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Down to the Wireless : Stakes High as Rivals Race to Provide Next Generation of Cellular Gear


SAN DIEGO — After years of posturing and rhetoric, a high-stakes battle over standards for a new generation of wireless communications services is finally moving to the marketplace.

In one corner is San Diego-based Qualcomm Inc., which together with partners Sony Corp., Northern Telecom Inc. and others is betting that a revolutionary digital technology will dramatically increase the capacity and quality of mobile calls--and facilitate a host of new services over telephone handsets.

Arrayed against them are AT&T Corp., Ericsson of Sweden, Pacific Bell and other companies promoting less radical but much better-proven digital methods. To the winner will go literally billions of dollars in business as communications companies move both to upgrade their existing cellular systems and to build entirely new wireless networks for so-called personal communications services, or PCS.

After a yearlong delay, the first U.S. wireless service featuring the Qualcomm technology, known as code division multiple access, or CDMA, was rolled out by AirTouch Communications in Los Angeles last week. The service will be offered only to selected business customers at first, but the entire industry will be watching to see how Qualcomm's controversial technology fares.

Also committed to CDMA are about half of the major telecommunications firms that have paid $7 billion for PCS licenses at a federal auction last year. Those companies include Sprint Corp., Primeco (a joint venture of Nynex Corp., AirTouch, Bell Atlantic Corp. and US West Inc.) and Ameritech Corp. All plan seamless nationwide PCS "footprints" giving callers coast-to-coast service with just one telephone number.

Earlier this month, a San Diego company called Nextwave, whose investors include Qualcomm as well as Japanese and Korean electronics and telecommunications giants, bid more than $4 billion to win the bulk of a special "entrepreneurs block" of PCS licenses auctioned by the Federal Communications Commission. With those in hand, Nextwave will try to blanket 40% of the country with CDMA-based wireless systems.

Yet for all the fanfare and billions of dollars being thrown at CDMA, there are legions of detractors who say Qualcomm's system is hopelessly complex and will never live up to its billing. Those critics point out that CDMA has never fully proven itself in a large metropolitan setting.


The only broad-based CDMA cellular system now in operation is in Hong Kong, where the subscriber base of 20,000 is too small to test whether it can work in a major city, said Rakesh Sood, a communications technology analyst at Hambrecht & Quist in San Francisco.

"You have to get to the hundreds-of-thousands-to-1-million range to get an even better flavor for the technology and how well it works," Sood said.

Qualcomm and its rivals are aiming to solve a common problem: Nearly all urban providers of cellular telephone service have become hostages to their own success. They simply do not have enough space on their assigned airwaves to accommodate the mushrooming demand.

Available to U.S. consumers only since 1983, cellular telephone subscriptions grew to 33.8 million last year, for a one-year gain of 9.6 million users--a staggering 40% jump. Bullish industry analysts such as John B. Ledahl of Dataquest Inc. in San Jose are predicting the user base will triple to 90 million by decade's end as costs come down and more wireless services are offered.

But symptoms of the maxed-out caller capacity abound: Interference, dropped calls and busy signals increasingly frustrate mobile phone users, particularly in big cities.

To expand capacity, communications companies are racing to develop digital cellular technology, which uses more compact radio wave signals, to replace frequency-hogging analog signals that are difficult to shield from interference. For the new PCS systems, the digital technology will also make it possible to offer new services such as two-way paging and other forms of data communications.

CDMA works by breaking the data stream of a phone call into discrete digital bits and assigning each of them a code that's identifiable only to the recipient. The coding makes the calls pirate-proof and allows many calls to be sent simultaneously over the same channel, thus promising to increase capacity by six to 20 times over that of existing analog cellular systems.

Qualcomm's main rival is time division multiple access, or TDMA, a way of sending three voice conversations on one channel by dividing the conversations into discrete segments. The biggest proponent is Ericsson, the global leader in cellular equipment, and a TDMA-based cellular service is already available in several states through AT&T.


Then there is GSM, or global system for mobile communications, the European digital standard developed by using a variation of TDMA technology. Pacific Bell Mobile Services will launch the second-ever GSM system in the United States this summer at the Republican National Convention in San Diego.

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