WiMAX Directions: Mobile World Congress: WiMAX community looks to a 2G/4G future Feb 22, 2010 – By Rethink Research
The recession gave WiMAX an unexpected profile boost last year, as operators
got cautious about investing too quickly in unproven LTE and took renewed
interest in an alternative OFDMA/IP standard that was gaining real world
deployments. This certainly put WiMAX in the spotlight in stimulus projects
and other time-constrained developments, though its vendors have suffered,
like everyone else, from an overall tendency for customers to scale back or
defer spending during 2009. In 2010, the real world cost and efficiency
advantages of WiMAX are still highly relevant in the race to mobile
broadband, but with LTE genuinely looming this time, the headstart cannot be
the only message.
In Barcelona this year, the vendors were out to prove that the roadmap will
continue to offer WiMAX carriers a step ahead of LTE, with the plans for the
new WiMAX2 standard. But among the host of WiMAX operators represented, and
some of the suppliers, coexistence was the overriding theme. Even in markets
where LTE’s success is virtually assured, WiMAX has a role – for
new business models, for disruptive players, and for partnerships with LTE
carriers. Increasingly, we heard that WiMAX really can support mobile
broadband even with unlimited tariffs, especially as many operators have
plentiful spectrum. This makes them ideal data offload partners for cellcos.
And in less developed economies, a lightly simmering WiMAX theme of the past
few years finally came to the boil – the chance for 2G cellcos to
leapfrog 3G and adopt a 2G/4G strategy. This has clear potential in parts of
Africa and Asia, as does the open retail model that the WiMAX community
pushes, which removes the subsidy burden from carriers.
So, will we see the unlikely spectacle of WiMAX becoming the friend of 3G
carriers? Unlikely not because of the technology itself, but years of
politics, and because WiMAX has tended to become the weapon for new operators
that seek to disrupt the 3G model. They do this either by offering more data
for less money on their efficient, high capacity networks; or by leveraging
those modern networks and plentiful spectrum to gain a headstart in new
lucrative areas such as embedded content devices or smart grid.
The fact is, the cellcos have to address the strain that mobile broadband is
putting on their networks quickly, more quickly than they can build out LTE.
Some will use WiMAX directly, or via a joint venture, as Sprint Nextel has
done. Some will look to pool as many networks and spectrum bands as possible
to achieve capacity for new services, whether consumer related or
vertical/embedded – KDDI is doing WiMAX via UQ, plus CDMA EV-DO Rev B
plus LTE; KT has a similar strategy. Some will work with a WiMAX third party
to offload mobile data to a more powerful network, or to establish an MVNO
dedicated to a certain high return user group or application.
This is a big opportunity for those investing in WiMAX networks in developed
economies where 3G and fixed broadband are in good supply. Offering their
systems on a wholesale basis for 3G partners, as well as for new models such
as machine-to-machine, can provide a cashflow kickstart for a new carrier.
Davide Rota, CEO of Italian WiMAX carrier Linkem, told an Intel-led gathering
of operators and vendors in Barcelona: “We will offer some relief for
the congestion on others’ networks.” Linkem already has a
partnership with Telecom Italia, initially geared to gaps in its fixed
broadband network, but evolving towards a mobile offload alliance. This will
be of key importance to Linkem, which contradicts the received wisdom that
WiMAX’ role in developed markets like western Europe is to address
underserved rural areas. As for any carrier, Rota argues, the real profits
lie in the urban centers, and being a partner for a cellco may help bring
those to a WiMAX player. “Italy has the lowest level in Europe of fixed
lines because of the incumbent’s fees. DSL replacement is not
necessarily about digital divide – 80% of our base stations are urban,
and all the profitable ones,” he said.
The vendors are aware of the opportunities lying in bridging the cellco/WiMAX
divide too – especially those with a foot in both camps. Bruce Brda,
senior VP and general manager of Motorola Networks, commented: “The
line between WiMAX and LTE has blurred a bit. Some cellcos on the LTE path
will use WiMAX – their own or a partner’s – to offload
data. They need to use everything available and we will soon see dual-mode
HSPA/WiMAX dongles. The division of the greenfield WiMAX operator and the
cellco LTE is blurring.”
However, Brda also hints at a trend that could see WiMAX once again proving a
bugbear for 3G, and leaping up to eat its lunch. This is the potential for 2G
operators in developing economies, where there is limited 3G availability, to
leapfrog HSPA and go straight to 4G for data, keeping EDGE for voice and wide
area roaming. The 4G element could be LTE or WiMAX of course, but in a
greenfield market, the WiMAX headstart comes into its own, since the carriers
will have no existing investment in 3G to steer them towards LTE, and WiMAX
will be more readily available.
Mo Shakouri, head of marketing for WiMAX Forum, points out that of the 555
WiMAX deployments worldwide, as of January, 95 are with mobile operators,
mainly 2G carriers looking for a data overlay in key markets.
One of those is Digicel, whose CEO Magnus Johanson was also presenting at the
Intel event. The firm has 2G operations in 32 markets, mainly in the
Caribbean but also in some other countries like Papua New Guinea. He
commented: “The 3G opportunity in these markets is miniscule except for
roaming in high end markets like Bermuda. There is no fixed infrastructure
either, so we can do fixed and mobile, and there is no need for 3G.”
For such operators, the retail model that the WiMAX community espouses will
also be attractive in many cases. Since users acquire their devices - whether
dongles, notebooks, phones or ultra-low cost gadgets being created for low
income bases – in retail outlets, without a contract, the carrier
avoids the heavy burden of subsidies and has significantly lower cost of
subscriber acquisition and of device sales/support. Of course, the downside
is that, in some markets, few people will be able to afford an unsubsidized
product, but most operators will live with that, seeking to avoid the
nightmare scenario of some 3G networks, where consumers snap up subsidized
phones and unlimited tariffs and generate no profit for the carrier. Many
operators would now prefer a smaller user base that consists of people who
can afford premium services – and in markets underserved by 3G and DSL,
data tariffs can be very high because of pent-up demand (this is especially
true in cities in many parts of Africa, which can see data ARPU of $100).
The heavy involvement of the Taiwanese ecosystem in WiMAX is driving a flood
of devices that come to market very quickly and are priced appropriately for
the mass market in developed economies, and the midmarket in emerging areas.
The WiMAX Forum is introducing a certification program for the retail model,
enabling devices purchased from stores to be used on any network, in theory.
Shakouri says this is the top priority for 2010, though he is realistic about
the huge change it represents from the world of intense carrier testing of
every device. “We are working with carriers on specific features for
the IoT (intereroperability testing) requirements,” he said.
“There will be a certain category of devices where the experience is
still optimized for the carrier; then a medium level with limited testing to
bring a device to the network; and some will have zero testing – more
over time.” Even with the mid-level, the cost of testing is reduced by
80%. Further cost savings lie in the IPR system, which is carrying lower
royalties than in 3G handsets, and in excluding 3G from the devices. Ehud
Reshef, head of WiMAX at chipmaker Comsys Mobile - which specializes in
EDGE/WiMAX device silicon - commented: “2G/4G is key in developing
economies. 3G is a significant extra cost to do because of silicon and IPR so
there has to be a real need for it, and purchasing power available.”
The lack of subsidies is only one reason why 2G operators have their eye on
WiMAX. Others include the lower total cost of ownership for a flat IP
network, availability of spectrum, and the high spectral efficiency. This
makes all-you-can-eat broadband viable for WiMAX carriers, even as 3G
operators start to turn away from its devastating impact on their networks
and profits. This was the message from Dennis Sverdlov, CEO of Russian WiMAX
carrier Yota, which pursues a retail-only device model and actually runs
contests to see which of its subscribers use the most data (Our user record
is 1.97Tb in one month – that’s real unlimited. Our customers use
20% more data on average than cable, 100% more than GSM.”
Such performance not only makes WiMAX providers good partners for 3G offload,
but in the hands of a 2G operator, may ensure 3G never gets a foothold at
all, or only for efficient wide area voice and text services (a likely
outcome in parts of India, where the two technologies are rolling out almost
simultaneously, so that each can be targeted at the appropriate model). This
would, of course, be good news for vendors with no 3G play, such as Motorola
or Alvarion – and for 2G-only operators which need to increase their
revenue streams and customer retention, as voice ARPU falls (Indian cellcos
have even resorted to per-second billing).
Research from Rethink found that almost 200 2G cellcos will be using WiMAX in
some portion of their footprint by 2013, and in capex terms, mobile operators
will account for about one-third of Mobile WiMAX spending by 2012. And Brda
believes that, even in developed economies, operators will start to use
current 3G and refarmed 2G spectrum for 4G (WiMAX or LTE), even moving users
off HSPA networks before GSM. So, ironically, as WiMAX provides a chance for
3G operators, in the short term, to extend the life of their HSPA investment
by pursuing offload partnerships, it may also shorten the life expectancy of
HSPA in global terms by enabling a new 2G voice/4G data combination that will
simplify the operators’ platforms and help them maximize the use of
their spectrum holdings.
WiMAX Directions: Mobile World Congress: WiMAX community looks to a 2G/4G future
