WiMAX starts to find Latin rhythm

Lack of spectrum availability has held back WiMAX growth in key Latin American markets, but there are signs this barrier is coming down.

For such a culturally and economically diverse region as Latin America-which stretches from Mexico to Argentina and has 19 independent countries in between-it might seem inappropriate to talk about ‘Latin American trends’.

Yet it is still possible to identify common WiMAX themes running through the region. One is a lack of spectrum availability in the standardised 2.5GHz WiMAX frequency band, occupied as it is in many Latin American countries by MMDS operators offering analogue and digital TV Services. It would be difficult for the region’s regulators to clear this spectrum anytime soon for broadband wireless access (BWA) where there is a policy objective to do so.

And where WiMAX is being deployed, it is usually by fixed wireless access operators who have held 3.5GHz licences for a number of years and are now looking to migrate from proprietary technologies to standardised WiMAX equipment in order to gain better cost-efficiencies and improved network performance. Frustratingly for the WiMAX community, delays in the release of additional spectrum in the 3.4-3.6GHz frequency band-which would allow more WiMAX operators to enter the market-has been another common feature of the Latin American landscape.

There is also, arguably, less clarity in Latin America than other geographical regions regarding the future of Mobile WiMAX in the 3.4-3.6GHz frequency band. At the ITU World Radiocommunications Conference (WRC-07) held in Geneva last November, countries in ‘Region 2’ (Americas and the Caribbean) did not go so far as to commit to the identification of 3.4-3.6GHz for IMT. (IMT is the ITU umbrella name for IMT-2000 (3G) and IMT-Advanced (4G) services.)

On the face of it, this decision was not ideal for Mobile WiMAX in Latin America; after all, 802.16e is now part of the IMT-2000 family of standards. In stark contrast, Region 1 (Europe, Africa and the Middle East) voted at WRC-07 to harmonise IMT at 3.4-3.6GHz. This was followed by a European Commission (EC) decision in May 2008 to allow operators in EU member states (eventually) to offer mobile and nomadic services-as well as fixed-in the 3.4GHz-3.8GHz band.

But the door through which 3.5GHz Mobile WiMAX can enter Latin America has not been shut. Th irteen Region 2 countries voted at WRC-07 to set aside a further slice of 3.5GHz spectrum (3.4-3.5GHz) for an additional ‘mobile allocation’ (3.5-3.7GHz had already been allocated by Region 2 for mobile). Th e countries giving the thumbs up to this new mobile allocation were: Argentina, Brazil, Chile, Costa Rica, Cuba, El Salvador, Dominican Republic, Guatemala, Mexico, Paraguay, Suriname, Uruguay and Venezuela.

“Th e mobile allocation is a positive step and doesn’t preclude IMT-2000 but neither does it single out the spectrum as being of particular importance to IMT-2000,” explains Tim Hewitt, director of regulatory and spectrum policy at the WiMAX Forum. “But I don’t see that as necessarily having a bearing on Mobile WiMAX prospects in the region. I think Latin America is looking positively at how to move forward with mobile broadband wireless access [at 3.4-3.6GHz] and having a mobile allocation is probably, for them, the most fl exible way of proceeding.”

Hewitt observes that the recognition of 802.16e as an IMT-2000 standard is “probably less important” in Latin America than it is in Africa, Asia and India, where he feels particular value is oft en attached to ITU endorsement. “Latin America seems to be working its own way forward on mobile broadband,” he continues, “but the very fact 13 countries made these very important new mobile allocations is a signal that a greater mobility footprint could be allowed in the not-too-distant future.” Th e prospects for WiMAX at around 700MHz (a frequency range for which the WiMAX Forum is undertaking important groundwork) appear less bright from Hewitt’s perspective. “A lot of UHF spectrum in the region is still being used for broadcasting,” he says. “Latin America is not as advanced as in other regions in their transition towards digital TV. Th ere is no immediate prospect of a digital dividend [at sub-1GHz].”

Growing WiMAX momentum

Spectrum availability aside, the Latin American region appears fertile ground for WiMAX: wired broadband penetration rates are low and mobile broadband is in its infancy.

According to fi gures from Informa Telecoms & Media, a mere 11.4 percent of households across the region were hooked up to a broadband connection by the end of 2007 and only 0.5 percent of the population had access to mobile broadband.

“Latin America is now a hot topic for the WiMAX community and with good reason,” says Ashish Sharma, VP of corporate market development at Alvarion. “It is a highly urbanised region and the penetration of existing telecom networks is still low-but businesses and consumers are ready and waiting for aff ordable services.” A number of operators have already started to deploy WiMAX for fi xed services in Latin America. Th ese include Brasil Telecom, Neovia, Embratel and TVA in Brazil; MVS Net and Axtel in Mexico; Ertach in Argentina; and Entel and VTR in Chile. WiMAX deployments are also taking place in Bolivia, Colombia, Peru, Paraguay, Ecuador and Venezuela.

And there are signs that some of the region’s regulatory logjams on spectrum allocation are easing. In September 2008, the WiMAX Forum applauded the announcement by Argentina’s communications department that it intends to award spectrum at 3.3-3.7GHz for wireless broadband networks. In Peru, the regulator has announced it will auction two WiMAX licences in the 2.6GHz frequency band on 24th October 2008. And in Chile, Gonzalo Dona, strategic technology director at VTR, the country’s largest cable TV operator, says this year the Chilean regulator will probably open a bid for 2.3GHz licences.

But for all that, WiMAX in Latin America has still some way to go before it can match the progress made in other emerging markets, particularly India and some parts of Asia. And in the two Latin American countries where there is arguably the most WiMAX potential in the region due to high urban population density and relatively strong economies-Mexico and Brazil-repeated delays in auctioning BWA spectrum are not helping the technology’s cause. By contrast, 3G is beginning to find traction in these two countries. Anatel, the Brazilian regulator, awarded 3G licences in December 2007. And in Mexico-although 3G licences have still to be awarded-Telcel, the country’s largest mobile operator (and a subsidiary of America Movil) and Iusacell, the country’s third-ranked mobile player, are each using in-band spectrum to deploy HSDPA.

The deployment of HSDPA in in-band spectrum (spectrum already held by the mobile operator, usually in frequency bands hitherto used for 2G and/or PCS) is a growing trend across the region, and one that would appear to give the mobile operators a time-to-market advantage over the would-be WiMAX players forced to wait in the wings until BWA licences are awarded. “There are 25 commercial HSDPA networks in 14 countries across Latin America and in all of them, apart from Antel in Uruguay, they have been deployed in in-band spectrum,” says Erasmo Rojas, director of the Latin America division at 3g americas, a trade association supporting the 3GPP family of standards.

WiMAX supporters would no doubt argue that WiMAX and 3G will serve different market segments and the two technologies will be complementary. The fact that HSDPA is picking up a bit of momentum is by no means a reason to write off Mobile WiMAX’s chances of making a big impact in the region.

This is certainly the view of Kevin Suitor, vice president of marketing and business development at Redline Communications, a Canada-headquartered WiMAX kit supplier that counts JMTelcom (El Salvador), Comunicación Telefonía Rural (Chile), Personal Broadband (Paraguay) and Neovia (Brazil) among its Latin American customers.

“Operators in Latin America, and other regions which have access to a 3G spectrum licence, will run wideband over 3G and broadband over WiMAX with high usage or no usage caps,” he says. “This is the trend you are going to see.”

Louis Lambert, Redline’s managing director for the Americas, says that in Brazil you can get a ‘low-price’ 3G connection delivering ‘up to 1Mbps’ on the downlink. But as soon as you transfer more than 1GB of data before the month is up, the downlink speed is reduced to 128Kbps. “The 3G network can’t sustain everyone at high capacity,” he argues. “You can’t do flat-rate data all the time over 3G.”

Alvarion’s Sharma adds that the region’s 3G operators will find it extremely difficult to enter the fixed broadband markets, which makes the start of HSDPA operations before the arrival of WiMAX less significant. “In some countries, such as Venezuela, operators have tried to use 3G as a replacement to broadband though it has been a challenge due to limited bandwidth available on 3G networks,” he says. “Despite 3G deployments in 18 markets in Latin America, data ARPU on average is only 13 percent of overall ARPU.” Perhaps predictably, Rojas sees the relationship between 3G/HSDPA and WiMAX somewhat differently. He says that most of the region’s mobile operators don’t see WiMAX as an opportunity to do anything that is much different from what they are already doing with 3G. “For the vast majority of mobile operators with no fixed operations, they are going with HSDPA,” he says. “But when you have operators that have licences for both fixed and mobile services, then you might see them considering WiMAX as an alternative for their fixed-line networks. That’s what we’re seeing in Latin America.”

Mexico and Brazil: big potential

Mexico, in many ways, looks an ideal place for WiMAX to prosper. In a country of around 108 million, 70 percent live in Mexico’s cities-and it is densely-populated urban areas that are usually ideal for the WiMAX business case. Moreover, the population in Mexico City is around 20 million, which makes it one of the most densely populated cities in the world.

There is also pent-up demand for connectivity. Mexico’s teledensity, according to estimates from the Economic Intelligence unit (EIU), was a lowly 18 percent by the end of 2007. Broadband subscriptions numbered a meagre 4.5 million at that time, translating into a broadband penetration of just over four percent. Moreover, the NAFTA trilateral free trade deal (among Mexico, Canada and the US) has encouraged US companies to set up base in the country in order to take advantage of the lower cost of labour. “You’ve got many companies based in Mexico but there’s hardly any infrastructure to support them,” observes Redline’s Suitor. It was back in June 2007 that Cofetel and the SCT (Transport and Communications Secretary) said it intended to auction spectrum in the 3.4-3.7GHz band for broadband wireless access; the auction was scheduled in a matter of months, they said, but it never happened. One publicly cited reason for the delay was the need to replace two of Cofetel’s five commissioners who had previously worked with TV companies (Televisa and TV Azteca), and so were not deemed entirely impartial.

“We don’t have a timetable [for an auction] at the moment, but it should be in the first half of next year,” Lester Garcia Olvera, director general of planning and regulation at Cofetel, told WiMAX Vision in an e-mail exchange in September 2008.

The regulator has plans to award three new licences in the 3.4-3.7GHz frequency band: one 2x25MHx licence and two licences of 50MHz each (see figure on adjacent page). Telmex, Axtel and Nextel have each held 2x25MHz chunks in the 3.4-3.6GHz band since 1997 and, under the terms of their licences, can offer local wireless access services via fixed or mobile technology.

Fixed-line operator Axtel has already started to deploy 802.16e kit from Motorola in Mexico. Its initial focus is on fixed and nomadic services but, according to the company’s website, it eventually aims to offer a quad-play package. Telmex, using WiMAX equipment from Alvarion, is beginning to roll out WiMAX in areas underserved by copper. Nextel has yet to announce any specific WiMAX plans as far as WiMAX Vision is aware.

Keeping with its technology-neutral stance, Cofetel intends to let the 3.4-3.7GHz licence winners offer fixed or mobile services according to the technology of their choosing. “Our aim with this auction is to reduce the digital divide,” says Olvera. “We believe the wireless broadband strategy will help achieve the government’s goals of a 22 percent broadband penetration and 70 million internet users by 2012.”

Brazil, like Mexico, is a country of much WiMAX potential. It has a high population (over 190 million) and one of the region’s highest GDP per capita at over $5,500 (only Mexico and Chile has higher GDP per capitas). It also has one of the lowest broadband penetration rates in Latin America, which is just above four percent. But just like Mexico, the prospects of nationwide WiMAX are being restricted in Brazil through repeated delays in 3.5GHz licence awards and limited access to the 2.5GHz frequency band.

“The majority of 2.5GHz spectrum in Brazil is held by cable companies fragmented from state to VTR Globalcom, the largest cable TV operator in Chile with over an 80 percent market share, acquired 2x25MHz of spectrum in the 3.5GHz frequency band in 2005.

The licence, awarded on a ‘beauty contest’ basis, gives VTR 3.5GHz spectrum in nine out of the 12 regions in Chile, including the country’s most populated cities. According to the terms of its licence, VTR can offer fixed telephony and broadband internet access, but not mobile service, at 3.5GHz.

VTR completed the rollout of a Mobile WiMAX network (supplied by Motorola) in March 2008 throughout its 3.5GHz licence areas but commercial launch is not expected until the end of 2008.

“We plan to use WiMAX to complement our HFC network to provide fixed telephony and internet services and, if possible, a portable internet solution,” says Gonzalo Dona, strategic technology director at VTR.

As a 3.5GHz operator, Dona believes not enough technological and regulatory attention has been given to this frequency band to offer mobile and portable services at competitive prices. “What is happening today is that [WiMAX] technology development is more focused on 2.5GHz for portability and mobility, which is delaying the deployment of other networks in different bands where operators are also interested in providing portability/ mobility services,” he says. “A multiband solution [including 2.3GHz, 2.5GHz and 3.5GHz] for infrastructure and devices will help a lot in reducing the WiMAX risk.”

VTR looks for more support at 3.5GHz state, which makes it very challenging to create a sizeable deployment,” says Alvarion’s Sharma. It is also not clear how much progress has been made in resolving this problem. “Regulators were supposed to re-farm that spectrum but we’re not sure where that currently stands,” adds Sharma. Moreover, there is no regulatory clarity on how far BWA spectrum holders will be allowed to offer mobile services. TVA, a multi-service company whose MMDS operations are owned by Telefonica, has licences to offer TV services across the entire 2.5-2.69GHz frequency band in Brazil’s major cities. But the country’s regulator, Anatel, is not keen to let TVA-or any other MMDS operator in Brazil-use any part of their spectrum for services other than TV, particularly mobile.

“The regulatory environment in Brazil remains unfavourable for the deployment of Mobile WiMAX networks, especially in the 2.5GHz band,” writes Cintia Garza, a market analyst with Maravedis, in a research note. “Anatel is still reluctant to allow MMDS operators to deploy Mobile WiMAX networks, mainly because of their perceived threat to 3G operators that spent billions to obtain spectrum licences at the beginning of the year.” Maravedis reports that Brazil’s MMDS operators are keener to offer fixed WiMAX services rather than full mobility, which would avoid a head-on competitive collision with 3G operators, although Anatel has yet to give its blessing to such a move Francisco Suarez, Motorola’s WiMAX business development manager in Latin America, is nonetheless confident that the regulatory picture in Brazil will become more favourable for Mobile WiMAX in the coming months. “I think the mobile operators will ease off the pressure [on Anatel] next year,” he says. “The main reason for that is they have already launched HSDPA services using USB dongles and cards. Once they feel they’ve got a grab on the market they’ll become less resistant to Mobile WiMAX.”

For fixed broadband services, there has already been some WiMAX activity in Brazil. Privately owned Neovia, which is supported by Intel Capital, is the largest broadband wireless operator in Brazil. It has a pre-WiMAX and WiMAX network covering half the state of Sao Paulo, running in a 21MHz slice of spectrum at 3.5GHz. And Embratel (a fixed-line subsidiary of Telmex) has launched commercial WiMAX services aimed at SMEs in Rio de Janeiro using kit from Motorola. The operator plans to extend its WiMAX coverage to 12 cities in Brazil and reportedly has a budget of $600m to achieve its rollout targets. For WiMAX to fulfil its true potential in Brazil and in other Latin American countries, the release of more spectrum and the easing up of restrictions on mobile services will be key. The region’s regulators look to be heading in that direction, which would allow WiMAX to find its true Latin rhythm.

Redline: CALA can tolerate $100-plus CPE

According to figures from Redline Communications, a WiMAX supplier headquartered in Canada, the cost of an outdoor CPE currently averages out at around $300. For indoor CPE it is in the $220 range. Although many analysts and operators have said these prices need to come down, preferably to the sub-$100 levels, Redline argues that the current prices of CPE equipment need not derail the WiMAX business case in emerging markets, such as the Caribbean and Latin America (CALA).

“In the CALA region you are seeing the average monthly fee between $30 [residential customers] and $40 [SMEs] per month,” says Kevin Suitor, vice president of marketing and business development at Redline. “So, if you have a hundred CPE units per base station sector, you can pay back your infrastructure costs in under six months.”

WiMAX vendors are working hard to make self-install CPE easier and cheaper. This requires a combination of OTA (over-the-air) auto-service provisioning tools and high-powered radios to penetrate the walls of homes and offices. By going for high-powered radios-Redline says it uses 10W for 802.16e at 2.5GHz, and 4W for both 802.16e and 802.16d at 3.5GHz-it reduces the need for the more expensive outdoor CPE units and the additional cost of sending out an engineer to install it.

Surprisingly, perhaps, there may even be business case benefits in sending out an engineer to install CPE, particular in places like Latin America where wages are much lower than developed economies “A lot of our customers have made extensive calculations on this and some of them have come to the conclusion that it’s better to pay someone $25 for an installation to get a better connection and deliver on a SLA,” says Louis Lambert, Redline’s managing director for the Americas. “You are also off-loading the base station from maybe having to handle a poor connection. As result of that, they are maximising the revenue per base station.”

VTR looks for more support at 3.5GHz

VTR Globalcom, the largest cable TV operator in Chile with over an 80 percent market share, acquired 2x25MHz of spectrum in the 3.5GHz frequency band in 2005.

The licence, awarded on a ‘beauty contest’ basis, gives VTR 3.5GHz spectrum in nine out of the 12 regions in Chile, including the country’s most populated cities. According to the terms of its licence, VTR can offer fixed telephony and broadband internet access, but not mobile service, at 3.5GHz. VTR completed the rollout of a Mobile WiMAX network (supplied by Motorola) in March 2008 throughout its 3.5GHz licence areas but commercial launch is not expected until the end of 2008. “We plan to use WiMAX to complement our HFC network to provide fixed telephony and internet services and, if possible, a portable internet solution,” says Gonzalo Dona, strategic technology director at VTR.

As a 3.5GHz operator, Dona believes not enough technological and regulatory attention has been given to this frequency band to offer mobile and portable services at competitive prices. “What is happening today is that [WiMAX] technology development is more focused on 2.5GHz for portability and mobility, which is delaying the deployment of other networks in different bands where operators are also interested in providing portability/ mobility services,” he says. “A multiband solution [including 2.3GHz, 2.5GHz and 3.5GHz] for infrastructure and devices will help a lot in reducing the WiMAX risk.”