Savvy businesspeople know the details of their business down to the brass tacks, but most have no clue how their cell phones work -- despite, according to the trade publication Cellular News, spending almost $1,000 annually to service each individual phone.

The technology may seem dense, but what helps is to understand that there are three main categories of cell phones represented by an alphabet soup of foreboding anagrams: GSM, TDMA and CDMA. GSM is a type of TDMA. And, if that isn't confusing enough, GSM and CDMA are the main competing cell phone technologies.

In order to make the right decision on cell phone technology for your business and employees, it's important to understand the basics. Here's a rundown on what the letters stand for and how the technology works:

GSM IS MOST WIDELY USED

GSM stands for Global System for Mobile Communications. If you are making a phone call, it almost certainly is on GSM, the de-facto cell phone technology standard today. More than two billion customers worldwide use GSM phones, an estimated 80 percent of mobile phone users globally, according to the GSM Association, the London-based trade group that represents 690 GSM mobile phone operators in 214 countries and territories. GSM uses several different frequency ranges to connect calls. Like radio stations, each region has a different band of frequency that GSM networks utilize. The Americas use 850 or 1900 MHz, and other continents use 900 or 1800 MHz. A few countries -- in Scandinavia, for example -- use 400 and 450 MHz.

GSM is known as 2G (second-generation) technology, meaning it is part of the second major upgrade in modern cell phone technology. "GSM differs from first-generation wireless systems in that it uses digital technology and time division multiple access [TDMA] transmission methods," says the GSM Association.

  • Advantages: The technology is mature. The network is stable. The features are robust. This leads to more consistent service and less signal deterioration inside structures, such as buildings.
  • Disadvantages: GSM transmission has a pulse nature which can interfere with some electronics, including pace makers and hearing aides, according to the GSM Association. This is why hospitals require people to turn off their cell phones.

GSM IS A TYPE OF TDMA

TDMA stands for Time Division Multiple Access. A common radio technology, TDMA is the foundation of GSM. As the name suggests, time division multiple access takes designated broadcast frequencies and divides them up so multiple users can use them.

  • Advantages: This technique frees up other broadcast signals for other uses.
  • Disadvantages: A well-noted challenge is the interference caused by multiple users sharing the same bandwidth. The new 3G Wireless technology, which uses CDMA, provides less call interference.

CDMA IS THE FOUNDATION FOR 3G WIRELESS

CDMA stands for Code-Division Multiple Access. Originally invented during World War II in England to thwart German wire interference, CDMA splits each phone conversation into pieces that follow unique but random routes. The Costa Mesa, Calif.-based CDMA Development Group describes it as a "'spread spectrum' technology, allowing many users to occupy the same time and frequency allocations in a given band/space."

Other technologies use one particular wireless frequency to transmit information. CDMA uses multiple paths (hence the name code-division multiple access) on each transmission, making it difficult to stop or eavesdrop on a particular conversation.

Qualcomm brought CDMA technology to cell phones in the late '80s and currently owns the patents to code-division multiple access. Thus, when you use CDMA, Qualcomm is making a profit. More recently, CDMA became the foundation for the newest cell phone technology, 3G Wireless.

  • Advantages: CDMA can accommodate more users in a frequency range than other cell phone technologies. It uses less power while covering larger areas. Less likelihood of dropped calls.
  • Disadvantages: Most CDMA technology must be licensed from Qualcomm, limiting the number of competitors offering service. Service may, at times, be inconsistent. As the number of subscribers rises, the range drops.