought it would be timely to revisit these claims. WhatI found was a Byzantine panorama of hype, obfuscation and denial surroundinga once-promising technology--a technology that has fallen far short of expectations,calling into question billions of dollars in investments by n etwork operatorsworldwide.

Qualcomm burst on the scene in 1989, claiming that CDMA would offer at least20 times, and perhaps 40 times, the capacity of analog cellular systems,compared to a mere 3:1 improvement for rival Time Division Multiple Access(TDMA) technology. In addition, superior voice quality, fewer dropped calls,easier system engineering and lower infrastructure costs were to heralda new age of wireless that would quickly render TDMA obsolete.

From the beginning, critics warned that the compelling theoretical potentialof CDMA would never prove out in the field; dynamic power control in rapidlyfading environments would be its Achilles heel; interference would vastlylimit capacity; systems under heavy load would be unstable; and power balancingwould make infrastructure engineering a nightm are. These warnings were shouteddown by a brilliantly orchestrated PR campaign, assisted by what financialanalyst Charles Biderman calls the "CDMA Mafia"--a group of keyindustry figures an d Wall Street investment bankers who earned millionsfrom Qualcomm stock offerings.

So Where Are We Now? In the seven years that passed since Qualcommbegan making its parade of promises, TDMA-based networks have been commerciallydeployed in more than 65 countries worldwide, supporting 18 million subscribers,growing at a compound annual rate of almost 200 percent. Technical problemsassociated with TDMA's first-generation D-AMPS systems have been largelyaddressed, second-generation GSM systems have taken the world by storm andthird-generation PCS-1900 systems are now ramping into high volume. A vastarray of low-cost, high-quality phones are on the market and improvementsin capacity management techniques like Advanced Channel Allocation (ACA)are slowly moving TDMA systems beyond their baseline capacity performancecloser to 6:1 or even 7:1.

CDMA systems, meanwhile, have barely managed to achieve commercial operationin two places--Hong Kong and a suburb of Seoul, South Korea. Comparativefiel d tests with Hutchison's Hong Kong system indicate that its voice qualityand dropped call rates don't come close to competing TDMA systems there.To address shortcomings in its product and attract enough subscribers toreach the 10,000 mark required to maintain license compliance, Hutchisonwas forced to offer an unprecedented flat rate, unlimited calling plan.CDMA phones, meanwhile, remain in short supply due to continued developmentdelays, which is probably just as well, since capacity projections are meltingfaster than a snowball on a summer day.

A Tale of Two Cities The most striking example of the differing fatesbefalling CDMA vs. TDMA operators is to compare Airtouch's experience inLos Angeles with American Personal Communications' (APC) in Washington,D.C. Airtouch was the first cellular operator to c ommit to CDMA, beginningtests back in 1989, prior to its divestiture by Pacific Telesis. The planwas to upgrade its congested analog system in Los Angeles, turning it intoa digital showcase.

After numerous delays, construction began in 1994 with the commercial launchscheduled for early 1995. Motorola, a licensee of Qualcomm, supplied the200 base stations required to cover the LA region. From the beginning, analoginterference, power balancing and poor voice quality plagued the system.Then significant "instabilities" cropped up. As 1994 and 1995came and went, a wall of silence fell over LA as the CDMA PR machine workedovertime, diverting attention to the lucrative licensing deals Qualcommwas signing with system vendors impelled to bring CDMA into their productline. It became so difficult to obtain information about what was reallygoing on in LA that even George Schmitt, then CEO of PCS Primeco, a partnershipof Airtouch, Bell Atlantic, NYNEX and U S West, claims he could not obtainaccurate information. (George later resigned, making no secret of his disgustwith Primeco's decision to go with CDMA.)

Airtouch is still struggling to get its first cluster of 20 base stationsonlin e. Airtouch executives unequivocally will not commit to going commercialin 1996, stating that they will not launch until the quality is at leastas good as analog. They also estimate that once the first 20 base stationsare online, it may take up to nine months to bring on the remaining 180,each cluster requiring meticulous power balancing before it can be integratedinto the system. Yet Qualcomm's brochures still boast that "additionalcells or sectors can be added quickly and flexibly with virtually no impacton the existing network plan." Qualcomm CEO Irwin Jacobs, who sayshe is unaware of these problems at Airtouch, still claims that "optimizationfor soft hand-off and power balancing is not very critical," and "qualitydoes not depend on tuning."

What about capacity, which is still advert ised by Qualcomm as 10 to 20 timesthat of analog? Airtouch now admits that the system could end up providinga capacity gain of as little as six times that of analog; this is with an8-Kbps vocoder, which provides markedly inferior voice quality to the 13-Kbpsstandard that CDMA has adopted to stay competitive with TDMA. At 13 Kbps,capacity drops proportionately to less than four times the capacity of analog.

In contrast, APC decided to deploy TDMA in its Washington/Baltimore system,after testing and rejecting CDMA. Turning on commercial service in Novemberof 1995, APC has already signed up more than 50,000 subscribers. Voice qualityis superb, system engineering went without a hitch and users now roam theD.C. area with state-of-the-art phones from multiple vendors that offerbuilt-in paging, caller ID, call waiting, fax and data capabilities. Ominously,Sprint Spectrum, with whom APC is affiliated, selected CDMA for its nationwidedeployment, insisting that it will someday overbuild APC's TDMA system.Perhaps so, but first someone has to make CDMA work properly. In a highlypublicized break, Motorola walked away from contract negotiations with Sprintover supplying base stations. According to t he Wall Street Journal, Motorolabalked at the financial terms, which included a 35 percent damage penaltyin the event the system "accidentally shuts down."

Shameless in San Diego Undeterred, Qualcomm marches on, recentlyembarking on a campaign that has inflamed consumer groups with allegationsthat TDMA products cause dangerous interference to everything from pacemakersto hearing aids to air bags. There is, of course, some basis for concernsthat any RF product could indeed interact with such devices. Preliminarystudies in Europe indicate a need for caution and further investigation,perhaps suggesting some design changes to mitigate effects. When asked ifhe was aware of any scientific studies that showed that CDMA phones didnot also cause similar interference, Jacobs stated that he was not. Withprecious few CDMA phones out there to test, how could there be any evidenceone way or the other?

As this column went to press, San Diego, Qualcomm's home town, had temporarilyhalted dep loyment of PacBell's TDMA system after a personal appearance byJacobs at a local hearing. The spectacle of an industry vendor precipitatingsuch adverse regulatory reaction has caused widespread alarm in the industry,since most leading manufacturers produce both TDMA and CDMA products. It'sa sad commentary when a company resorts to ham-handed tactics that couldboomerang if and when its own products ever ship in volume.

As bleak as things appear, even CDMA's most ardent detractors acknowledgethat someday, somehow the technology will be made to work, albeit at vastlyreduced capacity levels. Too much money and too many careers are on theline to back down. By the time large-scale systems are chicken-wired andbubble-gummed together, though, the promised advantages of CDMA over TDMAwill have vanished and we will be awash in aggregate capacity offered byan influx of new operators. Those that chose CDMA, saddled with what couldbe the most expensive and difficult to engineer wireless infrastructureon the planet , will have to watch as TDMA operators leap ahead, grabbingmarket share in what is forecast to be a brutally competitive market. Thisis a far cry from what was promised.

Sooner or later, reality must prevail. Given the aggressiveness with whichCDMA was promoted, I wouldn't be surprised to see Qualcomm end its daysmired in shareholder lawsuits, trying to deny the very claims once usedto hype its stock. In any event, I'll be back in this space same time nextyear to give you an update.

Bill Frezza is the president of Wireless Computing Associates. In theinterest of full disclosure, Wireless Computing provides three days permonth of consulting to Ericsson, a vendor of TDMA systems. Bill does nottrade in individual equities. The opinions expressed herein are his own.He can be reached at frezza@interramp.com.

April 15, 1996