MARAVEDIS

There are many new developments in wireless these days:

• The impact of open OS and device applications
• Industry reaction to the proposed rule changes and Android on iPhone issue in front of the FCC
• Development of LTE chips sets, devices and network deployment plans
• The impact on incumbent and new operators from the rapid increase in bandwidth traffic
• Mobile video services
• Acquisitions, partnerships and surrounding speculation

News worth commenting on comes up often to capture our attention and serve as fodder for analysis.

We think it is good every now and then to take a step back to ask questions about the basic assumptions that are helping to shape the industry and that have significant impact on individual companies and segments of the industry. Let us 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 advantage over the course of just 2-4 years as it becomes available. Questions remain regarding how competitive LTE will be in the fixed-nomadic and Greenfield mobile markets that WiMAX has established a beachhead.

WiMAX advocates sometimes stress that it takes advantage of similarities with Wi-Fi market development: that Wi-Fi establishes market momentum that WiMAX can now ride. Let's take a quick look at that assumption: The mobile wireless industry saw the grass roots emergence of Wi-Fi Hot-Spots and proliferation into homes and businesses and responded by doing acquisitions of leading Hot-Spot service providers and rolling out their own, and 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 do a deal with the devil of cheap, open access Wi-Fi if the service is often a give-away as part of a mobile package? Because some operators started offering Wi-Fi, many others were forced to follow. Also because this has been a way to head off WiMAX or any other challenger such as MetroFi clouds from competing effectively: the 3G industry has the markets share dominance that it 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 position of the mobile industry that it is the Universal Mobile Telecommunications System (UMTS) and thus no other standard is needed or appropriate. This stance carries with it a quandary: the universal radio approach as it pushes into multiple service 4G broadband 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 embrace 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 to discrete task groups and purpose designed standards: these specific tasks are given mandates to fulfill specific functions and then work to collaborate across lines of development. That 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 had led to islands of development and commercial momentum that are less organized and strategic than the well situated UMTS industry approach. The WiMAX effort specifically has been embryonic; although developing a competitive supply ecosystem, WiMAX has not yet had the scale to play the role of assimilator of markets similar to UMTS.

The WiMAX Forum might have jumped forward in their thinking to the situation the industry faces today: it still is in the catch-22 position of building commercial momentum while needing to amass huge amounts of capital to acquire spectrum and fund large-scale deployments that can compete with the mobile industry. Proponents of 3GPP LTE point to the large volumes their industry will develop that should lead to low cost per unit and network operation efficiencies.

A tact that might have been taken, one we had suggested here about 6 years ago would have been to develop WiMAX femtocells (the name femtocells had not been widely coined) and picocells. We had discussions with several companies: Why not develop WiMAX units that could be deployed by users directly as local area and campus networks? The answer was: "Because Wi-Fi already does that". From a technical perspective that made good sense. From a strategic market development perspective, limiting WiMAX to the 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 WiMAX can harness user-deployed networks that will be part of the same standard to gain 'viral adoption'. User deployment was needed to move DSL, cable, home entertainment, in other words any product that hopes to achieve mass market consumer adoption. Eliminating the installation charge that kills many business plans for deploying WBB is essential as NGNs evolve to use small cells. Moreover, WiMAX could have given users a bit longer range than Wi-Fi and operation in cleaner spectrum. There are many aspects of this that we do not have the space to go into.

The competing camps should think beyond technology to how they can harness market forces that will shape up in the future. Basic questions should be asked including 'how is WiMAX positioned are they positioning 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 about 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 development of competitive systems of technology and commercial momentum that meet the challenges that reached as the overall ICT industry develops.

Due to tie-in to incumbent business 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, as LTE advocates suggest, mean 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 said 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 now - about $6 each. WiMAX+3G HSPA chips are available but that has to carry with it the 3G IPR royalties so is not as low.

Motorola, Alvarion, Alcatel-Lucent, 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. Although the largest share will be driven by incumbent operators to LTE, WiMAX’ share will grow at a compounded rate of over 35% for several years.

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.