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ARTICLE
(Discussion Paper, Rick Ballard and Robert Syputa). Within 3-years, mobile WiMAX equipment sales may completely displace fixed WiMAX equipment sales. Within 2-years, most WiMAX sales into both fixed and mobile applications may involve only mobile WiMAX equipment. Many of the incumbent mobile network vendors stood back and watched as small, pure-play WiMAX-specialist vendors activated the market using fixed WiMAX equipment. Now vendors, small and large, are developing mobile WiMAX, but how soon should they promise commercial-grade availability? These promises alter market behavior, and misleading market expectations can be highly detrimental to some vendors’ sales strategies. WiMAX/802.16e-2005 is being even more hyped than was WiMAX/802.16d-2005, the ‘d’ meant fixed/nomadic, the ‘e’ will mean mobile. WiMAX-e finds itself in a global hype-war against the incumbents’ 3G-mobile standards, and it is high stakes poker. Few may be surprised if mobile WiMAX-e, or its competing standards, reach market prematurely—lacking enough functionality to accommodate a full range of mobile applications. Network optimization remains theoretical and it is easy to underestimate the integration challenges in complex multi-vendor solutions. Yet, if the ‘first wave’ of mobile WiMAX-e1 in 2007 lacks functionality, maybe the ‘second wave’ WiMAX-e2 in 2008 will be the moving target, or maybe next generation WiMAX II in 2010…? The eventual shift away from fixed WiMAX-d will be driven by integration of edge intelligence/MIMO, WiMAX-e IC’s and the price efficiency of high-volume mobile devices. Until then, many WiMAX-specialist vendors rely on their ongoing WiMAX-d revenues to pay for their WiMAX-e developments, and for their ‘big-step’ expansion into highly integrated mobile ecosystems. WiMAX-e hype paralyzes hesitant investors, especially those who expect WiMAX-d to gracefully transition into WiMAX-e (more on that later). Such stalling may serve prospective WiMAX vendors with nothing to offer yet, but it also serves incumbent vendors proposing their own 3G standards.
WiMAX II and 3G-mobile Long Term Evolution (LTE) are both aiming to become the default global 4G-mobile standard. The 4G market is the Holy Grail for broadband wireless access, lining traditional incumbents up against countless new entrants and adjacent industries. Convergence causes an increasingly competitive vendor-crunch, where formerly separate domains overlap, not only in wireless but also in the networking, media content and applications fields. 4G networks are expected to become “universal platforms”, delivering the entire range of last-mile access services and cellular mobile applications, including data networking, VoIP, back-haul and IPTV. WiMAX has entered the last leg of the race to 4G and it is moving fast, right past what 3G can (or will) deliver. The disruptive shift from mobile voice to flat IP-based networks has already pushed traditional mobile vendors to react. For example, Ericsson is now aggressively promoting LTE as a pre 4G-mobile solution, promising commercial deployments in 2009. This presents an interesting predicament, as both LTE and WiMAX use OFDM signaling, which is incompatible with existing cellular systems. Some incumbent mobile operators may require a ‘fork lift’ replacement of their newly-purchased 3G network, or new deployments in new spectrums. LTE is similar to WiMAX but with lower power and longer range for handhelds using the uplink, (MIMO-OFDMA downlink, SC-OFDM uplink). This comparison is similar to the upstaging of TDMA by CDMA during 1G to 2G upgrades, but this time around the pace of development is accelerating more rapidly.
Shifting IPR: WiMAX is vying for equal treatment with LTE in the global standards forums. IMT-Advanced IP-OFDMA is closing in on a definition for 4G, promising more than 100Mbps per mobile user. As 4G solutions unfold, vendors like Qualcomm may expect diminishing prospects and intellectual property royalties for their legacy 3G CDMA. Of course, Qualcomm and others also claim IPR property rights for both WiMAX and LTE. The level of royalties they may demand from the market has yet to be determined by the courts. Tier-1 operators in particular will require protection by large vendors with comprehensive IPR portfolios. However, the IPR for 4G is diversified, and it rides on many shifting technology developments. IPR uncertainty can be dangerous, so the position of both ETSI 3GPP LTE and WiMAX is for FRAND/RAND licensing with royalty caps. FRAND/RAND allows standards-essential IPR to be made available upon request to anyone wishing to implement the standard, at reasonable terms and on a non-discriminatory basis. However, some companies with key IPR may yet be acquired or otherwise persuaded to use their IPR to shut out competitors. This tends to make operators more observant of their multi-sourcing options. A likely outcome is for a higher degree of net-value cross licensing than experienced with 3G. While IPR for WiMAX and LTE should be less costly and difficult than 3G, there will still be considerable risks for both vendors and operators.
Shifting Revenue: The survival of many smaller WiMAX vendors hinges upon their ability to grow revenues from WiMAX-d (fixed) and pre-e (almost mobile), during their run-up to WiMAX-e (pre 4G-mobile). This is proving to be increasingly challenging as the larger WiMAX vendors condition the market to expect mature WiMAX-e much sooner than typical vaporware. WiMAX-e benefits from the accumulated experience of tier-1 cellular equipment companies and innovation from ‘WiMAX Pure play’ companies normally: this condenses development toward a field-hardened, consumer-acceptable quality of service. This is complicated in geographies where multi-mode WiMAX plus 3G can be deployed. For example, Sprint plans to deploy multi-mode WiMAX plus EV-DO, providing wide area mobility to users while allowing WiMAX to be deployed incrementally. So, single-mode WiMAX-d devices will not roam onto Sprint’s network. Without accelerating revenue from WiMAX-d, smaller vendors may struggle to keep up with accelerating global technology development. Could this make them vulnerable to low-ball acquisition offers from those same large vendors who are hyping WiMAX-e availability? If prospective WiMAX-d operators can be kept on hold, waiting, smaller vendors could perhaps be starved into submission, even though they may be sitting on a global gold-mine. The ability to offer WiMAX-e will create broader and more receptive market opportunities than WiMAX-d, but this does not mark the end point in the accelerating pace of development. The wait for WiMAX-e depends on which wave the operator is aiming for, WiMAX-e1 or WiMAX-e2. Wave-2 in 2008 is perhaps be the real target, as wave-1 perhaps in 3Q2007, may not have much more functionality than WiMAX-d. Several WiMAX IC, and ‘pure play’ suppliers including Alvarion and Airspan have announced intent to target wave-2, suggesting wave-1 is merely a transitory stagger-step that few operators will buy into. So, what should smaller vendors do to ride these shifting targets and remain competitive? Their ROI/profitability arguments for immediately available WiMAX-d equipment are convincing, but will the market expect them to get left behind with WiMAX-e? Shifting Core Competences: Can smaller WiMAX-specialist vendors hang in there, and also grow fast enough to support the accelerating pace of development? How well will they fare against larger end-to-end mobile vendors? Smaller WiMAX specialists such as Redline, Aperto and Airspan, have been the technology leaders in delivering fixed and nomadic access. However, the shift toward mobile WiMAX-e and 'WiMAX II' involves more complex and more broadly integrated ecosystems.
Fixed and mobile network vendors differ in their revenue focus, how they sell, how they develop products and how they manage partnerships. Some of the smaller WiMAX-specialist vendors are only resourced to sell fixed access. Their simpler value proposition is often about OPEX savings for the operator, e.g. cheaper back-haul. When selling mobile networks, the value proposition shifts into a more strategic “solution sale”. Of course, WiMAX-e also involves OPEX rationalization, but it sells because it enables future revenue streams. It requires speculative investment in future services that may also compete with the operator’s existing services. In mobile, the access layer is part of a far bigger picture that usually includes legacy infrastructures and services. There are more vendors in the total solution (ecosystem), more network elements, more service management systems, more focus on software and overall, exponentially greater complexity. The value proposition often involves professional services teams to deliver operator training, to support business case evolution and new service definitions, to plan systems integration and to facilitate new partnerships, (all as equipment pre-sale revenue). The shift toward highly integrated platforms and services favors those who can offer end-to-end solutions and good partner management skills. Consequently, smaller WiMAX-specialist vendors need to participate in best-of-breed ecosystems, alongside other leading vendors. They can become a subordinate part of a larger vendor’s total ecosystem solution, although this can be a more exclusive arrangement, or they can be a more equal partner in an ecosystem made up of many small vendors.
Within WiMAX, there are three levels of systems interoperability. The highest level is open compatibility, specifically designed to allow the mixing of best-of-breed equipment among otherwise divergent vendors. Best-of-breed vendors that move toward standardized interoperability can provide several layers of commonality, including core components, user device interoperability, NOS, EMS, and wide area roaming. It remains to be seen how practical this “interop” environment will be when mixing and matching components or specialized sub-systems. The growth from fixed vendor to mobile vendor is a step-function, not a smooth organic evolution, but so to is the scale of typical sales. Unlike mobile, fixed-nomadic networks can be gradually scaled-up from small-region, low-density as demand develops. The capital requirements to deploy networks in the cell densities needed for mobile service are usually far higher. This trend towards consolidation and highly integrated solutions is drawing in large vendor from adjacent markets, e.g. mainstream IT/networking players. With such vendors entering the market, small specialty vendors may find unexpected opportunities to supply critical and difficult wireless components, alongside application developers and third-party systems integrators, all of whom need to avoid being sidelined. Partnership management takes skill not only in crafting complex 4G wireless ecosystems, but in crafting strategic relationships that have both immediate and long term business prospects. Large IT/networking suppliers such as Cisco, IBM and Microsoft are not sitting idle. WiMAX or LTE wireless systems may not be their forte, but they do offer a competitive edge providing networking systems, software, servers, database software, integration and a range of corporate and end-user applications. 4G will become an extension of the Internet, of corporate networks, of government networks and of server environments. All companies involved in these environments will be compelled to play a role that either assists or competes with the large integrated communications suppliers. Small WiMAX vendors can perhaps position themselves as insurance for these large IT/networking suppliers as they face off against the large mobile vendors. Shifting d to e: Does WiMAX-d “naturally evolve” into WiMAX-e? Is it just a matter of re-flashing base stations and swapping out cards? The market remains very confused about how to shift subscribers from WiMAX-d to WiMAX-e, it is not like buying the latest generation of WiFi router. WiMAX–d operators can provide their users with a transition path using dual-mode (d+e) CPE’s and portable devices. This allows their users to roam between WiMAX-d and WiMAX–e networks, but dual-mode does not facilitate a transition path for operator’s network equipment. The modulation scheme of WiMAX–d and WiMAX–e are different, they use distinct equipment that does not co-exist in the same spectrum. Fixed and mobile also differ significantly in their cell plans, e.g. cell sizes, quantities, locations and subscriber densities. So far, there are no case studies showing how a fixed network evolves into a mobile network without a wholesale swap-out of network equipment. The majority of portable and mobile WiMAX devices are expected to be single-mode only. Consequently, WiMAX-d networks will become no-go ‘islands’ for WiMAX-e users. Dual-mode devices will be able to roam into WiMAX–e networks, but single-mode WiMAX-e users will not be able to roam into WiMAX-d networks. Migration is confusing to end-users, but many fixed applications may never see a reason to convert into mobile applications, and fixed-CPE does not normally roam. Operators may be even more reluctant to shift users from WiMAX-d onto WiMAX-e if it disrupts the flow of existing services to happily paying customers. Besides, most of the 500,000 users on 70,000 base stations globally are in 3.5GHz spectrum, which is not well suited to mobile operation, and which may also be restricted by regulators. 2.5GHz spectrum is far more suitable for mobile voice applications than 3.5GHz. The higher you go in frequency, the more line-of-sight (LOS) the application becomes, and mobile needs is very non-LOS. This preference to have WiMAX-d and WiMAX-e on different spectrums can not be over-stated. Operators are well advised to obtain separate spectrum allocations for WiMAX-d and WiMAX–e, creating two synergistic infrastructures each optimized for very different performance characteristics.
Shifting Market: WiMAX-d is more than adequate for many fixed applications, it has robust performance and favorable ROI’s, but it is becoming increasingly difficult to sell. Operators are being distracted by the sexiness of WiMAX-e, and by questionable promises that they will not have to wait long to get their hands on it. Many operators have said they will buy WiMAX-e equipment even if their country’s regulations prevent them actually offering mobile service. WiMAX-d also faces potential margin reduction and commoditization due to increasing competition from low-cost, non-western vendors. These are serious threats to small vendors, some of whom are licensing their IP to ODM’s in an attempt to defend market position. Fixed operators continually watch for opportunities to enter the mobile market, or at least position themselves for entry. If they admit to only needing WIMAX-d, they weaken any claim against the regulator for a level playing field with cellular. Hence, some operators are reluctant to show too much commitment to WiMAX-d roll-out. Also, they are often buying WiMAX with leveraged dollars, and it is easier to attract the lenders or investors if they argue that they may get access to mobile markets as well. The fact that WIMAX-d is working faultlessly and making profits for some operators, ought to tell the market that WIMAX-d is a valid business opportunity. Yet, the need to anticipate future competition and market opportunities forces consideration of WIMAX–e. Much of the early deployment of WiMAX targeted corporate, government and high value residential customers. These groups prefer wireless services that travel and relocate. Corporate customers may need WIMAX-e because it will allow global roaming, and because there will be many more WIMAX-e user devices/CPE’s available. Operators are people, and people instinctively shop for products that are trend-leaders (aka sex appeal). For example, the iPhone may sell well even if it proves lacking in call quality. It fits the 4G-like concept of a universal platform, with integrated convergent applications, and did I mention sex appeal? By the time WiMAX-e2 hits the market, many iPhone-style devices could be emerging with WiMAX-e inside. Protecting market niches without resorting to a price-war may require sustainable product differentiation. As the access layer is standardized and available to low-price competitors, product differentiation might have to be gained by improving the efficiency of higher layer functionality. Service layer applications, such as VOIP and IPTV, are the current favorites. Video services could position an operator well if they have their eyes on "WiMAX II" (4G-mobile), because 100Mbps per mobile user is enough for 4-concurrent MPEG4 HDTV channels in one convergence device; or up to 1Gbps in fixed-nomadic applications, which is enough capacity to simultaneously support high speed Internet access, many HDTV channels, a high-speed LAN and whatever else may soon be needed. Shifting Strategies: It will certainly not be easy for smaller, specialty WiMAX vendors to thrive in the new competitive environment because it stresses deeper pockets and integrated products and services. They will need to exploit WiMAX-d for all it is worth, while concurrently racing to be first to market with WiMAX-e2. Competition is fierce, and there may not be enough smaller niches to go around, but there are some larger niches available to those who can defend them, preferably without having to resort to a price-war. That may require clever integration of access technology and key service(s). The larger niche opportunities such as video (niche now, mainstream later), will take time and money to develop, and innovative best-of-breed partnerships, but there may be better margins in IPTV than in VoIP. In the meanwhile, small vendors should try to ensure that WiMAX-e hype does not paralyze operators, or close their eyes to the WiMAX-d market. Smaller WiMAX-specialist vendors have often pushed the edge of development, e.g. higher-order MIMO. However, R&D is requiring increasing industry-cooperation, which can level out any time-to-market advantages. The converged environment means ‘everybody is in everybody else’s businesses’. Network equipment suppliers, content providers, software developers, Internet portals and operators, computer and network systems integrators, and other segments of involved industries see both threats and opportunities in the unfolding of IP wireless broadband 4G. WiMAX-specialist vendors should:
Robert Syputa BSEE, MBA, has over 26-years experience globally, in the broad field of electronics and 7-years experience as a telecommunications industry analyst and consultant, particularly focusing on the emerging fields of wireless broadband, related technologies and business cases. He has become a recognized industry spokesman in emerging wireless communications fields, including cellular and /802.16 LTE standards for 4G systems, and is one of the world’s leading experts on intellectual property rights in these areas. He has developed a broad understanding using bottom-up analysis of the technologies, companies and business trends shaping the developed and emerging sectors of telecommunications ‘convergence’. He consults to broadband wireless startups and multinationals in the WiMAX/WMAN field, and he advises private investment groups and large telecommunications industry hedge funds on products, business strategies, company image, market positioning, industry trends and catalysts. Robert obtained a Bachelors of Electrical Engineering from Southern Polytechnic State University and a Masters of Business Administration from Seattle University. Richard Ballard BEng. MBA, DIMM, CSc. has over 20-years experience leading new-build engineering, operations and marketing teams, spearheading company acquisitions, evolving network solutions and managing strategic sales. He is a Business Developer and Country Manager for systems integrators serving convergence service providers and their ecosystem vendors, e.g. WiMAX, 3G, IPTV, VOIP, IMS. Recently he led 50-systems integrators building AT&T/Sprint’s mobile virtual network; he conceived and built Siemens’ first US marketing and operations office for residential gateways; he opened a new tier-1 market for Ericsson by optimizing and selling IMS and FMC platforms into Comcast; and he aligned technology roadmaps for Amino’s ecosystem partners serving 10 of the world’s top-30 IPTV providers. He began as a GSM engineer for Motorola UK after which he led ‘pioneer preference’ PCS trials for Time Warner and Cablevision. He was a co-founder and V.P. Operations in Videotron’s mobile consortium, (later renamed Microcell and acquired by Rogers/AT&T for $1billion). At Deloitte he helped build a global practice area offering multimedia convergence business strategies. Then as Convergence Director for Liberty Global, he developed quadruple-play operations in US and Europe, and launched wireless ISP’s in Australia and NZ. With executives from Liberty Global, plus former CEO’s from Nokia and Telewest (NTL), he co-founded a $billion pre-WiMAX operator in the Netherlands, leading market-entry into 16-countries as Regional General Manager. Richard obtained his first two degrees in the UK, a Bachelor Engineering (Telecom) from Coventry University and an MBA from Southampton University. More recently he obtained an undergraduate in Computer Science and a postgraduate degree in Multimedia Software, both affiliated with Toronto University. He also holds a Radio Engineer’s certificate from Washington University.
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There is generally less development and commercial support for WiMAX-d than WiMAX-e, and there are no plans to migrate within the standard from WiMAX-d to WiMAX II (the 4G-mobile contender). This causes concern about stranding available-generation WiMAX equipment. It is not just the shift in technology generations that is disruptive; the shift to an open applications environment exposes incumbent operators to competition from those companies and industries that ride new applications and services on top of an open Internet structured platform.
Unfortunately, immature ecosystems require constant re-integration and re-testing, as functionalities (lines of code) are added or improved in the various components. Each vendor may be a member of several other ecosystems, each serving different operators’ visions and hence following different product development roadmaps. Meanwhile, the various vendors’ software teams rarely work together in lock-step, and simple miscommunications can cause lengthy debugging delays. Thus, ecosystem solutions can be less market-reactive and slower to evolve than independent product development initiatives. 
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