With the launch of mobile WiMAX just months away, critics are rounding on the technology
by Iain Morris
Mon, October 1. 2007
Mobile WiMAX doubters are legion, but it’s rare to see a WiMAX operator in their ranks. So when Dov Bar-Gera, WiMAX Telecom CEO, says technical hold-ups could delay his commercial launch of mobile WiMAX in Austria, Slovakia and Croatia, he is bound to stir some anxiety among vendors trumpeting this technology as the next big thing.
As Bar-Gera joins the growing chorus calling mobile WiMAX into question, some of the more resolute skeptics sound more vociferous than ever. Last March, the GSM Association, a lobby group for GSM technology, published the results of a report commissioned from consultancy Arthur D. Little, which purported to shred the business case for mobile WiMAX in markets where 3G is already in service.
Ericsson, a confirmed WiMAX opponent, is equally dismissive. Mikael Halén, director of government and industry relations for the Swedish vendor, reckons HSPA, a high-speed version of 3G, will have 20 times as many subscribers as mobile WiMAX by 2011 (600 million vs. 30 million).
Australia’s incumbent operator Telstra has also snubbed WiMAX in recent weeks. In July—still smarting from the Australian government’s decision to award a sizable broadband contract to chief rival Optus—Telstra dismissed the capability of the WiMAX technology Optus plans to launch, arguing it is "unproven" and "vastly inferior" to its own HSDPA service.
None of this has deterred some big operators from announcing varying levels of commitment to WiMAX technology over the summer months. In the United States, for example, Sprint Nextel has upped the scale of its investment in a nationwide network to US$5 billion from about $3 billion. And in Europe, UK-based Vodafone has surprised some by joining the WiMAX Forum, the main lobby group for WiMAX (see Vodafone: No longer a WiMAX wallflower? at right).
With that kind of support, say mobile WiMAX backers, the standard is now poised to become a mass-market offer at launch next year.
Where does WiMAX fit?
Some supporters of mobile WiMAX say it will not compete directly with 3G but co-exist in harmony, as a complementary service.
At face value, this market positioning may appear contrived. Although 3G evolved from circuit-switched voice, while mobile WiMAX was designed with IP data communications in mind, both technologies are, essentially, designed to do the same thing: provide a mobile broadband connection allowing operators to sell advanced data applications to their customers.
Mobile WiMAX operates at speeds well in excess of 3G, WiMAX proponents respond, making it a "4G" service. But there could be two flaws in this rationale.
First, it assumes users need a higher-bandwidth mobile service. In fact, the evidence suggests they are still not much interested in high-speed data at all: voice generates around 80 percent of revenues for many mobile operators, with low-rate messaging the only data service that could be described earnestly as "mass market." There are signs this is changing in parts of Asia and Europe as mobile data ARPU creeps up, but if it is still well below what operators would like then technology is hardly to blame.
"The failure of data on 3G today is more to do with a lack of compelling applications and data services," says Tushar Rao, an analyst with Capgemini. "It’s not a technical issue."
Second, it may overestimate the bandwidth mobile WiMAX can deliver. Although the WiMAX Forum says rates of around 15Mbps will be available at first, the reality could be much lower in a congested commercial setting. HSPA appears to have carried 3G a long way since the days it struggled to sustain a 128kbps service: operators like mobilkom austria now claim to provide 7.2Mbps on the downlink, and next year—when mobile WiMAX first appears—they say this will rise to 28Mbps. As with the WiMAX estimates, such rates may be well ahead of the mark, but it seems unlikely HSPA will be at any immediate disadvantage to mobile WiMAX.
"The big mistake people make is to compare what WiMAX says it will deliver tomorrow with what 3G was delivering yesterday," Ericsson’s Halén says.
Mobile WiMAX vs. LTE
In time, however, mobile WiMAX vendors expect it to outperform HSPA on bandwidth, delivering speeds comparable to those with today’s fixed-line broadband technology. When this happens, 3G operators may need to weigh their options—especially, says the Arthur D. Little report, if "very evident demands ... grow rapidly for the capabilities associated with higher speed."
Led by Ericsson, 3G vendors are trying to encourage 3G operators to include the LTE (long-term evolution) standard in their development plans. Promising speeds to rival those of future WiMAX technology, LTE is being promoted as an evolution of 3G technology and, therefore, a more natural choice than mobile WiMAX for an existing 3G operator.
The trouble is, LTE has not yet been standardized. In the absence of defined technical specifications, its critics have been able to cast doubt on whether it has much in common with 3G at all. They point out it uses a different air interface called OFDMA—which, coincidentally, is also used by WiMAX—and so will not be able to reuse much 3G infrastructure, making it as costly a deployment option as mobile WiMAX. If operators are persuaded by this argument and already see the need to plan for a post-HSPA future, they are unlikely to wait for LTE.
But Ericsson sternly repudiates LTE criticisms. "We will have LTE modules that fit into existing 3G base stations," says Halén, who expected an LTE standard to be released in late September (nothing had been announced when Telecommunications went to press) and commercial deployments to appear in late 2009, just 18 months after Sprint Nextel aims to launch its first mobile WiMAX service. "For an existing 3G operator, it will be far more expensive to roll out WiMAX than LTE," he insists.
3G’s long commercial lead in some markets is the one challenge mobile WiMAX may face. More than 100 operators have launched the relatively immature HSPA in 63 countries. This appears to give 3G a major advantage over mobile WiMAX on economies of scale.
As a result, WiMAX operators may find it hard at launch to compete with 3G on price, especially in markets such as Austria, where intense competition between the country’s 3G providers has driven the monthly price of an HSPA service down to as little as €15 ($20). The challenge is recognized by WiMAX Telecom’s Bar-Gera, who is gunning ultimately for about 400,000 mobile WiMAX customers across Austria, Slovakia and Croatia.
"Unfortunately we will have to adapt to this price level," he says. "It will be difficult, but we will match it."
WiMAX chips are up
WiMAX Telecom can claim to enjoy one clear cost advantage over 3G: the support of chipset manufacturer Intel on devices. Along with others in the mobile WiMAX camp, WiMAX Telecom believes Intel’s ongoing push to install WiMAX chipsets in a range of consumer devices, from laptops and PDAs to MP3 players and mobile phones, will help foster a new kind of market.
"The equipment cost [for the operator] will be zero," says Andy McKinnon, WiMAX principal for EMEA at Motorola. "The consumer will have paid for the device he or she is using. It won’t be subsidized by the operator."
But customers who won’t pay the full costs of an HSPA-enabled handset may be unwilling to splurge cash on a similar device compatible with WiMAX. Nor does Ericsson agree efforts to install HSPA chipsets in other consumer products, including laptops, are lagging Intel’s WiMAX campaign.
"As we speak there are 311 HSPA devices in the market, including phones, PCMCIA cards, embedded modules in laptops and media players," Halén says. "We’re clearly addressing a much broader scope of devices."
Motorola’s McKinnon claims the intellectual property rights bound up with 3G make HSPA chipsets more expensive than WiMAX chipsets, but Halén rejects this argument, too. "What decides the cost is the silicon area and that’s the same for HSPA as it is for WiMAX," he says. "There is hardly any difference at all."
Whatever the costs, a race is clearly on to get devices to market, and WiMAX Telecom is concerned mobile WiMAX could finish trailing. "I doubt we will see any decent end-user equipment before the end of 2008," Bar-Gera says. "WiMAX suppliers are pushing to have some market edge, and that’s coming at the expense of interoperability."
McKinnon concedes device development is taking time but refutes any accusation it is holding back mobile WiMAX. "We’re simply not jumping in with two feet," he says. "Sprint has publicly announced it plans to launch in the first half of next year, and that’s purely subject to devices. You’ll see some announcements over the next couple of months."
Greenfield complications
A number of analysts insist the biggest opportunity for mobile WiMAX lies in countries where 3G has not been introduced. Others say commercial pressures, regulatory inertia and spectrum unavailability could trip the investment case in this environment.
China, for example, has a burgeoning telecom market, four established operators, no 3G and an apparent hunger for new technology. But the outlook for mobile WiMAX is hazy, according to a new report from the Yankee Group.
"If MII [the Chinese telecom regulator] does not actively engage with the WiMAX industry and create a mobile WiMAX policy as soon as possible, the Chinese market will miss the mobile WiMAX opportunity," the report’s authors write.
Two related issues appear to be holding up development: the Chinese government’s preoccupation with TD-SCDMA (the country’s homegrown 3G standard) and the lack of spectrum.
Actively encouraged by the Chinese government, the four main operators have made winning 3G licenses their top priority, says the Yankee Group, and are "not rushing to deploy WiMAX." Meanwhile, MII has not set aside any spectrum for mobile WiMAX: the 2.3GHz and 2.5GHz bands are reserved for 3G and cable transmission respectively, while the 3.5GHz spectrum went to fixed WiMAX, a fixed wireless broadband access technology.
The situation is similar in neighboring India, where a clutch of established and profitable operators are growing the mobile market by roughly 6 million customers per month.
"Spectrum is obviously a constraint," says Capgemini’s Rao. "That’s as much a problem for mobile WiMAX as it is for 3G."
It may, in fact, be a bigger problem for mobile WiMAX. As Indian regulator TRAI shapes its policies on 3G and WiMAX—which will be finalized at the same time, says the TRAI—it will undoubtedly come under pressure from vested telecom interests to favor 3G. Indeed, many analysts think the best use of 3G, and the spectrum that goes with it, is to relieve pressure on the country’s congested voice networks.
With India’s government expecting the number of mobile subscribers to surge from around 200 million today to a staggering half billion by 2010, that could be a persuasive argument.
