Detecon: WiMAX Transmission Standard - Window of Opportunity

> Opinion Paper WiMAX Window of Opportunity 2010 / 01 www.detecon.com WiMAX: Window of Opportunity Table of Contents 1 Abstract ............................................................................................................... 2 2 Introduction.......................................................................................................... 3 3 Broadband Stimulus ............................................................................................ 4 4 Conclusions ....................................................................................................... 10 5 The Author......................................................................................................... 12 6 References ........................................................................................................ 12 7 Glossary ............................................................................................................ 13 8 Annex ................................................................................................................ 14 9 The Company .................................................................................................... 15 Opinion Paper 1 Detecon International GmbH WiMAX: Window of Opportunity 1 Abstract WiMAX was the first technology to come to market as a candidate for the fourth generation (4G) transmission standard, after 3G lagged behind expectations in terms of performance and capacity. Its appearance created great excitement in the industry. WiMAX was seen both as complementary broadband to expand the tier-1 operators’ network capacity and as having the potential to be used for disruptive business models compared to the established 3GPP technologies. After four years the reality is different than the forecasted scenarios. WiMAX has not established itself globally with the scale and impact so many had predicted. After all the hype and discussions about WiMAX vs LTE, the time is now to look for ways to grow a larger ecosystem for WiMAX and reach economies of scale. Without this, WiMAX might be seen as a failed bet and establish itself indefinitely as a niche technology. Only robust business models, based on the capabilities of the technology and on market realities can overcome this and bring back some of the momentum seen before the end of 2007. The stimulus package in the US, approved in February of 2009, includes funding for broadband access in rural and underserved regions of the US. Similar “broadband-for-all” programs are in place around the globe as a means to boost development in the current economic downturn. Amongst the many broadband technologies available, how is WiMAX positioned to benefit from these broadband incentives? Will this be the stimulus WiMAX needs to recover and reach the forecasted subscriber numbers for the next years? Of the available technologies, WiMAX is a viable option in terms of performance versus costs. So the world-wide stimulus packages can create a window of opportunity to regain some competitive advantage and interest from investors. Opinion Paper 2 Detecon International GmbH WiMAX: Window of Opportunity 2 Introduction In 2005 there was great excitement in the Telco market about the first technology demonstrating 4G potential: WiMAX. Except for Ericsson, who opted for defending its majority share in the 3G market by keeping out of WiMAX, all other major vendors jumped on the WiMAX bandwagon. They looked to position themselves as the leading vendor by investing strongly in WiMAX and by announcing the revolutionary performance of their solutions. Intel was and still is the main defender of WiMAX, promoting its capabilities and investing in operators worldwide that place their bet in WiMAX technology. Between 2005 and 2007 and thanks to the flooding of the telecoms-related media and the hyped sales approach by the vendors, the expectations related to WiMAX’s performance were rising by the day. Sounds familiar? A similar phenomenon was seen in the late 90s with the 3G hype, which had serious impacts on the budgets of both operators and vendors. These have only in recent years finally begun to reach a positive return on investment (ROI), leveraged by the growing thirst for mobile broadband resulting from the appearance of the i- phone and of 3G USB portable dongles. This hype vs reality contrast was the main reason why major operators declined to invest in WiMAX. The main operators were just starting to capitalize on their huge 3G investments, namely the costs of buying spectrum in the auctions and the investments in equipment. Although interested in expanding their network capacity, they were more cautious, due to the lessons learned from 3G. During those years there has been extensive debate on whether operators could afford to wait for LTE or if they should invest in WiMAX which was already available. The problem was that WiMAX promised more in 2005 than it could deliver then and even more than it still can today. Currently, more realistic approaches are in place, since several networks have demonstrated how WiMAX works. Other important reasons for the general non-adoption are related to the lack of suitable devices. In 2005 it was announced that in 2008 the market would offer WiMAX-capable PDAs and laptops. For PDAs there are only two models in the market, offered by Samsung and HTC, while Nokia pulled out a few months after having announced its N810 tablet. Laptops have become available only in mid-2009. The economic downturn dealt another hard blow to the adoption of WiMAX with investors losing their access to credit and looking to minimize their risks by not investing in a new technology such as WiMAX. WiMAX is running or in the process of being deployed in 145 countries, but almost exclusively in small networks. The WiMAX Forum [1] estimates close to 5 million WiMAX users worldwide in 2009, a number which is a quarter of what was forecasted in 2007, which raises questions about current forecasts , e.g., 140 million in 2012. Some analysts have proclaimed WiMAX’s death, since it did not fully utilize its time-to- market advantage over LTE. This advantage is getting smaller by the day and many operators have already committed to deploy LTE, which also contributed to several vendors pulling out of WiMAX. But WiMAX is not dead, although it is increasingly seen as a niche technology. Sprint/Clearwire together with Intel, still advocate WiMAX’s success, but the reality is that WiMAX needs new impulses to create a larger ecosystem. This could be achieved with its use for vertical market services or with creating robust business cases that qualify it as a main receiver of broadband stimulus money for rural, underserved or unserved areas. Opinion Paper 3 Detecon International GmbH WiMAX: Window of Opportunity These incentives are being made available from governments worldwide as a means to allow broadband access for its citizens and to stimulate their lagging economies. Can this create a new window of opportunity for WiMAX, after the loss of momentum seen in the past 1.5 years? 3 Broadband Stimulus There is a broad consensus that technological investments are part of the solution to overcome the current financial crisis. In regions lacking broadband access infrastructure, such as less populated rural areas, the investment in telecom infrastructure brings broadband access to the local population, but is also expected to boost the development of those regions, creating new jobs and increasing the productivity of local businesses. Several governments worldwide have announced measures to boost investment in different technological areas, from renewable energies to “broadband for all” programs. This was particularly visible during the US elections of 2008. While still a candidate for the US presidency, Barack Obama announced measures to breathe new life into the economy, emphasizing the role that technology would have in that plan. This plan is being put into practice with the well-known US Stimulus Package. It is a multibillion dollar incentive package which will be injected into the US economy to be applied in different areas and distributed in several phases. “Our firms know that technology investments are the quickest way to dramatically turn the economy around” said Barack Obama in February 2009, when he signed the $787bn (€525bn) stimulus package into law. Its official name is of American Recovery and Reinvestment Act of 2009. From this stimulus package, $7.2bn (€4.8bn) has been assigned for broadband investments, particularly to deliver broadband to rural and unserved / underserved regions in the US. The amount was widely criticized, even by Democrats in the US Congress, because they had expected the allocation for broadband to be substantially larger. Several analysts had estimated the costs for “wiring the country” with fiber to be between $15bn (€10bn) and $30bn (€20bn). The money for broadband aid will be distributed by two agencies, the National Telecommunications and Information Administration (NTIA) and the Rural Utilities Service from the US department of Agriculture (RUS), in three different rounds [2]. Each round has an application submission period, followed by an evaluation of the candidates and finally the appropriation of money.