By Elliot Lamb, Cardel Ltd.

Ten to twelve years ago we used to talk into mobile phones that resembled the size and weight of house bricks. The combined weightlifting with mobile communication and all of the available systems were analogue. If any of you have bought a new mobile phone in the last 12 months or so, you will notice that will often display the number calling you. It will inform you while in the middle of a call that someone else is trying to call you and allow you to switch between the two calls. IT seems to work in other countries you travel to - when you arrive and switch it on it seems to latch on to some local service provider and work in exactly the same way as it does at home. How does it do this stuff? Well, I'm pleased to say that smartcard technology has a lot to do with this and is a key in its operation.

GSM systems are now operational in more countries than McDonalds is. In a period of less than 10 years GSM mobile systems have been established in 109 countries world-wide and currently have around 60 million subscribers world-wide. This figure is expected to reach 90 million by the end of 1998 and over 300 million by the year 2002.

What we are witnessing here in GSM is a technology which is part of a wider revolution of wireless telecommunication. However for such a widely used technology, suprisingly little is generally known about the workings of GSM. This article is intended to provide a brief overview and answer some of the more common questions.

What is the GSM System? GSM stands for Global System for Mobile Communication

The GSM system, as much as anything, is a standard agreed by a number of countries under a Memorandum of Understanding and operates under an organization called the GSM Secretariat. This is much the same way that VHS is a standard agreed by many countries in the operation of video and television.

GSM is a land based system which operates via a network of base stations, each providing coverage of a localized area or cell - hence cellular phone. You are all probably very familiar with base stations as there are now thousands and thousands in everyone's country. They are, in fact, those delightful looking constructions which have sprung up all over the populated areas of each of our countries which look like overgrown television aerials.

What happens when the phone is switched on?

What actually happens when you switch on your GSM mobile in the morning ready to take your first calls of the day, is as follows:

The phone activates, reads the unique ID data from the smartcard and locates the nearest base station. The phone then transmits its telephone number and ID number to the base station. The base station in communication with HRL uses the ID number to generate a new number using the encryption Algorithm. At the same time the phone generates the same number using the same Algorithm. Providing the two numbers match, the phone is then on line to the system. The algorithm is controlled by the GSM secretariat known only to a select number of companies, namely GSM operators and their suppliers. It is this Algorithm in fact that is the basis of the security of the system. A telephone conversation between digital GSM telephones is therefore extremely secure and was one of the concerns of the British Government in the introduction of this technology, i.e. non "buggable" calls - GSM is therefore very difficult to fraud.

At the same time the base station checks throughout the GSM network to validate the ID number given by the phone to ensure this is a legitimate handset - so every time you switch on your phone, quite a bit happens!

The M.E. or mobile equipment therefore comprises two essential parts, the phone itself and the smartcard.

The phone has the ability to send and receive information, but the smartcard contains the operational intelligence, the processing capability, the security, the memory and the functionality of the system.

The diagram shows a typical set-up of a network within a country where ME= Mobile Equipment, BTS= Base Transfer Station, MSC= Mobile Switching Center similar to a traditional telephone exchange, and HLR= Home Location Registration, CPU= Database control and VLR= Visitor Location Registration.

As a matter of interest, 15 telephones can operate simultaneously in each cell of the system. So next time you're in a busy area, if you can see 15 or more people using their mobiles, chances are you won't be able to use yours - something you may have begun to notice at busy international exhibitions.

How does country usage work?

When moving from one country to another, the same procedure of LOGGING ON happens as if your are at home, except with the relevant local service provider, who acts as the HOST PROVIDER while you are in the particular country.

When moving from one country to another, the customer file is transferred as a guest file to the country where the phone is moved to. All charges incurred in that country are then placed on the guest file VLR (Visitor Location Registration). This allows the local operator who is 'hosting' the phone to charge and receive payment for using his network.

Calls which are made within the new territory are routed directly in the same way as normal. This charge will then be registered on the VLR. Calls which are made back to the home country are routed directly and again registered on the VLR. Calls which are made to a third country are routed via the host country, so for example calling from France to Spain is routed from the UK.

Finally, someone calling you from your home country when you are in another country will dial your number and be automatically transferred to wherever you are. Since the caller has no idea where you are - which in some cases is not a bad thing - it is considered unfair to make the caller pay for the cost of the call. The system is therefore configured that the caller pays the national element cost of the call as if in fact you were at home, and you pay the international part which is transferred back to you from your host provider back to your home provider in the reconciliation. What all this means is that you pay a large proportion of incoming calls when abroad and have limited control on this.

At the end of all this, of course, some sort of reconciliation is required - so that each of the service providers is paid for the use of their service. At regular intervals therefore they are reconciled, and the VLR charges are charged back to your own provider who then passes on their charges, plus their own charges on to you. Typically this reconciliation is made on a monthly basis which means in general after you have gotten home.

This shows that as much as anything, the GSM system is a common standard for charging the customer. This element encourages providers of mobile phone systems to sign up to GSM to that they can charge visiting subscribers. As GSM grows and mobility of people grows this is an element which will become an increasingly important part of revenue.

This is much in the same way that airlines around the world cooperate to reconcile all the airline ticket charges.

How extensive is GSM and how has it grown so fast?

It is estimated that within the industrialized nations, as costs decrease, subscribers will reach around 30% to 40% of the population in each country. This is known as "penetration" of the mobile subscriber market. What is interesting is that there seems to be virtually no element of cannibalization in the market, i.e. the mobile of cannibalization in the market, i.e. the mobile market is an additional market in that people still have their landline phones. This is effectively the same phenomenon as modern day houses with two bathrooms and families with two cars.

Now, bearing in mind all GSM phones have a smartcard in them, GSM is therefore one of the biggest single applications for microprocessor smartcards in the world.

Why does your GSM phone use a smartcard?

The answer is, strictly speaking, it doesn't. It needs a chip. The concept of GSM is interchangeability, flexibility, mobility, and upgradeability.

All of these are achieved by having the intelligence of the telephone removable, transportable and interchangeable. This is what gives GSM the ability for a card holder to use any GSM compatible phone in any of the 109 countries in which GSM operates simply by inserting his or her own card into the phone and keying in a PIN.

The most convenient way to carry the chip and allow it to be handled and moved from place to place is of course a card. In fact there are two formats in which the chip is in fact carried: the familiar CR80 size and the smaller "SIM Plug-in".

SIM stands for Subscriber Identity Module

The plug-in format is designed to remain in the phone most of the time. The CR80 size is intended to be removed and replaced or interchanged more frequently. The choice of format is user defined. However from a card manufacturing point of view this creates a problem of what percentage of CR80 sized format to make and what percentage of "plug-in" to make. The solution is to manufacture the cards by cutting out the shape of the "plug-in" from the card but leaving it attached at a couple of points. This allows the card to be used as normal or if required the "plug-in" SIM to be pushed out by hand. This of course can be done at subscriber level.

So the card carries all the intelligence of the phone itself. The phone is only a dumb interface. This is why in fact the smartcard or "SIM" modules (depending on the format) are truly interchangeable from phone to phone as all the intelligence information and processing is carried out on the card.

Within GSM there are a range of frequencies in which it can operate and GSM is not the only mobile system standard in operation.

There are principally four main digitally based mobile systems in operation:

GSM : EUROPE

CDMA : USA

TDMA : USA

PHS : JAPAN

The other systems have a number of features in common with GSM in that they are digital, but are in fact competing standards with a number of different features. GSM is by far the oldest, most widespread and established system.

Advantages of GSM

Why, apart from GSM being the first major digital system to be established has it become so successful? The reason is it has a number of advantages.

• Easier and quicker to implement
• Smaller base station
• Technology works: a simplistic statement but GSM installations have proved relatively trouble free
• Better closed groups and data transfer
• Highly secure, due to encrypted communication

I mentioned previously that GSM is only part of the wireless telecommunication revolution. The future of this whole area is about integration of systems and services. So what else can we do within this technology and what other services can it provide?

GSM Phase 1, Phase 2 + Added Value Services

As technology develops in any area, upgrades and enhancements are introduced. The same is true of GSM. It has been introduced together with its features in stages. So far these are Phase I, Phase II and Added Value Services.

Phase I

Phase I gives the basic functionality of a mobile phone familiar to everyone:

• Functions as a transceiver to send and receive calls, plus:
• Abbreviated dialing numbers
• Memory of numbers

Phase II

This is where the phone becomes more than just a phone and becomes a transaction and communication terminal. Some of the features include:

• Call waiting
• Call hold
• Multi-party
• Closed user group
• Advice of charge
• Line identification
• Short message services - SMS

What we have discussed so far are the features related to making and receiving phone calls. These are enhanced features, but most of them are available with most modern fixed line systems. However when we talk about added services, the telephone stops being just a telephone and becomes a data and transaction terminal. Again each of these phases and the features they offer are controlled and implemented by the smartcard or SIM within the phone.

Added Value Services

SMS
Reuters - exchange rate via SMS
Banking - update balances transferred
Purchases - electronic cash - AT&T Nokia
Mondex co-operation
Tracking/location system
News
Sports
Weather
Stocks and shares
Currencies
Flights
Video Picture - 2 seconds
Virtual Private - Network - Corporate system uses 3 figure telephone number

All the features above are controlled and implemented by the smartcard or SIM within the phone.

Pre-payment GSM Cards:
No contract
No commitment
No traceability
Visitors
Low/occasional users
Reactive old phones
Children - cost control

The two big presents in Christmas 1997 were either a digital camera or a pre-payment mobile phone with a pre-payment phone package (phone card). For the first time a mobile phone can be given as a present without committing the receiver to a fixed monthly tariff or a minimum 1 year contract. Again without cannibalizing the existing market, pre-pay mobiles are targeted at additional niche users.

A Satellite Option

GMPCS= "Global Mobile Personal Communication by Satellite"

A third generation of GSM will launch which will provide enhanced services to give an edge over the competition. In more remote or less densely populated areas of the world, it is uneconomic to establish and run base stations. Therefore most mobile operators will typically aim for 90% population coverage in more urbanized areas which may represent only 40%-50% of the actual geographical area. GMPCS is a more effective and ultimately cheaper way to achieve global coverage.

The Future

The future, as they say, looks bright. GSM will continue to expand and increase coverage and penetration - and in areas where it is difficult to achieve coverage with the land based system or if it has competition from a rival system, it may well opt for "LEO" Low Earth Orbit - GMPCS system.

CDMA & TDMA - These will also continue to expand but are not likely to expand so rapidly and to so many countries as GSM. This is because the CDMA & TDMA being US based technologies, the USA is large enough to be a self supporting market in its own right. There is not the same need to sign up cooperations with other countries as there is in Europe. Europe, with its many smaller countries, needed to have a common interchangeable system to create a single standard and market. Many separate and incompatible systems in Europe would clearly never have made economical sense.

Finally, the mobility of people moving from country to country in Europe is very high, encouraging the implementation of a systems with god roaming ability.

It's a fact that within the USA only a very small percentage of the population travel beyond its borders. Only 15% of the USA population actually holds a passport and 7% out of the 15% are in fact the military which leaves 8% of the population civilians who are likely to travel. The incentive to create roaming opportunities for US subscribers is therefore limited.

PDS - while potentially technically advanced, it has probably joined the party too late to make a truly global impact on proceedings.

GSM will therefore be the main mobile digital wireless telephone/transaction/information system world-wide.

Conclusion

So, this is all good news if your are a smartcard manufacturer because the demand is set to increase for the foreseeable future. And, even if you are not in the smartcard business, it is still good news as all these cards will still need to be printed, laminated and cut. Even if you are not the manufacturer who makes the GSM card bodies, the GS requirement will take up the production capacity of your competitors leaving more of the market for you.

So, GSM really is good news for all in our business.

Credits

I am indebted to the following for some of the statistical and diagrammatic information shown:
Motorola
Alcatel
Nokia
Schlumberger