Who controls the wireless market? Part I: The players

Thursday, March 15, 2007

Coming from a small company, we are often confronted with one question: Who are we selling our product to? And that begs a bigger question:Who controls the wireless industry? This one is an enigma to most who have not seen it in black-and-white and the trade secret that maps the success of most big players.

Let us start with the food chain in the industry. We have

a) Chip vendors: Companies that provide the core chip for the phone. This piece of silicon provides for all base-band functionalities and typically interfaces with an independently manufactured radio frequency (RF) piece that includes one or more antennas. Chip vendors may have either or both of base-station and mobile chip manufacturing capabilities. Examples include QualComm, TI, Freescale etc.

b) Equipment manufacturers: These are the companies that assemble equipments for both base-stations and mobiles. Thus they have to put together teh chip, RF chain and the interface/platform to make a complete call-capable radio. Examples include Samsung, Sanyo, LG, Motorola, Nokia and of course Apple.

c) Service Providers/Carriers: These are the companies that buy spectrum, set up infrastructure and bring the service to the end user. They may provide voice and data services using suitable equipments. Examples include Sprint, Verizon, Cingular, Vodafone, Orange, Hutch and Reliance. They would be the paying customers for base-stations and in a lot of cases, part-payers for mobile phones too.

d) End User: You and Me.

There are also a few bits-an-pieces players like some Intellectual Property (IP)-based companies that make money by either selling key patents or by suing the big ones who may border on violating some of their key patents. There are also a few companies (like ours) who have some cool contributions to the technology. As is apparent right away, these two categories cannot sway a well-established industry with the big-companies attempting to further their strangle-hold on it. An IP-based company can survive for only so-long before it gets avoided like plague by everyone alike. Again, small companies are likely to be victimized owing to their perceived exclusivity to the contribution that they bring forth to the industry.

Now before we proceed any further, it is also important to mention that companies do not necessarily belong to one category or the other. For example, not until long ago, QualComm built its own phones. QualComm also has a strong IP presence and a major share of their revenues comes from the royalties that they get from their pioneering CDMA patents. Ericsson continues to build both chips and equipments. Freescale spun-off from Motorola.

With this as the basis, in the next part(s), I will attempt to dissect the industry dynamics and the interplay of the lead players in this game that everyone wants to be a part of.

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Conan Agrees!

Check this link out...

Conan, the Comedian

A friend of mine suggested I take a look at it. It has a greater impact in making the same point that I had in my iPhone article. Well, not exactly, but you would get the message.

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Posted by Vijay Nagarajan at 11:03 PM 0 comments Links to this post  

Is it the phone or the service provider?

Is it the phone or the service provider? The last post seemed to suggest that it is not always bad service that results in bad user experience. This note attempts a justification for that statement.
Let's first look at it from a service provider's perspective. The economic argument is fairly simple. They have the spectrum and they have a certain Capital Expenditure budget. So, they design the network (i.e. placing cells, and adding carriers and channel elements) based on peak user traffic and capacity requirement. Initial cell-sites may be set up such that each site supports upto a certain number of users and their placement is such that areas with dense activity get more cell-sites. Now, when this maximum user limit is hit, then channel elements and carriers are added to each of these cell-sites. Sporadically, the peak capacity is achieved due to a burst of activity and is likely to be ignored until the frequency of occurence of such an event in that given site is beyond a pre-set value. This is when you may experience a dropped call or when your call does not get through for a few minutes. And of course, there may be spots where the coverage is not good enough to get a call through owing to environmental conditions, buildings/tree canopy etc. Under this condition, your mobile is eternally searching for a signal or your call is lost with the message "Signal Faded".

This being said, the question now is if the phone manufacturer can go wrong at all. There is often a misconception that the standard bodies like 3GPP or 3GPP2 define the transmitter and the receiver in their entirety. This is not true. Typically, only the transmitter structure is defined clearly. Infact, that is where most of the intellectual property (IP) wars are fought in the standards. The receiver design is implementation specific and each company will have its own sweet technique, trade secrets and secret sauces to get performance edge. As far as receiver-side standardization is concerned, only minimum performance requirements on a limited set of test cases is stipulated. How a vendor meets it is their issue. For example, in 3GPP, there are type 0, 1, 2 and 3 receiver requirements which were arrived at using a simulation-calibrated rake receiver, receive diversity, equalizer, and receive-diversity+equalizer respectively. Again, the minimum requirements are arrived at after aligning simulations with the so-called "implementation margins" and an average of the submissions is taken as the minimum specification.

Now, the standard however does not specify that a type 2 receiver should be an equalizer. It also does not specify the maximum performance or average performance expected. Someone can obtain a type 2 performance using a 2-antenna solution or even a rake with a better decoder. So, it is here that companies try to go one up on the competition. On the flipside, vendors are also likely to minimize their costs by barely meeting the specifications. After all, an increased performance in the voice case does not impact the end user. Advanced receivers in this case, serve to reduce the transmit power needed to achieve the same link budget thereby increasing the cell-capacity. This can in turn translate into Capacity Expenditure savings for the service provider, especially if the infrastructure is not completely in place or if the network is not over-designed. But service providers again have to strike a balance between capacity and user experience. They are likely to attract more customers and thereby more revenue (though at lower margins) if they can have an array of sleek and multi-functional phones than if they have a really clunky-looking but great performing phone. How would the user care? For example, most of us would find it ugly to have two-antennas sticking out of our cell-phones. So, vendors try to embed the second antenna into the body. And that not being optimal in terms of its correlation properties, does not give expected performance.

Phones that barely meet the specifications can have issues that are not apparent in lab tests but are specific to the field. For example, 3G phones may have problems with backward compatibility with 2G networks. So you may face problems when you are moving from a WCDMA infrastreucture to a GSM infrastructure. Similarly, different phones are likely to handle situations like hand-offs (the process of shifting the mobile from one cell to another). So you may lose a call due to an inferior procedure that barely meets the requirements. There are many issues that are less apparant as phone problems. As mentioned in the previous post, the service provider is very likely to take the blame for much of this.

So the next time you have a service issue, think twice before you blame your Sprint or Verizon connection. It could just be because of your attraction to fancy devices which also serve as mobile phones.

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Posted by Vijay Nagarajan at 11:02 PM 0 comments Links to this post  

Of iPhones and "orifices" ...

iPhone, Steve Job's new answer to the gadget-crazy world! Is it a phone with music capabilities or is it a multimedia device that can double up as a phone? Though some may argue that it is semantics, I would probably vote for the latter option. It is really an iPod with a phone.

The reason, in my mind, is simple. Apple already attempted to bundle their iTunes software with a Motorola phone and were not happy with the outcome. It did not have the look and feel of the iPod. And hence it set the stage for the device that the entire world was waiting for with baited breath, the iPhone.

This being said, Apple and Jobs have re-defined the wireless business and set in motion, the move towards an all-in-all mobile phone. Though leading vendors have made public statements relaying that their sales volumes are unlikely to be swayed greatly, they are candidly admitting the threat posed in private conversations. Infact, LG and Samsung are already up with their answers to the iPhone with their own sleek designs. They can act fast, but it is unlikely that they can match the design geniuses in Apple and also their staggeringly huge fan-base. If the iPhone lives to its hype, the US is likely to see large-scale migration to Cingular and that could change the market dynamics even further with GSM/3GPP winning over CDMA atleast in the US.

Another interesting question that comes to mind and often figuring in casual conversations with industry insiders is if the iPhone is a snub to "3G". While the world is flaunting 3G and designing 4G systems, Apple and Cingular have made a bold statement by using a GSM chip. Though Cingular has rolled out WCDMA in 100 major cities in the US and also provides HSDPA in few markets, the iPhone has stuck to its predecessor. One may argue that Cingular has maximum coverage only on its GSM network, and so it makes sense to support GSM. But the flipside of the argument is that a WCDMA chip or even a HSDPA chip should be backward compatible with GSM and so should be able to still get full coverage. But atleast for this version of iPhone, no one saw an economic argument to go for a costlier alternative to the fairly cheap GSM chipset. More importantly, this also signifies the fact that even Cingular does not see WCDMA expand at the rapid rate it was envisioned to. While the 3GPP standards body is busy churning out release 7 and working out details for release 8 on the 3G side, this move by Cingular seems to suggest that GSM is still its cash cow and 3G in reality has a long way to go.

It is also very likely that other handset manufacturers are green with envy on the deal that Jobs seems to have got from Cingular. A lot of it is fairly unheard of in the industry and apparently Cingular has gone out of its way to secure this deal. Call it marketing genius or the power of iPod. Jobs, widely believed to have called service providers as "orifices" at some point in the past, has indeed leveraged the market position of iPod and perhaps the sleek design to get the larger part of the pie.

While it is to be seen how the iPhone does as a phone, it sure is going to have a lot of immediate buyers. Even hardcore modem designers who struggle to push the boundaries of performance want to lay their hands on this one. And of course, one should also not be surprised if the modem performance is overlooked. After all, it is the carrier who is going to take the flak from the customer. Someone having a cool phone is more likely to blame his bad call experience on the service provider rather than on the phone itself.

So lets wait until June to see if Jobs can once again say..

I came, I saw, I conquered!

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An introduction

My name is Vijay Nagarajan. I work for TensorComm, wireless start-up based out of Denver, Colorado. We work on advanced receiver design for CDMA/WCDMA/HSDPA phones. Simplistically put, an advanced receiver can improve data throughput when you are seeking to browse the internet via your cell-phone. Service providers like Sprint, Verizon in the US, Vodafone, Orange etc in Europe and Reliance in India can benefit from technology similar to ours by being able to service more users for the same infrastructure. For further details on our company and our product, I would direct you to our website (www.tensorcomm.com).

As far as this blog is concerned, I am hoping to be able to jot down my thoughts and observations on the wireless industry as I see it evolve on a daily basis and as I get to talk to other insiders in the industry. There has been no dearth of action during my three years in the industry and though I have developed some insights into industry dynamics, I have not collated them into a cogent thought process. I am looking to fill that gap through this forum and to start active and informative discussions on some of my articles.

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Posted by Vijay Nagarajan at 10:58 PM 0 comments Links to this post  

Contact

Thursday, March 1, 2007

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Posted by Vijay Nagarajan at 11:00 PM  

Vijay Nagarajan's biography

Vijay Nagarajan is a Product Manager at Broadcom Corporation, Sunnyvale and works to define and productize future Wi-Fi solutions. Prior to his role at Broadcom, he was a systems engineer at Atheros Communications, a Santa Clara-based wireless semiconductor company. At Atheros, he was an active part of the company’s efforts to bring state-of-the-art Wi-Fi and Bluetooth-enabled wireless devices to the world. Previously, he was with Denver-based Tensorcomm, a start-up providing advanced receiver solutions for CDMA-based 3G networks.

Vijay has over 20 published patent applications with the USPTO and the WIPO. These inventions span mobile receiver architecture and design techniques for 3G and 4G networks. Vijay also has 6 peer-reviewed international technical papers, including IEEE publications, in coding techniques for wireless and storage systems. He also reviews technical conference submissions in these areas.

While at Tensorcomm, Vijay was also actively involved in the 3GPP standards-body activities and in chalking the company's IP roadmap. His first-hand experience observing, participating and negotiating in the complex mobile value chain – the carriers, the handset vendors and the chipset vendors – have given him an understanding of the geopolitical alignment, impact of new technology, successful business models, financial modeling and competitive landscape in the mobile wireless space. Through his incisive writing in his blog - Wireless Industry Analyst, Vijay attempts to marry these insider insights and unique perspectives with his penchant for market research and analysis. The blog, Vijay hopes, will create ‘impact through information.’

Vijay’s articles are currently syndicated by Seeking Alpha and Yahoo Finance. Vijay also collaborates with Sramana Mitra to understand the mobile chipset vendor matrix. His valuation series on Qualcomm, InterDigital, Broadcom, Texas Instruments and Marvell are well-read and perhaps the most comprehensive techno-financial analysis published online. To arrange syndications or columns, please email him.

Vijay holds an M.S(EE) degree from the University of Colorado, Boulder and a B.S degree from the College of Engineering, Guindy, (Anna University) India.

For additional details, you can view his linkedin profile here.

Disclaimer: All thoughts expressed by Vijay Nagarajan in his articles are his and do not necessarily reflect those of Broadcom Corporation, Atheros Communications or TensorComm Inc.

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Posted by Vijay Nagarajan at 3:00 PM