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The WiMAX roller coaster ride

2007 has been a year of ups and downs for the WiMAX camp. More success stories are needed this year to quiet the doubters

WiMAX supporters have had a turbulent time of late. On the downside, last year’s breakup of the Sprint Nextel-Clearwire partnership to roll out a mobile WiMAX network across the United States has raised serious questions about the growth potential of this wireless technology.

Verizon Wireless also announced last November it was opting for LTE (the W-CDMA evolution path toward 100Mbps downlink speeds) as its "4G" mobile technology of choice. No mention was made of WiMAX, whose supporters also claim the 4G mantle.

And then there is Ericsson. The Swedish giant, early last year, said it would not be ploughing any more of its R&D resources into developing WiMAX kit. Instead, it would be channelling all its 4G efforts into LTE.

In the meantime, the number of HSDPA networks around the world continues to grow at an impressive rate. According to the mobile Global Suppliers Association (GSA), there were 154 HSDPA commercial networks up and running as of November 2007 (in 71 countries). This is almost double the number from a year before, the GSA says.

HSDPA, which can evolve to provide peak rates of 7.2Mbps, may already prove to be an effective challenge to WiMAX in delivering broadband services cost efficiently to customers. As its proponents invariably point out, HSDPA has a well-established eco-system in place, delivering competitively priced services and devices to market–including HSDPA-enabled USB modems and wireless routers. WiMAX, they argue, has far too much catching up to do to have a big impact on either the mobile or fixed broadband markets.

But there has been plenty for WiMAX supporters to cheer about. Perhaps the biggest boost, in recent months, was the announcement by ITU last October that IEEE 802.16 (WiMAX) is now an official 3G standard and part of the IMT-2000 family. This opens the door for many more operators to use mobile WiMAX (802.16 e) within their IMT-2000 spectrum allocation (the most promising being the 2.5GHz to 2.69GHz band, the WiMAX Forum says).

"This is a very special and unique milestone for WiMAX technology," said Ron Resnick, president of the WiMAX Forum at the time of the ITU announcement. "WiMAX technology currently has the potential to reach 2.7 billion people. Today's announcement expands the reach to a significantly larger global population [around 4 billion]."

On the heels of the ITU announcement, Cisco added its significant weight to the WiMAX cause through its US$330m cash acquisition of Navini Networks, which provides 802.16e kit. Cisco’s WiMAX focus, however, is on the business and consumer segments in emerging markets (WiMAX enthusiasts argue a business case can also be found in urban areas of developed markets).

The entry of Vodafone into the WiMAX Forum fold last August gave further fillip to the 802.16e camp, following as it did CEO Arun Sarin’s comments at the 3GSM show in Barcelona last year that he may look at mobile WiMAX as an alternative to LTE in some markets (sparked by frustration at the slow pace of 3G development).

How far Sarin’s comments can be interpreted as an endorsement of WiMAX or simply as a rebuke to 3G suppliers to get their acts together (he has publicly chastized 3G suppliers before, most notably at ITU Telecom World in 2003) is open to debate. However, Vodafone’s apparent warming to WiMAX, along with ITU’s endorsement, gives WiMAX much more credibility.

“Roaming is key to the WiMAX business case. We can learn from the mistakes of WiFi and GSM roaming”

Andy McKinnon, Motorola

Regulatory shifts can also help the WiMAX cause. Last November, Ofcom, the UK telecom regulatory body, gave approval for holders of 3.5GHz spectrum (a standardized mobile WiMAX frequency range) to be used for mobility. UK Broadband (owned by Hong Kong-based PCCW) and Freedom4 (owned by UK ISP Pipex), which hold 3.5GHz spectrum in the UK, had been restricted to using 802.16e equipment for only fixed and nomadic applications.

Regulatory loosening of this sort is an obvious benefit as it opens up new revenue streams. But not all regulators share Ofcom’s liberal view. In Pakistan, arguably WiMAX’s flagship country (it has the world’s largest 802.16e deployment to date, operated by Wateen Telecom, covering 17 of the country’s largest cities), the 3.5GHz spectrum holders are still prohibited from offering mobile services.

Where’s the business case?

Discussions of the WiMAX business case have been beset by claim and counter-claim. At one extreme is Robert Muir, WiMAX strategic planning manager at Intel Capital (venture capital arm of Intel). Muir recently described WiMAX at a briefing organized by the PA Consulting Group and Norton Rose (an international legal practice) as having the potential to become a "ubiquitous technology."

The WiMAX business case not only stacks up in developing countries where there is a lack of broadband coverage, Muir argues, but WiMAX technology also has a competitive edge over 3G. "There is significantly higher throughput [with WiMAX] than can currently be offered through 3G, which allows for true mobility," he says. "3G has taken too long to deploy, which has meant the need for a fresh approach, which WiMAX fulfils."

Yet a report published last year by Arthur D. Little, examining the business case for WiMAX, casts doubt on Muir’s assertion. Looking at factors such as cell radius size and modulation techniques between WiMAX and HSPA (an umbrella term for HSDPA and HSUPA), one of the report’s conclusions was that, in many cases, WiMAX will have a capex disadvantage of 20 percent to 50 percentæwithout any speed advantageæcompared with HSDPA (assuming the same size of coverage area as WiMAX).

There is, of course, a danger of over-generalization from both sides of the WiMAX debate. One way to dig a little deeper is to split the potential target markets for WiMAX into a six-box matrix, which is the approach undertaken by Greenwich Consulting, a firm specializing in the telecom space.

The so-called black, grey and white areas form the vertical axis of the matrix, and the business and consumer sectors form the horizontal. The black areas have very high population density and a high penetration of communications technology; the white areas have very low population density and little or no communications infrastructure; and the grey areas fall in between black and white.

For William Delylle, a senior consultant with Greenwich Consulting, the WiMAX business case is a non-starter in white areas for the consumer. "The high amount of capex required, combined with the low number of customers to target, makes the WiMAX business case extremely negative," he says. "In the black areas, targeting the consumer is also very risky due to the usually low broadband prices and high levels of competition."

The potential sweet spot for WiMAX, Delylle argues, is the business customer in black areas. But even here, the business case is far from clear cut and will differ from country to country (broadband competition levels and geographical constraints are two significant variables).

"To make the business case positive, the operator will need a minimum of 20 SME customers and one large corporation to one WiMAX base station," Delylle says.

To have a chance of achieving this subscriber level to one WiMAX base station, careful network planning clearly is required. And to keep costs down, the location of the base station will, ideally, not require a new tower. According to Greenwich Consulting’s figures, a WiMAX base station on a rooftop site will cost around €40,000 (US$59,000). If a new tower is needed, that cost shoots up to €70,000 (US$103,000).

In terms of keeping WiMAX capex down, mobile network operators (perhaps using WiMAX to add extra capacity on their access or backhaul links) seem best placed. Greenwich Consulting calculates that the cost of upgrading an existing GSM site to accommodate a WiMAX base station costs in the region of €22,000 (US$32,000) to €25,000 (US$37,000).

But even if a new entrant or mobile operator incumbent were willing and able to make the necessary WiMAX investment, would it still be able to offer a sufficiently attractive service? According to Delylle’s figures, a typical 802.16e base station has only 30Mbps capacity to share among its subscribers. Even through the use of statistical multiplexing, it is unlikely a "full-loaded" WiMAX base station (at least 20 SME customers) would be able to exceed ADSL fixed-line speeds (or even HSDPA).

There are also higher capex issues with WiMAX compared to HSDPA, points out Delylle (which chime with the findings from the Arthur D. Little report). One reason comes down to a simple law of physics: the higher the frequency, the quicker the signal attenuates in terms of distance. WiMAX using 3.5GHz requires many more base stations than HSDPA, which typically uses 2GHz. Greenwich Consulting calculates that achieving national coverage in one of the Eastern European countries it has studied requires 2,000 HSDPA base stations, but 3,500 WiMAX base stations are needed for equivalent coverage (at base station prices that are roughly similar between WiMAX and HSDPA). "WiMAX is potentially very tricky to justify at the national level," Delylle says.

The agile network

Andy McKinnon, who heads up Motorola’s WiMAX business development across the EMEA region, does not — as you would expect— agree with Delylle’s downbeat assessment of WiMAX’s prospects.

"What other technology has gone from the talking stage to national rollout in such a short space of time?" he asks, referring to, among others, Wateen Telecom’s WiMAX network in Pakistan (to which Motorola supplies equipment).

For McKinnon, a key strength of WiMAX is that operators can serve the mobile, fixed and nomadic markets all on one network, which provides greater cost-efficiencies: It is the ultimate, agile network. "Sprint Nextel and Wateen have totally different focus areas [the former mobile, the latter fixed] and have very different markets and cultures, yet both are using the same equipment," he says. "It says a lot about the agility of WiMAX."

McKinnon does not believe, however, that the WiMAX business case can’t be improved. He is chairman of the vendor sub-committee at the International WCA (Wireless Communications Association) Global Development Committee, which is responsible for promoting global WiMAX roaming among vendors and service providers. "Roaming is key to the WiMAX business case, and we can learn from the mistakes of WiFi and GSM roaming," he says, primarily referring to the need to develop uniform log-on procedures that are easy for WiMAX subscribers to use as they roam across different networks around the world.

While McKinnon describes the decision by Sprint Nextel to roll out a nationwide mobile WiMAX network as "bold and courageous" and a move that "expedited attention on WiMAX from operators around the world," he refuses to be downcast by Verizon’s decision to go with LTE. In fact, he sees an upside. "It might not be a bad thing to have different [4G] networks, otherwise there is danger you just compete on price," he says. "And anyway, as both LTE and WiMAX are based on the same OFDMA technology, it may be possible to have roaming between the two networks. It’s too early to say whether this will happen, but it’s a possibility. "

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