September 14, 2004 4:00 AM PDT
New phones put world in palm of the hand
Manufacturers such as Samsung and Motorola have released devices that support both CDMA and GSM, the two incompatible back-end technologies used in the vast majority of cell phone networks worldwide.
Cell phone makers are releasing products that support both CDMA and GSM, the two incompatible back-end technologies used in most cellular networks worldwide.
The hybrid handsets, niche products aimed at business travelers, could wind up roiling the industry, if they come down in price and break down technology barriers to mergers between carriers.
Several cellular carriers around the globe now offer so-called world phone models that work on both network types. Among the earliest backers was China Unicom, which has been building a hybrid network for years and in August announced a major order for hybrid cell phones. In addition, Israel's Pelephone has announced plans to sell hybrid handsets, while United States-based Verizon Wireless about two weeks ago began marketing a GSM-CDMA phone from Samsung that promises coverage throughout Europe, Asia-Pacific, Africa and the Middle East.
Analysts said the phones, for now, are a niche product aimed at business travelers who move frequently between regions that support different cellular standards. But the handsets could wind up roiling the industry if they come down in price and break down the technology barriers to international mergers between CDMA and GSM carriers.
"This is a very, very regional niche product for the next year," said Paul Reddy, Intel's wireless architecture manager. "But things should get more interesting in a year or so. If the prices go down, and phones work better, there'll be no real reason why carriers shouldn't deploy these phones in higher numbers."
The first world phones were introduced in the late 1980s, but sales fizzled because of the size and inadequate performance of the models. With no reliable device to bridge the incompatible networks, cell phone service providers were forced into a choice between CDMA (Code Division Multiple Access) and GSM (Global System for Mobile communication). They stuck with variants of the standard they supported, as they made improvements to their networks.
This "pick a standard" attitude created a divided world market in which about a billion cell phones use GSM, but a sizable pocket of about 200 million people in Asia and North America use CDMA. World business travelers know well the difficulty of crossing borders between CDMA and GSM nations. Many carry two phones.
Now manufacturers are taking advantage of shrinking chip sizes that let them pack pairs of radios and antennae into a single phone, in a dramatically smaller space than was previously possible.
These phones are pricy baubles at the moment. Verizon Wireless sells its version of Samsung's A790 for $350, including a discount for signing a two-year service contract. But if prices drop significantly, carriers will have more reason to build mixed networks to take advantage of each standard's particular strengths. GSM's major plus is its ubiquity, while CDMA has a faster data service.
Hybrid phones could also have an impact on cell phone company mergers, which would no longer be limited by the kind of standards considerations that came into play in the proposed merger of AT&T Wireless and Cingular Wireless--both GSM carriers.
The phones could also put a new twist on roaming agreements--the terms carriers reach with competitors so that subscribers can make or receive calls in each other's markets. With the broad adoption of CDMA/GSM phones, a GSM carrier would be free to consider deals with CDMA networks, bringing new competition to the market.
Not everyone agrees that dual-mode phones are a harbinger of major industry changes, however.
Executives at European carrier Orange and at T-Mobile USA said the wireless industry has coalesced around domestic and regional markets, offering few opportunities for synergies on a big international scale implied by melding GSM and CDMA.
"I just can't see a lot of carriers selling these phones," said Steve Glagow, director of group business development and partnerships at Orange.
Glagow believes that the phones will only appeal to corporate jetsetters such Bernie Larson, a San Francisco-based construction site manager who works for months at a time overseas in countries dominated by the GSM standard and where his Sprint CMDA standard phone doesn't work.
"My company would love to see me use one of those phones," Larson said. "They're tired of me having two different cell phones, two different providers and two different bills."
Unleashing an Asian powerhouse?
Skeptics aside, at least one carrier appears to be placing a big bet on the hybrid network. China Unicom has said that it's picking up on mixed standards because it wants the best of both worlds: the faster wireless data of CDMA and GSM's omnipresent voice coverage.
The company officially unveiled the first of its Worldwind dual-mode mobile phones at a launch ceremony on Aug. 5. Devices presented at the event included the Motorola A860, Samsung's SCH-W109 and LG's W800. The company, which announced at the time that it is buying 500,000 hybrid handsets, plans to use those phones to woo businesses in CDMA countries with ties to China, where carriers have made GSM the dominant standard.
China Unicom has already invited various Latin American and U.S. operators and handset vendors to Beijing to discuss forming an alliance for CDMA handset purchases.
"We have resolved to be a first-class global enterprise--our ultimate goal with our international strategy is to leverage our CDMA technology worldwide," Wang Jiangzhou, China Unicom's chief executive, said in a statement accompanying the phone announcement.
He added that sales of hybrid handsets are outpacing supply. "We're facing a shortage of Worldwind phones. It's been selling so well that we don't have enough stock to meet customers' demands," he said.
Healing wounds overseas?
Signs of how dual-mode phones might play into mergers and partnerships between CDMA and GSM carriers can be glimpsed in recent efforts from Verizon Wireless to market a hybrid phone.
Verizon Wireless believes the phones could strengthen its relationship with United Kingdom-based Vodafone Group, a GSM carrier that owns Verizon Wireless jointly with CDMA partner Verizon Communications.
Vodafone has since wrestled with some of the downsides of working across standards with its U.S. partner. For example, its predominantly European clientele must rent CDMA phones when traveling in Verizon's coverage area.
In a further sign of its discontent with Verizon, Vodafone tried to snap up GSM network AT&T Wireless when the carrier put itself up for sale last year. That bid failed, however, and GSM network Cingular Wireless walked away with the prize.
"The fact that Vodafone is one of our parent companies played a big role" in the decision to begin selling a hybrid phone, a Verizon Wireless representative said.
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