Danger, Danger: Falling on the Jagged Rocks of the CDMA Market

It’s been a war of religion, of sorts, this ongoing rivalry between GSM and CDMA, with the former doing most of the z-snapping. But now it’s not just that CDMA is losing the market share battle — it’s becoming a question of financial safety. Witness both Nortel Networks and Alcatel-Lucent running up against CDMA the way ships run aground on craggy shores then end up sinking.

GSM proponents in the U.S. revel — often and loudly — in its globally standardized nature and inherent ability to support third-party applications and devices, which, they say, makes it much more part of the zeitgeist than the interop-averse CDMA. And, they say, with no small amount of condescension, GSM allows you to automatically use your phone overseas — a perk the rest of the civilized world has come to expect. It’s the technology of the jet set, of the iPhone (AT&T Inc. of course being a GSM carrier), of coolness.

CDMA folks just say: I’ll see your HSPA and raise you early-to-market EV-DO Rev. A. And you say you have coverage? Bah!

Then Ericsson says: Oh yeah? Try 20mbps HSPA on for size. We got it. In the lab in Plano. Right now. Snap.

Then someone mentions LTE, and CDMA people get defensive and ... well, it all just smacks of weekend drama with the in-laws.

No one likes a bragger, but in this case GSM may just emerge validated as signs point to CDMA becoming not only a sliver of the market, but also actually a real liability to infrastructure vendors, particularly since UMB, CDMA’s answer to 4G, looks to be iced, defeated by WiMAX and LTE momentum.

ALU this week found itself with lackluster second-quarter results that included a year-over-year net loss that has widened by 45 percent. Why? Verizon’s soooooo over CDMA spending. LTE is where it’s at. CEO Pat Russo, before she stepped down, admitted the CDMA business was not likely to grow. Meanwhile, Nortel’s carrier networks business declined 2 percent in the second quarter — significant money when you’re the size Nortel is — citing, you guessed it, the slowdown in CDMA spending.

CDMA has four big players behind it: Bell Canada, Verizon Wireless, Telus and Sprint-Nextel Corp. And so, North America represents the biggest CDMA opportunity. But therein lies the rub, of course. There’s just not enough business to go around.

To boot, the pie may become even smaller soon. After months of rumors, Bell Canada and its rival, Canadian carrier Telus, are indeed looking to transition their networks to GSM, according to analysts. Whether that will involve leapfrogging straight to LTE or whether it means they’re going with HSPA remains to be seen.

And so, like today’s eclipse, it may just be that GSM will blot out the fire that was once CDMA. Back in previous centuries, eclipses — particularly total eclipses, and I’m not talking about Bonnie Tyler’s take on it — were generally regarded as portents for nothing good. Kings were said to lose power, empires to fall, military battles to fail, all on the strength of an eclipse. While we in the thoroughly modern cell-phone-toting, IP-embracing era don’t entertain such notions, this particular eclipse didn’t seem to bode well for CDMA. Vendors beware.

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