Dying Or Thriving? The Debate Over CDMA
Apple (NSDQ: AAPL) declared last week that CDMA, the network technology used by Verizon Wireless (NYSE: VZ), Sprint (NYSE: S) in the U.S. and many other operators worldwide, has a limited lifespan. That statement triggered a wave of comments by mocoNews readers, who were even blunter, calling CDMA obsolete, dead, decomposing and on life support.
But is that accurate? The question is an important one, as various reports (and some rumors) say Verizon is in high-level negotiations with Microsoft (NSDQ: MSFT), Google (NSDQ: GOOG) and even Apple to carry some of the most cutting-edge devices coming down the pipeline over the next year. And those potential partners will have to decide whether Verizon’s 86 million-plus subscribers are a big enough audience to justify making a separate device.
Some argue that because of the technology’s limited market share, handset makers should just wait until CDMA carriers like Verizon roll out LTE, a fourth-generation network that promises to be more pervasive. But wireless technology consultant Chetan Sharma says that’s a missed opportunity: “I think people who are counting out CDMA haven
The talk about the demise of CDMA2000 (aka 3G CDMA) is nonsense. All that is happening is that LTE standardization is being done by the same standards body (called 3GPP) that standardized UMTS. So, people have started saying that CDMA2000 is dying. What is perhaps dying is the standards body that created CDMA2000 (called 3GPP2).
CDMA2000 is with us till the transition to 4G happens, and that is no different from UMTS. Widespread deployment of 4G is still 5 years away. In that duration, wise handset vendors will build cutting-edge devices for CDMA. The handset business is all about volume. What makes a handset successful is not the speed but the ubiquity and subscriber base of a network. Remember that, Apple's first iPhone was launched on GSM/EDGE, not on 3G UMTS, even though 3G UMTS was available in limited form on AT&T's network, as well as in Europe and Japan.
Also note that 3G CDMA is not at a disadvantage compared to UMTS as far as the transition to 4G is concerned. In both cases, when operators move to 4G, they will have to build a brand new OFDM-based radio access network in new spectrum. In addition, in both cases, operators that want to offer voice over 4G will have to migrate from their existing circuit switched core networks to packet-switched "IMS" networks. And in both cases, they will have to rely on multi-mode handsets (either GSM + UMTS + LTE, or CDMA + LTE) for many, many years.
I absolutely doubt that CDMA is becoming obsolete considering the tremendous growth in subscriptions. Though there's a decrease in investment, their expansion can be supported by their subscription income.
The debate is not about current deployments but those in five years.
Consider the best case scenario: VZW is evolved to LTE and the UMTS world to LTE. There will be two chipsets, one backwards compatible with the CDMA2000 bands/signaling and the other with HSPA. If you are a device manufacturer looking at platform planning which chipsets would you choose? One with 80% market share or 20%? Granted both can be done with different SKU's (and radio chipsets) but Apple has shown the power of one SKU on bottom line. There is the added annoyance of no SIM,
As anyone who follows the Chinese market knows their 3G (and 4G) strategy is in shambles (with state authorized TD-SCDMA as a standard which will get marginal support from chip vendors), so the idea that China is a large CDMA market is completely false. China Mobile, the larger of the two (75% share) is a GSM/EDGE carrier and China Unicom has both GSM AND CDMA, so there will be little effect on global handset planning.
T-mobile USA will be yet another casualty with their obscure 3G band that no one supports.
@Amit: There are no "quality phones" for VZW or Sprint. LG and Samsung have made build-to-order phones with zero innovation. In fact Sanyo eventually withdrew due to a lack of volume. Not an environment to offer anything but cookie cutter clamshells or sliders such as the VZW Voyager (kindly count the number of keys and how many ways one can navigate, not to mention the number of button presses to do a simple task).
Timm: your info on China is outdated. The telecom sector in China went through a huge restructuring last year so now:
China Unicom = GSM
China Mobile = TD-SCDMA
China Telecom = CDMA
China Telecom is adding 2+ million CDMA subs per month, so that seems to refute your argument that China is not a large CDMA market…at least in terms of growth potential.
As for your 80/20 ratio points, do you not know that the top 5 manufacturers (even Nokia) all currently address the CDMA market. I'm pretty sure they are all looking at chipsets that support LTE + CDMA as well, so why wouldn't Apple consider it? They could sell 10M CDMA iPhones in North America easily, not to mention rest of the world.
Also, CDMA does have SIM cards – they're called R-UIM cards, but very few operators use them.
Since when is tens of millions of customers too few to bother with?!? Especially with Apple, world renown for being a niche market specialist. Talk about short sighted megalomania!
I always love this inane new logic that says we should only produce products that work with European standards or only produce products for least common denominator, majority markets (aka Wal-Mart or bust). So, by that logic, we should abandon 110VAC, 60Hz power grid in favor of a 50Hz one and we should never have gone with the NTSC standards, we should have gone with PAL and SECAM? For that matter, why even bother with English version products, why not just go with Chinese? After all, there are far more people on Earth who speak Chinese today than have ever spoken American English. What? You can sell significantly more products if you localize it? Imagine that.
As for future compatibility: Apple and every other handset manufacturer doesn't sell phones today that they want you using 5 years from now. They want to sell you at least two more phones between now and then (remember, it is extremely unlikely that Apple will be releasing a LTE compatible iPhone next week, so it will have to be replaced with a new version before then too). Why not sell phones in the market that exists now?
If Apple can cram it all in, they may want to consider the next gen iphone being built as a dual standard GSM/CDMA device (like the blackberry worldphone) with carrier capability to lock it either way. Then the following gen could be tri-standard LTE/GSM/CDMA. If they want to play with Verizon over the next 5-6 years, they'll have to support CDMA for backwards compatibility until the LTE build-out reaches full coverage. That may be the best option to keep costs down and reach the entire market.
To say that the largest cell phone company with the best coverage in the company with the highest customer satisfaction with the best 3G coverage in the country as using obsolete technology is crazy. Its like saying that the Camry is obsolete because it does not come with Onstar. lets face it, it's about making a reliable phone call in your coverage area not the rare trip you might take overseas. If being in the military and going across country while people from tmobile and AT&T always ask to borrow your phone to call there wife is obsolete, I will take that any day.
cdma will remain in use for the years to come (at least 5 to 10 years). So many reasons: still 3G is not in full use., some countries are just offering licenses. Subscribers will be satisfied with 3G service, why they (operators) will go for 4G. Investors are very clever now., especially in this global economic crisis. Ecosystem for cdma may improve bcoz of China Telecom. 1X advanced and EVDO Rev A & B have so much to offer. Gone are the days, when people use to follow the trend blindly.