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 Back to Basics By Robert Syputa, Senior Analyst and Partner Contact the author at robert@maravedis-bwa.com |
There are many new developments in wireless these days:
News worth commenting on comes up often to capture our attention and serve as fodder for analysis. It is useful every now and then to take a step back to ask questions about the basic assumptions that have a significant impact on individual companies and industry segments. Let’s review a basic claim for WiMAX. An overarching strategy of WiMAX is to be a low cost, low barrier to entry, next generation wireless BB network. With LTE following a very similar set of technologies, the time to market and technology edge advantages will slip away as it becomes available over the course of just 2-4 years. Questions remain regarding how competitive LTE will be in the fixed-nomadic and Greenfield mobile markets where WiMAX has established a beachhead. WiMAX advocates sometimes stress that it takes advantage of similarities with Wi-Fi. Let's take a quick look at that assumption: the mobile wireless industry saw the grassroots emergence of Wi-Fi Hot-Spots and proliferation into homes and businesses, and responded by acquiring leading Hot-Spot service providers and rolling out their own, as well as marketing 3G SmartPhones with embedded Wi-Fi. Although Wi-Fi has not turned into a revenue source nearly on par with traditional mobile services, the assimilation has provided the industry with a low cost way to offer higher bandwidth that is attractive to a large set of subscribers. Why did mobile operators decide to go with cheap, open access Wi-Fi if the service is often a give-away as part of a mobile package? The answer is that once some operators started offering Wi-Fi, others were forced to follow. It was also a strategy to head off WiMAX, or other challengers such as MetroFi clouds, from competing effectively. The 3G industry has the dominant market share, and therefore does not have to develop, so much as assimilate, the technologies and commercial developments that pose threats to its future. By the time WiMAX mobile has become available in most areas, the family heritage with Wi-Fi development and open IP commercial nature no longer is a major distinguishing factor. This big picture strategy starts out with the mobile industry’s positioning itself as the Universal Mobile Telecommunications System (UMTS), and thus no other standard is considered necessary or appropriate. This stance carries with it a quandary: as it pushes into multiple service 4G broadband, the universal radio approach in essence espouses to embrace much of the traditional microwave BWA and specialty wireless business segments within its domain. As the industry embarks on IMT-Advanced, the effort has become ICT, Information and Communications Technologies, rather than just the embracing of mobile enterprise. This, of course, thrusts the mobile industry into bed with IT/Cloud Computing, Internet, open OS and web development standards and commercial structures. IEEE wireless standards, including 802.11, 802.16, 802.20, 802.22, start out with the view that the complex task of designing wireless networks must be chunked down into discrete task groups and purpose designed standards. These tasks are given mandates to fulfill specific functions and then work to collaborate across lines of development. This has been necessary because IEEE is open to all, and thus must build a consensus among many participants from around the globe who may have different orientations. However, this approach led to islands of development and commercial momentum that are less organized and strategic than the well-situated UMTS industry approach. The WiMAX effort has been embryonic – although developing a competitive supply ecosystem, WiMAX has not yet had the scale to play the role of market assimilator similar to UMTS. The WiMAX Forum might have jumped forward in their thinking to the situation the industry faces today: it still faces the catch-22 of building commercial momentum while needing huge amounts of capital to acquire spectrum and fund large-scale deployments to compete with the mobile industry. Proponents of 3GPP LTE point to the large volumes their industry will develop that are expected to lead to lower cost per unit and operation efficiencies. A tactic that could have been implemented – one which we had suggested here at Maravedis about 6 years ago – was to develop WiMAX femtocells and picocells. At the time, we had discussions with several companies recommending developing WiMAX units that could be deployed by users directly as local area networks. The response we heard was: “because Wi-Fi/IEEE 802.11 already does that.” From a technical perspective that made good sense, but from a strategic market development perspective, limiting WiMAX to wide area applications did not recognize the need to offset the huge volume and market leadership position of the mobile industry. Our thinking was that femtocells/picocells would allow WiMAX companies to harness user-deployed networks that would be part of the same standard. WiMAX can harness ‘viral adoption’ that eliminates the installation charge that kills many small cell deployment business plans. Further, WiMAX could have given users a longer range than Wi-Fi and operation in cleaner spectrum. There are many aspects of this issue, which we do not have time to go into at length here. The competing camps should think beyond technology to consider how they can harness market forces that will shape up in the future. Basic questions to be asked include: “how is WiMAX positioned vis-à-vis 3G-LTE?” and vice versa. Ericsson has recently discussed the use of LTE as a local area network element, espousing the simplicity of using one standard to scale across local, campus, metro and wide area mobile network requirements. The LTE and WiMAX proposals for IMT-Advanced accommodate local network capability including ad-hoc network clusters. As we look forward to the next generation of WiMAX and LTE we can see that these will become comprehensive in their approach. So there should now be no surprise to find that the standards have moved toward what we had suggested for WiMAX development over 5 years ago. The need to chunk-down standards development efforts in order to gain consensus and order should be moderated by commercial efforts that are forward-looking. The governing issue for standards and industry groups is the development of competitive systems of technology and commercial momentum that meet new challenges as the overall ICT industry develops. Due to tie-ins with incumbent businesses and assimilation of open development, open applications, and viral adoption of Wi-Fi, within five years LTE is likely to achieve higher volumes than WiMAX. But does that mean, as LTE advocates suggest, that WiMAX will be at a cost disadvantage? The contrary point of view is that WiMAX starts out as a flat IP network architecture, has very low IPR barriers compared to 3G, has international support including ‘home grown’ industry development, and has developed in a highly competitive environment that, over the years, many 3G equipment suppliers have found commercially challenging. The argument against domination of the converged ICT industry is that WiMAX has a lower cost structure that can compete when confronted by LTE. Huawei's recent newsletter claimed that WiMAX was proving to be very low cost and that the company expects to see continued growth. Being a leader in LTE as well, Huawei should have a good feel for how WiMAX can fair against LTE going forward. The company mentioned some facts, including that WiMAX and WiMAX+WiFi chips and modules are already competitive and are expected to drop over the next 3 years to be about the same price as Wi-Fi chips are now – about US$6 each. WiMAX+3G HSPA chips are available but must carry the 3G IPR royalties, which increases the price. Motorola, Alvarion, Alcatel-Lucent, and Huawei are among suppliers that say that LTE and WiMAX will compete alongside each other for shares of ICT. We forecast that growth of next generation wireless will be robust. As next generation networks move forward to 4G IMT-Advanced, some old and some new questions arise on how these competitors can leverage the advances in technology to exploit disruptive changes and opportunities in the marketplace. The industry should always consider the future in formulating systems development strategies, outside industry involvement and market approaches. For more information you can contact the author at robert@maravedis-bwa.com |
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