Cellular Breakthrough : San Diego Firm at Forefront of New Mobile Phone Technology

Major players in the cellular telephone industry agree that, unless second-generation technology is quickly introduced, cellular telephone systems in the nation’s largest metropolitan areas soon will be overwhelmed by the growing number of callers who won’t leave home without the seemingly ubiquitous mobile telephones.

When the cellular industry began searching four years ago for a digital technology that would replace aging analog cellular systems, most companies were inclined to support a new technology called TDMA-Time Division Multiple Access--that had been under study for several years.

Initial studies suggested that there were few other technologies that would help the industry squeeze more calls into its finite number of radio frequencies.

But that scenario unexpectedly changed about two years ago when San Diego-based Qualcomm surprised the industry with a competing digital technology called CDMA--Code Division Multiple Access--that promptly impressed some industry heavyweights. Qualcomm’s unexpected appearance sent cellular manufacturers and cellular system operators scrambling to learn about the new competitor.

The cellular industry, which is enjoying dramatic growth, doesn’t want to pick “a technology that becomes antiquated in a few years,” said Scott Hoganson, vice president of PacTel Cellular’s operations in San Diego and Imperial counties. “We see this (technology) as a step into the 21st Century, as opposed to a technology that will serve just the decade of the 1990s.”

The need to increase capacity is evident in Southern California, New York City and other large metropolitan areas where existing analog-based cellular systems soon will be overwhelmed as cellular phones gain in popularity. Cellular systems nationwide now have 4.3 million subscribers, with an estimated 140,000 new customers signing up each month.

Consequently, cellular system operators “want the capacity issue resolved very quickly,” said Mario Salvadori, a spokesman for Motorola Inc., a leading designer and manufacturer of cellular switching systems and cellular telephones. “The obvious solution (to the capacity crunch) is to go digital . . . but there are, at this time, different alternatives,” Salvadori said.

While the industry is still debating technological merits of the competing systems, Qualcomm co-founder and president Irwin Jacobs has no doubts that his company’s CDMA technology will prevail over TDMA, or time division multiple access.

TDMA, a digital technology that allows cellular systems to send tiny bits of voice data over a single channel, could accommodate at least three times the number of users as existing analog systems. With subsequent improvements, TDMA could handle about 15 times the subscribers handled on existing analog systems.

But CDMA, which turns digitized voices into encoded messages, has the immediate potential to handle 10 to 20 times the number of subscribers as existing analog systems. And, Jacobs said, with modifications, CDMA could dwarf any increases that TDMA promises down the line.

CDMA also will bring improved sound quality. And, because the CDMA system encodes signals before transmitting them, cellular customers will enjoy a degree of privacy that won’t be available through TDMA, Jacobs said. Some customers have complained that their conversations can be overheard by strangers with audio scanners capable of picking up cellular signals.

Jacobs expects CDMA to gain wider exposure later this year when Qualcomm and PacTel Cellular conduct a large-scale test of the company’s digital technology in San Diego County.

When the industry began its search for a successor technology four years ago, CDMA wasn’t an option, said Norman Black, a spokesman for the Cellular Telecommunications Industry Assn., a Washington-based trade organization.

“CDMA was something faintly out there on the horizon,” Black said. “It didn’t get a great deal of scrutiny at that time because there wasn’t much to scrutinize.”

But CDMA, which has been used for decades in relatively expensive military applications, quickly became a “viable alternative” when Qualcomm made “important advances” in integrated circuit technology, Jacobs said.

Consequently, although CDMA was introduced relatively late contrasted with TDMA, technological advances and a small-scale test completed in 1990 have brought it up to speed with TDMA, Jacobs said.

Industry observers agree that only one of the two competing technologies is likely to survive when major cellular telephone companies begin to place orders for the technology that will be used in cellular switching stations and the telephones used by consumers.

“There’s ultimately going to be some kind of horse race or a selection process as the orders are placed,” Black said, adding that there is probably not enough of a market to support two competing technologies. Manufacturers of hand-held sets would probably follow the lead of cellular operators so their equipment remains compatible.

Despite its relatively recent appearance, Qualcomm’s technology has won support from some industry heavyweights.

Motorola, AT&T;, Clarion Corp. and Nokia Mobile Phones each has signed product testing and development agreements with Qualcomm. Qualcomm also has announced agreements with Nynex Mobile Communications Co., which serves New York City, Ameritech Mobile Communications, which serves Chicago, and PacTel Cellular, which serves Southern California.

Industry leaders who have seen CDMA in action are convinced that the relative newcomer has enormous potential to increase capacity and improve quality.

Although most companies, including PacTel, are following both technologies, PacTel is spending heavily to test CDMA in its San Diego County operations. The test, which is being co-funded by Qualcomm, is designed to “show the rest of the world by the end of this year that CDMA effectively works in a cellular network,” Hoganson said.

Qualcomm, which was founded in 1985, reported $46 million in revenue for its most recent fiscal year. The company, which has nearly 600 employees, hopes to double its revenue during the current fiscal year, Jacobs said.

Most of Qualcomm’s revenue is generated by OmniTracs, a satellite-based, mobile communications system that provides two-way information to the trucking industry. Jacobs said that Qualcomm will begin to generate revenue from CDMA as early as next year if the test in San Diego County is successful.