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The August 21, 2003 Issue Provided by System Dynamics Inc.
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Broadband Anywhere: The Extended Broadband Home


Introduction

Within the next ten years, many people will get broadband connections to their portable devices just about anywhere, just as they now get voice connections to their mobile phones. What is not so clear is the path by which we will get there, what technologies will be used, and which service providers will get the largest market share.

Back in the dark ages (the early 1980's) when Sandy was working on voicemail at AT&T, people kept telling her she had to be crazy: people wanted to talk to a real person--nobody would talk to a machine. Dave was working at the same time on the start of what became Prodigy, and based its architecture on home computers; many people thought he was crazy since very few homes had computers and they were all "toys" from Commodore, Radio Shack, and Apple. Now most people have voicemail and computers in the office and at home.

To get from those days to the present took many steps--both in the underlying technologies and services and in what consumers expected and became used to.

The move of broadband into the home is another of those changes that started with pundits writing a few years ago "only 1% of North Americans have broadband". Now we have passed the tipping point.

Here's some of what makes us believe that we are indeed on the path to extending the broadband home to "broadband anywhere".


User Behavior--One Key to Success

Sandy using a V110 on our deck --> Click for larger pictureWe're seeing changes in how people get information around their homes. As laptops have gotten cheaper and Wi-Fi home networking has taken off, it's no longer unusual to be surfing from your sofa, or completing a transaction from your outside patio, all while using your broadband connection.

When power went out on August 14th, New Yorkers (and millions of others) found many of their cell phones not working. Momentarily, the old fashioned payphone became important again. Payphones got people accustomed to making phone calls when away from home--and then were largely supplanted by mobile phones.

Using Clearwire at Starbucks --> Click for larger pictureWe see the beginnings of a similar trend toward people getting information and communicating via portable PCs and PDAs using Wi-Fi at hotspots. If you had a choice between getting your data and content wherever you happened to be, or having to go to a specific area like a Starbucks, airport or hotel lobby, there's little question that you'd opt for the former.

Both notions--having a broadband connection in and around the home, and having broadband while away from home--are starting to become part of the social fabric.


Succeeding with New Services

New ways of doing things evolve from the old ways when four forces come into alignment. The new way must be:

  • Useful--meets customer needs
  • Familiar--doesn't require radical behavior changes
  • Implementable--the technology can operate as part of a fully-functional system and services, and
  • Affordable--the technology and service costs are within the customer's willingness to pay.

The payphone/cellphone example shows that people's behavior does change over time. Mobile phones get customers used to portable communications devices. Broadband services get people used to always-on high speed connections. Wi-Fi home networking gets people accustomed to using broadband anywhere in the office and home, and hot spots are starting to get them used to having broadband while away from home. It's a natural progression to broadband anywhere.

When cell phones cost thousand of dollars and minutes cost nearly a dollar each, the mobile phone market was limited to business people with pressing and cost justifiable needs. As cell phones became virtually free and minutes came in ever bigger buckets, the consumer market took off. We believe that flat-rate pricing for home broadband means that consumers will not be willing to pay per-minute rates for broadband data away from home. The winning technologies will need to support a cost structure that gives some bundle for an affordable fee, perhaps as an add-on to a user's existing home broadband service.


Technologies for Broadband Anywhere

We are now seeing a wide variety of technologies which promise to make broadband available almost anywhere rather than only at hotspots. Some are logical extensions of--and closely coupled with--mobile phones; others are designed as "wireless metropolitan area networks" (WMANs). Some are based on standards, while others are proprietary.

There are currently six broad contenders for the "broadband anywhere" opportunity: Wi-Fi, proprietary, 3G, 4G, 802.16/WiMAX and 802.20. We don't think they can all be part of the future landscape, and we think the first two are unlikely to play major long-term roles in the wide area.

The success criteria for any of these is their ability to be used over wide areas, at broadband rates (megabits not kilobits) and at consumer price points. Which technologies and services will best meet consumer's needs? Which will be deployed broadly? Which will have the cost structure and deployment volumes to meet consumer willingness-to-pay?

Wi-Fi: A complementary role

Afitel base-station antenna in Zamora --> Click for larger pictureThe take-off in popularity and affordability of Wi-Fi created a whole new wave of enthusiasm and use. Based on the IEEE 802.11 standards for wireless local area networking (LAN), Wi-Fi was designed to operate in and near a building and it performs that job admirably. Enthusiasts have tried to extend its reach far beyond its intended design--from the LAN to the MAN. Wi-Fi's ready availability and low cost tempt companies to use Wi-Fi for broadband wireless coverage of a whole city--see Afitel - Wi-Fi in Zamora.

We do not see Wi-Fi playing a major role in metropolitan area broadband. 802.11 wasn't designed to cover wide areas, to support mobility, or to scale as a carrier-grade network with thousands of users. It has a role, but primarily as a complementary solution and a "bridge" between home broadband and "broadband anywhere".

A couple of recent examples illustrate this emerging complementary role:

  • Verizon is offering Wi-Fi service from Verizon HotSpots around New York City at no additional charge for its DSL online customers, saying: "Does your current Internet provider give you free Wi-Fi access? Verizon Online does!"
  • SBC announced a plan to deploy hot spots in 6,000 locations over the next three years and create an integrated Wi-Fi and 3G wireless service to be called FreedomLink(SM). A spokesperson said customers who subscribe to most of the company's other communication services may get Wi-Fi free as a promotion.

Proprietary

More than 70 proprietary technologies are competing in the broadband WMAN market. Many were originally developed for broadband wireless access, providing wireless service to businesses and homes in competition with wired technologies like cable modems and DSL. Most of these were designed for fixed access (in a single place), and some are being extended for portable and mobile (driving around) use.

Recent announcements indicate some success in deploying these proprietary solutions. For example, U.S. Wireless Online announced plans for city-wide deployment in Louisville, KY of a non-line-of-sight, wide-area wireless broadband network using equipment from Navini Networks. Customers will be able to use their broadband connection anywhere in the coverage area: whether in another room of the house or office, by the pool, at the park or in a café.

The proprietary technologies suffer from relatively low penetration and relatively high cost, especially for the consumer equipment. They have succeeded mainly where wired broadband alternatives are not available.

Some of these technologies will likely be incorporated in evolving standards--indeed, Navini is an active participant in 802.20 (see below). As the standards reach maturity and volume deployments, we think most if not all of the proprietary technologies will fade away.

3G

3GPP manages the evolution of GSM --> Click for larger pictureIn many ways the most logical way to get to broadband anywhere is through today's wireless carriers, who already serve millions of customers' mobile voice needs and some low-speed mobile data needs. They have the billing relationships, infrastructure, and support staff. Nearly all have announced 3G deployment plans as a smooth evolution from their existing technologies.

3G is rolling out, but quite slowly. We have all read the negative publicity about the enormous amount of money spent on 3G licenses and the slowness of companies to roll out 3G technologies. Part of this stems from the high costs of the equipment, doubts about the actual consumer applications and concern about whether user willingness-to-pay will cover the costs of the new equipment and services.

Most wireless mobile carriers are continuing with 3G deployments based on technologies developed prior to home broadband. Some analysts say that the limited aggregate bandwidth of these earlier 3G technologies will make it difficult if not impossible to provide simultaneous users with the megabit-per-second speeds users now take for granted, and to price these services to meet consumer expectations.

Other carriers are conducting trials and some have launched services based on later 3G technologies which come closer to meeting the speed and pricing expectations of consumers.

IPWireless PCMCIA card --> Click for larger pictureRecent announcements include:

  • IPMobile in Tokyo is providing trial subscribers with Internet access via their laptops or PDAs at up to 3 Mbps with portability and mobility. The mobile broadband network solution, supplied by IPWireless, has been deployed at three cell sites and uses the UMTS TD-CDMA standard.
  • IPWireless was also selected by AtlasONE for a national broadband wireless network in Malaysia.

4G

Many of the companies promoting newer proprietary technologies loosely refer to themselves as "4G", positioning themselves to wireless carriers as a follow-on or alternative to the "traditional" 3G technologies. The ITU has been studying 4G with the goal of formalizing standards by 2010 and beginning deployment in 2012.

We think the rapid uptake of home broadband and the emergence of competitive technologies will force carriers to move faster than the ITU's timetable, or be overtaken by events.

802.16/WiMAX

The WiMAX Forum promotes 802.16 --> Click for larger pictureWiMAX is the newest player on the scene, providing a wireless broadband alternative to cable and DSL and including support for portable and mobile applications. The WiMAX Forum is promoting wide-scale deployment of wireless networks based on the IEEE 802.16 WirelessMAN and ETSI BRAN HIPERMAN and HIPERACCESS standards.

IEEE 802.16 develops WMAN standards --> Click for larger pictureThe IEEE 802.16 standards cover WMANs in the 2 to 66 GHz frequency bands; 802.16a, the standard for 2 to 11 GHz licensed and unlicensed bands, was ratified early in 2003. Unlike many earlier broadband wireless technologies, 802.16 is intended to allow non-line of sight operation and self-install capabilities.

ETSI is working with IEEE 802.16 --> Click for larger pictureETSI--the European standards organization--is working closely with IEEE 802.16 to create compatible European standards, making it likely that a global standard for WMANs will be adopted by the end of this year.

This move toward global WMAN standards is intended to radically reduce the equipment cost, improve the performance, and provide interoperability. The WiMAX Forum aspires to play the same role for WMANs that the Wi-Fi Alliance has played so effectively for wireless LANs (WLANs): to accelerate the market for interoperable products, and to promote them to wireless providers and customers.

Until now, broadband wireless solutions have been based upon proprietary products from companies like Motorola, Alvarion, Proxim and hosts of others. WiMAX brings together players across the entire value chain--from microelectronics to test labs--to support a common standardized approach.

Intel is a strong mover in the WiMAX Forum and has said publicly that "WiMAX is the next key disruption after Wi-Fi." In addition to supporting and leading the WiMAX forum, Intel has also announced it will develop silicon products based on the IEEE 802.16a standard and is working with Alvarion, a wireless access equipment provider, to deliver low-cost WiMAX-certified equipment based on Intel's silicon. Fujitsu Microelectronics has also announced its commitment to producing an 802.16a and WiMAX-compliant silicon product.

The key to "broadband anywhere" is the emerging 802.16e, an add-on standard which supports WMAN operation in moving vehicles, handoffs between sectors and cell sites, and roaming. It is designed as an extension to and upward compatible from 802.16a, which means that WiMAX will extend to encompass fixed, portable and mobile broadband wireless MANs. This is expected to be completed in 2004, and we expect that 802.16a and .16e will merge in much the same way 802.11b and .11g have merged for WLANs.

We believe WiMAX is a very viable contender for broadband anywhere. The WiMAX Forum estimates that CPE cost will initially be less than $300 and will drop the same way Wi-Fi costs did. Base station costs also look affordable and the expected range and number of users supported seem reasonable. Interoperable 802.16a equipment is expected to be available from multiple vendors by the end of 2004, with 802.16e equipment by the end of 2005. We expect that proprietary equipment is likely to fade out in favor of this standard, since current WiMAX members account for a large percentage of the sub-11 GHz broadband wireless access equipment shipments worldwide.

802.20

IEEE 802.20--the Mobile Broadband Wireless Access Working Group formed in December 2002--represents a wild card. Although the parties deny it, there appears to be a clear competition between 802.16e and 802.20, with equipment vendors choosing one camp or the other. Arraycomm and Flarion are two of the very active vendor participants in this group. The primary difference in the objectives for .16e and .20 seems to be whether the priority is to optimize for mobility (the 802.20 position) or to have a common standard for fixed, portable and mobile broadband operation.


Conclusions

There is no doubt that people will get "broadband anywhere"--and that it will be a huge business opportunity for the winning equipment vendors and service providers. Who these will be remains unclear.

The key questions are the performance and costs of various solutions and how these will be translated to pricing. What speed do consumers want and need? How much will they use it? How much are they willing to pay in addition to what they now pay for nearly unlimited broadband use at home? Which service providers will try to meet these needs? Will 3G technologies meet these needs or fall far short? Will providers and consumers wait another decade for 4G or will WiMAX fill the space? Will existing wireless providers deploy WiMAX or will it be new entrants?

Since we think "broadband anywhere" is the logical extension of the broadband home, we'll keep watching this.

( www.wi-fi.org ) ( www.verizon.com ) ( www.sbc.com ) ( www.uswirelessonline.com ) ( www.navini.com ) ( www.ipwireless.com ) ( www.atlasone.net ) ( www.wimaxforum.org ) ( www.intel.com ) ( www.alvarion.com ) ( www.fujitsu.com ) ( www.ieee802.org/20 ) ( www.arraycomm.com ) ( www.flarion.com )