Will CDMA Survive?

One of the most
contentious battles being waged in the wireless infrastructure industry is the
debate over CDMA and GSM. These two technologies have divided the wireless world
into opposing camps. While GSM is clearly dominating the Indian market; CDMA is
facing the rude shocks of declining ARPUs, shortage of spectrum, lack of clarity
in spectrum allocation, regulatory discrimination, tough competition, and high
prices.

GSM still has the upper hand. But industry players believe
that CDMA has a lot of potential and the segment will flourish, provided
operators are offered sufficient spectrum. They say it is the shortage of
spectrum that caused leading operators in this space, like Reliance and Tata
Teleservices, to embrace GSM too. It is also expected that the entry of
technologies like 3G and WiMax will provide the required fillip to the CDMA
market.

Players' Opinion

Today GSM is enjoying more than 80% market share with a subscriber base of
around 335.5 mn. Whereas in June this year, CDMA crossed the milestone of 100 mn
subscribers. According to the CDMA Development Group, the CDMA market is
expected to add another 100 mn subscribers in the next two to three years. With
a significant installed base, CDMA offers an attractive upgrade market and many
OEMs are introducing feature-rich, high-end devices to tap this opportunity.

In August 2009, Samsung launched its first open market
handset (OMH)-Mpower 699-in the Indian market. Almost all OEMs have plans lined
up and more than half a dozen CDMA OMHs will hit the Indian market over the next
six months.

According to Rajeev Batra, CIO, Sistema Shyam TeleServices,
"The underlying strength of CDMA lies in superior data capabilities. Voice
quality is definitely better. Besides, great coverage at lower costs, seamless
packet data, greater capacity, and improved security are some of the growth
drivers of CDMA space in India."

Commenting on the same, BV Raman, country head, CDMA
Development Group says "On the voice side, superior quality of network and low
congestion, compared to other choked GSM networks will drive growth of CDMA
subscribers in the urban areas. In rural areas, superior network coverage and
low costs would drive CDMA customers' acquisition."

"On the data front, all three CDMA operators have already
launched high speed Internet access, using EVDO Rev A. This has seen phenomenal
acquisition across the country for Reliance Netconnect Broadband Plus and the
photon plus offerings. Sistema Shyam TeleServices too has launched EVDO Rev A.
The competition from GSM has no matching offer and the CDMA operators have the
head start," adds Raman.

Some of the visible growth drivers include low voice and
data tariff, as compared to GSM. Handset cost is also cheaper and this is a huge
differentiator when it comes to developing countries like India, where buyers
are price-conscious, especially those in villages. CDMA networks seem to have
done fairly well in terms of users' adoption in these markets.

Talking about growth boosters, Bimal Dayal, VP and country
manager, business development, Qualcomm India and South Asia says, "The CDMA
market will continue to expand with the entry of new players, as well as
expansion of the existing ones. All CDMA operators have launched EVDO based
mobile broadband service, and support the open market handset program that will
offer choice and flexibility to change and upgrade handsets."

Game Changer

Globally, migration from 2G to 3G is well underway, and India is expected to
follow a similar path. As 3G technology is CDMA, it also expected that the
introduction of new age technologies like 3G and WiMax could be a game changer
and shall provide the much required impetus to the CDMA market. "Primarily, CDMA
has high speed data download capabilities, video call capabilities, etc, and
these shall result into a paradigm shift when it comes to the communications
scenario in the country," says Prem Kumar, CEO, India operations, Meridian
Mobile.

Fly Mobile, with offering for CDMA technology, is excited
about the 3G introduction. The company has come up with 3G CDMA (EVDO)
phone-cum-pocket PC, called Ivory, which is available through MTS. The company
has aggressive plans to launch more products based on EVDO Rev A standard.

Commenting on the 3G and CDMA Raman says, "CDMA 1X
Networks being operated by all three private CDMA players are already 3G
capable. With the launch of EVDO service, we have already moved to higher end of
3G. We just want an equal amount of spectrum made available to the CDMA players
for offering world class service in 3G."

Entry of 3G and WiMax will enhance the focus on offering
out more and more content like TV programs and other futuristic data
applications to customers, and lead to data proliferation. 3G technologies are
CDMA based, which means that the position of CDMA in India will be strengthened.

"3G will be a mainstream service in India, and Qualcomm is
working with its ecosystem partners to bring affordable 3G devices to the
market. 3G will enable us to introduce new devices and services, that will bring
in computing and Internet experience to devices that are primarily used for
communication today. 3G USB dongles and data cards will open up a new consumer
segment," says Dayal.

"There is limited space for WiMax in India when existing
mobile players are well positioned to offer mobile broadband through EVDO or
HSPA. Besides, unlike 3G, WiMax market is neither mature nor proven," he further
adds.

Qualcomm is working to ensure that the benefits of 3G CDMA
are realized by both urban and rural markets in India in order to bridge the
current digital divide in voice and broadband teledensity. The company is
working with OEMs to have 3G handsets across all tiers from entry level 3G
handsets, smartphones, to high-end 3G handsets.

"Demand for low cost computing and Internet connectivity
in India and across the world have only begun to be addressed. There is still
room for innovation in this emerging market and we are very excited about the
prospects in India," says Dayal.

Rude Shocks

But the path for CDMA to strengthen its position in the Indian market and
compete with GSM technology is not an easy task. The biggest challenge this
segment is facing is that of spectrum shortage. There is no clear roadmap
available for CDMA spectrum.

Talking about the spectrum challenge Raman says, "The main
challenge from our perspective as a CDMA Industry Association is to ensure
regulatory parity with competing technologies. A rationalized and level playing
field on the spectrum allocation front-by the release of spectrum in 450, 800,
or 1900 Mhz-will help. This will show some forward growth path to the operators,
who have invested in the technology."

Another major bottleneck is that of declining ARPUs, which
are putting pressure on profitability. Telecom in India is highly competitive
landscape, which has made product differentiation challenging.

Since the technology is new and shall take some time to
become more broad based, the prices may seem to be high as of now.

Upcoming Trends

One of the most evident trends is that users, for whom high speed data
transfer matters as and when they are on the move, shall switch to 3G CDMA
networks. The demand for it is slated to grow exponentially. Another major trend
in the offing is the introduction of handsets that can be used on CDMA as well
as GSM network. This shall offer immense flexibility to end users.

"On the standards front, CDMA as a technology is well
equipped to migrate seamlessly to LTE,when the time comes. Leading CDMA players
around the world would be the first to launch LTE based services ahead of
anybody else. In India, wireless broadband will propagate and bridge the digital
divide going forward," says Raman.

"Also, with mobile number portability coming in, we expect
some churn of high end GSM users moving to a single voice and data solution,
from the CDMA operators," he further adds.

The open market handset initiative, which has been
launched in India, will create a robust value chain that will effect the entire
CDMA mobile ecosystem and result in more freedom for subscribers. Open market
handset initiative will increase CDMA handsets variety, improve device
time-to-market, expand distribution channels, and reduce inventory risks.

Talking about the trends Dayal says, "After bringing in
affordability in voice tariffs and handset price, CDMA will drive affordability
in the broadband and mobile broadband space. CDMA will evolve to technologies
like 1X Advanced, which significantly improves network coverage and capacity,
and to 3G technologies like WCDMA and EVDO, which will trigger the growth of
mobile broadband in India."

Major players in the CDMA ecosystem believe that the
future of CDMA in India is very bright and data would be the main differentiator
in the near future. Several moves recently like open market handsets
initiatives, initiatives on roaming like the formation of international roaming
hub, and forward path to LTE are making the picture little clear and favorable.

Even as the CDMA lobby seems to be optimistic about its
future in India, looking at the current scenario, it appears that CDMA has still
a long way to go.

Arpita Prem

arpitap@cybermedia.co.in