November 29, 2007
The myth of competing mobile standards
Jim Surowiecki, the astute financial columnist of the New Yorker, wrote an article that I admired in Wired magazine five years ago, arguing that the US approach to technology standards for mobile phones was superior to that of Europe.
Essentially, Surowiecki said that the European approach of mandating a single technology standard in GSM had shut down technological progress, while the US decision to allow GSM to compete with other standards, including CDMA, had allowed the best technology to win.
Here is the crucial paragraph from the article:
Once the marketplace was allowed to work, it quickly converged to CDMA, which proved to be superior. CDMA is ascendant in America. More important, it’s the foundation for the next generation of cell phone technology - 3G - since it turned out to be the only technology capable of making the leap to fast and capacious wireless data transmission. Had the US government mandated a standard, by contrast, it would undoubtedly have picked TDMA or GSM, since those were the dominant technologies at the time. And then we wouldn’t have CDMA leading the way to 3G today.
I am afraid that history has not been kind to this argument. Europe has stayed ahead of the US in mobile telephony, and in 3G services. Having one technology standard has spurred competition among network operators and handset manufacturers while competition in the US has been stymied by a proliferation of technologies.
I thought of the piece again this week when Verizon Wireless announced that it will open up its wireless network next year to allow consumers to use handsets that are compatible with its CDMA standards. It has adopted this stance under pressure from open standards adherents, led by Google.
Verizon’s move will allow Sprint customers to switch to its network. But customers of AT&T, which uses GSM technology and, with Verizon, is the biggest mobile operator in the US, will not be so lucky. No matter how open Verizon becomes, AT&T handsets will not work on its CDMA network.
The reality is that the proliferation of technology standards in the US has worked against the interests of consumers. In Europe, it is easy to switch among networks because they all work on a single standard. The US had had limited competition in part because Verizon customers and AT&T customers are kept apart by technology.
I have lived and worked for many years on each side of the Atlantic and see things differently. Mandating a single technology for next generation cellular or mobile TV would be a great mistake. Only the market can decide what it is best for customers.
If CDMA had been excluded, the whole world would be several years behind where it is today in 3G. WCDMA owes a lot to CDMA because both standards share a lot of essential technology (eg, for power control and soft cell site handoff) that was developed first for CDMA. The US was the test-bed for these new technologies.
The US is a very competitive market with more choice of carriers, devices and services than for European consumers. The price per minute is one third that in Europe.
The US leads Europe with four times more minutes of use per subscriber and greater substitution of wireline services. The innovative and successful BlackBerry and iPhone came to the US first. Three carriers offer nationwide 3G services. Preponderance of prepaid plans in Europe with laxer subscriber count qualification than for postpaid inflates subscriber European penetration with an implausible 110% of men, women and children declared as subscribers.
Keith Mallinson
Posted by: Keith Mallinson | November 30th, 2007 at 1:47 pm | Report this commentFounder, WiseHarbor (www.wiseharbor.com)
I wondering: why don’t the successful BlackBerry and iPhone use *DMA technology?
Posted by: Leo | November 30th, 2007 at 4:55 pm | Report this commentWell, Poland with its 2% of EU27 GDP has four 3(.5)G carriers and almost universal coverage for all of them. I do not see much real difference in pre-paid vs subscribtion service - it is much, much cheaper to have the former in Europe than in the US (you pay two dollars for the line!), cost per minute is hardly an indication of the total costs of phone usage. iPhone, BlackBerry? There is Nokia and SonyEricsson instead.
Posted by: Mateusz Szczurek | November 30th, 2007 at 5:11 pm | Report this commentAnd iPhone is GSM (not even 3G)
@Keith, you are conflating their business models with technical standards. I can’t get 3G in Brooklyn or in a lot of the US. The same will happen in 4G with the fight between LTE and WiMax. Our phones are better or more innovative? Hardly. Please point me to a phone that gets television, has DVR functionality, real GPS or even Dolby surround sound (all of which are available in Japan on DoCoMo). My 1 penny Japanese phone was roughly equivalent in features to a high end phone here in the US and I had ubiquitous 3G data.
Competition in standards will only work if one of the standards eventually dies. Especially standards that are essentially meaningless from the consumer point of view. The costs of wiring up the entire country including low yield areas is astronomical, and doing it twice is more than foolish. And it has nothing to do with superior technological solutions and everything to do with patent licensing fees- monopoly rent seeking.
Posted by: akatsuki | November 30th, 2007 at 5:12 pm | Report this comment