WiMAX – The Reality and the Potential
The Reality and the Potential
by Steven Hartley, Senior Analyst, Ovum, & Julien Grivolas, Principal Analyst, Ovum
Why WiMAX…and why now? A few years ago, the technology promised to change the economics of Internet access by providing faster, more efficient broadband service over unprecedented distances and growing into a ubiquitous open wireless network. Despite the challenges it has faced in reaching these ambitious goals, WiMAX has several strengths that make it a viable option to alternative technologies. Therefore, business technology decision makers would be wise not to dismiss WiMAX.
WiMAX and LTE (Long-Term Evolution) appear regularly in the media in relation to the mobile telecom industry’s evolution to “4G”*. The two technologies promise to take wireless data communications to the next level by enabling a wireless broadband user experience that compares favorably to those from fixed-line alternatives such as DSL or cable. At speeds faster than most DSL and even cable in some locations, WiMAX and LTE allow customers to use the same account for Internet access both at home and while roaming.
Both WiMAX and LTE are all-IP technologies using similar techniques to enable a better end-user experience and, crucially, enabling service providers to transport data more efficiently. This last point is vital in an era of intense competition and falling retail prices. The ability of a service provider to efficiently handle the explosive growth in wireless data traffic can mean the difference between a profit and a loss.
WiMAX is important now, as it is currently available, as opposed to LTE, which is still at the trial phase. This means that service providers can deploy the technology immediately to offer end users next-generation services.
WiMAX is the commercial brand name used for the 802.16 wireless interface specifications developed by the Institute of Electrical and Electronics Engineers (IEEE). There are two standards of WiMAX: 802.16-2004 (also known as fixed WiMAX or 16d) and the more recent 802.16e-2005 (mobile WiMAX or 16e).
Both fixed and mobile WiMAX are promoted by the industry trade organization known as the WiMAX Forum, which runs a certification process to ensure interoperability between infrastructure and end-user equipment products from different vendors based on the 802.16 standards. Interoperability is of critical importance because it enables greater competition between vendors and therefore more choice for operators and end users, ultimately reducing costs.
Table 1 gives a brief overview of the main technical and commercial differences between the two types of WiMAX.
Mobile WiMAX Has Greater Potential Than Fixed WiMAX
Even though mobile WiMAX (16e) is the younger technology, vendors and operators quickly realized that it had greater potential than fixed WiMAX because it supports mobility. This led to an anticipation of greater economies of scale for mobile WiMAX equipment and the associated cost-saving advantages, especially on the device side. Over the last 18 months, mobile WiMAX has rapidly accelerated its progress toward technology maturity.
Certified products are now available that work in the 2.3GHz, 2.5GHz and 3.5GHz spectrum ranges. The WiMAX Forum expects there to be over a thousand certified mobile WiMAX products globally by 2011. Furthermore, the expected availability of certified laptops and other consumer electronics with mobile WiMAX connectivity embedded in the device (rather than added via a data card or USB modem) will help operators interested in WiMAX establish a business case. In sufficient volumes, such embedded consumer electronics devices will enlarge the addressable base—without requiring subsidies from service providers.
The WiMAX Forum expects there to be over a thousand certified
mobile WiMAX products globally by 2011.
1 Both standards are technically capable of operating in radio frequencies from 2 to 66GHz. However, the WiMAX Forum has defined the above frequencies, in licensed spectrum ranges, to focus product development and aid economies of scale.
* Technically speaking, “4G” should refer to technology defined by the International Telecoms Union (ITU) as IMT Advanced. For WiMAX, this actually refers to 802.16m, the successor of mobile WiMAX. For the alternative wireless technology, LTE, this definition refers to the next step in the evolutionary process too: LTE Advanced.
The WiMAX Vendor Ecosystem
The largest infrastructure vendors have paid the most attention to the mobile standard of WiMAX, and they identified the greater potential of mobile WiMAX early on. At first they decided to develop their own mobile WiMAX products instead of outsourcing development to original equipment manufacturers (OEMs), as they had done for fixed WiMAX.
Key Suppliers of Mobile WiMAX Network Equipment
In the main, the infrastructure vendors that remain most committed to mobile WiMAX are those that have managed to attract the majority of mobile WiMAX contracts. The top mobile WiMAX players include Motorola, Samsung, Huawei, Alvarion, ZTE and Alcatel-Lucent. In contrast, Nortel simply exited the business, while Nokia Siemens Networks (NSN) finally decided to resell Alvarion’s mobile WiMAX solutions instead of relying on in-house systems as initially planned. However, there may not be enough room for all of today’s WiMAX infrastructure vendors in the future. Over a dozen companies are currently competing for contracts, yet even the much larger UMTS/HSPA infrastructure market is currently dominated by just four players Ericsson, NSN, Alcatel-Lucent and Huawei).
All the main vendors with ambitions in mobile WiMAX promote their end-to-end capabilities—from network infrastructure to end-user devices, and from systems integration services to applications. However, the key difference between the vendors is the extent to which they rely on in-house development and capabilities. When a technology is new (such as was the case with mobile WiMAX two to three years ago), in-house end to end capabilities are a strong competitive advantage. These capabilities help to ensure that customers have good levels of system stability, resulting in a better end-user experience.
This is one of the factors behind early mobile WiMAX contracts — such as that for Sprint — going to end-to-end providers such as Motorola and Samsung (see our interview on page 4 for more details). These contracts, in turn, helped to establish these vendors as early market leaders. However, given the fact that mobile WiMAX is maturing (and more certified interoperable products from a variety of vendors are now available), this advantage is eroding over time.
Device Cost and Breadth of Choice Are Critical Success Factors
Among service providers, one of the original key market drivers for WiMAX was the strong belief that WiMAX chips would follow the same evolutionary path as WiFi. Therefore, they would eventually be built into the majority of laptops.
For service providers, the intended ubiquity of WiMAX would mean lower costs, thus less need for subsidization and a wider potential customer base. Unfortunately, the reality has been quite different. At the peak of the hype surrounding WiMAX, embedded laptops were expected by 2007 with volumes ramping up to achieve high market penetration quickly. However, the first laptops with embedded WiMAX are only now coming to the market, and in limited numbers.
Nonetheless, several device vendors have recently reported positive signs of growing WiMAX demand. Chipset supplier Sequans has announced that it shipped its millionth WiMAX chipset in June 2009, while Beceem shipped more than 1 million WiMAX terminal chips in Q3 2009 alone. On the device side, Motorola announced at the 4G World event in September 2009 that it had shipped its millionth WiMAX end-user device.
Several industry sources have also confirmed a rapid decrease in mobile WiMAX device prices. Price points as low as $50 for a USB modem have been mentioned in relation to upcoming WiMAX projects in India.
The Market for WiMAX Services
In 2008, the mobile WiMAX industry reached a number of positive milestones, including the first certified products for use in the 2.3GHz and 2.5GHz spectrum ranges and approval of the WiMAX joint venture between Clearwire and Sprint. 2009 was set to be another critical year for mobile WiMAX, with certified products for use in the 3.5GHz spectrum available starting in January. Also, a number of large-scale deployments have finally launched and are currently expanding their footprints, such as Clearwire in the U.S., UQ Communications in Japan, Yota in Russia and BSNL in India.
In spite of the above examples, mobile WiMAX has generally attracted only small players or new entrants. Certainly, in mature telecom markets, rollouts have come from myriad small, specialist service providers, mainly focusing on very specific geographic coverage. This is most apparent in Western Europe—in particular in France and Italy—where a lack of fixed broadband coverage in rural areas has enabled niche providers, such as Altitude Telecom in France, to seize the initiative from the more established providers.
To date WiMAX has predominantly been used only for the provision of fixed wireless or nomadic (hotspot) wireless broadband services, much like WiFi. This is instead of the fully mobile services originally envisaged in the mobile WiMAX specifications, which enable users to move between different radio base stations, as in the cellular world. This is despite the standard called “mobile” WiMAX being the most widely used technology. Such mobility is limited by the need for handover of voice calls, intertechnology handover (e.g., GSM or HSPA to mobile WiMAX where WiMAX is not available) and roaming limitations between different WiMAX operators.
However, there are signs that the provision of truly mobile WiMAX services is starting to emerge. Yota in Russia is already offering dual-mode GSM/WiMAX handsets, supplied by HTC. Furthermore, Clearwire, which currently off ers only fixed wireless residential voice services, expects to launch mobile voice over its WiMAX network from the middle of 2010. In addition, Clearwire, UQ Communications and Yota have recently signed a memorandum of understanding to allow international roaming.
The Effects of the Financial Downturn and LTE Developments
The financial downturn has clearly affected many operators looking to secure funding for their projects. However, smaller operators or potential new entrants have been even more exposed. As a result, several WiMAX projects have reportedly been cancelled because the small companies involved failed to secure funding. Even Intel, which helped finance several WiMAX operators, has invested in fewer start-ups over the last couple of years.
So, as the world’s largest mobile operators line up to announce LTE as their next-generation mobile broadband technology, what chance is there for mobile WiMAX?
There’s Still an Opportunity to Succeed In Emerging Countries
A number of key market opportunities in emerging markets remain open to mobile WiMAX, most notably in India. The reasons are twofold:
•First, untapped demand exists today that cannot be met by fixed alternatives. This means that wireless operators using WiMAX can avoid a host of challenges faced by their fixed-line rivals trying to penetrate these areas, such as the high cost of laying cables. For example, Yota in Russia looks like the success story the WiMAX community has been long awaiting. In a market where broadband penetration is low and 3G is just beginning roll out, the operator, after only three months of operation, has attracted more than 100,000 subscribers in just four cities.
•Second, a number of mobile operators in emerging markets (even those with 3G spectrum) may consider mobile WiMAX as a better alternative to DSL in rural areas than HSPA, due to potential spectrum capacity constraints. Mobilink in Pakistan and Globe Telecom in the Philippines are good examples of this phenomenon.
Therefore, the outlook for mobile WiMAX depends heavily on its success in penetrating emerging markets. As Figure 2 illustrates, by 2014 the majority of mobile WiMAX connections are expected to come from such markets.
In Developed Markets, Strong Competition Makes WiMAX Mainly a Niche Technology
In most cases, WiMAX will become a niche solution where strong competition from both fixed technologies, such as DSL and cable, and/or mobile technologies, such as HSPA, exists. WiMAX operators in such markets are best served by using it to target untapped broadband demand in areas with poor or no cable or DSL availability.
There is little advantage to an operator having a mobile WiMAX time-to-market advantage when alternative technologies already dominate among target customers. Differentiation is the only way it can find its place in the market. This is what several WiMAX players are attempting in various ways. For example, some are focusing on new services that highlight the performance advantages of WiMAX compared to today’s technologies.
Overall, competing head-to-head with existing players and technologies requires deep pockets to expand the coverage footprint, while at the same time spending heavily on marketing. In order to focus entirely on services, some WiMAX operators, like Sprint, have decided to opt for an approach more akin to that of a mobile virtual network operator (MVNO) model.
Therefore, it is likely that WiMAX will remain a niche technology in most developed markets. The greatest opportunities exist in the U.S. and advanced markets of Asia. However, in all cases, the availability of the right spectrum at the right price will be critical.
Samsung Sees WiMAX’s Future in Emerging Markets
An Interview with Dr. Hung Song, Vice President of the Global Marketing Group, Telecommunication Systems Division, Samsung Electronics Co., Ltd.
Samsung is one of the world’s most active vendors of mobile WiMAX network infrastructure equipment. We wanted to know what motivated it to take on such a role and what it believes the future holds for the technology.
Which markets do you think have the greatest potential for WiMAX?
Right now (late 2009), the greatest potential to deploy 16e is in the Middle East. In a financial crisis, lots of countries have difficulty securing funding, but the Middle East and countries with oil money do not have this problem. Recent contracts with Datak Telecom in Iran and Mobily in Saudi Arabia illustrate this point.
The Asia-Pacific region is another key area for mobile WiMAX, and Samsung supplies equipment to YTL in Malaysia, a market characterized by low broadband penetration. Backed by the deep pockets of its parent company, the large Malaysian conglomerate YTL Group, YTL e-Solutions’ plans include the rollout of a nationwide network to support the provision of mobile broadband and mobile VoIP services competing head-to-head with HSPA.
And the other key market opportunity is of course India, now that 3G/Broadband Wireless Access (BWA) spectrum auctions are scheduled for early December 2009. Samsung is heavily engaged with many WiMAX candidates in India and hopes to secure a large market share in this strategic market. Being a strong player there will help us reach an even more significant scale for both network components and devices. These are the biggest opportunities for 2009 through 2010. However, beginning in 2011, Africa will be another market opportunity.
What is the current status of the end-user device ecosystem? What are the pricing trends?
The WiMAX Forum is working hard on device certification, and today around 115 16e devices from 40 different vendors have been certified.
Chipset prices for these devices are going down quickly. USB modems (“dongles”) are being priced at around $70 to $90, with prices going down quickly.
What benefits do Samsung’s WiMAX solutions offer to an operator, compared to those of your competitors?
The greatest benefit Samsung brings to its customers is its price/performance ratio. Samsung leverages its strong expertise and the field experience gained through its selection as a key supplier in the largest mobile WiMAX networks worldwide (Clearwire, UQ, Yota and KT). Samsung off ers an end-to-end capability, from devices to professional services (from rollout to network optimization), which allows operators to focus on services. In addition, Samsung confirms its technology leadership through its active role in the development of 16m (the next generation of the WiMAX technology standard).
Can you give an update on how many WiMAX customers Samsung has today?
Currently Samsung counts 13 commercial customers (including Datak) and is engaged in discussions with 35 additional companies.
What is the business case for WiMAX now that LTE is approaching commercial readiness?
Mobile WiMAX and LTE are very similar. They share the same technologies and will address the same mobile broadband market needs. However, mobile WiMAX is available now with a strong ecosystem in place, while it will take two to three years for LTE to reach the level of maturity offered by WiMAX today.
Dr. Song is responsible for worldwide marketing and business development of Samsung’s Mobile WiMAX and Fixed Mobile Convergence solutions. He joined Samsung Electronics in 2000 and has more than 20 years of international management experience in the telecommunications industry. Dr. Song holds a Doctorate in Computer Science, and a Master of Science and a Bachelor of Science in Electrical Engineering.
The first 4G data card: the Sprint 3G/4G U300
Sprint Seizes the 4G Initiative With WiMax
An interview with Tim Donahue, Vice President of Marketing, Sprint
U.S. mobile network operator Sprint has been the most high-profile adopter of WiMAX and, with its partner Clearwire, has launched 4G services in 21 cities. We wanted to find out what advantages the technology offers service providers compared to alternatives.
Why did Sprint opt for WiMAX?
This reflects Sprint’s commitment to change and to being disruptive— shaking up the market in order to differentiate itself from its rival national players.
WiMAX is here now. This gives Sprint a significant head start over its competitors. WiMAX is delivering a technologically and economically superior mobile broadband experience for our customers—with speeds up to ten times faster than today’s 3G.
There are over 484 global commercial deployments of WiMAX in 135 countries worldwide today and currently 435 million POPs (points of presence) covered by WiMAX, expected to grow to 800 million POPs by the end of 2010. Sprint first launched WiMAX in Baltimore last year and then rolled its WiMAX operations into Clearwire, of which it is the majority stakeholder at 51%. Clearwire today focuses on its core business of rolling out WiMAX.
What is Sprint’s view on LTE?
LTE and WiMAX are actually very similar technologies, making them very efficient for carrying data. However, mobile WiMAX is here today and, in spite of the hype, standardized LTE is not being used yet.
In order to deliver true mobile broadband, spectrum assets and a core-IP network are more important than the underlying technology used. Fortunately, we have a 4G technology that’s commercially available today—operating on an all-IP network designed from the ground up to deliver data—and unmatched capacity for data services due to significant spectrum holdings.
What is Sprint’s WiMAX service strategy?
Sprint decided to partner with Clearwire because it really simplifies the approach to providing 4G by enabling Sprint to focus entirely on customer service, its dependable 3G network and its 4G innovations. At the same time, Clearwire is focused on aggressively deploying WiMAX. Sprint sits on Clearwire’s board and works closely with them on all rollout plans.
What is Sprint’s value proposition for WiMAX in the U.S.?
Currently Samsung counts 13 commercial customers (including Datak) and is engaged in discussions with 35 additional companies.
What is the business case for WiMAX now that LTE is approaching commercial readiness?
Sprint’s 4G service has a number of key differentiators:
•Speed: Sprint 4G provides speeds up to ten times faster than 3G’s. This enables and enhances a variety of business and consumer applications not possible with 3G.
•Availability: Sprint 4G WiMAX service is available today in several major markets including Atlanta, Las Vegas, Chicago, Philadelphia and Dallas-Fort Worth. The service is operating in 21 markets across the country and coverage will continue to expand to more cities this year and next year, including Seattle, San Antonio, Austin, New York, Boston and San Francisco.
•Services: Sprint’s 4G enhances a variety of applications. 4G consumers today can watch streaming video from YouTube on the go. They can download enormous files, pictures and video in just seconds, or wirelessly share a live event via video as it happens. Sprint 4G enables a variety of remote applications for the healthcare, insurance, construction, real estate, government and public sectors such as digital signage, remote diagnostics, resource tracking and digital surveillance. For example, the Indianapolis Police Department uses the service today for remote traffic monitoring.
•Devices: Sprint currently off ers the 3G/4G USB U300, which provides wireless mobile broadband access to Sprint’s 4G and 3G networks. Sprint also off ers two 4G routers—the Personal Hotspot, capable of connecting up to four WiFi-enabled devices to the Sprint 3G or 4G network; and a business router, which supports up to 32 simultaneous WiFi connections to both networks. On the product road map this year and next are embedded laptops, a 4G phone, small-office/home-office routers and more dual-mode data devices.
•Pricing: Sprint’s 4G plans are currently just a $10-a-month premium over 3G—and for that, end users get unlimited data on the 4G network.
Can you give an update on the WiMAX take rate?
Sprint does not disclose 4G subscriber numbers. However, Clearwire’s WiMAX is now available to over 10 million people in the U.S. Before the end of 2010, Sprint expects to cover 120 million people in 80 markets.
Sprint is also seeing a 4G halo effect on 3G. Customers interested in 4G decide to sign up for Sprint’s 3G in areas where 4G is not yet available, to future-proof themselves for the arrival of 4G.