WiMax's bright future and five hurdles to overcome

Doubters question pricing, usage model

Last month's WiMax World 2007 conference in Chicago was filled with old-fashioned technology optimism, featuring twice as many vendors and visitors as the previous year's event along with new details of Sprint Nextel Corp.'s nationwide Xohm WiMax rollout for next year. One balmy evening, Sprint and Motorola Inc. executives toasted the future of the technology aboard a Chicago River boat cruise to demonstrate how well the wireless broadband technology works.

The future could hardly have seemed brighter for WiMax technology that night, with a $5 billion, multiyear investment in Xohm expected to catapult WiMax generally. The performance of the broadband wireless technology, designed to boost speeds to all kinds of devices over greater distances than Wi-Fi, had been an uncertainty but was now being revealed.

But wait.

For some analysts and others who mostly disregarded the Chicago hoopla, there are still obstacles that WiMax will face prior to widespread adoption.

A potentially serious factor could be what impact the recent resignation of Gary Foresee as Sprint's chairman and CEO will have on the Xohm division. Xohm has a spirited backer with Barry West, Sprint's chief technology officer, as its president, who could insulate Xohm from Sprint overall.

But Philip Marshall, an analyst at Yankee Group Research Inc. in Boston, said West now must get support from the financial community outside of Sprint. "Without this [support], a new Sprint CEO might opt to back away from Gary's strong support for WiMax," Marshall said.

Of course, WiMax is much more than just Sprint's Xohm version of WiMax, with many vendors in the market already. Even so, it still faces some obstacles that range from concerns over pricing of WiMax devices, chips and network services to whether WiMax speeds of 2Mbit/sec. to 4Mbit/sec. will even matter when compared with other emerging broadband wireless technologies.

There are at least five concerns for WiMax promoters to face, according to technology analysts and the vendors:

1.What will it cost?

The prices that will be charged for WiMax chips, devices and network services are the key worry when examining WiMax's future. Pricing is clearly on the minds of the service providers, including West, who is expected to announce Xohm pricing after the first of next year.

West made headlines earlier this year for claiming costs for WiMax networks could be one-tenth of competing wireless networks. But will that savings be passed to end users?

In an interview at WiMax World, West said prices for hardware such as a WiMax laptop card would approximate the cost of a Wi-Fi laptop card, while a monthly subscription might approximate that of residential cable or DSL service. "It will be affordable," he said.

That "affordable" measure of costs would satisfy some critics, since the WiMax speeds with Xohm are supposed to range from 2Mbit/sec. to 4Mbit/sec., which is above the clock speeds of many broadband wireless plans running over EV-DO or other networks at a cost of about $60 a month for business users.

"There's a pent-up demand for mobile broadband Internet access that's available anywhere," said Berge Ayvazian, a Yankee Group analyst, citing a survey in the first quarter of 2007 of 2,000 consumer Internet users.

The survey showed that the majority of users would switch to mobile broadband from their home-based DSL or cable connection and would be willing to pay a small increase over what they pay today for the added convenience of mobility, Ayvazian said. Average U.S.-based consumers would not want to pay the $60 for monthly broadband wireless access via a laptop card. But they would be willing to pay a "small premium" over the $30 per month they now pay for home DSL or cable service to receive speeds of, perhaps, 2.8Mbit/sec. over that wired connection.

"Clearly, people don't want to pay the rates offered today for business mobile broadband at $60 a month," Ayvazian added.

Meanwhile, Intel Corp. and other chip makers must drive down the costs of WiMax chips, not just in laptop cards, but also for chips inside laptops and in the smallest wireless phones, said Jack Gold, an analyst at J. Gold Associates in Northboro, Mass. "Wi-Fi took off mainly because of Intel's Centrino chip, so we still have to see if there's a WiMax chip that's affordable," Gold said.

"It's a Catch-22 situation right now," he added, since WiMax chip prices will go down when volume production of the chips increases. If a WiMax chip set boosted a laptop's cost by $40 to $50, as is estimated today, Gold said users would probably not buy them. By comparison, however, users have easily adjusted to the $5-to-$7 premium for Wi-Fi chips in laptops, Gold said.

2. What's so special about WiMax?

Assuming a user can find a device with WiMax service that's not too expensive, the second concern is what will WiMax provide? In other words, is there a killer application or usage model that only a WiMax wireless network can support that you can't get with another wireless broadband service?

"The biggest concern with WiMax for me is how it fits into the pantheon of wireless solutions, since wireless in the wide-area network competes with cellular," said Craig Mathias, an analyst at Farpoint Group in Ashland, Mass., and a Computerworld columnist. "I mean, what do you do with it?"

To answer the question of the killer app with WiMax, Intel provided a partial answer at WiMax World, where the chip maker demonstrated a gaming device running with WiMax speeds versus DSL to show how WiMax provided smooth full-motion gaming video simulations compared with jerky video motion while running at a slower bandwidth.

Beyond gaming and into the business user's realm, West said one business application would be to use WiMax for showing videos of homes for sale, giving customers quick access to the features of a kitchen or floor plan supported by video sent wirelessly to nearly any device.

But perhaps the biggest advantage to WiMax is mobility, Ayvazian said. WiMax will mean, for instance, that video a home-based broadband user watches from a PC today can also be viewed in a car or on a walk outside the house. Currently, some versions of mobile TV run fairly smoothly at slower data rates than WiMax, "but the downloads take forever," he noted.

Also, anyone surfing the Web with a cellular network can get impatient, as the experience using Apple's iPhone over the AT&T Corp. EDGE network has shown, Ayvazian noted. When the iPhone runs on Wi-Fi, he said, "it shows what iPhone could be if it ran on WiMax."

And there is interest. Ayvazian said he recently met with officials from the NBA who are "preoccupied" with being able to deliver video content of games to "every kind of mobile device possible."

In another example, Scott Wickware, vice president of carrier networks at Nortel Networks, said Nortel demonstrated in May the value of WiMax for enabling emergency personnel to gain quick access to medical records and to transmit video of a patient from a moving ambulance to doctors in a hospital.

3. How reliable is WiMax?

Consumers might not care much whether a video over a WiMax connection slows or stalls, but a business user working on a WiMax connection to find the status of an order with an angry customer certainly would be.

The question of reliability might not seem to be a concern, except that Xohm's West said Xohm will not be backed by a service-level agreement, which is a guarantee that a minimum bandwidth will be provided or the customer receives a refund. Such SLAs are commonplace today for many networks used by businesses, but not for existing cellular services typically.

"We will give you a good experience, but not SLAs," West said. Later, in an interview, he said Xohm will be "affordable ... around the needs of the individual."

Ayvazian said West's comments show that Xohm was clearly focused on consumers, not business users. "His comment surprised me," Ayvazian said. "I'd be surprised if that's Barry's final answer on SLAs," he added. "Business customers are going to demand some kind of SLAs."

Still, there could be WiMax SLAs offered under plans by other service providers in the U.S. and abroad, and the advantages for business users could be significant.

Among the advantages for a reliable WiMax business-focused service, backed perhaps by SLAs, would be the ability to provide lower-cost devices and coverage across a large corporate campus, as opposed to setting up a patchwork of Wi-Fi access points, said Gartner Inc. analyst Phillip Redman.

Eventually, the entire corporate LAN could converge with the WAN, which would create greater efficiency and lower costs, Redman added. And since a WiMax network would run over pure IP, it would provide an IT shop the ability to support more applications than it can today.

4. How fast can WiMax roll out to millions of devices?

"Mobile WiMax holds promise, but the real question is will we see actual consumer electronics devices?" asked Zeus Kerravala, another Yankee Group analyst.

Redman said Xohm's potential for success is built partly on a vision of low-cost devices that will sell for under $100, such as an inexpensive iPhone with a larger screen. "But that will be difficult to pull off," he said.

West said 50 million or more devices will be needed in the next three years to run over the Xohm WiMax network. He said five laptop makers are already on board to provide internal WiMax chip sets for laptops, but he would not give any names. Sprint selected the infrastructure vendors for Xohm because they make mobile devices, and one of them, Motorola, even demonstrated working alpha WiMax-enabled wireless phones on the Chicago River cruise. Intel also demonstrated a laptop with an internal WiMax chip and said it is working with Nokia to provide handhelds that incorporate an Echo Peak module with combined WiMax and Wi-Fi capability, using the draft 802.11n specification.

Inevitably, there is a relationship between having enough devices running WiMax chips and drawing enough market interest that customers will buy devices running WiMax in bulk, analysts noted. It might not be all that different from the past, but with WiMax, and especially with Xohm, the timetable seems more pressing than before because of a variety of competing wireless technologies, especially in the U.S. and other developed countries.

5. How does WiMax compare with the competition?

Ultimately, the fifth obstacle concerns competition and which of the WiMax providers will win with it compared with alternative technologies backed by other vendors.

On the network equipment side, Motorola, Intel and Nokia might seem to have a lead with their connections to Xohm. However, Nortel Networks, which did not win a role as a WiMax equipment provider for Xohm, still sees a big market for WiMax gear and has several deployments under way. WiMax World also featured dozens of small vendors offering WiMax components. These included full-blown systems with antennas, gateways, client chip sets and software supporting it all.

The real unanswered questions are how well Xohm can do in the next two years before Verizon Wireless and Vodafone begin work on a pathway to Long-Term Evolution technology for broadband wireless, Ayvazian said. LTE, in some fundamental ways, is similar to WiMax, he noted, since both technologies rely on multiple-input, multiple-output (MIMO) antennas and orthogonal frequency modulation to send signals.

In another competitive comparison, AT&T Inc. has already begun rolling out its BroadBandConnect 3G network operating on GSM with the world's first use of High-Speed Downlink Packet Access (HSDPA) technology. AT&T advertises the average downlink speeds in the range of 400Kbit/sec. to 700Kbit/sec., but the potential of such networks is theoretically more than 14Mbit/sec., Redman said. Still, he bet that HSDPA might run only as fast as WiMax in real-world networks.

Redman noted there is less latency, or delay, with WiMax technology, which enhances its usage for voice technology. WiMax also uses the available spectrum more efficiently, a factor that will matter to the carriers providing the networks and to end users.

However, as with many radio technologies, there are many variables that affect what an end user can accomplish wirelessly, including the efficiency of the client device he carries, Mathias noted. In a WiMax network, West said many channels could be added to an antenna in crowded zones to bump up performance for a client device. However, in a separate interview, Mathias retorted, "Sure, but what happens when you add many, many more users?"

In addition, Sprint Nextel, in collaboration with Clearwire Corp., has control of licenses in the 2.5-GHz spectrum in the U.S. for WiMax. That control is what some experts see as a clearcut advantage over any carrier seeking to enter the WiMax market here.

Given spectrum licensing and competing broadband technologies, Redman predicted late in 2006 that in 2011, there will be fewer than 10 international wireless operators deploying WiMax.

However, Ayvazian said the events and enthusiasm of WiMax World helped accelerate Yankee Group's latest prediction of users for WiMax. The last projection of 7 million to 8 million WiMax subscribers in the U.S. for 2011 and 27 million subscribers worldwide should be moved to a year earlier, he said, to take into account Sprint's partnerships with Clearwire and Google Inc.

"We're at the inflection point of how this market's going to jump forward," he said.

It's obvious that there are many questions, obstacles and potential obstacles for WiMax. Yet there is so much promise that while analysts are unwilling to be too optimistic, they aren't too pessimistic in predicting how successful it will be.

How well Xohm performs in its first markets in Baltimore/Washington and Chicago in December should answer many questions.

Copyright © 2007 IDG Communications, Inc.

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