Not enough growth for CDMA
In 1999, Åke Persson was made head of the CDMA operation that had grown in San Diego from the unit acquired from Qualcomm.
He says he is convinced that Ericsson – with its broad technological know-how, as well as its momentum in the wireless market – would have been able to retain and increase its hold on the market as a whole, even if the company had opted to offer CDMA at an earlier stage.
When Ericsson’s CDMA operation got going, it did well, winning a 25 percent market share among all new CDMA systems globally. The problem was that the overall volumes were still too low.
“Our long-term business plan presumed that we would get at least one large CDMA deal in the US and one in China. But China’s decision on 3G licenses took ages. And we never got into the US, where the margins on contracts were better than anywhere else,” Persson says.
The major cuts across the group between 2001 and 2003 also affected the CDMA operations. Almost 1,000 jobs were shifted from San Diego to other Ericsson facilities: development was moved to Canada and production to China.
When Persson retired in 2004, Ericsson employed only 400 people in San Diego.
A year later, Ericsson closed down its CDMA operations, and two years later, all product development based on CDMA.
WIMAX A WINNER?
Was WiMAX going to be a winner? Marie Westrin, Jan Uddenfeldt and colleagues were keeping a close eye on what was going on.
In the first phase, WiMAX was designed only for fixed wireless links, such as broadband links to households. This was only a niche market for Ericsson but it led to the decision in 2004 to join the WiMAX Forum. Ericsson’s spokesman on the issue, Peter Olofsson, said at the time: “We can see rising demand from our operator customers, so we want to have some influence on the WiMAX standard.”
Ericsson started a project to develop fixed WiMAX. As with the work on 3G, Ericsson was able to establish an advanced dialog with the Japanese operator DoCoMo.
Håkan Eriksson explains: “We felt that the WiMAX people were trying to achieve what HSPA already offered. They were thinking in terms of 5 Mbps when HSPA already offered that and more. We both felt, Ericsson and DoCoMo, that it should be possible to get 100 Mbps and higher in mobile phones based on HSPA.”
Given Ericsson’s position in the industry, it was obvious that both allies and competitors listened when the company sent out its technological experts. One important forum was trade organization CTIA Wireless’ event in Atlanta in 2004. Eriksson was one of those attending, spending an hour describing his view of the mobile broadband of the future.
Eriksson had been told that Dick Lynch, head of technology at Verizon, the biggest US CDMA operator, would perhaps drop in to listen for about ten minutes. Sure enough Lynch arrived and then stayed for the whole of Eriksson’s presentation. Afterwards they exchanged a few words and agreed to meet again.
Verizon had been created just before the millennium through a series of mergers including Bell Atlantic and GTE, both already giants. Verizon had promoted itself hard as a CDMA supporter, while its competitor, AT&T Wireless, as we have seen, switched to the GSM world and had already announced investments in HSPA.
Author: Svenolof Karlsson & Anders Lugn