Opportunities and Challenges for Broadband Wireless and WiMAX in the USA, 1st Edition:

2: Executive Summary

A new study from Maravedis peers through the WiMAX hype to make actionable predictions. Here's the big picture, the executive summary.

by Tim Sanders with Adlane Fellah, Jeff Orr, Cintia Garza, and Robert Syupta for Maravedis [February 25, 2008]

The BWA/WiMAX conversation in the US market begins with Sprint. Sprint experienced struggles in its PCS business irrespective of its WiMAX initiatives. The hiring of Dan Hesse as CEO is intended to stem the tide of customer losses among its Nextel customer base. On the WiMAX front, the breakup of Sprint's collaboration with Clearwire unsettled the whole industry. Sprint maintains it is committed to WiMAX. In fact, Sprint has moved forward with a soft launch of the Chicago, Washington DC, and Baltimore MD markets in December 2007. Despite Sprint's announcement last week that it would eliminate 4,000 jobs and close 125 company stores as part of a reduction of sales points, Maravedis believes that Sprint has the best mobile WiMAX opportunity and will proceed with its XOHM WiMAX play under three possible scenarios detailed in the report.

While our research indicates that Sprint and Clearwire have the best mobile WiMAX agenda, they have been by no means the only carriers investing in WiMAX in the US.

Carriers feel that expansion into specialized niches, especially business-to-business sales coupled with strong service models, integrated back-office systems, and additional service bundles, provide a powerful enough proposition to customers to succeed even with fixed/portable wireless plays.

Regulatory and Spectrum

The US regulatory environment is very supportive of broadband wireless. The industry is well represented by cellular wireless associations and broadband-specific groups that promote the interests of broadband wireless carriers.

For spectrum at 2.3 GHz, there were 162 active licenses held by a handful of companies as of October 25, 2007. In the 2.5 GHz range, split between BRS and EBS segments, there were 1728 active BRS licenses and 3180 active EBS licenses at the end of 2007.

The 2006 auction of AWS spectrum improved the broadband wireless opportunity despite some spectrum-clearing issues that have slowed deployments. Carriers largely feel that this spectrum meets immediate mobile voice and 3G expansion needs and that these needs don't require WiMAX networks. Maravedis concludes that AWS spectrum will be utilized largely for LTE, beginning in the 2010 timeframe.

The upcoming FCC auction of 700 MHz spectrum is drawing intense interest from carriers and could potentially drive a nationwide broadband network. Maravedis anticipates that major deployments in 700 MHz will emerge by 2010 after spectrum is cleared. Some carriers whose spectrum has been freed are already in deployment.

Market and Applications

Market data indicate that mobile voice has grown steadily and cannibalized market share from wireline voice. Some estimates assert that mobile voice could reach penetration of nearly 95 percent by 2011, forcing mobile voice carriers to look elsewhere for revenue and subscriber growth. Broadband access data point to a rapidly maturing US broadband market. Broadband penetration among Internet users topped 85 percent, up from around 40 percent two years previous. Business user broadband penetration among active Internet users is already above 94 percent. Carriers increasingly must look for new niches to serve, such as low density areas.

Our findings show that cellular carriers are increasingly looking to mobile broadband to improve revenue and enter new product niches. However, mobile broadband business models are immature and not well understood, although certain elements such as synchronous data speeds and flat-rate usage bundles are in demand. Other IP-based services, particularly video, are garnering attention and were recently cited by AT&T as a major and surprising factor in the rapid growth in Internet usage by iPhone users. Clearly, mobile broadband is a market differentiator in a maturing Internet environment. Many carriers spoke about the increasing demand for broadband services from customers who are increasingly involved with user-generated content and video applications.

These types of opportunities, coupled with IP-PBX products for business and other IP services, are helping drive providers' interest in broadband wireless.

New services based upon IP technology were cited by carriers, including Sprint, as having great potential for new revenue generation. The variety of IP services that are already or could be driving broadband wireless range from online gaming to video download and streaming, VoIP, instant messaging, text messaging, near field communications (device-based credit card payment), and context- and location-sensitive search, along with numerous business applications including remote workforce management tools, fleet management, and remote security monitoring.

Our conversations reveal that users in smaller towns have broadband needs equivalent to those in urban settings. This segment of the marketplace offers opportunity for WiMAX.

Maravedis estimates that non-Sprint BWA/WiMAX subscribers in the US will exceed 10 million by 2012. Current estimates of BWA/WiMAX customers in the US are pegged at a half-million, with about half belonging to Clearwire.

The municipal wireless industry is bogged down with technical and business case problems.

Carriers

Carriers expressed disinterest in using AWS spectrum in any type of WiMAX play. Carriers focused upon the need to use these bands for PCS or PCS/data needs immediately. Some regional, rural carriers we spoke with indicated they would follow their Tier 1 roaming partner's technology path. Interestingly, many carriers did not view fixed/portable and mobile wireless as competing products.

There is heavy interest from carriers in partnerships, particularly as regards spectrum assets. Certain spectrum holding companies will play key roles in how successful carriers are in securing relationships for deployments using others' spectrum assets. Maravedis believes that the motivations of Sprint and Clearwire to renew their partnership are stronger than ever.

Service providers believe mobility will be a market differentiator, but they also believe that their customer base will not shift away from fixed/portable in the short run. Carriers still see major opportunities in fixed/portable access competing with DSL and cable, and they anticipate the shift of customer premise equipment (CPE) cost to consumer devices as those come online. Carriers cite the synergistic value of interoperable roaming in providing overall future growth in the technology. While carriers would love to have true interoperable mobile WiMAX technology now, they are not waiting idly for it.

Satellite-based broadband, while highly pertinent in rural and ultra-rural applications, does not appear poised to become a major national player.

Verizon and AT&T have significant fiber initiatives in play, both of which are experiencing solid growth. Fiber shows particular promise for delivery of robust services. Maravedis believes that fiber technology will play an increasing role in the US broadband equation. Maravedis forsees that LTE will be the dominant mobile broadband wireless technology by 2012.

Threats and Challenges

Sprint is the dominant proponent of WiMAX in the US. It needs to send a clear signal to the market about its mobile WiMAX development plans. There is clear momentum for LTE technology among other mobile wireless carriers.

Achieving seamless interoperability in real-world deployments in the US market before 2009 is a challenge. A major component that must be considered is the development of back-office support systems including billing. There are also technical hurdles, including how to provide seamless handoffs between cells of different carriers.

Development of a device ecosystem that meets customer needs and expectations is important. We are seeing early signs of this from Sprint, based on the new partnerships it announced at the recent Consumer Electronics Show.

Carriers are concerned about the implementation and testing of product profiles in additional spectrum ranges that could broaden their business prospects, particularly in 700 MHz. Carriers believe this will scale towards lower CPE cost. Carriers look forward to when this cost shifts completely to the end user, including the device that the user purchases.

But this brings up another issue faced first by XOHM. And that is, offering customers a value proposition for XOHM applications that mitigates the loss of device subsidies sufficiently to encourage customer adoption.

The willingness of spectrum holders to sublet spectrum or otherwise partner with other carriers to build out their spectrum assets fast enough to secure a major market position is unknown. Key spectrum-holding companies such as NextWave, Sprint, Clearwire, and Horizon Wi-Com will play a major role in the quality of opportunities for carriers with licensed spectrum.

Potential negatives here could be partially obviated with 3.65 GHz spectrum for carriers with limited licensed spectrum assets.

The likelihood of an economic recession is increasing, which may negatively impact CAPEX investments by all carriers in 2008 and 2009. Despite significant threats, ultimately carriers believe they could succeed with broadband wireless technology.

— End

Copyright 2008 Maravedis, Inc.
This exerpt from the report Opportunities and Challenges for Broadband Wireless and WiMAX in the USA, 1st Edition, is reprinted with permission. To purchase the report, visit the Maravedis website.

< Back to page one Key Findings