Motorola, Nortel Networks and Lucent Technologies have been shortlisted by Telecom New Zealand as potential strategic partners for its new CDMA (code division multiple access) cellular digital network.

Planned for commercial rollout in the first half of 2001, the new network will initially cost between $NZ160 million ($129 million) and $NZ200 million. The final figure will depend on how much risk the strategic partner accepts. Payment will be made based on quality assurance as customers are added, so any or all of the capital expenditure might be made over the next three years.

Network group general manager David Bedford says negotiations with the potential vendors will be entered into within the next few days and a decision will be made within a couple of months. "Price will be important," he says.

The network chosen by Telecom is cdmaOne, the brand name adopted for networks complying with the IS-95 family of cellphone standards set by Qualcomm Inc, which is the dominant technology backed by the CDMA Development Group. CdmaOne has two and a half to three times the capacity of D-AMPS and requires fewer cell sites. Had Telecom stayed with TDMA (time division multiple access), it would have needed 80 more cell sites. CDMA needs only 30 more. There are thus large cost benefits.

Other immediate benefits, according to Bedford, include better voice quality and coverage and smoother "handoffs" for customers who are moving from cell site to cell site.

Telecom expects big cellular growth to continue. It anticipates 30 per cent coverage of New Zealand's population by the end of this fiscal year, and 50 per cent within another year. The transition to CDMA technology will be gradual, and will not involve a "forced migration" of users to new handsets and numbers, as has happened in Australia with Telstra Corp.'s CDMA implementation, Bedford says.

Though voice will initially be the main driver for CDMA, high-speed data applications will be rolled out as they become available. CDMA offers a minimum 144Kbit/sec packet data solution compared to the current 19.2Kbit/sec offering. It will eventually provide up to 2Mbit/sec in a stationary environment.

Handsets for CDMA are expected to be similarly priced to those for other technologies by the time the system is rolled out. There are half-a-dozen providers of D-AMPS handsets, but already 25 for CDMA, which is being used in the US, Canada, China, Japan and Australia. Telecom CDMA customers will be able to roam in Australia.

"Customers will be migrated on to the cdmaOne network as is convenient to them," Bedford says.

"Virtually all cellular technology paths lead to (some form of) CDMA, including GSM. We need to ensure that in the future our cellular network meets all the requirements of our customers, including the need for high-speed, quality mobile data," he added.

"The transition to CDMA is being designed to be as smooth as possible by providing customers with an attractive upgrade path," Bedford said. "Existing customer services, including pre-paid, will be able to be supported on the new network."

Telecom had a choice of remaining with its TDMA network and migrating to EDGE, the mid-way standard which GSM carriers will go to before full Wideband CDMA is available in 2003 or 2004, or going with cdmaOne.