ALKHOBAR, 9 March 2004 — Last week Custodian of the Two Holy Mosques King Fahd appointed Dr. Muhammad ibn Ibrahim Al-Suwayel as the governor of the Telecommunication and Information Technology Commission (CITC), the regulator of the telecommunications and IT markets in Saudi Arabia. Dr. Al-Suwayel will preside over the formal licensing process for a new mobile operator and two new data telecommunications services providers.
As the deadline for the Request for Pre-Qualification (RFPQ) for those interested in the Saudi mobile license approaches on March 21, the situation behind the scenes is turning a bit ugly. A few weeks back I received an e-mail from an interested party in the upcoming mobile bid. It read in part:
“As you so rightly said, the CITC did mandate a GSM system in their RFP. However, a mandated technology poses problems with regard to WTO accession and further WTO talks will be held at the end of this month. In addition, a mandated GSM system will end up costing the Saudi consumer more, not just in lost access to high-speed data transmission, but also in the capital and operating costs that will have to be paid at some time in order to upgrade the wireless system. Dual mode handsets are in production now and will make it easy for GSM and CDMA to be interoperable...
“We have been in discussion with other Saudi companies who are most concerned that the Kingdom may take a step backward in the wireless arena at a time when it needs to advance as a technology leader in this area. This is a matter of grave concern to all of us who want Saudi to create a balanced economy — and more jobs for its current and future graduates.”
Not all readers may have understood the issue at hand. Let’s take a step back and do some explaining. Saudi Arabia is working hard to join the WTO. It has concluded agreements with all nations of the world except the United States. It appears that there are some who would like to question the judgment of the CITC and the Saudi government as long as the WTO negotiations have not yet been completed.
That brings us to the cellular industry, which is dominated by two technologies — Global System for Mobile Communication (GSM) and Code Division Multiple Access (CDMA). GSM is the European mobile standard and CDMA is the default American digital phone standard. Cellular networks currently are considered to be 2-2.5 G (second generation) or 3G (third generation). Voice with limited text and data applications are offered by 2.5G networks such as Saudi Arabia’s.
As of December 2003, GSM had 970 million users around the world with a growth rate in 2003 of 22.8 percent. CDMA had 181 million users in December 2003 with a growth rate in 2003 of 24.3 percent. During 2003, more than 180 million new users joined the global GSM community representing 80 percent of the 227 million new digital mobile phone users connected worldwide. It is thought that with an average of 15 million new users a month globally, the billionth GSM user will be connected during the first quarter of 2004.
CDMA as a standard is about a decade younger than GSM and it does have some technological advantages. Infrastructure costs of CDMA systems can be less than those of GSM systems. The infrastructure can handle many more calls, so, on a per call basis, CDMA wins. Another CDMA advantage is spectrum efficiency. CDMA packs the largest number of conversations within the spectrum, handling congestion and noise better than GSM. CDMA is also better than GSM in terms of overlaying data. If we were all going to just start building mobile phone networks today, CDMA technology would be chosen over GSM by everyone.
But today there are more than a billion mobile phone users on this planet and most of them are using GSM. GSM handsets have better features and are more cheaply produced than CDMA handsets. Across Europe and the Middle East, GSM rules. Roaming agreements allow GSM users access to networks in nearly 200 nations. Even in the United States, land of CDMA, GSM roaming is a fact of life in most major metropolitan areas.
Recently, dual CDMA/GSM handsets became a reality. However, they are expensive, in short supply and still bug prone. CDMA advocates claim that new advances in interoperability allow GSM and CDMA networks to communicate. Global Roaming is set to be launched by several CDMA operators in mid-2004 to take advantage of the new interoperability.
The CDMA vs. GSM issue is in some ways like the old argument between Betamax and VHS. Betamax was the better technology but VHS became the standard. Or take the IBM PC vs. Apple’s Macintosh. Apple had the better technology but the PC soon ruled the market due to low prices and high availability.
For the second year running, GSM added as many new customers during the year as CDMA had in total at the yearend. In absolute terms, the Asia Pacific region drove GSM’s growth during the year adding more than 70 million new users. China maintained its position as the world’s largest mobile market: China’s two GSM operators added 42.8 million subscribers — 21 percent more than the year’s global growth for CDMA.
Europe contributed 42 million new users, with strong growth recorded in Central and Eastern Europe. The GSM Association’s Russian members added 16 million users while both India and North America each added more than 10 million new users. Growth in both Africa and the Arab world exceeded nine million.
The extent to which the migration of Latin American TDMA and CDMA operators to the global GSM standard is gaining momentum is vividly illustrated by the fact that this region recorded growth of more than 130 percent to finish the year with 16.5 million users. Russia and India both recorded annual growth of around 100 percent.
“With a user base approaching one billion, solid foundations are in place for the successful migration to 3GSM. As we entered 2004, 25 operators were already delivering 3GSM services to customers in 17 countries. Improvements in the supply of dual-mode handsets capable of delivering seamless interoperability between GSM and 3GSM will provide the catalyst for the launch of at least another 40 3GSM services in the year ahead,” said Rob Conway, chief executive of the GSM Association and member of its board.
Here in Saudi Arabia we already have a GSM system. But access to it is priced too high to be affordable for all. One of the hopes with telecom competition is to bring down the price of mobile communications in Saudi Arabia. To do that, should the new network be GSM or CDMA?
In Iraq, where the choice could have been either technology, the Coalition Provisional Authority in coordination with local agencies chose GSM. It is true that dual GSM/CDMA handsets were unavailable when most Iraqi licenses were awarded. But speaking to industry insiders, the choice for GSM in Iraq was made to enable as many people as possible to communicate as cheaply as possible. The decision considered such factors as handsets, infrastructure, technicians and roaming in the region.
Selection between CDMA and GSM is a choice for an expert. Here’s what Dr. Saad Al-Barrak, director general, Mobile Telecommunications Company (MTC) — Kuwait, had to say about the issue. Dr. Saad has a BS in Electrical Engineering and an MS in Industrial and Systems Engineering. He completed his Ph.D. in OS/IT management in 2001 at the University of London. MTC announced Sunday that their GSM network in Southern Iraq has gone live.
“There is no plus or minus in the CDMA vs. GSM issue,” said Dr. Saad. “It’s like comparing English and French. They are both great languages. The issue is usability, proliferation and penetration of the standard, the protocol of communication. GSM is the dominant standard in Europe, the Middle East and Africa. That’s why it’s more important for us. I do not care about the technological differences. At the end, everything will converge into one standard in the years to come beyond 3G. The issue for us is really practical. The dispute is an old political dispute between Europeanization and Americanization.
“When Saudi Arabia chose to solicit bids for the second mobile license and specified a GSM network, it was not only the handsets that were a consideration. It was a matter of the network itself supporting the standard and a matter of cost effective, efficient interconnection between the networks and roaming. There are still some issues in this area between CDMA and GSM. Eventually they will be resolved but we aren’t there yet. Saudi Arabia is a part of the Middle East where GSM is the communications standard and this makes it the best choice for the Kingdom’s second mobile network.”
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