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WiMax: Town & Country

Light Reading
News Analysis
Light Reading
10/28/2004

The latest report from Light Reading's research division, Heavy Reading, shows that wired operators are very interested in using WiMax to deliver fixed and mobile broadband services but finds that the nascent wireless technology is liable to be a country mouse rather than a city kitty.

WiMax boosters like to talk up the myriad fixed and mobile wireless applications that the technology will be used for -- when officially certified products start to hit the market -- probably in the second half of 2005.

But Heavy Reading's "WiMax Reality Check" finds that larger operators hoping to use technology to extend the coverage of cable and DSL services in urban areas may find it easier to stick with the devil they know rather than leap into the wireless unknown.

In the city, DSL and cable will prove to be extremely competitive on performance and price.

"DSL is continually improving in terms of both bandwidth and in coverage distance from the central office," the report states. "That raises the question: Assuming that commercial WiMax gear debuts in the second half of 2005, will DSL technology have improved to the point that many of the shortcomings WiMax is supposed to address no longer exist?"

And beyond DSL, a huge expansion in fiber connectivity is looming. "There's going to be an increasing number of subscribers who have access to fiber to the home," opines Shaun McFall, VP of field marketing at Stratex Networks, in the report. "When that's done, the game is over for WiMax."

And even on price it is hard to see how WiMax operators will compete with established wired networks. Estimates for the initial cost of WiMax basestations range between $10,000 and $20,000. Meanwhile, CPE boxes could cost anything between $750 to $250, according to vendors quoted in the report.

"Growth in WiMax equipment volumes will drive down the cost of network infrastructure and CPE, and the speed at which it can reach levels that are competitive with DSL and cable will determine how quickly and widely it's adopted," the report notes. "Price competition in the broadband arena is already fierce, so it's rather difficult to see how one could swoop in with an offer that would convince a broadband provider to adopt WiMax rather than upgrading its cable or DSL infrastructure."

And wired broadband operators are already offering services priced around $30 a month -- or under.

"We don't foresee in the near term offering service for $30 a month," says Philip Urso, founder and CEO of TowerStream Corp. in the report. "It's not profitable for us or for anyone."

But in rural areas the story is reversed: Broadband infrastructure is nowhere near as established, and WiMax starts to look like a much more attractive proposition.

"This market condition provides the most fertile ground for WiMax," writes Tim Kridel, the report's author. "In the rural area of a developed country, for example, the only option for Internet access might be dial-up – possibly via a long-distance call... We believe that this strategy is sound."

— Dan Jones, Site Editor, Unstrung

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Frank
Frank
12/5/2012 | 1:08:38 AM
re: WiMax: Town & Country
Good point, Tony, concerning business reasons. Beyond baaic install times, for instance, my clients would be looking to WiMAX and other wirelesses for D/R and secondary ingress/egress purposes in their smaller branch offices in order to back up critical services, even if on a highly impaired basis. However, based on our last experiences with major outages and the ability of wireless services to fit the bill, it appears that even wireless suffers initial shock syndrome before a period of stabilization or equillibrium can be arrived at, as we witnessed during 9/11 here in NY City.

Frank
freetoair
freetoair
12/5/2012 | 1:08:38 AM
re: WiMax: Town & Country
Tony,

Agree. The question/challenge is on the business side. Can another "pipe" be offered at a cost/price point where an SP business case is viable. Without a new application (vs wireless DSL) then it all comes down to the business economics. Does the rural market only support this? Can CPEs hit the right cost point? Can service be reasonably engineered to support predictable service assurance & levels? Not clear from recent history that this is the case. And WiMAX chipsets do not change that. If the primary goal of the chipsets is to drive costs down that is great. But at what RF power levels can you make CPEs/modems that are viable from a battery consumption/heat dissipation level to use in laptops, etc.? Does the challenge here necessitate turning power down such that coverage/performance is now on par with 3G? How different is this from 3G once you look at RF performance/packaging in portable, battery powered devices?

Thoughts?
Tony Li
Tony Li
12/5/2012 | 1:08:38 AM
re: WiMax: Town & Country

While it's probably true that WiMax might not provide something that is technically vastly superior to DSL, I think that that is not the whole story. For alternative access providers or mobile access providers, WiMax may make a nice way to make an end run around the RBOC's install times. The draw may be on the business side, not the technical side.

Tony
paolo.franzoi
paolo.franzoi
12/5/2012 | 1:08:37 AM
re: WiMax: Town & Country

I think the point is that Wireless Internet will serve the same speed needs as 2 embedded technologies (DSL and Cable). Thus, its likely to be a niche business in the industrialized world urban/suburban settings. In particular, current 1 - 3 Mb/s offerings are going to be challenged by higher connect rate (FIOS primary service is a 15M/3M connection) services.

I think its challenging to want to invest in a broad way into a market with 2 incumbents with not a lot of differentiation to the service.

seven
sgan201
sgan201
12/5/2012 | 1:08:37 AM
re: WiMax: Town & Country
Hi,
WiMax will succeed or fail depending on whether it is useful outside of the developed countries. In developed world, there are too many alternatives to justify the business. It is easier to deploy when you are green field and no other alternative existed. So, in order for WiMax to succeed, it has to be deployed first with volume in countries like India, China, Latin America, Africa, Eastern Europe. And, when the volume reach to a point where the CPE's price is around $100 or less, then we can talk about this as being viable alternative to DSL/Cable Modem.

But, given that WiMax is not designed optimally for the emerging market, it may never succeed.. Something else may win...


Dreamer
rjmcmahon
rjmcmahon
12/5/2012 | 1:08:36 AM
re: WiMax: Town & Country
The report states,

"Price competition in the broadband arena is already fierce, so it's rather difficult to see how one could swoop in with an offer that would convince a broadband provider to adopt WiMax rather than upgrading its cable or DSL infrastructure."

But according to an article in yesterday's Mercury news, Americans are paying 20 times as much for internet access as the Japanese and still too many don't have access at all.

Americans pay 20 times as much as the Japanese for broadband access. Quoting Business Week, the report says U.S. consumers pay about $35 a month for a 1.5-megabit-per-second connection, compared with about $25 a month in Japan for a 26 megabits a second. While half of American consumers with incomes over $75,000 a year have broadband access, half of those who earn less than $30,000 have no Internet service at all.

http://www.mercurynews.com/mld...

Looks a lot like the flu vacine problem where public interests are not being served very well. Why is that?
unlimited
unlimited
12/5/2012 | 1:08:34 AM
re: WiMax: Town & Country
It's hard to know the role that WiMax will play in access but it's not for incumbent providers. Today broadband Internet is still so constrained that it holds back the transisiton to VoIP. Incumbents have a desperate need to sell voice and Internet access at prices that will sustain their current revenue levels. That means they do not want to make it easy for service bypass. I suspect triple play services will be constrained so that access bandwidth is metered out in expensive per service increments. A new wireless access provider could take a fresh approach and set pricing and performance levels at far more attractive levels. Whether and how this will happen remains to be seen.
Tony Li
Tony Li
12/5/2012 | 1:08:33 AM
re: WiMax: Town & Country

Rj,

It's very true that Japan's access prices are far lower than what we pay. However, it is entirely possible that the market in Japan is still in the midst of the bubble. Access prices may be artificially low, driven by a land-grab mentality amongst the providers there using cheap access as a loss leader to gain subscribers. Only time will tell if prices stabilize at that level.

Tony
douggreen
douggreen
12/5/2012 | 1:08:32 AM
re: WiMax: Town & Country
rjm,

While I won't argue that access in the US is a problem, Japan is not an apples to apples comparison. Aside from the issues that Tony pointed out, Japan has a dense concentration of population in cites that puts large percentages of people within easy reach of fiber. It's a lot easier to run a fiber bundle to a high rise apartment complex and service hundreds of households than to deliver service to one house at a time.

We are certainly paying a penalty for the way our access network has evolved historically. One might also argue that we pay a penalty for the fact that we want to live in the suburbs in neighborhoods versus concentrated in large cities in apartments.

fiber_r_us
fiber_r_us
12/5/2012 | 1:08:31 AM
re: WiMax: Town & Country
Yes. But we are willing to pay the "suburb penalty" for roads, sewers, water, gas, gasoline, electricity, shopping, work, schools, etc.

So, getting decent telecom access is clearly economically within the realm of something that can be done (as it is cheaper than many of the items listed above).
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