A roller coaster ride for 802.16e

In January 2007, mobile WiMAX’s high profile American champion Sprint Nextel announced that Finnish giant Nokia would be a “key infrastructure and consumer electronic device provider” for its 4G WiMAX mobility network. Sprint was expected to invest up to $800m (£414.5m) during 2007 and between $1.5bn and $2bn in 2008 on its nationwide US WiMAX network.

Nokia joined Intel, Samsung and Motorola in creating the network, which at the time was expected to be live sometime late 2007.

Following the announcement Olli-Pekka Kallasvuo, president and CEO, Nokia said: “WiMAX is an ideal technology for open internet models in all major global markets. With Sprint’s leadership, the next generation network will offer innovative mobile broadband services, connecting people with content and technology in new and exciting ways.”

By the time the GSM World Congress had rolled into Barcelona in February the industry was engulfed in WiMAX launches, releases, announcements and unveilings of every possible type. The biggest news of all, though, came from comments made by Vodafone CEO Arun Sarin.

Making a keynote address at the GSM show (now expanded and rebranded) Sarin called on the industry as a whole to work faster on its plans for Long Term Evolution (LTE) highlighting the faster than anticipated adoption of WiMAX on the world stage. “The GSMA needs to influence the ecosystem. LTE is still at the standards stage, while WiMAX is a commercial reality,” said Sarin.

GSM Association chairman Craig Ehrlich countered: “I would take issue that WiMAX is the elephant in the front room. You could have said that about CDMA – which is great technology – but now you could argue that it has become niche. As an organisation we have no position on it. We accept that some of our member operators will adopt it. But we’re gearing up on our own mobile broadband evolution path.”

The industry didn’t have to wait too long for the world’s largest mobile operator by revenue to further signal its interest in mobile WiMAX. In September Vodafone joined the WiMAX Forum. Steve Pusey, global chief technology officer, Vodafone, said: “Our membership of the WiMAX Forum will complement our existing memberships of other key industry bodies such as the GSMA, 3GPP and the Next Generation Mobile Network initiative.”

Ovum analyst John Delaney noted that the move seemed perfectly natural. “In Vodafone’s case, the move is especially logical because of its increasing presence in emerging markets. The prospects for WiMAX to play an important role in the future development of mobile are better in those parts of the world where large numbers of people do not yet have access to telecoms or the internet,” he said.

“On the other hand, the telecoms model will predominate for the foreseeable future in more mature markets. Vodafone clearly needs to be involved in the development of both types of model, since its business encompasses both types of market,” Delaney said.

The debate over where – not whether – WiMAX will be most successful rages on. US management and technology consultant Diamond suggested in March that mobile WiMAX would factor heavily in US service providers’ data-network-deployment strategies, since it holds a critical time-to-market advantage of about a year before 3G technologies, such as 1xEV-DO Rev. C and HSPA+, become available with “substantially improved” data rates.

Staying in mature markets, in July Macropolitan-led UK-based collaboration Urban Wimax, announced a partnership with Canadian kit firm Nortel to build and trial a user-ready mobile WiMAX service ahead of the UK’s spectrum auction in early 2008. Sasha Williamson, CEO of Urban Wimax, said: “The potential for 4G using WiMAX connectivity is enormous. If the UK is to remain competitive in the digital economy it must improve broadband connectivity, both in terms of penetration and bandwidth. 4G WiMAX is the most economical way of achieving this.”

This was followed up in November with the news that seven additional firms had come on board. Bluenowhere, imag!ne, Mott MacDonald, National Grid Wireless, Quiconnect and Red-M joined Macropolitan and Nortel joined the fray. The collaboration intends to commence a number of showcases in the New Year to test the mobile WiMAX user experience which, if successful, will then help demonstrate that mobile WiMAX services are ready to be rolled-out in the UK.

Meanwhile, Senza Fili Consulting suggested that early success of WiMAX in emerging markets is crucial to ensuring the long term prospects for the technology. “The mobile market will take longer than the fixed one to grow, because most mobile operators do not yet need a data-only wireless network to complement their 3G networks,” said Senza Fili’s Monica Paolini.

Informa Telecoms & Media (ITM) reckons portability will drive WiMAX revenues. Starting in 2009, growth in revenues from non-fixed WiMAX services will outstrip growth in revenues from fixed WiMAX services, said the analyst.

As the first portable WiMAX devices arrive, in the form of PC cards and notebook computers, portable revenues will start to increase strongly and will provide almost half of total revenues by 2012, said ITM. Mobile devices will follow with revenues from mobile users growing even faster, albeit from a small base, to reach 30 per cent of total revenues by 2012, showing the value that will be placed on the ease of use and flexibility provided by a variety of device form factors.

The largest element of WiMAX revenues worldwide will be access charges, growing to $17bn in 2012, stated ITM. Value-added services for both the consumer and business sectors are forecast to grow significantly faster, reaching about 30 per cent of total revenues in 2012, while advertising is expected to start later but show the fastest growth of the three revenue streams, reaching just under 13 per cent of the total by the end of the forecast period.

Access charges include both regular contract subscriptions and ad hoc or prepaid charges, such as those incurred when a user visits a WiMAX hotzone in an urban area. “The assumption is that WiMAX operators will continue to charge flat-rate fees, similar to wired broadband fees, albeit with usage limits,” said Mike Roberts, principal analyst at Informa. “This is in contrast to the per-megabyte fees charged by some mobile operators.”

The vital question in any discussion of WiMAX, or indeed any other network technology, is the cost. In April Ron Resnick, president and chairman of the WiMAX Forum spoke exclusively to MCI: “There’s an inference that the cost is higher. But it’s already there,” he said. “The deployment cost is highly competitive in the access network.” WiMAX is a native IP or Ethernet system and so the core network consists of widely used routers and servers that are already being produced on a very large scale for general purposes.

Devices, though, remain scarce, and it amounts to an industry principle that without good devices, one might as well give up. “Subscriber stations, well, there’s tens of millions of cellphones, but the initial deployments are primarily customer premises equipment in homes and enterprises, then notebook computers, and ultra-mobile PCs,” said Resnick.

Resnick reckons the first PCs with integrated WiMAX chipsets will ship next year. “It will scale better than 3G,” he said. “If you already have WLAN, the incremental cost is very small, and the royalty rate significantly less than for cellular. If you think a cellular 3G card is about $120,” he went on, “the first [WiMAX card] should be $75-100, and will go significantly lower in PCs.”

In July, Sprint and Clearwire announced a partnership that would see them join forces to build-out a nationwide WiMAX network. Sprint would focus its efforts on building out WiMAX coverage in geographic areas covering about 185 million people, including 75 per cent of the people located in the 50 largest US markets. While Clearwire would focus on areas covering approximately 115 million people. The following month Sprint announced that its soon to be launched service would be known as Xohm.

In October, the International Telecommunication Union finally announced that WiMAX had been approved as a 3G IMT-2000 standard. Meaning WiMAX deployments to occupy globally allocated frequency bands and complement or compete with other 3G technologies.

Overall, things looked to be going well for WiMAX in 2007. However, mobile WiMAX’s ambitions were about to head south in the most dramatic of fashions. In early November, Sprint reported a year-on-year 77 per cent drop in third quarter net income from $279m in 2006 to $64m in 2007.

Commentators, speaking with the benefit of hindsight, were quick to point out that instead of focusing so heavily on a commercially unproven technology, perhaps Sprint CEO Gary Forsee would have been better placed concentrating on getting the best out of what he had in place already. Ripples of shareholder disquiet broke out. Many wondered whether mobile WiMAX was Forsee’s folly. The chief stepped down.

Worse was to come, a mere four months after their fanfare marriage, Sprint and its WiMAX build-out partner Clearwire announced their separation. The US carrier maintains that it will go ahead and roll out WiMAX, but the plans are in disarray.

Clearwire’s results show that WiMAX build out is an expensive business. Although revenues jumped from $26.9m a year ago to $41.3m in the third quarter, the company reported an adjusted Ebitda loss of $84.1m, compared to $23.3m in the third quarter of 2006. The expanding losses were driven primarily by Clearwire’s ongoing investment in the construction and deployment of wireless networks, associated market launch costs and increased total subscriber acquisition costs, the company said.

Next year is crucial for mobile WiMAX. “Most people will be wondering how the company-wide issues at Sprint will impact on the technology roll out. Our view is that Sprint will launch services in selected markets in 2008 as expected, partly because it has come too far and invested too much to back down now,” writes Informa’s Roberts, in the firm’s annual Mobile Industry Outlook report. “There is clearly a chance that the roll out will be scaled back due to cost-cutting across the company, but we don’t expect anything more dramatic given that Sprint’s 2.5GHz spectrum is a potential competitive advantage, and an asset that is has to use by 2008-09 or risk losing it due to FCC requirements.”

The WiMAX market is, of course, much bigger than Sprint, and a lot of deployments based mainly on WiMAX fixed equipment will move ahead regardless of how well mobile WiMAX is received. But then, many of these deployments are small. Or as the GSMA’s Ehrlich would say, “niche”.