EXECUTIVE SUMMARY
INTRODUCTION
WIRELESS STANDARDS
GSM
(Global System for Mobile Communication)
CDMA (Code Division Multiple Access)
TDMA (Time Division Multiple Access)
W-CDMA (Wideband CDMA)
MAJOR SUPPLIERS OF
WIRELESS INFRASTRUCTURE IN THREE REGION - US, EUROPE and JAPAN
United States
Europe
Japan
WIRELESS MARKETS IN THE
THREE REGIONS
United States
Europe
Japan
CHALLENGES FACING
WIRELESS NETWORK OPERATORS
Aggressive Pricing
Service Differentiation
Evolving to Data-Centric World
Changing Customer Requirement
Congested Spectrum
Evolving Technology Standards
ROLES OF IS MANAGEMENT
IS
Management Roles in Wireless Network Provider
Investment Protection
Forward Evolution
Backward Capability
Scalability
Network Interoperability
IS Management Roles in Wireless Network User
Top Management Supports
Technology Alignment with Business
Needs
Planning
Operations and Maintenance
Human Resources and Training
Outsourcing
CONCLUSIONS
Walking
into a new millennium, wireless infrastructure industry still looks
prospective. Subscribers to digital mobile phones in the world skyrocket so do
battles between different standards in wireless infrastructure. While the
competitions among 2G standards such as GSM, TDMA, and CDMA, further intensify,
3G standards, i.e. W-CDMA and CDMA2000, have started to take off in several
regions. As different standards and players dominate the world’s three major
markets - U.S., Europe, and Japan, integrations and alliances are expected to
grow intensely. On the other hand, wireless network operators are facing more
and more challenges. Facing such a dynamic environment, IS managers, working
for either equipment providers (Motorola, Nokia, and NTT) or equipment users
(Microsoft, GM, and Amizon.com), have too many issues to take into account when
making relevant decisions. In this paper,
we cover the overview of wireless industry and provide some recommendations for
IS management to deal with those challenges.
In this report, we will explore market dynamics and challenges in wireless infrastructure, followed by the future trend of technologies and its implication to wireless players especially wireless network operators.


GSM stands for Group Special Mobile, now known as Global System for Mobile Communications, is the most common standard digital cellular phone service you will find mainly in Europe, Asia/Pacific, Australia and elsewhere around the world.
To ensure interoperability between countries, these standards address much of the network wireless infrastructure, including the radio interface, switching, signaling, and intelligent network. Since GSM is limited to technical standards, an association of GSM operators called the Memorandum of Understanding (MoU) ensures service interoperability, allowing subscribers to roam across networks. Hence, GSM has gained widespread acceptance in several parts of the work, most notably Europe, with deployment in 52 countries by midyear 1994. GSM subscriber data is carried on a Subscriber Identity Module (SIM) or so-called “smartcard” which is inserted into the phone to get it going. As a result, the subscriber potentially has the option of either SIM card mobility or terminal mobility across multiple networks.
To facilitate the roaming on
a global basis, GSM terminals incorporate one or more of the GSM frequency
bands listed below:
GSM 400
· 450.4
– 457.6 MHz paired with 460.4 – 467.6 MHz or
· 478.8
– 486 MHz paired with 488.8 – 496 MHz
GSM 900
· 880
– 915 MHz paired with 925 – 960 MHz
GSM 1800
· 1710
– 1785 MHz paired with 1805 – 1880 MHz
GSM 1900
· 1850
– 1910 MHz paired with 1930 – 1990 MHz
Code Division Multiple
Access or Call Division Multiple Access (CDMA) is a name for a new form of
digital cellular phone service. CDMA is
a spread spectrum technology that assigns a code to all speech bits, sends a
scrambled transmission of the encoded speech over the air and reassembles the
speech to its original format. CDMA
works by combining each phone call with a code which only one cellular phone
plucks from the air. The dispersed
signals are pulled out of the background noise by a receiver, which knows the
code. This technology is pioneered by
Qualcomm Inc., a San Diego company.
CDMA systems are designed to offer up to 10 times more call handling
capacity than the conventional cellular systems by assigning a special
electronic code to each call signal, allowing more calls to occupy the same
space and be spread over an entire frequency band. Several simultaneous conversations can therefore share the same
frequency allocation. As a result, CDMA
technology becomes a very attractive solution to today’s congested spectrum
environment.
TDMA (Time Division Multiple Access)
Time Division Multiple
Access (TDMA) is one of several technologies used to separate multiple
conversation transmissions over a finite frequency allocation of through-the-air
bandwidth. TDMA is used to allocate a
discrete amount of frequency bandwidth to each user, in order to permit many
simultaneous conversations. It provides
each user access to the entire frequency channel for a brief period, during
which the user transmits data. Each
caller using TDMA is assigned a specific timeslot for transmission. The users’ frequency channel is shared with
other users who have timeslots allocated at different times. A digital cellular telephone system using
TDMA assigns 10 timeslots for each frequency channel, and cellular telephones
send bursts, or packets, of information during each timeslot. These packets of information are then
reassembled by the receiving equipment into the original voice components. TDMA promises to significantly increase the
efficiency of cellular telephone systems, allowing a greater number of
simultaneous conversations. Despite the higher capacity, TDMA faces similar
issues in GSM that it will easily congest the limited frequency spectrum. Thus
making it unattractive to expand into a higher capacity required by data
traffic.
W-CDMA is CDMA that operates on a wider bandwidth platform. It is one of the major standard used in Japan. The voice, images, data, and video are converted into a narrowband digital radio signal. Then the digital radio signal is assigned a marker (spreading code) to distinguish it from other users, and is then spread over a frequency band that is anything from tens to hundreds of times wider.
Comparing to CDMA, W-CDMA
uses variable rate techniques in digital processing and it can achieve
multi-rate transmissions. This allows
the construction of mobile multimedia networks that can cover from low to high
speeds. The major benefit is that even
when transmitting at high speeds large volumes of data indispensable for mobile
multimedia, such as video data, it can avoid the complexity of system
configuration. Therefore, it provides
low costs and smooth full-motion video.
As background for assessing
the wireless infrastructure markets, subscriber growth has been an important
indicator – more subscribers mean more infrastructure sales to accommodate more
customers. However, the number of
subscribers pales in importance to the volume of wireless traffic each
subscriber generates. On the contrary, traffic volume figures will soon replace
subscribers as the key metric in assessing the industry growth. The key growth driver behind wireless
infrastructure becomes the handling of a constant surge in wireless traffic as
voice minutes shift over from the wireline networks and as data services add to
the pie. The relative market share among
major wireless suppliers can be found in figure 3. The clear message is that there are significant economies of
scale for larger suppliers, and that smaller could face an uphill struggle to
develop next-generation technologies on a small base.
From the last 5 years, the market shares in wireless infrastructure as fairly stable, and the line-up of major suppliers is expected to consolidate further in coming years[2]. The reasons for this steady market shares can be attributed by the longevity of the installed base of equipment, high switching cost, huge capital investment in R&D and the scarcity of critical resources across the industry.

One of the major wireless
infrastructure suppliers from each region is described briefly below. We will
be looking at Motorola from the US, Nokia from Europe and NTT Docomo from Japan
to illustrate the dynamics of the industry.
In US market, Motorola is a major key player with their various
innovative technologies and high quality. The company supports many standards.
For analog cellular, they provide AMPS/NAMPS, TACS/ETACS and JTACS/NTACS. In
digital cellular technology, they support TDMA, CDMA, and GSM/DCS1800.
Motorola reported that wireless
infrastructure sales increased 11 percent to $1.8 billion, which is 19% of Motorola’s total sales. Figure 4 below shows the sales revenue for Motorola’s network
system segment.

To stay in the leading role
in wireless technology, Motorola announced an effort to begin the standardization
process for a new technology, which will offer operators a migration path to
provide integrated voice and data speeds of more than 5 megabits per second on
their existing CDMA infrastructure.
Clearly, competition for future wireless technology will be converged
towards voice and data combination.
The
Finland’s company is the world's largest manufacturer of mobile phones and a
leading supplier of digital cellular networks. The company is concentrating in
Europe that contributes 53% of the company’s net sales while US market does for
25%. Figure 5 below shows the net changes of sales over the period from 1998 –
1999. During this period, the company's
sales increased at a faster rate than all three comparable companies. While
Nokia enjoyed a sales increase of 48.4%, the other companies saw smaller
increases: Telefonaktiebolaget LM Ericsson sales were up 16.8%, Motorola
increased 11%, and Lucent experienced growth of 27.1%.

Nokia supports
GSM standard, which is most common in Europe, and TDMA. The company is also
expanding their business into EDGE (Enhanced Data rates for Global Evolution)
and W-CDMA. Their challenge for keeping current market share and further growth
would not so different from Motorola’s. The difficulties in integrating the operations of
newly-acquired businesses and achieving strategic objectives, cost savings and
other benefits, and continued gains in the digital wireless telephone market
and market acceptance of new products would remain for their future success.
In Japanese market, NTT Docomo Inc.
(Formerly NTT Mobile Communications Network, Inc.) is the key player. It
provides cellular and other wireless services including cellular phone services
(PDC-Personal Digital Cellular System), PHS, dual-mode handset-Doccimo, which can combine the
benefits of using cellular and PHS network in a single unit. Now NTT DoCoMo is expanding their service into Wideband CDMA
(W-CDMA).

The company has
a significant market share in cellular service as well. In 1999, the company
marked 57.5% of Japanese market share. However, market share of PHS service is
slowly decreased by 1.4% from 1997 to 1998, and decreased again by 5% from 1998
to 1999. It’s due to the high competition in the segment.
While the mobile
communications market in Japan has grown remarkably, its wireless
infrastructure market had started to show signs of slowing down due to economic
sluggishness in recent years as Japan is facing the major challenge of emerging
from the long-lasting effects of a slow economy. To enjoy the continuous
growth, NTT DoCoMo finds ways to stimulate new market demands by investing its
R&D efforts in new technology like W-CDMA and I-mode and many other
derivative standards.
The United States is the
world’s largest market for mobile phones, with almost eighty million
subscribers. But at 26% of the population, the proportion of people with
mobiles is lower than Japan (37%) and the Scandinavian countries (over
50%). The low penetration rate (see
figure 7 for the detailed penetration rate) could be attributed to abysmal
service, and exorbitant “roaming” charges. Also, wireless networks have also
been slow to upgrade to digital, largely because in the first half of the 1990s
Congress dragged its feet over auctioning off spectrum. Meanwhile, the majority of subscribers in
Europe have migrated to use digital.

Although US have the
strongest economy in the world, it lags behind in wireless industry. Some
experts consider that many of the problems stem from its refusal to establish a
national standard for digital. This may be true given the fact that Europe has
the same digital standard for the entire continent while the United States is a
battleground among technologies: TDMA, CDMA, and GSM (see figure 8 for
details). These incompatible standards are irritating to consumers because they
make it more difficult to roam across the country or to switch to a different
service; they make it harder for manufacturers to achieve economies of scale
they need to justify investing in infrastructure; and they sometimes lead to
shortages of vital equipment. CDMA-based companies such as Bell Atlantic, GTE,
and AirTouch were slow to sell digital service because, for most of 1997 and
the first part of 1998, the appropriate handsets were too expensive and too
hard to get hold of.
Company
|
Revenues
($) |
U.S.
POPs Licensed to Serve* |
Standard |
|
Omnipoint |
NA |
126.6
million |
GSM |
|
BellSouth
Mobility |
2.6
billion |
NA |
GSM |
|
Western
Wireless |
NA |
58.1
million |
GSM |
|
AirTouch |
3.9
billion |
64.3
million |
CDMA |
|
Sprint
PCS |
1.2
billion |
234.0
million |
CDMA |
|
Bell
Atlantic |
3.7
billion |
56.9
million |
CDMA |
|
GTE
Wireless |
2.7
billion |
NA |
CDMA |
|
AT&T
Wireless |
5.4
billion |
314.6
million |
TDMA |
|
Nextel |
1.8
billion |
165.3
million |
GSM** |
* This
listing by the population of the U.S. markets (or U.S. POPs) that a firm is
licensed to serve differs markedly from market share rankings by revenues. Pops
rank the major wireless players as far as prospective customers are concerned.
This list suggests potential market position as the industry enters a phase of
accelerated development, expansion, and in all probability, consolidation.
** Nextel
operates on an enhanced specialized mobile radio (ESMR) platform with GSM
principles.
The issue is further
aggregated by the influence of political and economic motivations, which do not
always keep in the best interest with technology reasons. For instance, the North American GSM
Alliance and the Universal Wireless Communications Consortium - the group that
represents TDMA technology - announced that they will work together to promote a
multiple-standard approach to the third generation development while backers of
CDMA technology advocated the convergence of the GSM-based wideband CDMA
standard and CDMA-based cdma2000 version under the so-called family of systems
concept. Obviously, the debate between
multiple standards versus single standard is an intriguing one. With a single
standard, competition is generally restricted to how vendors implement the
specification; with multiple standards, there is more incentive to improve the
specification. However, it is hard to
expect these battles among standards come to an end within several years.
Following the World Trade
Organization’s (WTO) agreement to liberalize the telecommunications markets
came into force in 1998, the European telecommunications industry is being
reshaped, not by telecommunications alone, but also by a new breed of emerging
carriers, mergers and service providers. It is growing incredibly fast.
Subscriber growth for Europe as a whole has been about 60 percent annually.
During 1997-1999 alone, average penetration for the European countries rose to
40 percent from 10 percent in 1993, and it's headed higher. While a number of
factors contributed to that growth, the rapid decrease in per-minute costs
played a major role. Plus, an increase
in competitors--from 20 to 46 operators--fueled that downward price spiral. By
2003, Europe's cellular market could top 140 million subscribers with $179
billion market worth (see figure 9).
The growth level will likely to be continued by the falling cost of
mobile services, increased competition, seamless roaming service, and launches
of GSM 900/1800 networks. Future
wireless market growth in Europe will also likely to be expanded by the
introduction of 3G technologies.

NTT Mobile Communications
Network, Inc. (NTT DoCoMo), Japan’s giant mobile communications operator which
provides a comprehensive range of wireless service including cellular phone,
paging, satellite mobile communication, maritime telephone, and in-flight
telephone dominates the market with more than 30 million subscribers in March
2000 and consolidated sales of 3.1 trillion yen in fiscal 1998. The Company is
now actively involving in domestic standardization, aiming at an early
realization of a third generation mobile communications system based on
Wideband Code Division Multiple Access (W-CDMA) in 2001.
While Japanese wireless
carriers are ready to embrace W-CDMA, U.S. suppliers of upcoming CDMA-2000
cellular phone systems begin to fear that Japan is back to its old tricks of
blocking competition by using its own, incompatible standard. The giant NTT
DoCoMo will use W-CDMA, which means virtually all competitive Japanese wireless
carriers will be forced to adopt NTT’s standard to interconnect with the Sumo
network. That locks U.S. suppliers out of the competitive Japanese market,
where carriers and traditional domestic suppliers are providing chips,
handsets, and base-station equipment.
U.S. companies are instead developing new wireless equipment based on
the alternative Qualcomm CDMA-2000 standard that will be deployed by the United
States, Korea, and possibly China. By
contrast, many Japanese W-CDMA vendors, especially handset makers, intend to
develop CDMA-2000 products to compete in the huge U.S. market. Their U.S. counterparts complain this is
just the same old story: Japanese rivals build up a strong sales base in their
protected home market, and leverage this muscle to penetrate the open U.S.
market.
Whether or not the same old
story will appear on the stage of the world’s wireless industry as Uncle Sam’s
worries, Japanese wireless industry seem to agree that a worldwide
standardization of the next-generation mobile communications system is moving
forward with International Telecommunication Union (ITU) as its core. As a
result, Japan just submitted a proposal to the ITU based on W-CDMA. Of course
it’s still too early to say which standard will be the winner of the next
generation all over the world. It is pretty sure that W-CDMA will prevail over
any other 3G technologies in Japan within several years, however.
For wireless network
operators with businesses to run, there are plenty of challenges ahead at the
embarkation point to the next millennium. Amongst the most significant ones
are:
The aggressive pricing has
been a by-product of increased competition – has reduced the average airtime
revenue per subscriber, for one. To increase revenue, it is imperative to
attract new customers, encouraging subscriber MOU (minutes-of-use) growth, and
deploying value-added, revenue-generating features such as unified messaging
and network-based intelligent agents, as well as support for data applications.
How to challenge one’s
service is another challenge for wireless network operators in this highly
competitive industry. Quality of
service, including superior network availability, seamless roaming services,
and customer care, are specifically important factors for new providers who
need to offer service on par with or better than established providers. Other
ways to achieve differentiation require an open service creation platform that
cuts the interval for developing and provisioning compelling services that
attract new customers and increase loyalty – such as virtual private networks
for corporate customers, convenient unified messaging offers, and
location-service.
With more than 150 million
new people expected to jump on the Internet over the next two years, data
communications is poised for explosive growth. Inevitably, these users will
come to expect their on-ramp to Internet-based information to be accessible
from almost anywhere, and wireless affords this convenience like no other technology. This is also the reason why incumbent and
new operators are beginning to plan accordingly. Even as they manage current growth in voice and sophisticated
calling and billing features, prudent network operators can now be prepared for
the coming data onslaught with networks that combine the quality and
reliability of today’s circuit-switched services with the improved
data-handling capabilities of packet technology. To realize the economic
benefits of packet technology as data traffic increases, however, operators
need to have a solid course of action that will enable them to seamlessly
evolve and migrate to packet-based networks from existing networks.
Mobile users expect data
applications to be available anytime, anywhere, and with the same convenience,
speed, quality and flexibility that they have at the office or home. With a
market that has grown accustomed to flat monthly rates for data, the question
remains as to whether or not people are willing to pay as much for data on a
per bit basis over the air as they are for voice.
Operators in constrained
spectrum must implement a transition plan to free enough spectrums and to
support data applications while simultaneously serving voice customers. Many next
generation operators have the added task of securing new spectrum as they plan
their next generation path. For instance, in the highly congested spectrum
environment like GSM, it is probably very difficult to secure additional
channels to accommodate new data services. Therefore, alternative ways to reuse
existing spectrum will be an attractive and immediate solution.
The mission for the world’s wireless industry has been identified: it is to deploy high-speed high bandwidth wireless systems. However, before one standard singles out as a winner, there are still competitions to churn out the worldwide acceptable wireless standard. Wireless network operators will face higher uncertainties today in deciding the right technology to accommodate market needs in future except to pay much attention to its flexibility to migrate to another platform which deems relevance in future. On the contrary, although much effort has been put in to bring wireless technologies to a higher ground, there has been little deployment of high-speed services to wireline customers. Will there be another wave of r/evolution to converge wireless/wireline technology remains questionable. The migration of the technology generations towards the so-called third generation systems is shown in figure 10 along with likely introduction dates for the interim technology stages.
|
Fi
|
* GPRS =
General Packet Radio Service
As a wireless network
provider, the company’s IS management level should be concerned about the
investment protection, forward evolution, backward capability, scalability, and
network interoperability. More details
are described below.
The last thing the wireless
network operators want to hear is that there are going to a complete overhaul
to get their networks ready for the next generation services. Therefore, in selecting the appropriate
wireless technology, one of the important criteria is to select network that
allows step-by-step migration to next generation services that, to certain
degree, enables lower cost of implementation.
Along the same line, the selected architecture should allow wireless
network operators to selectively deploy the new generation technology – 3G
technology – in areas where there is sound business justification, and to use
their existing 2G network to supplement 3G coverage for ubiquitous service. This argument holds true for new operators
as well. New licensees will selectively
choose wireless architecture that builds core platforms that are compatible
with today’s digital platforms, yet allow flexibility an offer revolutionary choices
for selecting next generation solutions.
For incumbent operators, a
path for incremental evolution to IP-based models that deliver higher capacity
and advanced services is imperative to avoid obsolescence. A wireless network
architecture that is designed to evolve to provide the next generation voice
and data capabilities subscriber will demand in the future seems to be a
winner.
In order to create networks
that offer seamless coverage and compatibility with today’s widely-deployed,
commercially-successfully networks, regardless of embedded technology
standards, a wireless architecture must preserve backward compatibility with
contemporary digital technologies.
Perhaps scalability is one
of the most important factors to influence on wireless operators decision on
selecting the right wireless technology. In order to ensure the existing
networks can support the growing subscribers base, the technology platforms
chosen must be proven to be upgradeable and scalable to accommodate higher
traffic.
For years to come, today’s
networks – incumbent and new, wireline and wireless – will have to co-exist.
Creative ways are needed to make them work together seamlessly. For this reason, wireless system providers
have invested in the capabilities necessary to offer the leading network
options for IP and packet-based networks.
For instance, Lucent enthusiastically supports the Operators’
Harmonization Group’s framework of backward compatibility between alternative
modes of CDMA radio technology and today’s mobile networks – regardless of
current standard. Lucent is also well-positioned to build on the commonalities
between evolved TDMA and GSM networks through General Packet Radio Service
(GPRS) and the Enhanced Data for Global Evolution (EDGE). This example
demonstrates the importance of interoperability not only applicable to
wireless-to-wireless, wireless-to-wireline, but also applicable to
wireless/wireline and future generation of networks.
Apart
from the challenges faced by the wireless service providers, some major
concerns for the IS management level of the wireless network users are top
management support, technology alignment with business needs, systems planning,
operations and maintenance, human resources management, and outsourcing
decisions.
The successful technology connects the user
convenience to the business needs. IS
management plays an important role here to analyze the current business
requirement and find out the feasibility of wireless systems to fill the gap
and to provide improvement to existing operations, if it is necessary at all.
This alignment will help organizations to protect their investment by making
appropriate decisions based on business requirement rather than following the
trend.
During the network planning
process, IS management must recognize the potential risk of technology
advancement that has in part makes current platforms obsolete. Therefore, much
emphasis must be put on the flexibility, scalability and upgradeability of the
wireless systems when making recommendation.
In addition, if integration with existing platforms is needed, the
higher the interoperability of the new system, the better it provides seamless
integration. However, it also means higher complexity.
Although
interoperability allows multiple systems to work together as a complete system,
telecommunications application become much more complicated when different
technological standards exist concurrently. Most importantly, the system would
be not only too complex to operate but also expensive to maintain under these
circumstances. Since readiness and cost of operations and maintenance are both
vital issues in terms of IS management, eventually IS managers are often forced
to make tradeoffs between service coverage that supports multiple standards and
the serviceability of these platforms.
Like many other technology
intensive industries, the critical resources are scarce especially in wireless
arena. One point evident over the past years is the difficulty of building
critical mass and experience in software and radio frequency engineering
skills. These pools of expertise do not crop out overnight. Comprehensive training program may help to
fill the gap but it is far more important find ways to retain existing talents
once they have developed these unique skills.
The
complexity of wireless technology might outweigh the capability of existing IT
resources within the company. Given a tight implementation schedule and limited
resources, company may consider outsourcing as an alternative solution to
overcome its shortcomings in terms of skilled labors to implement the systems. However, much effort needs to be carried out
carefully by the company before engaging with outsourcing. Issues such as
relationship management with outsourcers, human resources allocations, cost,
communications involves outsiders, protection of proprietary information and so
on should be addressed.
Today several wireless standards are
available in the market and technology continues to evolve. Even though each standard has dominated
different regions, it is trying to expand and offer better roaming
services. Because of the competitive
and dynamic characteristics of the wireless industry, it is a challenge for
both wireless network providers to stay competitive in the market and wireless
users to choose, operate, and maintain the standard that best fits the
company’s need. IS management plays
important roles to serve those purposes and only after carefully evaluating and
considering different dimensions in the industry can they make the best
decisions.
MBA Class 2001: Yihuei
Chan - Hasbay Kadri - SukYoung
Lee - Laksana Ratanasiriwilai -
JengBin Tsai
Date: May 8, 2000
[1] 1999 ITU Telecommunications Review. www.itu.org
[2] Morgan Stanley Dean Witter Equity Research, June 1999. www.msdw.com