There were intensive discussions within Ericsson during 2005 and 2006 about which technological approach it should take.  

One important insight was that GSM was not about to die out, as Marie Westrin points out. “We saw more and more cases in which only limited radio capacity would be required and where GSM would be reasonably dimensioned.

“We believed for a long time that 3G would end up killing off GSM. But GSM continued year after year to exceed the sales forecasts. And further development made GSM better and better and cheaper and cheaper.”

In 2008 there were still nearly 1,000 Ericsson employees working on GSM development. That was more than the number occupied with LTE.

DON’T REINVENT THE WHEEL

Another major decision in autumn 2006 was to put an end to work on WiMAX and devote the resources this freed up to other projects, mainly HSPA and LTE. Håkan Eriksson summarizes it in this way: “We thought it was unnecessary to reinvent the wheel. We probably never really got behind WiMAX. I would prefer to say we never really decided to start.”

CEO Svanberg recounts: “We could see that with even the most enthusiastic marketing forecasts WiMAX would never get more than 10 per cent of the broadband market. This did not justify such a major development investment.” 

This decision, evolved after a great deal of analysis and discussion which also involved the operators. Eventually, a group executive meeting reached the official decision.

Svanberg says: “Up to a point, an issue like this is also a political one. Could we have decided on a somewhat simpler investment in WiMAX so that we could at least make our voice heard? We try to move forward as cautiously as we can. We do not want to end up arguing with our customers. But at the same time leadership involves making choices. You can’t do everything.”

WHERE IS THE PROFIT?

Sara Mazur, head of Ericsson’s radio network research until the end of 2006, recalls: “Ericsson could certainly have contributed to the development of WiMAX. But however we looked at this issue, we ran up against the question of where the profit was. WiMAX added no technical advantages compared with the technologies we were already developing. We would have split our resources so that our main path would have developed more slowly. And the volumes for our main product would have been lower so we would have lost the economies of scale.”

Ericsson’s hesitation seemed to offer new opportunities to some of its competitors. The breakthrough for large-scale WiMAX seemed close at hand in 2006. For instance, the American operator Sprint Nextel – the result of the acquisition by Sprint in the previous year of its competitor Nextel – declared its intention of collaborating with another operator, Clearwire, in investing the equivalent of SEK 20 billion in a national WiMAX network. The network that would start to operate in 2010 and offer coverage to 100 million people across the US. The supply contract went to Motorola, Samsung and Nokia.

Ericsson countered by setting up a demonstration of LTE and inviting operators to meetings at which future issues could be discussed. Eriksson says: “The question we kept on asking was ‘Why should we begin a fight?’”

It was at this time that the first HSPA networks came into commercial use. The first was the American operatory Cingular Wireless in December 2005. In Sweden the operator 3 was first with a HSDPA network that opened in November 2006, offering a maximum speed of 7.2 Mbps downlink and 384 kbps uplink.

Author: Svenolof Karlsson & Anders Lugn

SEVEN-YEAR DEVELOPMENT TREND, SKETCHED IN 2007

CDMA is not expected to grow significantly, and mobile WiMAX will remain a minor solution.

© Telefonaktiebolaget LM Ericsson and Centre for Business History

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