Web and Telecom - The New Economy in Perspective

We are living in a digital civilization. It’s the age of web and telecom. Last week I mentioned, the Microsofts and Googles of the world are the corporations that govern our existence on the web. Google offers mostly everything for free. The ‘free’ attraction and freedom is gone. Call it the subliminal effect of brands in the e-age but that’s the future of the interactive brand. It’s a phase when things that will matter in the new economy are being built and when empires are built, a lot of dust is thrown up. This digital age is currently witnessing a phase when giants to gather a foothold in the mega market of tomorrow are fighting it out. The Google versus Yahoo versus Microsoft saga has been written about for years now. There is an equally interesting war in the telecom world. The CDMA versus GSM war. As the digital convergence gathers speed so does the CDMA GSM war. A few months ago I had written a story titled Qualcomm versus Nokia: US Open Round Three and now there is more.

CDMA – The Lost Attraction

Is CDMA less attractive than GSM? Has CDMA in India lost steam? Is GSM the winner in India?

If a recent report by Credit Suisse First Boston is to be believed then all the above is true. The report by Credit Suisse First Boston has said GSM is winning the race with more upside, referring to the Indian market. The report also said CDMA subscribers’ share in the Indian market will fall to seven per cent by 2010 while GSM subscribers’ share will grow from the current 75 per cent to 93 per cent.

So much power yet losing steam

Let me ask you a question. Which are the biggest telecommunication companies in India? Ok so there is the big daddy Reliance Communications, there is the giant BSNL, another giant MTNL, yet another giant TATA Teleservices. All of them are offering the CDMA technology. So much power yet GSM is on growth path in India not CDMA. To top it there is now the royalty row with the biggest company that uses CDMA technology in India.

Reliance versus Qualcomm

The former is a market leader with the maximum subscribers in India. The other an organization that refuses to budge. The row started a few months ago when Qualcomm refused to lower royalty charges on wireless telephone chipsets which Reliance Communications said were way too high. Reliance felt less was being charged by Qualcomm elsewhere, in other parts of the world.

Qualcomm refused to budge and the official communication I received from Qualcomm says “Our meetings with operators and other partners were positive and focused around business solutions to address long-term business growth.”

One wonders how positive the meetings were considering Reliance Communications has applied for GSM spectrum in the two key circles of Mumbai and Delhi.

CDMA – The Worldwide scenario

318 million is the CDMA worldwide subscriber base which is less than 20 percent of its GSM counterpart whose reach is over 2 billion cell phone users. The growth rate of CDMA subscribers is 25% as compared to 35% for GSM. GSM is the clear winner here.

The Nokia Qualcomm standoff is well known. In June when Nokia said it would stop making CDMA Qualcomm shares dropped 15 percent translating into almost $10 billion loss in market capitalization.

On the royalty issue it isn’t just Reliance which has a problem with Qualcomm. Brazil’s CDMA operator Vivo, China’s China Unicom and Australia’s Telstra maybe migrating to GSM technology for future growth.

The Qualcomm bet – The Intellectual Property Battleground

The third generation standards for mobile telephony WCDMA (Wideband Code Division Multiple Access) and CDMA 2000 owe much to Qualcomm research. Qualcomm bet is GSM players would be using 3G technology. GSM players using 3G would mean they use Qualcomm’s patents and research in the implementation of the CDMA multiplexing technique. Thus Qualcomm is betting on the income from royalty

3G – Is it an expensive unwanted technology?

Would the Qualcomm royalty bet pay? Is 3G what the market demands? I guess it isn’t very rosy a picture. Recently International Herald Tribune carried this article “Over the long term, 3G runs the risk of becoming the Edsel of the mobile phone industry - an expensive, unwanted albatross rejected by consumers and bypassed by other, less costly technologies, some experts say.” You can view it here.

Puneet Mehrotra is a columnist in HindustanTimes.com and edits www.thebusinessedition.com you can email him on puneet@cyberzest.com