Opportunities and Challenges for Broadband Wireless and WiMAX in the USA, 1st Edition:

1: Key Findings

A new study from Maravedis peers through the WiMAX hype to make actionable predictions. Here are the details, the key findings.

by Tim Sanders with Adlane Fellah, Jeff Orr, Cintia Garza, and Robert Syupta for Maravedis [February 25, 2008]

The conventional wisdom has been that the opportunity for exploiting WiMAX and broadband wireless access (BWA) was exclusive to two companies: Sprint Nextel and Clearwire. In terms of mobile WiMAX, these carriers do have the best opportunity. However, WiMAX as a whole appears to offer ample opportunity for additional carriers and their investors. In this report, we profiled more than 23 carriers, vendors, spectrum holders, and industry stakeholders to ascertain, primarily from the carrier point of view, opportunities, realities, and threats.

Top Key Findings

• Maravedis believes that Sprint has the best mobile WiMAX opportunity and will proceed with its XOHM WiMAX play under three possible scenarios:
  • Scenario 1: A slower build-out tempo than previously announced and a more modest CAPEX investment in 2008 and until Sprint consolidates its position in the mobile play. Sprint would make modest investments on the infrastructure side and focus on the development of a proper device ecosystem until fully certified equipment is available.
  • Scenario 2: Sprint spins off its WiMAX unit under a new entity, where external investors such as Intel and possibly Samsung/Motorola become dominant investors. Sprint would retain full control of the very valuable BRS spectrum. A partnership with Clearwire would also be revisited.
  • Scenario 3: Sprint continues to develop WiMAX deployments in 20-40 MHz of its 90 MHz of available 2.5 GHz spectrum for WBB connectivity. Sprint then deploys LTE as a fully mobile service. WiMAX and LTE converge in multi-mode portable devices and embedded applications. Sprint lets the market decide which technology to deploy and to what extent their two markets converge.
• WISPs using both licensed and unlicensed bands will continue to deploy BWA and WIMAX equipment. Notable WISPs interviewed indicate that there exists a clear opportunity for WiMAX outside Sprint.
• Opportunities for WiMAX and BWA in the 700 MHz bands are real but will not start materializing until at least 2010.
• A fixed and/or portable differentiation play with a strong service model, integrated backoffice technologies, and additional services is a powerful enough proposition to bring to market.
• Non-Sprint WiMAX subscribers will exceed 10 million by 2012, up from a half-million at the end of 2007.
• The current regulatory environment in the U.S.—along with strong representation from industry and standards groups—is providing a robust pro-broadband wireless framework.
• LTE will be the dominant broadband wireless access technology in 2012.
• Service providers are seeking to differentiate into niches. There is particular emphasis upon business-to-business services in the next three years.
• Many of the firms surveyed are products of consolidation and are increasingly interested in additional consolidation.

Regulatory and Spectrum

• In the US, the regulatory environment is broadband wireless friendly. The FCC is increasingly attempting to shift spectrum for commercial use and for mobile use.
• As of October 2007, the FCC listed 162 active WCS licenses in 2.3 GHz spectrum, 1728 BRS licenses in 2.5 GHz, and 3180 EBS licenses—also in 2.5 GHz spectrum.
• Respondents agreed that more spectrum, both licensed and unlicensed, is needed.
• There has been a very strong interest on the part of carriers and vendors in the 3.65 GHz band of frequencies since the FCC rulings of this past summer accorded existing WiMAX technology a role in this band.
• Licensed point-to-multipoint spectrum is not considered a viable backhaul technology by carriers. They report that licensed 2.5 GHz and 2.3 GHz frequencies are too valuable for use in multipoint access.
• Most carriers also use licensed point-to-point spectrum in 6 GHz, 11 GHz, 18 GHz, and 23 GHz for backhaul.
• Using licensed point-to-multipoint spectrum to serve business customers is not always the best choice, due to increasing high-bandwidth requirements by customers.

Market

• Non-Sprint WiMAX subscribers will exceed 10 million by 2012, from a half-million at the end of 2007.
• The slowing broadband adoption curve signals a maturing market and a shift in focus of carriers towards high-value services. Carriers need IP-based services and technologies to compete.
• A number of IP-based services are helping drive broadband use, particularly VoIP, but also video services and numerous business class IP-based services such as IP-PBX that carriers are using to secure customers with bundling.
• Rural areas represent a great opportunity for BWA and WiMAX to reduce the digital divide.
• The municipal wireless industry is bogged down with technical and business-case challenges.

Carriers

• LTE will be the dominant mobile broadband technology in 2012.
• The motivation for Sprint and Clearwire to renew their partnership is greater than ever.
• Most cellular-carrier winners of the recent AWS spectrum auction report little interest in a WiMAX play in this spectrum.
• Carriers would love to have true interoperable mobile WiMAX technology today, but they are not waiting idly for it. For many carriers, a fixed/portable play, coupled with strong service models, integrated back-office technologies, and additional services, is a powerful enough differentiation proposition to go to market in the short term.
• Cellular carriers often don't view broadband wireless (usually fixed/portable) and mobile wireless as competing products.
• Satellite broadband is very important for rural and underserved applications, but is largely focused in this niche. In fact, many respondents chose to partner with satellite broadband providers.
• Carriers largely feel that no single spectrum choice is always best, although those with major holdings in specific frequencies do favor those ranges. Most carriers report using multiple wireless technologies for backhaul and at the edge of their networks to support customers.

Applications

• Cellular carriers are looking increasingly to broadband mobile services to improve revenues and create new business.
• Mobile broadband applications and business models are still immature and not well understood, but synchronous service speeds and all-you-can-eat packages are increasingly in demand.
• Cellular carriers are starting to see user bandwidth spike with certain applications such as user-generated content.
• Carriers are reporting unprecedented demand for higher-capacity links from broadband wireless customers—leading some carriers to shift to point-to-point dedicated wireless technology to meet enterprise customer needs that range up to 100 Mbps.

Technology

• WiMAX and LTE are converging upon 4G technology that includes seamless hand-over, QoS, security and higher-level compatibility such as user authentication and billing across yet dissimilar low-level interface networks.
• As the broad industry IC manufacturers become the primary arbiters of WiMAX and LTE IPR, use of both will have fewer barriers and costs than for 3G. WiMAX will retain an open market advantage despite pressure for LTE to open up technology and network access.
• WiMAX is part of the converged 4G wireless future but can immediately be decided upon the stand-alone merits of the individual business case.
• WiMAX benefits from allies including Google, eBay, Microsoft and a host of Internet and wireless service providers while LTE attempts to craft semi-captive solutions and revenue sharing agreements.

Challenges for WiMAX in the US

• Sprint is the leading proponent of WiMAX in the US. It needs to send a clear signal to the market about its mobile WiMAX development plans.
• LTE is gaining momentum among US mobile carriers.
• Achieving seamless interoperability in real world deployments before 2009.
• Development of a proper device ecosystem and application platforms.
• Establishing a proper customer-value proposition for XOHM applications to mitigate the loss of device subsidies.
• Prompt implementation and testing of new WiMAX product profiles in spectrum ranges that broaden the opportunity, particularly in the 700 MHz range.
• Backoffice and technical impediments to seamless interoperable roaming between carriers.
• The willingness of spectrum holders to sublet spectrum or otherwise partner with other carriers to build out their spectrum assets fast enough to secure a major market position.
• The likelihood of an economic recession is increasing, which may negatively impact CAPEX investments by all carriers in 2008 and 2009.

— End

Copyright 2008 Maravedis, Inc.
This exerpt from the report Opportunities and Challenges for Broadband Wireless and WiMAX in the USA, 1st Edition, is reprinted with permission. To purchase the report, visit the Maravedis website.