CDMA operators start to compete GSM carriers<\/p>\n
Rudijanto, Contributor, Jakarta<\/p>\n
When state-owned telecommunications company PT Telkom Tbk
\n(Telkom) launched its first fixed wireless telephone service
\nbased on Code Division Multiple Access (CDMA) technology, the
\nTelkomFlexi, in Surabaya, Balikpapan and Denpasar in 2002, many
\npeople believed the new service would pose a deadly threat for
\nGlobal Service for Mobile Communications (GSM) cellular
\noperators.<\/p>\n
The entry of other operators such as Bakrie Telecom and PT
\nMobile-8 Telecom in the CDMA market late last year makes the
\nthreat even more imminent.<\/p>\n
Based on CDMA2000 1X technology, TelkomFlexi only requires a
\nUS$200 investment per line. Such low investment capital makes it
\npossible for Telkom to offer the service at very competitive
\nrates, comparable to those of GSM cellular services.<\/p>\n
Unlike the previous CDMA generation that uses no Subscriber
\nIdentity Module (SIM) cards, TelkomFlexi is equipped with a
\nRemovable User Identity Module (RUIM).<\/p>\n
TelkomFlexi customers can use their wireless handsets wherever
\nthey are, as long as they stay within their coverage area. For
\ninstance, TelkomFlexi users in Jakarta can only use their
\nhandsets within the Public Service Telephone Network (PSTN), or
\nthe fixed line rate within the 021 Jakarta area code.<\/p>\n
In other words, subscribers are far more limited in their
\nmovement than those who use GSM cellular services.<\/p>\n
However, since the number of cellular phone users requiring
\nhigh mobility -- those who travel frequently out of the city --
\nis estimated at not more than 20 percent, many believe that it is
\nonly a matter of time before the remaining 80 percent of GSM
\nusers shift their allegiance to CDMA-based services.<\/p>\n
In September, last year, PT Bakrie Telecom, which has been
\nproviding wireless telecommunication service since 1996, launched
\nEsia, a wireless local loop service using the 3G CDMA2000 1X
\nnetwork.<\/p>\n
Esia targets notonly customers whose activities are
\nconcentrated in the home zone, but also those who have a highly
\nmobile outside the home zone.<\/p>\n
Jakarta is divided into eight home zones under this concept:
\nCentral Jakarta, East Jakarta, West Jakarta, South Jakarta, North
\nJakarta, Bekasi, Tangerang and Depok.<\/p>\n
Like TelkomFlexi's rate, Esia also charges PSTN rates for all
\ncalls made within a customer's home zone. Calls made outside a
\ncustomer's home zone incurs an additional charge of only Rp 100
\nper minute -- far lower than that of GSM cellular rates.<\/p>\n
As with GSM operators, Esia also offers both prepaid and
\nmonthly billing service options. To allow users to switch
\nhandsets at will, Esia also provides RUIMs that can be installed
\neasily in any CDMA-compatible handsets at the same frequency.<\/p>\n
Unlike TelkomFlexi and Esia, Mobile-8 -- which uses 3G
\nCDMA2000 1X and 3G CDMA 1X EV-DO systems -- cannot apply PSTN
\nrates and consequently, its rates are determined by air time.<\/p>\n
Mobile-8 promises to deliver high-speed data transfer, a
\nvalue-added service beyond the standard features already in the
\nmarket. Focusing initially on Java, the company has built around
\n300 Base Transceiver Stations (BTS).<\/p>\n
The company has allocated 17 BTSs to its EV-DO broadband
\nwireless service, via which Mobile-8 offers various value-added
\nservices, including multimedia content and Internet access. As
\npart of its promotional campaign, Mobile-8 is offering free
\nInternet access until March for its Fren card users.<\/p>\n
These new players in the CDMA fixed wireless market constitute
\na real challenge for existing GSM cellular operators. Without
\ncontinuous innovation, GSM operators will be in trouble in the
\nlong run as subscribers to CDMA services continue to increase.<\/p>\n
Telkom, for instance, is targeting an increase in TelkomFlexi
\ncustomers to 1.2 million, from 452,000 in 2003.<\/p>\n
\"The growth of TelkomFlexi in 2003 is gladdening, and we have
\nestablished services in 39 cities -- including Medan, Batam,
\nPekanbaru, Palembang, Cirebon, Semarang, Yogyakarta, Solo,
\nBalikpapan, Palangkaraya, and Pontianak -- at a capacity of
\n829,547 lines,\" said Gunung Simaremare, head administrator of
\nTelkom's Fixed Wireless Division.<\/p>\n
Gunung believes that people are attracted to TelkomFlexi
\nbecause of CDMA2000 IX, which is a 2.5G technology -- only a
\nhalf-generation away from 3G, or third generation cellular
\ntechnology.<\/p>\n
\"The market for CDMA-based Telkomflexi is very large. We are
\ntargeting those who do not yet enjoy PSTN services and those with
\nlimited mobility within a single area code,\" he said.<\/p>\n
Meanwhile, Esia projects a customer base of 3 million only
\nfive years after its launch.<\/p>\n
By the end of 2003, Esia users numbered a modest 50,000. This
\nyear, the company expects an increase to between 100,000 and
\n150,000 customers.<\/p>\n
\"We cannot set too high a target, because we know that CDMA is
\nrelatively new. That is why we need to educate the market. We
\nalso have to develop more features, for instance inter-operator
\nSMS,\" said Norman Ilyas, Esia public relations manager, referring
\nto the highly popular Short Message Service.<\/p>\n
Norman said inter-operator SMS is facing obstacles among
\ncellular operators, such as conflicting business interests.
\nDiscussions are ongoing, so there is yet a possibility for
\ndeveloping this feature.<\/p>\n
GSM operators might watch to keep careful watch over the CDMA
\nmarket, although CDMA operators claim their products do not
\ncompete with GSM operators, as they have different market
\nsegments.<\/p>\n
\"We are not competitors of GSM operators because our coverage
\nis limited while they have full mobile coverage. I prefer to
\nthink of our services as complementary to that of GSM operators.
\nRather than competing, I want to establish cooperation with GSM
\noperators for the benefit of customers,\" said Norman.<\/p>\n
The emergence of CDMA operators have prompted GSM operators to
\ncut their profit margin and offer alluring discounts to
\ncustomers. Norman said this move was attractive to customers and
\nhad thus boosted the number of GSM customers.<\/p>\n
GSM operators even enjoyed a surge in the number of customers
\ndespite the launch of CDMA services. This year, the number of the
\nsubscribers of three major GSM operators Telkomsel, Indosat and
\nExcelcomindo reached 17 million by the end of 2003, exceeding
\ntheir combined target of 15 million. The three producers
\nprojected the number of their subsribers would increase to a
\ntotal of 26 million by the end of this year.<\/p>\n
Compared to such a figure, the population of CDMA users is
\nmerely a blip on the cellular market. The combined modest target
\nof TelkomFlexi and Esia means that CDMA users will not exceed 2
\nmillion by the end of 2004.<\/p>\n
Such a user population is relatively small, but quite
\nsignificant when compared to the first two years of GSM market
\nperformance.<\/p>\n
GSM operators may have to sharpen their innovative edge to
\nretain their market, but consumers have good reason to expect the
\ncompetition to provide more convenient, low-cost services.<\/p>",
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