Unified standard seen linking mobile world
GSM backer Craig Ehrlich tips migration to one technology
A chance to work for Asia's superman Li Ka-shing lured Craig Ehrlich to Hong Kong more than two decades ago. He hasn't looked back.
Carving out a career in the city's highly competitive telecommunications market, Mr Ehrlich gained a reputation as an astute operator in an industry where mistakes are not easily forgiven.
After holding senior positions in Mr Li's sprawling telecommunications and media empire, Mr Ehrlich went his own way by helping found mobile operator Sunday Communications in 1996.
Then leaving Sunday in 2001, he took on a wide-ranging role as chairman of the GSM Association, representing the world's dominant mobile technology.
Mr Ehrlich has since rejoined the Li fold and is now a director of Hutchison Whampoa.
Along the way, he married one of Hong Kong's top political and environmental figures, Christine Loh Kung-wai.
The 53-year-old American has seen mobile phones transform from the luxury gadget of the 1990s to something even the poorest mainland peasant can afford.
He said mobile telephony's increasing penetration globally was one of the landmark achievements of the 2000s, not only stimulating competition in developed markets such as Europe and the United States but also bridging the digital gap in the developing world.
Mr Ehrlich has a bachelor's degree from the University of California Los Angeles, a master's from Occidental College, and a postgraduate fellowship from the Coro Foundation.
He is a director at Hutchison and was the chief executive of Sunday from 1996 to 2001. The company was acquired by PCCW in 2005.
Why did you come to Hong Kong years ago and how did you secure the link with Li Ka-shing?
I came to Hong Kong in 1987, joined Hutchison Cablevision as managing director in October of that year and was a founding member of the team that launched Star TV, Asia's first satellite delivered multi-channel television network. After four years with Hutchison Whampoa, I became the group operations director at Hutchison Telecommunications and was responsible for its operations in 10 countries.
In 1993, I left the Hutchison group and established companies involved in the introduction of cable television and paging services.
I then sold these companies in September 1996 and started Hong Kong mobile operator Sunday in November of that year. I was its managing director until 2001.
The company was awarded a GSM mobile licence and secured a 3G licence in the auction in Hong Kong. In 2001, I resigned from Sunday and rejoined Hutchison as a director. I also put more time into the GSM Association and my own investments.
What is it like working for Mr Li?
I admire him and the wealth he gets from his companies' dividends and his stakes in these firms is much larger than any salary he would receive. So I strongly believed that founding my own business could be the best way to generate wealth and to be an entrepreneur. This is the reason why I came to Hong Kong and started working for him 22 years ago.
What are your major business interests now?
In the Philippines, I am vice-chairman of the investment group that owns Eastern Communications, the former Cable & Wireless company in that country. I am also a board member of Philweb, the country's leading public gaming company. In addition, I am chairman of Taiwan's largest cable television firm, Kbro, formerly known as Eastern Group.
I am also the chairman-founder of Novare Technologies, an onshoring and outsourcing software company development headquartered in Hong Kong and serving clients around the world.
What was your role at the GSM Association?
I worked for the association for seven years from 2001, turning it from an organisation dealing with wireless technology standards to a more open industry group to promote the GSM standard around the world. The association has done a good job with subscribers for the European GSM mobile technology overtaking rival technologies such as the US-based CDMA, PDC or TDMA in 2G and 3G.
My major role when I took the helm of the association was to change it into a total trade group. After the internet bubble burst in the early 2000s, operators paid the highest price for their 3G spectrum and the industry believed it needed to have an association to lobby on a wide range of issues. I talked to the chief executives of mobile operators and they all agreed to transform the association into a trade group.
What were your main achievements in the association?
One of my main achievements was to transform the group into a corporate association with a board of directors, a chief executive and a chief technology officer.
Under my helm, subscribers for the GSM mobile service have reached 3.5 billion from only 600 million seven years ago; 300 mobile operators have joined our camp.
With the larger user base, the economies of scale have driven handset prices down from US$80 to US$15. A rival technology like CDMA, which used to have a subscriber base very close to GSM, has faced setbacks with several big operators joining the GSM 3G service.
Now, GSM-related technology has about 86 per cent of the global wireless communication market and we expect to have a unified standard for the next-generation mobile technology based on Long-Term Evolution (LTE).
For sure, the most successful achievement would be defeating the rival CDMA technology in the mobile market, even though several fast-growing mobile markets like China, Brazil and India all have CDMA operators.
The GSM family still enjoys a bigger share because of the falling cost of 2G mobile phones, which allows emerging markets to add mobile subscribers aggressively. For instance, India is adding 10 million mobile phone users per month, while China is adding 7 million.
GSM's big user base also allows mobile phone makers like Nokia and Samsung Mobile to lower their costs.
What is your view of spectrum allocation? Do you think auctions are still the best method?
It is the worst method to allocate spectrum. This delayed the introduction of 3G in the early 2000s as the mobile operators were facing financial problems paying for licences at a very high price.
The telecommunications sector helps boost the local economy, as for every 10 per cent increase in telecoms service penetration, there is a 1 per cent increase in gross domestic product. The higher the penetration in every country, the increase in efficiency dramatically changes people's lives. The government should use mobile services to bridge the digital divide. To do that, the government should grant the licences without any taxes on phone services.
However, the rising popularity of mobile broadband service does raise concerns about the lack of spectrum for the mobile network. The government should grant more spectrum to drive the growth of mobile broadband. Mobile broadband is the way to drive competition and boost broadband penetration.
China is one of the more eye-catching markets in mobile telephony. You went to Beijing last month, what do you think about the development of its mobile sector?
Mainland operators like China Mobile and China Unicom have played an important role in GSM Association. In fact, China is likely to adopt the LTE path for the next-generation mobile technology.
While the Chinese government is keen on developing its own 3G mobile technology based on TD-SCDMA, it could be worked together with the GSM camp. As the European LTE technology is based on frequency division duplex while the mainland technology is based on time division duplex, equipment vendors are working on the dual-mode chips needed for the next-generation mobile network that could bring the two technologies onto one chip.
This could help China-developed technology become a success story. The TD-SCDMA technology is coming out too late, and the technology can survive just in China itself. It is a classic mistake that adopting a proprietary technology does not win the market in the long term. The TD-SCDMA will be in better position in the next generation mobile field by joining the LTE camp.
The European WCDMA technology will also have a good start on the mainland as China Unicom, one of the three mobile operators in China, is expected to have a trial run of 3.5G mobile technology in the near future, and the full service is expected to roll out in August.
What will the next-generation mobile technology be like? Will there be only one technology dominating the market?
The future next-generation mobile technology is expected to be LTE, which is based on Europe's GSM and WCDMA mobile technologies. The technology is gaining support from rival technologies like CDMA, and leading CDMA mobile operators like Japan's KDDI, US-based Verizon and India's Reliance have all declared they will join the GSM camp for next-generation mobile technology. This is a dramatic shift.
Since the 3G mobile technology deploys US-based CDMA technology by the European-developed WCDMA technology, the two rival technologies are friendly together in the GSM Association, especially Qualcomm, which owns the CDMA intellectual property rights. We are in an excellent relationship.
In the next-generation mobile world, all CDMA mobile networks will be gradually migrated to the European LTE technology. CDMA networks are expected to shut down. We will have only one standard and this should be good for us. In fact, there is almost a unified mobile standard in the 3G field already, as WCDMA and CDMA share the same fundamental technology of CDMA.
What do you think about the future of rival technologies such as WiMax?
I don't think mobile operators in the GSM camp will leave and join WiMax. WiMax seems to have no valid business model since the technology emerged three to four years ago. Don't waste the money on that technology. For existing 3G operators, they are pushing faster to deploy 3.5G and LTE mobile technologies for faster transmission speeds. WiMax should have no impact on GSM.
You have been in Hong Kong for decades. Do you consider Hong Kong your home now?
Hong Kong is a nice place to live, but it seems the government has failed to tackle the pollution issue. I have a young daughter so my wife and I care about her health. While the rest of the world is also facing traffic pollution problems, governments everywhere have some measures to cut pollutants to protect the health of their citizens. However, our government seems to be doing nothing to improve the environment.
My wife has been talking with shipping companies about having their vessels abide by new emission standards when they enter harbours like Hong Kong. These companies have agreed to follow new measures as many foreign countries have already implemented a high standard in controlling air pollution. But the hindrance here is that the government does not want a tighter rule to control air pollution from vessels. I just want the government to have a better plan to care for our environment, and with stronger execution.