WiMAX Goes Defensive

It’s been a busy month in the WiMAX industry, with no less than three conferences in one week around the world bringing the faithful together to examine the opportunities for a standard under mounting pressure. The first half of 2010 was tough for the 802.16e standard, once the darling of the wireless world. The WiMAX Forum, the non-profit industry group of WiMAX equipment vendors and operators, reportedly lost up to 100 members and closed its Portland, Oregon field office. The Forum now has around 300 members worldwide with losses due to “natural attrition” according to chairman Ron Resnick. Russian wireless ISP Yota, the poster-child for large-scale WiMAX deployment with over half a million mobile broadband subscribers, announced in May that it would drop WiMAX in favor of LTE. In June, other mobile WiMAX operators Freedom4 (UK) and Worldmax (Netherlands) ceased operations and disposed of their assets. Intel Capital, who had seeded many early WiMAX pioneers, lost investments totaling almost $75 million in those two ventures alone. Robert Syputa of analyst Maravedis suggested that as a result there would be “a rapid deterioration in WiMAX and its chances of achieving mainstream market momentum”. So not a pretty picture then.

WiMAX Conferences Try To Cheer Up The Faithful

Rather than picking up the revolver and heading out back, the WiMAX community responded with positive action to affirm its position as a viable standard. CommunicAsia was held in Singapore (June 15-18), and at the event Intel was keen to point out that it considered WiMAX far from dead, highlighting the almost 600 service providers around the world who had committed to the 802.16 standard.

The WiMAX Forum Global Congress in Amsterdam (June 16-17) saw announcements of performance improvements to 802.16e mobile WiMAX, the first certifications of equipment operating in the 2.3GHz band, and a joint announcement with the Femo Forum of WiMAX femtocells to improve in-building coverage, often an issue at higher WiMAX frequencies above 2GHz which due to propagation and reflection characteristics have greater difficulty penetrating buildings of stone, glass and steel in the urban core. Ironically the news that garnered most interest was from Motorola, a WiMAX stalwart, who announced a new range of RAN (radio access network) solutions that support WiMAX today, but can be reconfigured for TD-LTE should an operator decide to switch horses down the line.

The irony that a WiMAX Forum board member should be proposing a easy exit from WiMAX to an alternative standard was not lost on many analysts and commentators. Clearwire – the preeminent champion of WiMAX in the US and majority owned by Sprint – has spent billions of dollars acquiring around 85% of the available 2.5GHz spectrum in the US, and building out a network that will cover over 120 million people in eighty-odd markets by the end of 2010. Yet the company pulled no punches when it declared itself ‘technology agnostic’ earlier in 2010, with CEO Bill Morrow adding that the company can ‘sunset from one technology going forward’. Clearwire’s value proposition comes with its massive block of over 100MHz of 2.5GHz spectrum in most US markets, which can and will be monetized regardless of the last mile technology at the base station. A little while back Clearwire started marketing its service as ‘4G WiMAX’ rather than just ‘WiMAX’; one wonders how long it will be before the ‘WiMAX’ is dropped, leaving the technology behind the network more ambiguous.

Huge Growth Issues Ahead

The same week as the Amsterdam event saw the 4G WiMAX Developers Symposium held at Stanford University in California. Hosted by Sprint and Clearwire with contributions from Comcast, Time Warner and Cisco, the event drew application developers from around the San Francisco Bay Area. Although Clearwire has yet to launch its consumer network in California, the company has rolled out a scaled-down version called the ‘4G Innovation Network’ in Silicon Valley for the benefit of the many hundreds of high tech companies in the region.

According to Simon Aspinall, Senior Director of Service Provider Marketing at Cisco, there will be a 3900% increase in mobile data traffic between 2009 and 2013, at which point 66% of mobile traffic will be video. Meanwhile US mobile broadband subscribers will grow from 5 million to 30 million in the same period (36% CAGR). Globally by 2014 over five billion personal devices will be connected to the Internet and billions more M2M devices for vertical applications ranging from smart meters to Wi-Fi on trains to live TV broadcasting in the field. All of this puts immense strain on wireless broadband networks, and thus the rush to all-IP based infrastructure and the demand for spectrum.

What Next For Clearwire?

Bob Azzi, SVP of Networks at Sprint, illustrated the huge advantage the US-based (and Sprint-owned) Clear network has over competitors AT&T and Verizon with 120-150MHz of spectrum at 2.5GHz compared to 12-46MHz at 700MHz on Verizon’s LTE. The company is spending upwards of $3 billion in 2010, the majority on capital expenditure such as network infrastructure. He explained that while 4G competitors would typically have 100Mbps per base station, Sprint/Clear 4G would have up to 420Mbps, meaning far greater capacity and fewer potential bottlenecks, with microwave Ethernet backhaul that was easily scalable. There is no doubt that, thanks to its spectrum holdings, Clear and its shareholders are very strategically positioned.

So all this begs the question: when will Clearwire go wholesale? Surely it cannot make sense for the company to continue its aggressive marketing of consumer wireless broadband when – frankly – Sprint, Comcast and Time Warner, with their existing installed base of millions of mobile- and cable-consuming customers, would be much better at it. At the time of writing, Clearwire has a market cap of $1.6 billion, yet Bloomberg estimates the value of its spectrum in excess of $20 billion while the mobile data market could reach $93 billion in revenue by 2013. This underlines the seeming impartiality of Bill Morrow and Sprint CEO Dan Hesse back in March about the last mile technology. It just doesn’t matter.

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About the Author

Jim Baker is an technology entrepreneur and seasoned veteran of the wireless broadband industry as both a service provider and hardware vendor, having founded and served as CEO at Telabria (a UK-based wireless ISP) and Moovera Networks (a manufacturer of cellular gateways for vehicular connectivity). Most recently he was Chief Marketing Officer at Icomera following its acquisition of Moovera in 2008. He is currently a partner at Xenventure, a market strategy and private equity company based in London and San Francisco, and a non-executive director of several technology companies.

Comments

  1. C.S. Puglio says:

    How did it happen that a company worth $1.6B owns $20B worth of a scarce national resource?

  2. Jim: Excellent article, thanks. Finally I see some perspective on CLRW, $20B worth of spectrum per Bloomberg.

    I’m convinced the demand will double every 10 months as predicted by Cisco. We’re seeing the use cases: on-line ‘zines’, HD, on-line compelling media content and ads, games, and soc media. And we’re seeing the devices, iPhone quadrupling pixels on screeen plus GPU/CPU combo, Cisco’s CiUS, and all the androids.