WiMAX: The Secret Ingredient

4th May , 2004

From an operators' perspective, WiMAX, the new wireless broadband standard, can ease the financial burden of deploying and expanding a network. According to technology market research firm ABI Research, these cost advantages help both the smaller wireless internet service providers (WISP) and the larger, regional and national players. For smaller WISPs, lower cost equipment reduces the breakeven subscriber point for a new tower. For those with grander plans, the cost efficiencies brought on by the new standard will allow a company to cover more ground at less cost.

While the business model for fixed broadband wireless operators is steadily improving, specific plans on service launches remains unclear. Operators, long known for keeping their plans under wraps, are not saying a word. But recent activity point to big things, including Craig McCaw's moves with Clearwire and Microcell.

"McCaw's moves historically have not been small, but are typically grand plans," observes Edward Rerisi of ABI Research. "With WiMAX equipment on the horizon, now is the time to assemble a portfolio of spectrum, the scarcest resource in this industry."

While large moves are in the works, the small-town WISPs that are everywhere from the concrete canyons of Manhattan to the remote provinces of China also stand to benefit. A recent survey sent to nearly 400 WISPs worldwide by ABI Research points to some interesting trends. Over half of the respondents, with an average of just 765 subscribers, intend to deploy WiMAX equipment as soon as possible in order to lower overall equipment costs, both for customer premises equipment (CPE) and for base stations. The survey indicated that respondents are also not afraid to go after incumbents. Over half mentioned that their initial service launches are in areas served by two or more competing technologies.

These trends are observed in the market place by companies like NextWeb in California and TowerStream on the East Coast. Both are successfully competing in markets served by cable, DSL and T-1 access.

In a move signaling the dawn of a new wireless era, Nextel Communications launched their Wireless Broadband service in the Raleigh-Durham area this week. Nextel, the Reston, VA-based wireless carrier, launched their commercial network using technology based on Bedminster, NJ-based startup Flarion Technologies. The launch, anticipated by ABI analysts to occur in December, sends a strong message to other wireless carriers and infrastructure vendors: The future of wireless does not revolve solely around UMTS and CDMA2000. Though investment in these technologies is still expected to dominate overall carrier spending, rival technologies, including Flash-OFDM like that of Flarion, could represent about 20% of overall spending before the end of the decade, according to technology market research firm ABI.

Nextel, long the technology outlier of the wireless industry, has a proven business model using proprietary technology based upon Motorola's iDEN. This technology, though only available from Motorola, has been the foundation for Nextel's success. With a core base of enterprise users, the company has enjoyed a high ARPU (average revenue per user), driven mainly by low-churn and "sticky" features, like their push-to-talk technology, a core feature of iDEN.

"Deploying Flash-OFDM or a similar technology enables a wireless carrier to skip a generation, leap-frogging the competitors' service offerings," declares Edward Rerisi, VP of Research at ABI. "With Nextel's history of operating against the grain, they are not committed to either the GSM or CDMA camp, freeing them to make these bold moves."


Nextel is positioning to provide a new unique offering reminiscent of its push to talk service Direct Connect, through which Nextel has enjoyed a monopoly until recent imitations by competing wireless carriers. According to ABI, the potential to create yet another unique service offering may send shivers down the spines of Nextel's competitors and their suppliers.

Other successes with these advanced wireless broadband networks are evident across the world. In Auckland, New Zealand, operator Woosh Wireless has deployed a service using technology based on IPWireless. This service provides wireless broadband access to a large portion of the city. According to a recent ABI study, spending on all "last mile wireless" solutions will reach about $3 billion by 2009. While the largest customer base for these networks will be residential/SOHO customers, some will serve backhaul and enterprise applications. The residential/SOHO segment will represent about 54% of all subscribers by 2009. Early adopters of these networks, including Nextel's trial in Raleigh-Durham, are expected to be high-income individuals or mobile workers, including construction crews, real estate agents or government employees.

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