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The November 5, 2006 Issue Provided by System Dynamics Inc.
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WiMAX World 2006: "Wi-Fi On Steroids"

Listening to a lot of the speeches at the recent WiMAX World 2006 in Boston, we often felt like we'd walked into a pep rally for a candidate during this intensely political season. Illustrating the heightened industry interest in WiMAX, the show attracted over 4500 attendees, compared with 2600 a year ago. Since many were new to WiMAX, the speakers must have felt it appropriate to extoll its virtues.

Don't get us wrong. We're not WiMAX cynics. On the contrary, we think WiMAX—particularly its mobile 802.16e version—will have a huge impact on the world of personal broadband. And we saw lots of signs of progress at the show. It's just that after a while, all the praise for the wonders of WiMAX got to be a bit wearing.

While WiMAX World included a lot of "strategic vision" speeches, we think the biggest news came from three areas:

  • An increasing number of major players from the telecom infrastructure world as speakers and on the show floor, showing that WiMAX is becoming part of the mainstream;
  • Real products displayed and demonstrated on the show floor; and
  • Realistic appraisals of key outstanding issues, and the timeframe for market penetration.

To put the conference in perspective, here are some of the major events that have occurred since last year's WiMAX World show:

  • The first certified WiMAX Forum-certified products for the fixed implementation profile (WiMAX 802.16-2004) were launched.
  • KT started commercial WiBro service based on the initial WiMAX profile.
  • Intel and Motorola invested $900 million in broadband wireless provider Clearwire.
  • Sprint Nextel confirmed plans to develop and deploy a mobile WiMAX IEEE 802.16e network in the 2.5GHz band. Intel, Motorola and Samsung were selected as vendors.
  • An additional WiMAX certification lab was opened in Seoul for mobile WiMAX products.
  • Some vendors have launched pre-802.16e products -- built to spec but not yet certified.
  • The ecosystem continued to develop with more vendors in each of the critical sectors.

View From The Big Guys -- Intel, Clearwire and Motorola

One of the biggest WiMAX stories this year was the announcement in early July that Intel and Motorola would contribute $900 million to Clearwire. Intel Capital invested $600 million, and Motorola contributed $300 million as a combination investment in Clearwire and purchase of Clearwire's NextNet Wireless subsidiary.

So it was no surprise that the opening session of the conference featured keynote talks by top-level executives from the three companies. While we've heard much of this before, it was good to hear the prospects for WiMAX spelled out clearly by companies who have "put their money where their mouth is," investing billions of dollars toward their convictions.

Intel

Sean Maloney of Intel --> Click for larger pictureSean Maloney, Intel's executive vice president and chief sales and marketing officer, went first. He started by explaining "why we need a global broadband wireless standard". Explaining why Wi-Fi alone won't do, he said "The global standardization of the 2.4 and 5.8 spectrum bands meant we could start driving mass wireless into notebook computers. Wi-Fi tipped notebooks to be a consumer product. Notebooks are now 60% of European PC sales." But "the problem is that Wi-Fi runs out" because it doesn't go very far. "Now we need Wi-Fi on steroids."

With cellular carriers spending billions to deploy 3G, he explained why Intel is so bullish on WiMAX: "WiMAX is 1/10th to 1/20th of the cost of traditional wireless infrastructure. It's four times more capable than 3G at 1/10th the cost."

Then he addressed some key remaining issues. The cost of user equipment is still too high: "The promise of WiMAX will only be delivered if we can drive cost down over the next 2 or 3 years."

Roaming remains a major issue: "We have to do away with the dreaded 'get my card out at the airport' scene" which everyone used to have to do with Wi-Fi before it was built into notebook PCs, and have to do now to use 3G data services. He pointed out that people don't have to log in on their cellphones every time they want to make a call. "We must make global roaming easy."

He's optimistic these problems will be overcome: "WiMAX will drive a new embedded mobile Internet business model. There are now 100 million plus notebooks per year, smart cellphones are moving in that direction, and new device categories are ripe for experimentation from CE companies." He said he expects to see "WiMAX integration across all segments."

Clearwire

Ben Wolff of Clearwire --> Click for larger pictureBen Wolff, Clearwire's Co-Chief Executive Officer, was next up. He started by saying that he'd been "watching the evolution of the cellular and broadband wireless businesses." They're similar in that "people highly value access to communications services whenever and wherever they might be. They're no longer tethered to a specific location for making calls and accessing the Internet." But he also sees differences: "In the early days, cellular predicted total penetration of 1-2%. We're now getting 1-2% of people covered by Clearwire per calendar quarter."

He said Clearwire is growing very fast, with good market penetration: "Clearwire now covers 5.5 million US homes, and expects to reach 9 million by yearend. We ended last year with 50,000 customers, and we now have 162,000 customers in US and international markets. We're now operating in 31 markets. 20% of the markets have greater than 10% penetration of households passed. One has 18% penetration."

Commenting on Clearwire's fast growth, he said "It's a differentiated product not widely available in the market. It's simple, fast, portable, reliable, and affordable. It creates a compelling customer proposition."

He talked about where Clearwire's customers come from: "Most customers come from wireline broadband - 58%. 32% come from dialup, and 10% had no internet access. Some customers view Clearwire as complementary to their wireline broadband, some think it's all they need. 64% get it for personal use, one-third for business purposes--these are mobile professionals. The top three reasons they get Clearwire are simplicity, portability and speed."

Motorola

Greg Brown and Scott Richardson --> Click for larger pictureGreg Brown, Motorola's President, Networks & Enterprise, started by mentioning that Networks & Enterprise is a $13 billion business. He said we are "sitting at a fundamental threshold of a major transformation of communications: making mobile broadband affordable and accessible. Do we really need it? Are people going to pay for it? Technologies change, the questions remain the same."

He then talked about Motorola's strong interest in wireless services of all types: "Mobile broadband penetration is growing rapidly - there will be 18% annual growth now to 2010. Wireless broadband is the most significant shift since the development of cellular networks. Users will mix and match across technology - wireless mesh, metro Wi-Fi, fixed and mobile WiMAX."

Motorola is one of the largest wireless infrastructure providers, and he said "we're seeing a tremendous interest from service providers, including traditional providers. WiMAX has seen an unprecedented pace of innovation and development. In 2007, we'll see all types of operators--there's a host of new players with new spectrum licenses." He predicted we'd see "a broad adoption by the end of the decade - a broad base of devices with embedded WiMAX." He also said we'd see "inter-network roaming across markets and across countries."

He closed by saying "In mature markets, people are clamoring for any time, anywhere broadband today. In emerging markets, they want broadband at cost and at speed." Asking "How do we make this a WiMAX world?" he said "Motorola is committed and positioned".


WiMAX Forum--Global Roaming Working Group

Ron Resnick, President and Chairman of the WiMAX Forum, delivered a later keynote. An Intel employee, Ron launched and became general manager of Intelís Broadband Wireless Access business startup focused on wireless Metropolitan Area Network technology more than four years ago.

Resnick started by saying he was "a broadband guy" and noted that there are "250 million broadband users in the world"--but there are already 2.2 billion cellphones. Echoing Sean Maloney's earlier talk, he said "We need to deliver a wireless broadband experience similar to fixed broadband" and "WiMAX is the global platform for the mobile Internet".

Responding to Maloney's roaming concerns, he said the WiMAX Forum has formed a Global Roaming Working Group that is "working from the ground up to allow for global roaming." Chaired by Korea Telecom (which launched the Korean WiBro service based on WiMAX in June), the roaming group's charter "includes roaming agreements, rating, billing and settlement." He said the roaming group "will offer brokerage services -- initially WiMAX only, then WiMAX to Wi-Fi, then to 3G as well. We want to create a global roaming ecosystem based on the best practices in GSM."

Resnick also talked about "the Taiwan program." He said "the Taiwanese government is backing WiMAX, and the 2.5-2.69 GHz band is allocated for WiMAX. Taiwan has the majority of market share in notebook PCs. We want to do the same with WiMAX." He said Taiwanese manufacturers are "all building products based on WiMAX today."


View From the Trenches--PicoChip Weighs In

In contrast to the cheerleading scenarios in the keynote talks, Rupert Baines, VP of Marketing at PicoChip, presented a somewhat more cautious view in a breakout session on "The Evolution of WiMAX Devices". PicoChip is one of the most innovative chip makers (see our profile of PicoChip (BBHR 8/15/2004), and its "software based radio" chips have been embedded in many WiMAX products, including one from Intel announced at this show.

Baines started by talking about the forces reshaping the development of telecommunications equipment. He said it "went from the fully integrated AT&T to a full value chain. Component suppliers are doing more and more development, including reference designs - this would have been unthinkable 5 years ago."

After discussing other aspects of the wireless evolution, he cautioned "it always takes five years to get volume, and it's always the handsets that are late. It takes a decade from launch to when it peaks." He said research by independent analysts "predicts a full-scale WiMAX launch in 2010 and a peak in 2016" and said that would be the "fastest life cycle for wireless."

He then described some of the challenges: "Customers want ADSL data rates - the industry is in danger of repeating the tech-lead disasters of WAP and 3G auctions. The technology has to be cheap enough, have decent battery life, performance and prettiness." By "prettiness" he meant that WiMAX phones have to look good in comparison with high-fashion consumer phones -- consumers won't buy big, heavy, unattractive phones with poor battery life.

WiMAX promises much higher data rates than 3G, but he pointed to the high cost of WiMAX today: "The WiMAX BOM is much higher than GSM, WCDMA, and Wi-Fi. WiMAX is twice the cost of HSDPA - can it deliver twice the ARPU?"

He cautioned "Power will be biggest problem. Consumers turn off 3G mode to save power, and WiMAX will draw much more power than 3G. OFDMA has a high power drain."

He said WiMAX might first go into smart phones, which have a big screen and high performance. "Today's smart phones are incredibly sophisticated - with multiple silicon in the same package, thin and light. The 2007 3G smart phone is even more sophisticated." But with "an average selling price of $300," smart phones represent "only 10% of the market -- they're now niche and not the mass market."

He was encouraged by all the effort going into WiMAX. "Nokia, Motorola, and Samsung are the leading handset makers, and they're all committed to WiMAX. 21 manufacturers are making chipsets for WiMAX, and a grand total of several billion dollars is pouring into WiMAX development."

He closed with an observation on the future of WiMAX: "The first 500 million cellphones were sold to rich people who already had copper phone lines. The next 2000 million will be sold to people who will never have a copper line. How will they get broadband?"


Major Companies and Announcements

After the WCA meeting in late June, our article Targeting the Mobile Internet referenced the many big companies that were visible at that show. Those were all at WiMAX World, and there were more including IBM and Nortel.

Many of the large companies had booths at the show. Many major companies made product announcements, some incorporating innovations by smaller companies that have been developing their WiMAX expertise over a substantial period.

Motorola WiMAX products --> Click for larger pictureMOTOwi4 sign in the NextNet booth --> Click for larger pictureMotorola was a very visible player in this conference, both in the major keynotes and on the show floor. Both Sprint and Clearwire are committed to using Motorola products. MOTOwi4 was the prominent theme, including a WiMAX line supporting fixed, nomadic and mobile environments. Motorola had a display cabinet showing a range of WiMAX devices. They included both outdoor and indoor units with MIMO, and laptops equipped with Beceem Mobile WiMAX PCMCIA cards.

NextNet Wireless, recently acquired by Motorola, was brought under the Motorola umbrella with a prominent MOTOwi4 banner in their booth.

Jim Parker showed us Samsung's WiBro phone --> Click for larger pictureSamsung is a driving force behind Korea's WiBro service, providing base stations and handsets. At their booth, Jim Parker showed us their WiBro/WiMAX phone, but there was not a lot to see without operating infrastructure.

Jim Freeze of BelAir Networks --> Click for larger pictureJim Freeze, Senior VP Marketing at BelAir Networks, showed us their latest equipment. We asked why BelAir, a strong player in Metro Wi-Fi, was at a WiMAX show, and he explained that BelAir already offers 802.16d fixed WiMAX for backhaul in its Wi-Fi products. They're currently developing products based on mobile WiMAX for the 2.3, 2.5 and 3.5 frequency bands; these are in trials now and they expect delivery by the end of 2007. He mentioned that BelAir was making wireless products with built-in DOCSIS cable modems for cable operators.

BelAir equipment with Siemens logo --> Click for larger pictureAt the show, Siemens Networks and BelAir Networks announced an agreement enabling Siemens to market and sell BelAir products globally under the Siemens brand.

Alcatel announced commercially ready products for early adopters of mobile WiMAX, using technology from Israeli OFDMA chip maker Runcom. Runcom reportedly has many OFDMA patents and has pioneered several OFDMA silicon solutions for the last six years.

Nortel demonstrated their mobile MIMO-powered WiMAX solution, also powered by chips from Runcom. Nortel's equipment is the basis of a WiMAX field trial in Moscow by Golden Telecom.

Fujitsu Network Communications and Fujitsu Microelectronics launched their fixed WiMAX product line, including two models of base stations for indoor or outdoor use. Fujitsu is targeting mid-year 2007 for its Mobile WiMAX system-on-chip (SoC).

Intel announced the WiMAX Connection 2250 (Rosedale 2) their system-on-chip that supports both fixed and mobile WiMAX networks. WiMAX vendors committed to use the SoC include Motorola, Alvarion, Alcatel, Airspan, Siemens and Aperto. Intel also announced a new baseband card for WiMAX base stations, with a physical layer (PHY) from PicoChip and Intel's media access control (MAC) layer.


For More Information

( www.wimaxworld.com ) ( www.intel.com ) ( www.motorola.com ) ( www.clearwire.com ) ( www.wimaxforum.org ) ( www.picochip.com ) ( www.beceem.com ) ( www.samsung.com ) ( www.belairnetworks.com ) ( www.siemens.com/networks ) ( www.alcatel.com ) ( www.runcom.com ) ( www.nortel.com ) ( us.fujitsu.com/telecom ) ( www.fma.fujitsu.com )