Esme Vos expressed surprise to read in the Wall Street Journal on June 11 that Nortel will focus its R&D and sales efforts on LTE instead of WiMAX. The company claims that demand for LTE equipment outstrips that for WiMAX and, as a result, they are putting their money into LTE. They are not abandoning the WiMAX market altogether, but instead have entered into a deal with Alvarion to combine their technology with Alvarion’s. Anyone care to speculate what’s going on? I believe that demand is driving Nortel’s decision.
Verizon Wireless recently declared that it had officially chosen LTE as its 4G technology, steering clear of the UMB (Ultra Mobile Broadband), which would have been the expected progression of its current EV-DO network, as well as WiMAX.
Now take into consideration the recent 700 Mhz auction and its winners, AT&T and Verizon. Verizon has stated that it plans to deploy LTE in the spectrum it won in the recent 700 MHz auction, with initial network deployment to begin in 2009 and network launch expected in 2010; AT&T the same.
While Verizon’s decision is evidently not positive for WiMAX, it is certainly more negative for suppliers heavily invested in supplying EV-DO equipment such as Lucent and Nortel than it is for WiMAX. Airvana in partnership with Nortel, provides EV-DO infrastructure to Verizon Wireless and Sprint Nextel in North America.
In addition, Verizon’s choice appears heavily influenced by its desire to share a common 4G technology with Vodafone, its largest shareholder and international roaming partner, which has also chosen LTE as its 4G standard. Vodafone is the largest mobile telecommunications network company in the world by turnover and has a market value of about £86 billion (May 2008).
AT&T, Verizon and Sprint own significant portions of the US market. Now, Verizon has made a bid for Alltel. For now, the volume of customers and subsequent revenue associated with supplying AT&T or Verizon with anything, suggests a shift in focus on R&D to accommodate that shifting paradigm. This might be driving Nortel’s decision.
Now, with that said, the WiMAX market is experiencing the fastest growth rates in emerging markets. Alvarion is one of the technology leaders and their analyst reports suggest growth will come from developing nations. WiMAX deployments in underserved markets, they report, require 30% fewer cell sites. This implies a cheaper and faster build-out, as well as a lower total cost of ownership in rural areas. For Nortel, it means a faster time to market with existing products in exchange for any R&D value they bring to the table. No wonder they didn’t abandon completely their foothold in WiMAX.
Watch this space to see the drama unfold and may the best and most cost-effective technical solution prevail.
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Cathy Horton is the founder of Beta Strategy Group. Before founding Beta Strategy, Cathy was a lawyer with the firm Thompson Hine. She has spent more than 20 years cultivating a global mergers and acquisitions and venture finance practice. Cathy spent 15 years in London, where she worked with global enterprises, governments and start-ups to foster and capture the value of strategic innovation. She developed a flair for bringing strategic partners together to form valuable market exchanges, shared product offerings and bundled services provision amongst partners. Also, while in London, Cathy consulted as a trusted advisor with the Cabinet Office of the Prime Minister on e-government, and with the Northern Ireland government, to help determine ways in which technology development could drive economic outcomes for Britain.
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