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Exclusive Interviews Interview 1 | Interview 2 The Early Days of Cellular CDMA Excerpts from a discussion with Irwin Mark Jacobs, CEO of QUALCOMM October 20, 2003 By Dave Mock  Dave
Mock: After launching your first product at QUALCOMM, the OmniTRACs fleet
tracking and messaging system, when did you start to explore CDMA for use
in cellular networks?Irwin Mark Jacobs: With some cash flow, we could go back to the CDMA effort and that was roughly in October of 1988. We brought that to the cellular industry in about Feb. 1989 after had done an analysis to show that this was indeed very promising. At that time the industry was debating on TDMA and FDMA and they ultimately decided on TDMA even though at least AT&T (Lucent) and Motorola favored FDMA. We had done a TDMA phone at Linkabit for IMM and they were one of the supporters, and I think Ericsson, a few others and eventually TDMA did eventually win. That vote occurred in January and here we came along in February and said 'you missed a good thing here with CDMA' and most people didn’t want to hear about it. PacTel Cellular was interested because they didn’t think the TDMA factor of three times was enough. So they did support us to move ahead and made a presentation to the industry in June in Chicago and no one found any holes in it so we spent many 24 hour days through October to put together the November demonstration to show that all these problems people had been citing in CDMA we had good solutions for. DM: Had you been working in any of the industry bodies at this point to present CDMA? IMJ: No, this is all internal to that point. We did a lot of work ourselves using computer simulation. Then a little later I went to the FCC to see if an operator did find CDMA promising that they could be permitted to use it. The FCC said as long as it didn’t disturb the AMPS networks, that the operators are free to choose and to let the market decide. DM: So that gave you the green light to build and test CDMA designs in a cellular network? IMJ: Pursuant to talks at the CTIA we invited people - big people internationally - to come to the demonstration such as NYNEX, Bell Atlantic and Ameritech. Many said 'so it works in San Diego but does it work in Manhatten?' So we repeated it there and it worked. The original equipment was very large so we spent the next two years completing designs and building them into very small integrated circuits. Two years later we had another demonstration with commercial sized equipment to demonstrate the technology. DM: Being new to the industry, it must have been a hard sell. IMJ: There was a lot of skepticism - many people thought that this would not be very successful. Or if it was technically successful would it be economically successful? Would the operators wait for it or go with TDMA technology? A couple of professors at Stanford even claimed that it violated the laws of physics. The strategy we followed to resolve those arguments was basically a very open one. While we were putting the chips together, we began to invite the various companies – whether they agreed or disagreed – to come in and participate in the testing and formulate their own tests. So we were very open with the testing, giving people the data to go check it for themselves, just to get as much understanding and support in the industry. DM: Now, had you always intended to license CDMA technology? IMJ: We debated what was a reasonable business plan if we were successful and certainly one could think about trying to take ones arms around it and do the manufacturing yourself. People occasionally raised the Beta vs. VHS issue – that better technology doesn’t always win. But part of that was that VHS was much more broadly licensed so there were many more supporters, among other things. Fairly early we decided that we would try to license the technology but we needed to get the major manufacturers involved. DM: How did early efforts to license the technology pan out? IMJ: We began to negotiate with AT&T, Motorola and Nokia as well as others and the give and take of that began to set the terms and conditions of how we would license. None of us had any experience in licensing before this so that was kind of educational as well. I did a lot of negotiating over that period. Once we could get enough support, it was important for us to sign more licenses because once again we were running out of money. We needed license fees to keep the development going as we had no royalties yet with no equipment being sold. That’s how we ended up with the upfront license fee as part of our licensing approach. DM: You also had some early success in seeing CDMA adopted internationally as well, correct? IMJ: The initial efforts were here in this country but at our public demonstrations we did invite people from other countries to come and see this. Allen Salmasi was largely responsible for making the contacts that gave us a chance to talk with people in the Korean government and research to talk about CDMA. The argument we made was that Korea was moving from low tech to high tech and they were competing with Japanese who were faster to market so they had to compete on price. With mobile phones, Korea did little analog and Japan went quickly with PDC. We said that Japan is going TDMA, but if you went CDMA (risk, not proven commercially but) you’d have a head start with that, not only for domestic but for export. We agreed to a technical exchange with them, they could send a group to work with us in San Diego and bring back the technology and set the framework for a licensing agreement. So that took place over the next few years. That worked out very well on both sides – any good agreement has to be good for both parties. DM: Early on you made the decision to actually manufacture CDMA equipment as well. What spurred this? IMJ: To do the demos in 1991, we had to build a commercial sized handset. We had to build the chips and stuff just to make it work, so we had a head start over the other manufacturers. We had licensed AT&T, Motorola Nokia and others but one problem with bringing the technology to commercial introduction - as with other technologies - was the handsets always lagged. So we decided we better continue to develop the equipment commercially so that when the standard was complete we could quickly launch equipment. A late product could have killed it because time was critical. The first commercial system went in Hong Kong in October or November of 1995 and shortly after in Korea with two carriers. Without handsets available there would have been no business. We did then debate how we could get into the manufacturing business. We weren't a manufacturer of that magnitude - we did OmniTRACs but this was bigger - we had no brand name and we didn't have huge volume to get less expensive components. Sony had no knowledge of CDMA so we set up a 50/50 joint venture with them to manufacture. Also as we were trying to convince Airtouch and Sprint to go CDMA - the brand name of Sony was quite important here so that was the strategy. DM: Sony was your partner on mobile handsets, how about the infrastructure? IMJ: Nortel, though we had spoken with them along the development cycle, had not started development themselves so another strategy we did follow was to sign agreements with Nortel to transfer technology to them, including manufacturing, software, test equipment and have a joint manufacturing effort. We'd do some in our plant they'd do some in their plant. For some time period back to the manufacture of equipment for Sprint we actually jointly manufactured with Nortel.  |
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