Jeffrey R. Hultman, president and chief executive of PacTel Cellular, likes to tell his employees that they are pioneers in a "100-year business."
Taking a long-term view keeps a decision such as which of two competing cellular phone technologies to adopt from seeming quite so daunting, he says. Even so, Hultman and other cellular industry executives are grappling with the biggest technological transition in the industry's brief history.
The change involves modernizing the nation's cellular networks with second-generation digital technology that will allow cellular companies to squeeze calls onto an already cramped wave band.
For PacTel Cellular, the nation's second-largest cellular phone company, the change comes at a crucial time. In Los Angeles, the Irvine-based company's largest market, the carrier that converts to digital first could capture the lion's share of subscribers, who are tired of network congestion.
The industry, including PacTel's local rival, Los Angeles Cellular Telephone Co., has endorsed a new technology standard to improve and expand service in the coming decade. But PacTel Cellular has chosen a different path.
The conversion to digital is expected to cost cellular phone suppliers hundreds of millions of dollars per market over a period of years. That's why the decision over which flavor of technology to select is critical.
PacTel Cellular, a subsidiary of San Francisco-based Pacific Telesis Group, packs a lot of clout in the industry. So Hultman's decision to buck the industry's choice and instead champion a technology developed by a little-known San Diego company may compel the rest of the industry to follow, some analysts say. But if the choice is wrong, PacTel risks losing its leadership position in the fast-growing Los Angeles area, where it has 57% of the market. And the industry may lose its hope for a nationwide compatible network.
"I don't know if the technology will work yet," Hultman said. "And we never want to get into a standards fight with the rest of the industry. But we will put this technology out in the marketplace and let the market decide if it is better."
With about 10% of the nation's cellular business, PacTel has gained prominence in the young industry.
"The industry is so new that everything can still be very experimental on the management side," said Stuart Crump, co-author of a book on cellular phones and editor of Cellular Sales & Marketing in Washington. "There's a lot of risk taking, sort of like being an early airline operator, and PacTel has a reputation for doing that."
Hultman said he was skeptical when officials from Qualcomm Inc., a San Diego start-up, approached him late last year and told him their digital technology--known as code division multiple access, or CDMA--would allow PacTel to squeeze 20 times more callers onto the existing network.
After all, just a few weeks earlier and at Hultman's recommendation, the Cellular Telecommunications Industry Assn. voted unanimously to adopt a digital technology called time division multiple access, or TDMA, ending a two-year dispute over industry standards. Because it emerged so late, CDMA was not considered.
TDMA extracts three to seven times more capacity from the existing analog system by slicing a frequency into a number of time slots. The transmitter bursts a signal for a call for a given period of time and then alternates to another call, dropping the first one for a split-second. The caller can't notice the gaps between the call signals because they are so short. In effect, several calls are handled simultaneously on the same frequency.
But CDMA systems, first developed by the military to protect radio communications, spread a number of call signals across the available frequency spectrum simultaneously and assign a unique binary code to each signal. The signals are sorted from the background noise by a receiver that knows the code. The method uses the airwaves as efficiently as a skyscraper uses real estate, Qualcomm claims.
Hultman's decision to back the CDMA standard--although he says the company still has the option of switching to TDMA--received some key support three weeks ago when American Telephone & Telegraph Co., Ameritech Mobile Communications and Nynex Mobile Communications Inc. said they would develop CDMA systems. AT&T makes cellular phones; Ameritech Mobile and Nynex Mobile are cellular arms of other Baby Bell companies.
"I give (Hultman) a lot of credit for being farsighted and open-minded enough to listen," said Harvey White, Qualcomm's chief operating officer. "They were the first ones to really make a commitment and give us an audience."
Norm Black, spokesman for the Cellular Telecommunications Industry Assn., said the industry will begin producing TDMA equipment next year. He cautions, however, that any further disputes over standards could delay industry growth and raise the cost of digital cellular equipment.
