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Telecommunications: The iphone wars (42)

Telecommunications goes cellular

In the last post, we discussed the dawn of telecommunications. Closely connected to war and later becoming state-owned, the industry had just benefited from the latest technical developments and was ready to shake things up again.

Up until that point, telecommunications relied on static node placement. If you needed to call your business contacts, you had to reach a landline phone; either at an office or a payphone. But agile American entrepreneurs, often traveling, were hungry for instantaneous mobile communication — and the market delivered.

To address the consumer need for mobility it was necessary to think bold. A single antenna that covers a lot of ground would need toο much power and would be able to service only a limited amount of people simultaneously. The range would also be limited and any big obstacle like a building or a hill would weaken the signal. Motorola engineers in 80's Chicago innovated their way out of the problem and instead divided their coverage area to "cells" each with their own antenna (hence the name cellular communication or cellphone).

The demo run in Chicago was quite successful, despite its limitations. The phones themselves were still cumbersome and the amount of users was limited, but signal quality was adequate and handover from cell to cell was smooth which enabled actual mobile communication. Cellular telephony was a good niche application.

The European answer

But Europe had a clear edge when it comes to telecommunications. The strong European ecosystem, with ties to excellent state funded universities proved to be ingenious. A completely digital system that enabled many more simultaneous calls was developed, standardized and launched in the old continent.

The secret to success? Maintain the cellular architecture, but divide time into slots. This way, each call gets its own time share to access the base station. The sound is then re-assembled at the receiver and just like that much more people can communicate while using the same infrastructure.

The Global System for Mobile Communications (GSM) or 2G systems became a commercial tsunami. Further features that were possible due to digitization of the communication chain, such as message exchange and limited internet access and of course the massive efficiency gains, made investing in it a no-brainer for anybody wishing to sell more call minutes.

The killer application

There was a point where 2G seemed like the king. Investments were underway and the market seemed satisfied. The state owned organizations in Europe, relaxed in their moat and not wanting to invest more (especially considering the gatekeeping role of governments with spectrum licensing), decided to steer their R&D to further incremental developments rather than the cutting edge.

This proved to be a fatal miscalculation. No-European companies adapted quickly, leveraging the powerful US computing industry to enable even more simultaneous users and significantly higher data speeds—leading to the development of 3G.

What however actually created this market from thin air and drummed up demand, was a way to use all this data. Instead of answering to e-mail, famous entrepreneur Steve Jobs designed the iPhone to watch videos and listen to music or even better download 3rd party apps through the app store. The game was no longer about selling minutes but about selling data - users (and the market) were hooked.

This evolution led us to the 4G, 5G, and soon 6G world we live in today. The key lesson? Success in technology depends on understanding the industry’s trajectory. As we've seen in the Deepseek case, vision and strategy can overcome even the most formidable technological moats!


 

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