GSM vs CDMA: The Tech Battle Is On

Zia Askari

Whether it is the desire to increase business productivity or a simple voice communication between two users, we all live in a connected world today and the two major technologies driving this communication arena are GSM (global system for mobile communications) and CDMA (code division multiple access). These are the two technologies service providers use to carry voice signals across the network. But what are they and why do they matter?

GSM is the term given to a particular use of TDMA (time-division multiple access) technology. Normally different users accessing the same frequency band without causing interference can share the radio spectrum. The techniques used for this are TDMA, FDMA (frequency division multiple access) and CDMA.

CDMA is a form of multiplexing (access to the same resource will be given to more than one user), which allows the use of a particular frequency for a number of signals, optimizing the use of available bandwidth. It is a cellular technology that uses the spread-spectrum technique. In CDMA technology every channel uses the full available spectrum.

GSM was first introduced in 1991 and until recently before the establishment of CDMA networks, GSM was the only mobile communication system present in the market. Interestingly, CDMA was first used during World War II by the English allies to foil German attempts at jamming transmissions. The allies decided to transmit over several frequencies, instead of one, making it difficult for the Germans to pick up the complete signal.

Since bandwidth is a major problem in modern times, CDMA has a very clear advantage over GSM in these terms. The number of channels (users) that can be allocated in a given bandwidth is comparatively higher for CDMA as compared to GSM. The cost of setting up a CDMA network is also comparatively less than the GSM network. Due to these advantages there is high probability that CDMA tech-nology will dominate the future of mobile communications.

Indian scenario
The mobile industry in India is divided between the two technologies-GSM and CDMA. New players have been using CDMA technology quite successfully and today CDMA technology commands a significant share of the Indian telecom market.

Venturing into the virgin territory of CDMA, Reliance India Mobile started its services with offers like STD at 40 paise a minute, free handsets, etc. Offers like this triggered a telecom revolution in the form of low cost handsets as well as the services attached with them.

Whether GSM is better or CDMA is more superior is certainly a debatable issue. As per the present scenario, it is probably an understatement to say that cell phones have become the single greatest tool in business as well as personal communication.

In today's connected world, more and more companies and organizations are giving top priority to 'communication on the go'. It has become more of a necessity for these companies now.

Whether it is an entry-level mobile phone or a high-end business phone, a major part of the evaluation is focused towards deciding the phone model based on the features and benefits of the handset.

On the other hand, if mobility is what a user wants, the most important decision they make regarding their service may not have anything to do with the features usually considered important for handhelds. It is here that the choice of carrier and the technology it uses for its network might demarcate between being productive or ending up out of the service area.

India, the fastest market
With more than a million subscribers being added on a monthly basis, India is surely riding high on the telecom revolution. Most global telecom players like Nokia, Alcatel, Samsung or LG have already started their local manufacturing capabilities here.

Having said that, industry experts believe that the market is still big enough for both the GSM and CDMA players to thrive in. With service providers like Bharti for GSM or Reliance for CDMA plunging towards providing innovative services to the end-customer, both these technologies are likely to drive the country towards generating big number of subscribers in the near future.

Additionally, consolidation has already taken place and a handful of pan-India operators have emerged, with very few regional operators still in the game.

According to industry estimates, in Oct 2006, the GSM subscriber base increased by 81 percent on a YoY basis, higher than the 53 percent YoY growth in Oct 2006. At the same time, CDMA subscriber base has more than doubled over that of last year.

In May 2006, the mobile subscriber base (GSM and CDMA) reached the 100-million mark, which is a big achievement for India. Experts from the telecom industry rightly believe that now the stage is set for an even greater telecom revolution.

Interestingly enough, in August and September last year, India added more wireless subscribers than China. This also means that India is showing a lot of promise when it comes to growth potential and sharper growth trajectory.

This also means that moving forward, India will reach the same kind of milestones that China has achieved in a shorter timeframe. This may be of huge interest to all the big and small telecom players present in the region.

Focus on small cities
It would not be unfair to say that the next wave of telecom growth for India is already coming from the B and C circles of the country. As per the present scenario of the country, most GSM operators have concentrated their efforts on expanding their subscriber numbers in volumes, these service providers have specifically targeted B and C class cities, which are considered less lucrative.

Increasingly the focus is on these areas and specifically semi-urban and rural areas.

The launch of lifetime plans by most GSM operators is one of the reasons for the strong growth this year. Under these set of schemes, mobile operators were able to attract a large number of subscribers. With these schemes, the services providers have also been able to venture into smaller locations more efficiently.

However, such a hefty growth has not resulted in a proportional increase in revenues per minute.

CDMA or GSM
As a direct result of expanded services, today service providers are consolidating their set of services and offerings to maximum number of locations and are not worrying too much about their competition.

The technology does not matter so much today, so whether it is CDMA or GSM, the telecom boom has completely altered the tele-density landscape of the country, which has increased from barely three percent at the beginning of this millennium to as much as 16 percent at present. As companies continue to penetrate deeper into the interiors of India, the tele-density is likely to increase further in the near future.

The financials of major operators reflect the changing scenario in the industry. This quarter, both Bharti and Reliance Communications, which are the leading GSM and CDMA operators, witnessed an impressive growth in their topline.

Cutting itself away from a traditional mode of CDMA player, Reliance has already ventured towards providing GSM services in the form of 'Smart' in select cities. This may be regarded as a good move as the company will be able to deliver flexibility of providing CDMA as well as GSM services to its end customers.

In a scenario like this where customer is the king, future certainly belongs to service providers showing flexibility as well as technological excellence and this is where technological battle lines of GSM or CDMA will be in favor of the customer.

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