Managerial economics presentation

MANAGERIAL ECONOMICS

BUSINESS PROSPECTS OF LAUNCHING CDMA MODEL OF

iPhone In INDIA

Introduction

Apple has recently announced the launch of iPhone which will use CDMA network in India.

Until now, the phone was only available on GSM network.

Reliance unveiled India’s first iPhone on CDMA network on June 28, 2013.

The objective of this presentation is to analyse whether the present market is conducive for the sale of iPhones on CDMA network and the business prospects of this launch of iPhones working on CDMA network.

Types of Networks

There are 2 major types of mobile networks which are available in mobile phones:

1. GSM Network2. CDMA Network

GSM(Global System for Mobile Communications)

GSM stands for Global System for Mobile Communication and is an open, digital cellular technology used for transmitting mobile voice and data services.

The GSM emerged from the idea of cell-based mobile radio systems at Bell Laboratories in the early 1970s.

The GSM is the name of a standardization group established in 1982 to create a common European mobile telephone standard.

The GSM standard is the most widely accepted standard and is implemented globally.

The GSM is a circuit-switched system that divides each 200kHz channel into eight 25kHz time-slots. GSM operates in the 900MHz and 1.8GHz bands in Europe and the 1.9GHz and 850MHz bands in the US.

The GSM is owning a market share of more than 70 percent of the world's digital cellular subscribers.

The GSM was developed using digital technology. It has an ability to carry 64 kbps to 120 Mbps of data rates.

Presently GSM supports more than one billion mobile subscribers in more than 210 countries throughout the world.

The GSM provides basic to advanced voice and data services including Roaming service. Roaming is the ability to use your GSM phone number in another GSM network.

Advantages of GSM

Improved spectrum efficiency. International roaming. Low-cost mobile sets and base stations

(BSs) High-quality speech Compatibility with other telephone

company services. Support for new services.

CDMA(Code Division Multiple Access)

CDMA stands for Code Division Multiple Access, a digital cellular technology that uses spread spectrum techniques.

As the term implies, CDMA is a form of multiplexing, which allows numerous signals to occupy a single transmission channel, optimizing the use of available bandwidth.

The CDMA standard was originally designed by Qualcomm in the U.S.

With CDMA technology, data and voice packets are separated using codes and then transmitted using a wide frequency range. Since more space is often allocated for data with CDMA, this standard became attractive for 3G high-speed mobile Internet use. 

CDMA consistently provides better capacity for voice and data communications than other commercial mobile technologies, allowing more subscribers to connect at any given time, and it is the common platform on which 3G technologies are built.

Unlike GSM which has a SIM card, so that the phone can be easily swapped, CDMA cell phones have an inbuilt R-UIM(Removable User Identity Module) where this is not possible.

Advantages of CDMA

Improved Call Quality Greater coverage for lower cost Improved security and privacy Increased Data Throughput

Chart showing GSM and CDMA users with reference to the various service providers in India

Analysis

From the above chart, it is very clearly that the number of GSM users are very large in number as compared to the number of CDMA users.

Bharti Airtel, Vodafone India, Idea Cellular and Spice which are some of the major service providers in the country do not even provide services to CDMA users.

Even though Reliance Communications, BSNL and Tata Teleservices provide services to the CDMA users, the number of GSM users are more than the number of CDMA users.

Thus we can discern that CDMA network has not been able to establish itself so strongly as the GSM network.

GSM v/s CDMA

As it has been established that GSM is more widely used than CDMA, it is important to find out the reasons for the greater usage of GSM network.

The following points will be helpful in comparing the 2 networks :

Coverage: The most important factor is getting service in the areas you will be using your phone. Upon viewing coverage maps you can discover that GSM network has a wider coverage as compared to CDMA network. It is because the GSM network came into existence before the CDMA network and the number of GSM users are more than that of CDMA users.

Data Transfer Speed: With the advent of cellular phones doing double and triple duty as streaming video devices, podcast receivers and email devices, speed is important to those who use the phone for more than making calls. CDMA has been traditionally faster than GSM, though both technologies continue to rapidly leapfrog along this path. Both boast "3G" standards, or 3rd generation technologies

Subscriber Identity Module (SIM) cards: Only GSM phones use SIM cards. The removable SIM card allows phones to be instantly activated, interchanged, swapped out and upgraded, all without carrier intervention. The SIM itself is tied to the network, rather than the actual phone. Phones that are card-enabled can be used with any GSM carrier.

Roaming: For the most part, both networks have fairly concentrated coverage in major cities and along major highways. GSM carriers, however, have roaming contracts with other GSM carriers, allowing wider coverage of more rural areas, generally speaking, often without roaming charges to the customer. CDMA networks may not cover rural areas as well as GSM carriers, and though they may contract with other CDMA carries for roaming in more rural areas, the charge to the customer will generally be significantly higher.

International Roaming: If you need to make calls to other countries, a GSM carrier can offer international roaming, as GSM networks dominate the world market. By purchasing a SIM card with minutes and a local number in the country you are visiting, you can make calls against the card to save yourself international roaming charges from your carrier back home. CDMA phones that are not card-enabled do not have this capability.

According CDG.org, CDMA networks support over 270 million subscribers worldwide, while GSM.org tallies up their score at over 1 billion.

Global Reach: GSM is in use over 80% of the world’s mobile networks in over 210 countries as compared to CDMA. CDMA is almost exclusively used in United States and some parts of Canada and Japan. As the European Union permissions GSM use, so CDMA is not supported in Europe. In North America, especially in rural areas, more coverage is offered by CDMA as compared to GSM. As GSM is an international standard, so it’s better to use GSM in international roaming. GSM is in use by 76% of users as compared to CDMA which is in use by 24% users.

Security: More security is provided in CDMA technology as compared with the GSM technology as encryption is inbuilt in the CDMA. A unique code is provided to every user and all the conversation between two users are encoded ensuring a greater level of security for CDMA users. The signal cannot be detected easily in CDMA as compared to the signals of GSM, which are concentrated in the narrow bandwidth. Therefore, the CDMA phone calls are more secure than the GSM calls. In terms of encryption the GSM technology has to be upgraded so as to make it operate more securely.

Launch of iPhone on CDMA network

Recently, Reliance Communications launched India’s first iPhone running on its CDMA’s network.

Business Prospects

In order to find out whether the launch of iPhone on CDMA will be successful or not, a comparison should be made between iPhone on GSM and CDMA network.

iPhone GSM v/s iPhone CDMA

The iPhone GSM model is available with carriers worldwide while the iPhone CDMA model is only available with certain carriers.

From a functional standpoint, the major change is that the GSM-equipped iPhone 4 supports the EDGE "2G" mobile wireless standard as well as 3G networking. The iPhone 4 (CDMA) model, on the other hand, instead supports CDMA (EV-DO), which means that global coverage is considerably more limited.

Other limitations of the CDMA model include the inability to receive voice and data simultaneously and slower data altogether, the inability to place a call on hold and conference calls are limited to two calls rather than five. These limitations are due to the older CDMA standard rather than the phone itself.

From the chart and the information presented above it is very clear that the iPhone CDMA model does not provide any advantages as compared to the iPhone GSM model and instead has a few limitations.

Apart from that, the prices of both the GSM models and CDMA models is the same, so the customer does not get any additional benefit from buying the CDMA model.

The prospect of launching iPhone in CDMA is not a viable option as the company will not going to benefit from its launch and instead has to incur some marketing expenses.

Thus the launch of iPhone CDMA model is not a beneficial business prospect as the CDMA model doesn’t provide anything new to the customers.

THANK YOU

-PURAV SHAH