Last week Alvarion announced an agreement to supply Open Range Communications with WiMAX and core networks. This contract is a step forward for Alvarion as they fill the role of prime contractor of a deal that is valued at US$100 million over a five-year period.

A unique aspect of the Open Range deployment (for the U.S.) is the tie-in with a satellite company for use of terrestrial broadband spectrum and satellite overlay. This hybrid network approach has been used to reach under-served areas in Africa and elsewhere that the cost and time to deploy of building backhaul infrastructure is prohibitive. Partner Globalstar has agreed to the use their Ancillary Terrestrial Component (ATC) authority spectrum to provide a hybrid satellite-terrestrial access network that will eventually reach an estimated 546 rural communities. Open Range has secured US$367 million in investments and loans: US$100 million from One Equity Partners (OEP), theprivate equity arm of JPMorgan Chase & Co. (NYSE: JPM). This guarantees release of a United States Department of Agriculture's Rural Development Utilities Program (RDUP) approved Broadband Access Loan of US$267 million (March 2008).

What this is:

A large contract in terms of size and scope.

In size, this is among the largest WiMAX deployments; for Alvarion this is the largest single contract to date. According to Alvarion, it represents about 10% of projected sales during its duration. Alvarion typically has small orders with few and far between exceeding 5% of sales.

In terms of scope, Alvarion will provide the integration of RAN and higher level functions. This is important to work up the supply chain to do more business with large operators, particularly the incumbent mobile operators who have grown to expect turnkey deployments and which can include network and some extent of back office operations management as well.

This comes at a good point in the proposal and funding process for RUS and other government programs. Of course Alvarion hopes this win influences other operators’ vendor choices in the U.S., but we wont know the degree of success spillover until information leaks or awards are announced.

What this isn't:

It isn't a mandate for large-scale mobile deployments. It is not necessarily a foot in the door for turnkey or ‘fully mobile’ network deployments. The scale and scope of the business is starting to move into the ballpark for mobile deployment contracts, but direct experience in that segment is measured based on dense deployments of fully mobile, fully loaded networks. This has been a problem for all of the WiMAX pure plays: a 'chicken and egg' hurdle that has come about over the past several years. Making entry of a new supplier into mainstream ranks all the more difficult is consolidation and shake out has occurred within mobile operators and suppliers.

The reaction of tier 1 operators to Alvarion’s win remains speculative: some may not think that this order places Alvarion squarely in the ranks of their much larger mobile network competitors. It does raise eyebrows and probably opens doors for more serious consideration of proposals. We have yet to gather feedback of individual decision makers. However, Alvarion probably stands a better chance of becoming a secondary supplier for Clearwire and similar operators. While the long-term objective may be consideration equally to Motorola, Ericsson, Samsung, Nokia and others, there remains a big gap in size and ability to support incumbent networks and services. The fact remains that a secondary supply contract for a multi-billion dollar deployment can be larger than a prime contract that is nice but only covers 6 million POPs.

Alvarion has long been regarded by its competitors and by many among the world's largest and most respected operators as being a hard-nosed, 'Cadillac' of emerging suppliers.

Various types of deployments and supported services require different scale and range of experience. Alvarion has built a very strong portfolio of products to address both licensed and unlicensed wireless broadband opportunities. They have had success with small-to-mid-sized mobile system sales, but none of these have yet to be 'fully mobile mass market' deployments that butt heads against 2G-3G mobile directly. For the most part these networks have been for greenfield operators – those who do not have current mobile networks or are otherwise deploying a fixed-nomadic network into new rather than converted spectrum. The networks have not displaced mobile services and typically compliment them rather than compete against them directly.

This new contract is for low-density rural deployments that are expected to cover 6 million people across several states. Although mobile they do not face the same hand-off problems as more densely packed networks. Alvarion may well be able to handle the denser, more complex network deployments but that takes winning with mostly incumbent operators who have long-standing relationships with the likes of Ericsson, AL-LU, Samsung and Motorola.

This deal was able to parlay Alvarion's unique strengths and size into a winning combination. This is an eyebrow raiser for competitors who have been saying basically that “WiMAX pure plays are too small to play our game.”  However, this is not a ‘game changer’ unless it leads to significantly more business.

Reference links and comments can be found at: http://www.agglom.com/set/67739/Alvarion_Snags_a_Big_One

For more information you can contact the author at robert@maravedis-bwa.com

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