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Huawei Converges on America

Light Reading
News Analysis
Light Reading
3/15/2005
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Chinese infrastructure provider Huawei Technologies Co. Ltd. is hoping to break into the U.S. market with a third-generation CDMA system aimed at dramatically reducing operating costs for mobile carriers (see Huawei Details 3G Deployments and Huawei Adds CDMA2000 Switch).

The announcement is significant in that it further shows how committed the Chinese giant is to making a name for itself in North America. In addition to having a core-to-access product portfolio in the wireline world, the company is quickly gaining the attention of North American carriers, even though it has only just dipped its toe into the market (see Huawei Gains Ground in HR Survey, Huawei Goes Hard Core, and Huawei Unveils Newish IP DSLAM).

Here's what Huawei's up to this week: The firm has developed a 3G wireless system that divides the control and radio elements of the network. Previously both the control and radio side of a wireless system were housed in the same centralized location, a model that works for the voice world, where sessions are dedicated and single-purpose, but it's too expensive to use for data applications.

The new system, the CDMA2000 IP Distributed Network Solution, comprises two parts: a softswitch MSC (mobile switching center), the controller; and a distributed Base Transceiver Station (BTS), the radio element that communicates with mobile telephones.

Huawei says that with its new system, carriers can simply add extra capacity by plugging its baseband controller, which can support the CDMA (Code-Division Multiple Access) 1xRTT and EV-DO (Evolution-Data Only) standards, into a 19-inch telecom rack. Optical fiber is used to link the controller and the distributed radio system -- giving operators a system that Huawei says can support up to 1.8 million subscribers in three cabinets.

The firm says the capex for the equipment is roughly the same as that offered by established vendors in the U.S. “The key right now is opex,” says Charlie Wei Chen, VP of wireless networks at Huawei. Huawei is claiming that its new wireless system will cut operating costs by a third, because its distributed system will cut the power consumption and human resources needed to manage a 3G system.

The firm appears to be looking to get a foothold in the U.S. market by the time CDMA carriers look to add more capacity to their 3G networks. It's not targeting Tier 1 carriers right away, a market that for now is dominated in North America by large incumbents such as Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Ltd. (NYSE/Toronto: NT) -- but it will get there, company spokesmen insist. “In phase one we have no chance,” says Edward Chen, senior VP at the firm. “But in phase two we have a chance.”

Huawei is betting that its rack and distributed radio system will appeal to operators that want to quickly add capacity and services to their 3G offerings. Some analysts say Huawei's timing and message are both on track. "Softswitch MSCs are making a major impact in the GSM [Global System for Mobile] and UMTS [Universal Mobile Telecom System] world, where Huawei has already had success. Clearly it also makes sense in the CDMA world," says Unstrung Insider analyst Gabriel Brown.

"It’s equivalent to the circuit-to-softswitch migration in the wireline world and should amount to fairly large capex bucks," he adds. "It’s also the strategic platform for IMS [IP Multimedia Subsystem]. Using these kinds of distributed architectures operators can reduce the number of network elements in the circuit core by over 30 percent. This can generate some significant opex savings."

For the time being, though, Huawei is being uncharacteristically modest about its stateside wireless ambitions. Attendees and media were giving unprecedented access to senior Huawei officials at a reception here -- a sign the company is hoping to become as well liked as it is well known. “We are a freshman in North America and 3G,” Max Wang, president of Huawei's North American division, told the small-ish gathering on Monday evening.

— Dan Jones, Site Editor, Unstrung, and Phil Harvey, News Editor, Light Reading

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