Cingular/AT&T Deal: Is Verizon the Real Winner?

[David McNamee]

<div class='os_post_top_link'><a href='http://www.businessweek.com/magazine/content/04_09/b3872045.htm' target='_blank'>http://www.businessweek.com/magazine/content/04_09/b3872045.htm</a><br /><br /></div>Business Week seems to think that Verizon could be the big winner of Cingular's purchase of AT&T Wireless. By jumping in at the last minute, Verizon Wireless partner Vodafone helped to increase Cingular's purchase price of AT&T Wireless. Add to this the cost of integrating the two networks and the nine months expected to complete the transaction and Verizon looks like it could be in good shape to build upon its current standing as the top U.S. cellular service provider. It could also drag Cingular's parents, BellSouth and SBC into the mess, helping Verizon out in its land line business.

[ShivShanks]

Wasn't I saying something similar when the deal was announced? I'm convinced this is not a good deal. Verizon is eventually going to come out the better from it. CDMA 2000 is much easier to upgrade to higher end data services than any GSM evoluton to W-CDMA. I think Cingular/AT&T are going to be stuck at EDGE more or less with some token W-CDMA deployments. Plus after spending all this money in the acquisition and the money to be spent converting the TDMA networks, where the heck will Cingular get the money to compete with Verizon? Verizon is already investing heavily, with EV-DO in serious deployments this year. On top of that once Sprint starts deploying EV-DV in 2006, CDMA will be the king for data services and all the GSM based carriers wouldn't have anything much to compete with.

[aristoBrat]

IMO, CDMA will have to over-come its lack of phone selection and data plan pricing for it to truely dominate.

See the new Smartphones phones being shown at the GSM Congress in Cannes? They'll probably never see the light of CDMA.

[ShivShanks]

IMO, CDMA will have to over-come its lack of phone selection and data plan pricing for it to truely dominate.

See the new Smartphones phones being shown at the GSM Congress in Cannes? They'll probably never see the light of CDMA.

What data plan pricing issues are you talking about? I get unlimited data access on my i500 for $10 a month and this is at 144kbps peak 1xRTT rates. I don't have any problems with that. There is also no dearth of phones for CDMA. Just take a look at the wide selection of phones available with Sprint. Only with the recent GSM uptake has AT&T and Cingular been able to match it. I agree though that overall GSM probably has more devices. However do you think any mfr will not try to please a carrier if it wants a CDMA version of such phones? Samsung seems to have no problems making cool CDMA phones when the carriers want it. With Windows Mobile its just a matter of MS convincing some of the CDMA carriers to be more serious about it and then you'll see better WM CDMA devices also. Don't forget that of late CDMA uptake has been very rapid in large markets like India, China.

[aristoBrat]

Your $10 unlimited Vision plan is great for your Smartphone, but I see laptops/PDAs as being the "market" for EV-DO. (Can you imagine a Smartphone surfing at 300-500KBPS? That's a little overkill! :D). Anyhow, a laptop on Sprint's 1x network costs $100/month for 300MB. That's not so great.

I don't understand what Microsoft did to GSM/GPRS carriers to get them excited about Windows Mobile Smartphones, but again, it seems like GSM is kicking CDMA's butt with sheer number.

Maybe CDMA will have a "Congress" this year with a bunch of new models? :D

[swbuehler]

IMO, CDMA will have to over-come its lack of phone selection and data plan pricing for it to truely dominate.

See the new Smartphones phones being shown at the GSM Congress in Cannes? They'll probably never see the light of CDMA.

GSM is the de-facto standard in Europe and Asia; it's only a matter of time before it also overtakes America and CDMA. America has consistently been behind Europe in the wireless environment; only recently have they caught up with devices and are now finally starting to surprass Europe with the implementation of EDGE technology.

[ShivShanks]

IMO, CDMA will have to over-come its lack of phone selection and data plan pricing for it to truely dominate.

See the new Smartphones phones being shown at the GSM Congress in Cannes? They'll probably never see the light of CDMA.

GSM is the de-facto standard in Europe and Asia; it's only a matter of time before it also overtakes America and CDMA. America has consistently been behind Europe in the wireless environment; only recently have they caught up with devices and are now finally starting to surprass Europe with the implementation of EDGE technology.

Actually America isn't behind Europe at all contrary to the common misinformation out there about people thinking GSM is superior to CDMA. Technically CDMA is superior to GSM. It has better spectral efficiency and higher data rates than GSM. CDMA 2000 1xRTT is already 3G whereas you need to get to EDGE or W-CDMA (3GSM) for something equivalent in the GSM world. There is complete US wide CDMA 2000 1xRTT coverage and hence one can say complete US coverage for 3G. There is nowhere near close to that level of EDGE or W-CDMA coverage in Europe or Asia (other than Japan/Korea) and most operators in Europe are struggling to achieve full 3G coverage having paid through their noses for the 3G spectrum and are now capital starved for equipment upgrades to 3G. Technology upgrades in the CDMA world are much easier compared to that. The advantage that GSM has is the huge installed base that it has in the world (but mostly of old 2G technology) and that's why they have more devices. GSM isn't likely to overtake CDMA in the US anytime soon. The US has more significantly more CDMA subscribers and coverage than GSM. E.g. Verizon has the best network with the most subscriber additions every year and they are CDMA. The GSM network isn't even in place fully in the US since there is a lot of old TDMA networks out there. And once Verizon rolls EV-DO this year and Sprint rolls EV-DV after that, the GSM networks will be playing catch up forever both in terms of having lower data rates and lower spectral efficiencies to grow subscriber bases on their limited bandwidth spectrums.

[aristoBrat]

Verizon has the best network with the most subscriber additions every year and they are CDMA.
Verizon's 1xRTT data coverage:
http://www.verizonwireless.com/images/maps/express_network/national.gif

Cingular's GPRS coverage:
http://onlinestore.cingular.com/images/Maps/National/nation_GSMgen_map_2_17_04.gif

[aristoBrat]

Also, don't forget that BetaMax was the better video recording format, but VHS won that battle.

Point being, if CDMA providers don't start supplying some more selection in the Smartphone/PocketPC arena (emphasis on Microsoft products, which tend to have this tendancy to dominate), who cares about their spectrum-saving, blazingly fast EV-DO networks? :D

[ShivShanks]

Cingular's GPRS coverage:
http://onlinestore.cingular.com/images/Maps/National/nation_GSMgen_map_2_17_04.gif[/quote]

But thats only GPRS which is slower and capacity constrained. That's an Apples to Oranges comparison IMO. If you had contrasted that with AT&T's EDGE service then a different picture would have emerged. Besides the that Verizon map does not show the whole US wide 1xRTT coverage since you'll need to do a union with Sprint's coverage map. And lastly I am somewhat skeptical about Cingular's claims about having that much coverage. Where's all the TDMA network in that if its all GPRS. They don't even have a full GSM coverage and the GPRS network is that big? Considering how bad their service is I am a big skeptic. Here in California Cingular is the worst bar none. (Ironic that considering this is SBC's home turf).

[ShivShanks]

Also, don't forget that BetaMax was the better video recording format, but VHS won that battle.

Point being, if CDMA providers don't start supplying some more selection in the Smartphone/PocketPC arena (emphasis on Microsoft products, which tend to have this tendancy to dominate), who cares about their spectrum-saving, blazingly fast EV-DO networks? :D

This argument also doesn't hold that much since BetaMax never really took off. CDMA however has taken off very well. The US is a majority CDMA territory and with a well growing Verizon and declining AT&T and stagnant Cingular its no way feasible that CDMA will lose ground. Also last year CDMA grew spectacularly in India and China. In fact in India Reliance Mobile became the largest mobile service provider within a year and a half of launch! using CDMA technology. CDMA is a future proof technology since its already 3G and upgrades are easy. GSM needs expensive upgrades so guess what happens when all those cool color phones with whiz bang features are better on the CDMA networks. Perhaps in Europe CDMA might never amount to much (although its growing in Eastern Europe) but by no means is it a given that GSM will beat CDMA in North America or overshadow it in Asia. The Windows Mobile devices will come for CDMA even if it takes some time. Verizon and Samsung would be stupid to ignore the growing WM market. Who knows evene Sprint might jump in soon. After all Samsung has been traditionally very closely aligned with Sprint.