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Industry News

WiMAX: A reality check

Chinese vendors are moving, but carriers remain mum

August 14, 2008
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WiMAX, a high-speed wireless service, is gaining momentum worldwide. Latest figures show WiMAX equipment sales rose nearly 50 percent in 2007 to US$800 million. WiMAX networks have been deployed in some 80 countries with 2.2 million customers, and growth is expected to continue.

According to the WiMAX Forum, worldwide WiMAX customers will exceed 200 million by 2012, generating US$7.7 billion in equipment sales. With IEEE 802.16 ratified by the ITU last October, many operators see it as a sensible alternative to 3G mobile Internet service.

So far, most of the excitement has been generated by equipment manufacturers, including Chinese companies. Huawei Technologies, a member of the WiMAX Forum, is moving fast to take advantage of surging demand, mostly outside China. So far Huawei has sold 16 commercial networks and 30 trial networks, making it one of the most prolific WiMAX vendors in the world.

Huawei also is engaged heavily in WiMAX R&D activity: It has 1,200 engineers dedicated to WiMAX product development; it owns 100 WiMAX- related patents, more than any other company. Huawei is also developing WiMAX terminals which are expected to become available for sale later this year. The handsets reportedly will work in dual-mode with CDMA, GSM and 3G (WCDMA).

ZTE, another Chinese equipment maker and a senior member of the WiMAX Forum, began OFDM research in 1998. It projects sales of WiMAX equipment will reach that of CDMA by 2011 (estimated US$700 million). ZTE is more enthusiastic about WiMAX; it predicts WiMAX will make up 20 percent of the global wireless market by the end of 2009 after commercial handsets become readily available later this year.

Carrier community remains quiet

In contrast with equipment vendors’ optimism, Chinese operators keep mum on whether they will jump on the WiMAX bandwagon. China Mobile and China Unicom show no signs of massive deployment or commercial service after small trials two years ago in a half-dozen cities, including Beijing, Shanghai, Wuhan and Shenzhen.

Most trials employed 802.16d (fixed access) at 3.5 GHz, a temporary spectrum band for experiment. Most trials used WiMAX as backhaul for businesses to transmit data and video in a campus environment. It is premature to assume large-scale deployment will follow, at least in the immediate future, because the industry is consumed completely by restructuring, which, in addition to changes in organization and personnel, ultimately will affect the outlook of China’s 3G landscape.

China Mobile, for example, is carrying the torch of TD-SCDMA, a home- grown, 3G wireless standard which the government hopes to become a winner someday. For China Mobile, TD-SCDMA is very much a political mandate and it has no option but to succeed. If this holds out, it is natural for the operator to adopt some kind of LTE for TD-SCDMA, an evolutionary platform for faster speed and more profitable service.

The same reasoning applies to China Unicom for WCDMA and China Telecom which has agreed to acquire CDMA. However, LTE is still a long shot for Chinese operators as the country has yet to embrace basic 3G. They are most concerned about when the government will grant a license, how to roll out 3G service, and what to do to compete with rivals. For now, all this is preceded by the Olympic Games, so issues like WiMAX, 3G service and LTE are being pushed to the back burner.

But questions remain. Operators must weigh WiMAX’s potential gains against the cost of deploying regional or national networks, and there is no clear-cut answer. While WiMAX can offer significant speed to fixed and mobile devices which are conducive to more bandwidth-sensitive services like video and TV broadcast, the key hurdle is scale. As tests show, a typical 802.16e base station delivers 30Mbps, but actual speed can whittle down to 1.2Mbps or lower when “fully loaded” with access.

If speed is compromised, cost will become a serious concern. According to estimates, operator capex for WiMAX will be 20 percent to 50 percent higher than for HSDPA, a software-enabled overlay for sending data over 3G networks. At higher frequency, say 3.5 GHz, the number of WiMAX base stations must increase, as many as 50 percent more than for HSDPA, to cover the same area without signal degradation. This is the last thing Chinese operators want after already plunking down billions on 3G networks.

There are regulatory issues as well. At present, 2.5 GHz, an ITU- recommended spectrum for WiMAX service, is being used by TD-SCDMA, and there is not enough bandwidth available in 3.5 GHz for operators to carry out national service. Typically 140 MHz is the minimum requirement for a large-capacity network, while a national coverage may entail three to four times more in bandwidth for a single operator. This simply is not conceivable in China unless drastic changes occur to the current spectrum policy, which regulators are reluctant to do.

Public acceptance is a risky proposition. Despite its speed, WiMAX is designed for data service only, not voice, whereas voice is a prevalent choice for most Chinese, even with 3G.

It is estimated 70 percent of users will stay away from fancy service like Internet access, TV broadcasting and streaming video (e.g., VoD, P2P). For them, the criteria is not speed but service charge, and this will put operators in a Catch 22 situation: The service charge will decrease when customers reach critical mass and have a variety of services to choose from, but customers will be unlikely to sign up if service is unavailable or unattractive.

The latter aspect applies not just to WiMAX but to 3G as well. So far operators have focused mainly on network and handset performance and not on services which can have a negative effect on initial growth. Despite all the hype, it is not clear if WiMAX will create the miracle equipment vendors want to see in China, since there simply is a lack of driving force among the government, operators and the public. If anything, WiMAX will complement 3G especially in data service for high- end customers, enterprises and government agencies, but its role as a public service will be limited.

Lin Sun is a Beijing-based consultant with more than 20 years’ experience with the Chinese telecom industry Contact him at lsun@chinanex.com.

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