Telecom's technical dilemma

By PETER GRIFFIN telecoms writer

Telecom has signalled for the first time that it may make a radical technology switch for its planned third-generation (3G) mobile services.

It has begun looking at the merits of moving to W-CDMA, an advanced mobile standard backed by rivals Vodafone and TelstraClear.

If a change does result, it would have huge implications for equipment makers who have invested in mobile systems evolving from the CDMA standard used by Telecom, which, confusingly, is not compatible with W-CDMA.

Telecom, which shares roughly half of the mobile market with Vodafone, has confirmed that it has commissioned equipment makers Ericsson and Alcatel to undertake a radio-planning exercise, which will look at forgoing an upgrade of the current 027 network and replacing it with an entirely new and more expensive network.

"We've engaged some resources out of Ericsson and Alcatel to work with us on our long-term planning around W-CDMA," said Telecom's head of network investment, Stephen Crombie.

"We've got W-CDMA assets in Australia with Hutchison [but] we're committed along our CDMA path with the current network, which is performing really well."

Insiders say Telecom has become increasingly nervous at activity in the Vodafone and TelstraClear camps as they plan for 3G.

Vodafone managing director Tim Miles has committed his company to spending "hundreds of millions of dollars" over the next few years building a 3G network.

He has ruled out building a network in conjunction with TelstraClear, which has also sought proposals from Nokia, Ericsson, Siemens and Nortel for its own 3G network. TelstraClear at present has no mobile presence, only a resale agreement with Vodafone that it is unhappy with.

The cost of building a full 3G network has been put at between $500 million and $800 million.

Telecom's planning exercise is understood to consider a number of scenarios - from building W-CDMA networks in main centres and negotiating with Vodafone for roaming around the rest of the country, to overlaying its own network with GSM, the standard Telecom passed over when it built its 027 network.

This would be an admission that Telecom backed the wrong horse when it settled on the CDMA standard several years ago.

Globally, GSM is the dominant standard and is expected to pass the one-billion-subscriber mark this year, all of whom are destined to upgrade to W-CDMA handsets.

The CDMA standard has 60 million subscribers and networks, mainly in Asia and the US. A lack of seamless global roaming is its biggest downfall.

The big lure of 3G is considered to be its ability to handle video transfer - allowing such things as phone-to-phone video conferencing, video voicemail and messaging, the streaming of movie and music clips and live broadcast video.

Both W-CDMA and Telecom's logical upgrade path CDMA EV-DO boast access speeds up to 384 kilobits per second (Kbps), faster than many broadband packages now available.

TelstraClear will hold a 3G demonstration tomorrow in Auckland using video-calling with equipment supplied by Ericsson.

An industry expert on CDMA said Telecom was probably trying to plot a route to W-CDMA so as not to lose any more ground to Vodafone, which has jumped from a 17 per cent market share since 1997.

"They may be keen to learn more about W-CDMA so that they will have a better idea of how to respond when Vodafone deploys.

"Carriers in the US do this a lot to learn more about their competitors' technology. In the EU they all use the same technology so it's not an issue."

The deal is understood to have upset Telecom's existing mobile equipment partner, Lucent, which in June signed a five-year, $200 million contract with Telecom and has responsibility for managing the 027 network and planning for upgrades.

Managing director Ian Gardner would not comment on Telecom's deal, but said any move to 3G for Telecom was still some time away.

"We've a very clear competitive advantage with CDMA1X already and that's where we'll continue to focus. There is no competitive imperative to enhance the network at this stage."

Lucent would vigorously resist any move by Telecom to W-CDMA and would be able to take Telecom to 3G more quickly and cheaply.

"It is a relatively simple upgrade. Obviously, [W-CDMA] is building a new infrastructure," he said.

Ultimately, Telecom is hoping that bridging technology will remove any mobile compatibility issues before 3G really takes off.

That would allow a Telecom 027 phone user to roam on GSM networks in Europe, where CDMA is non-existent.

But such handsets are expensive to produce and are still up to a year away from being marketed.

"A lot is happening with handsets," said Telecom's Crombie.

"Qualcomm are coming out with multi-mode chips with GSM, W-CDMA and CDMA 2000.

"A whole lot of things will happen in the next few years that make these choices easier for us."

Crombie said Telecom's 3G play was still two to three years away but the rival standard had to be evaluated now. "The jury is out on all the technologies."


The path to 3G

The Telecom evolution:CDMA2000 - Code division multiple access, multiple transmissions carried simultaneously on a single radio frequency band.

CDMA1xRTT - Telecom's latest evolution, provides data transfer speeds averaging 60 kilobits per second (Kbps) to 80Kbps, twice as fast as dial-up internet.

CDMA1xEV-DO and EV-DV - Telecom's logical next step. Increases voice and data capacity with potential data transfer speeds up to several megabits per second (Mbps).

The Vodafone evolution:

GSM - Global system for mobile communications, the alternative to CDMA. A standard based on time division multiple access. All of Vodafone's customers use it.

GPRS - general packet radio service, with data speeds up to 114Kbps. The next step up from GSM. Popular among business mobile and Vodafone Live! users.

W-CDMA - wideband CDMA, a third-generation (3G) wireless technology for voice calls and data transfer at speeds of up to 2Mbps. This is the standard for Vodafone and TelstraClear and now Telecom is looking at it. While it is based on the same technology as Telecom's CDMA platform, it is a different standard and is the evolution from GPRS. W-CDMA competes with CDMA1x EV-DO and EV-DV.