Solving WiMAX

Service providers face a Rubik’s Cube of potential business model options

In the past year, WiMAX has gone from cult fave to era-defining phenomenon, as service providers at home and abroad have gotten involved in the industry. But the path to success hinges on putting together a winning business plan in what is still an untested market. As was the case with a certain fad from an earlier decade, the Rubik’s Cube, solving the WiMAX business model question is a puzzle of many combinations.

What became painfully clear in discussions at January’s WCA show in San Jose, Calif., was the fact that there are still many questions about how the market landscape will play out and which use cases make sense for the technology.

T-Mobile USA Inc., muni Wi-Fi players and others with large Wi-Fi footprints may be able to partner with WiMAX operators to extend their reach and offload data traffic. For some cellular carriers, offloading data traffic to WiMAX may be a way to reduce the need to invest in an expensive cellular network upgrade. For cablecos, it’s a way to gain mobility; the Sprint Nextel Corp.-cableco joint venture already has announced it will leverage WiMAX and potentially MVNO relationships for this purpose. For competitors and new entrants, WiMAX could represent a way to compete with DSL/cable or incumbent cellular carriers, bypassing the local loop or need for an MVNO deal. For incumbents, it can be a disaster-recovery and in-fill technology. In short, WiMAX can mean a lot of things to a lot of people.

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But, right now, there’s no guideline for how many of these scenarios will actually play out or which will be successful. “Figuring out how we’re going to make money in the WiMAX space has become as important as solving any technical challenges,” says Jim Welch, vice president of wireless broadband networks and enterprise business at Motorola Inc., which has invested $4 billion in the past 18 months into wireless broadband. “The business model has to make sense. We have to move beyond considering the technology to deliver the access and consider how all the business relationships need to work out to enable WiMAX’s promise.”

Fixed-line deployments have begun, sporadically in the United States, but mobile WiMAX isn’t due for several months yet. Even so, the fact that Sprint has selected mobile WiMAX as its 4G technology means other cellular operators will have to make decisions about how to deal with the standard now — before the impact of WiMAX on the cellular industry can really be determined. “For existing cellular carriers, WiMAX may potentially become a big competitor, a great ally or a minor factor,” says Allen Nogee, principal analyst at In-Stat. “Nevertheless, it’s clear that a strategy for WiMAX is the biggest decision cellular carriers have had to make since planning for 3G deployment.”

He adds: “When WiMAX competes with cellular, cellular operators will be forced to decrease their prices for wireless data services over cellular. Even if WiMAX fails after that point, it is unlikely that cellular carriers will ever again be able to charge the amount they currently do for wireless data services.”

Clearing up the uncertainty is contingent on would-be WiMAX carriers to answer their own questions. The first to ponder: Fixed or mobile? The fixed implementation of the WiMAX standard remains the only implementation stateside, since certified 802.16e mobile WiMAX equipment will not hit the market until late this year. AT&T Inc. and Clearwire Corp. are deploying fixed WiMAX, while other players have rolled out pre-WiMAX in anticipation of new implementation profiles from the WiMAX Forum. “How big of a market there will be for mobility remains to be proven,” says Manish Gupta, vice president of marketing and alliances at Aperto Networks. “The states are not crying out for another wireless access technology right now. Players should focus initially on where the economics make the most sense.”

“Today’s personal broadband is fixed/portable, and will be for a couple of years,” says Mel Levine, director of wireless broadband at the newly combined AT&T/BellSouth, which offers fixed WiMAX in the form of portable CPE that acts as a gateway to connect computers via a Wi-Fi router that in turn connects to a WiMAX pipe out of the house or office. “Our offer isn’t mobile, and it’s not built into a laptop, but it’s portable and untethered. It will work anywhere, up to 11 miles from a base station, and it gives people a lot of flexibility.”

Levine says the ILEC’s strategy is to provide data access for first responders in disaster areas lacking in services and in rural areas where there is no DSL coverage. Going forward, he says, he is considering the fate of the desktop modem as a next generation of WiMAX-enabled devices comes to market. “We’re moving forward and will work on our plan as mobility happens,” Levine says. “Anyone who thinks WiMAX will keep up with the capabilities of fiber is fooling themselves, but this technology will be right for certain applications. We’re just not sure what that will be just quite yet.”

Once 802.16e does arrive, fixed implementations may still remain the initial focus for new entrants. “There is [a] push in standards for enhancement of mobile WiMAX 802.16e with advanced features to improve air interface performance in terms of spectral efficiency and coverage,” says Kamal Kanaujia, product line manager for BWA radio at Siemens Networks, which offers 802.16d WiMAX backhaul solutions for U.S. operators in the 2.5GHz licensed spectrum. “The goal here is to offer broadband DSL/cable experience with a very competitive (versus fixed-line solutions) and cost-effective WiMAX deployment.”

On the mobile side, Sprint will be the pioneer in this country. Sprint’s mobile WiMAX promise, Motorola's Welch explains, is the “Internet everywhere” concept of 4G data services. However, it only works if there is ease of use — the ability to seamlessly move around without having sessions dropped or having to re-authenticate when moving to a different network. And because there will be multiple parallel networks for some time to come, it will require interoperability and relationships between providers of WLANs, 3G networks, public safety networks, municipal wireless and more.

“No matter how good a network type is, there are other installed bases and other networks that are more appropriate for certain profiles,” Welch says. “So the question to ask is, how will all these integrate and play together, and what does that mean for partnerships. That will be worked on more and more in the next two years as it is the central strategic concern.”

Indeed, when it comes to actually deploying 802.16e, questions loom: how to plan for mobility when the standards aren’t quite gelled, how to take into account different frequency allocations in each country, and what to do about the currently expensive consumer devices, since those costs factor into the forecast for overall end-user adoption? To boot, the WiMAX Forum has published only a few implementation profiles, which vary around the world. That means mobile “WiMAX devices will likely operate differently in different regions, unless device manufacturers are willing to accept extra expenses to make a universal WiMAX device that supports all profiles,” notes Nogee. Of course, that has implications on roaming — an essential requirement for mobility to succeed in the first place. So, WiMAX players have to weigh device costs versus user uptake, the network build costs versus projected ARPU and ROI — all in a time when the applications that will be deployed, and likely user acceptance, are complete unknowns in the United States.

“Mobility is the killer attribute that adds value to all the things we know and love about the Internet,” says Tom Quast, in corporate development at Sprint. “WiMAX can provide true broadband, wirelessly. The idea of the quad play is that it’s bundling four different services. That’s not the case — it’s about liberating the three services you already have. And so, the anchor application for WiMAX will depend on the consumer electronics device at issue.”

Ashish Sharma, senior director of strategy at Alvarion Inc., agrees that successful mobile WiMAX essentially will be an extension of the Internet we know today and should be treated as such. “The ability to do broadband Internet in a different way than what we’re used to, but with a similar user experience, will be the answer,” he says. “It’s not just about having a fat pipe, you have to have the community too.”

To that end, Welch says carriers need to encourage a pool of independent third-party developers and content providers. “We need to facilitate an environment to bring productivity and market share gains to entrepreneurs and SMBs,” he says. “A developer community will provide that, and should be something people are investing in, as well as encouraging content.”

Eventually, the market will solidify and the winning business models will be categorized and proven. For now, though, the WiMAX players are looking at the puzzle from all angles in hopes that everything will align for a winning combination. “WiMAX could be the cornerstone of next-generation personal broadband,” says Howard Liu, director of digital network architecture, new technology and development at the Walt Disney Co. “At Disney, we must rethink out relationships with distributors. We are looking to make the consumer cable-free with something that is peer-to-peer, far-reaching, high bandwidth, always-on and all IP. WiMAX is certainly a viable technology, but there are others we could use. New business models will define this market as we go forward.”

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