Qualcomm Inc (QCOM)

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Is "world phone" a dead ringer?

New dual-mode technology poses more risk than reward

February 15, 2004
By: Kirk Laughlin
America's Network


The upcoming rollout of a new dual-mode "world phone" that supports GSM/GPRS and CDMA-1x would appear, at first glance, to be a major achievement.

For the first time GSM subscribers who possess a new dual-mode device can roam into previously forbidden CDMA-1x territory - including across the Atlantic and Pacific - to experience faster data rates without reaching for a back-up handset.


The value proposition of dual-mode phones rests with high-end customers -- Brian Rodrigues, Qualcomm director of product management

At the same time, carriers such as Verizon Wireless, the nation's largest CDMA provider, will sell devices that permit customers to roam across virtually all of GSM-centric Europe, utilizing Vodafone's footprint.

The dual-mode phone - enabled by Qualcomm's new MSM6300 chipset solution - is symbolic of mobile technology convergence. The great divide separating GSM and CDMA is becoming barely perceptible, at least at the terminal level.

Yet, despite greater handset flexibility, it is the carriers themselves that may be slow to embrace this new capability. The only carriers who have shown public interest so far are Verizon and Vodafone (Vodafone is part-owner of Verizon) and China Unicom.

Utilization of dual-mode phones is clearly determined by the business models of individual carriers. China Unicom, which operates both GSM and CDMA networks, is promoting dual-mode handsets as a way to transition voice-centric GSM users on to a data-centric CDMA-1x network, where users have more opportunity to spend money on data services.

Verizon and Vodafone want dual-mode phones for a different reason - to serve business customers who travel between Europe and the U.S. The carriers are expected to announce details of their world phone offering around the CTIA wireless show in March.

"At this point, the value proposition is in terms of providing enterprise roamers and high-end subscribers with both voice and data applications," says Brian Rodrigues, director of product management at Qualcomm's CDMA technologies division. No announcements have been made on which handset makers will produce the phones.

Part of the reason that dual-mode phones are considered higher-end is because actual dual-mode devices are expected to cost around 20% more than regular CDMA phones. Costs are an issue, but perhaps a larger problem is that dual-mode phones present the risk of cannibalization. Given current marketplace positioning, it is difficult to find examples of major carriers who need more data or voice network access. What North American carriers want are more customers, especially big spending customers. Dual-mode phones, at least in their current form, provide little help in this area.

Chris Pearson, executive vice president of the pro-GSM group, 3GAmericas, says dual-mode handsets are a niche play. "There are not going to be great economies of scale," he says. While Pearson admits that "GSM has been a little late in coming to the Americas," the technology has quickly gained a following. Nearly 100 operators in North and South America utilize GSM/GPRS. A total of nine operators in the U.S. have committed to deploy EDGE, a 3G wireless technology that is comparable to CDMA-1x.

Dual-mode and multi-mode phones still do have an important role to play for carriers that plan to acquire other carriers. As the number of North American carriers begins to thin, multi-mode handsets could offer carriers unique market positioning opportunities.

While handsets that support multiple air-interface standards may be interesting to carriers, technologies that enable roaming into wireless LAN environments seem to be generating far more excitement.

In addition, the maker of the highly successful PAS wireless local loop technology, UTStarcom, continues to lay the groundwork for a U.S. deployment of its systems which support both voice and data services. It likely won't take long for mobile carriers to seek out opportunities to partner with providers of PAS, as seamless roaming takes on an entirely new dimension.



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