Mobile WiMAX Has Niche Opportunity, But Window Will Close Fast on Fixed WiMAX—Analysts

Outlook4Mobility’s Andy Seybold was less sanguine: He said the march of 3G technology leaves even mobile wireless only a 3-year window late this decade to recoup development costs, and he repeatedly questioned whether that’s feasible.

WiMAX and 3G will both compete and coexist, Paolini said. They will compete for service provider investments and subscribers. They will coexist in networks and devices. Both technologies are moving to OFDMA, an Internet Protocol (IP) core and IMS, so the capabilities and services will be the same and the technology choice not as important as it might seem, she said. Service features -- applications, marketing and prices -- will determine what succeeds, not performance differences between the underlying technologies. Short-term, WiMAX seems as if it will perform better than WCDMA LTE, for “long term evolution,” but the gap will narrow as both move toward OFDMA, MIMO and wide channels, Paolini said.

The best way to increase wireless traffic is getting fixed traffic to switch, Paolini said. That can be done using WiMAX, GSM over IP or Unlicensed Mobile Access. Carriers must start integrating multiple edge technologies, she said: “That’s a big challenge for the service provider. Typically, they've been used to one technology,” or at worst integrating new technologies built to work with the old ones.

Subscribers will have devices with multiple wireless interfaces, Paolini said. That will raise costs, but the bigger problem will be managing the network connections, she said. Traffic will grow but be split among technologies, Paolini said. Revenue per user of mobile data won’t grow in proportion to the use, she said.

3G is doing better than some people think, Paolini said. But “mobile operators haven’t understood the market well” and unless they “come up with better service [offerings], it’s hard to see how this will take off.” SMS and ring tones have been the big hits, and those “just sort of happened.” For many carriers, wireless data other than SMS is producing less than 20% of data revenue, she said. This shows that “oftentimes, you just don’t need broadband” for mobile data. In Japan, mobile data revenue per user is declining as a percentage of overall data revenue and video calling is flat. In Europe, MMS use is dropping.

Most carriers won’t give figures on sales of 3G to notebook computer users, but Vodafone Germany had only 140,000 such subscribers at the end of 2005, Paolini said, and she estimates Verizon has 200,000-400,000. The laptop market hasn’t been attacked strongly. With a voice bit much more expensive than a data bit, carriers don’t want mobile data to be too successful because they see it as mainly congesting their networks, she said.

Still, with voice revenue dropping, carriers need to raise data revenue per user, Paolini said. The main attraction of mobile WiMAX is that it can support both fixed and mobile access and a wide range of services, she said. “It’s a way to expand your portfolio,” she said. A good network is expensive, but with such versatility, the cost can be recouped, Paolini said.

By 2010, fixed WiMAX will have 6 million subscribers, but mobile WiMAX will have passed it with 9 million, Paolini predicted. Still, “it’s a tough business case, especially in developed countries… moving toward saturation in broadband services.” An opportunity exists, however, in creating attractive services, because cable and DSL providers have largely dropped the ball on that, she said.

Seybold said the money in noncellular wireless data technology is to be made in integrating cellular service with indoor Wi-Fi access: “Wi-Fi needs wire-area more than wide- area needs Wi-Fi.” He said he has sources who say T-Mobile loses $1 million monthly on its Hotspot business. Seybold trashed the prospects for municipal wireless as producing “an expensive, temperamental network prone to interference and maintenance issues.” He said Philadelphia has already had to abandon promises of free access: “They can always use the access points as fillers in the potholes… There is no business case for this.” Winners in wireless data will include big U.S. cellular carriers, DSL and cable providers, and MediaFLO and DVB-H mobile TV providers, Seybold predicted. “This is something that you need to pay attention to,” he said of mobile TV.

WiMAX delivers “damned little that can’t be delivered without it,” Seybold said. But it’s “a good technology as an adjunct to other technology that is already in service.” Incumbents may take it up through the Advanced Wireless Services (AWS) auction or 200 MHz spectrum, or to offer VoIP, Seybold said. “WiMAX needs a win. They need a Sprint… They need someone.” He handicapped the chance of Sprint’s going with WiMAX at 50-50.

CDMA operators aren’t moving in substantial numbers to fixed WiMAX or to UMTS, contrary to media reports, and there’s no compelling reason for them to do so, Seybold said. Rev A of CDMA2000 1xEVDO is “coming real soon” and “fixing a lot” of the shortcoming of the current Rev 0. The new version will enable faster links up and down, including for multicasts, but the most significant improvement will be ensuring quality of service to support VoIP, he said. Rev B most importantly will let operators combine 1.25 MHz channels for very high bursting speeds.

Some Internet companies think they can use WiMAX to compete with 3G mobility, Seybold said: “It’s gaining momentum. I don’t see a business case for it… There are large capex issues.” The main WiMAX backer, Intel, is trying to free frequencies around the world, Seybold said: “I have a huge problem… WiMAX is not 4G… but everybody thinks it is.” The FCC’s impending AWS spectrum auction could result in a WiMAX network with high capital costs and expensive handsets. Sprint will find at 1.9 GHz that it requires 3 times as many cell sites to cover an area as Verizon does at 850 MHz. NTT DoCoMo, the carrier most successful at selling mobile data -- 78% of its customers use it -- gets only 30% of its revenue from data.

WCDMA has made great progress chasing EVDO, and “there’s more coming,” Seybold said. “Capacity demands will drive deployment of it.” WCDMA LTE -- like 802.20, coming to market in 3-4 years -- will “leave WiMAX and everything else in the dust in spectrum efficiency and peak speeds, he said.