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Thu 14 Feb 2008 04:00 AM

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The WiMAX way

With WiMAX offering a more efficient and flexible way of delivering broadband internet access, Delta Partners looks at the development of the technology and the commercial opportunities it offers.

With WiMAX offering a more efficient and flexible way of delivering broadband internet access, Delta Partners looks at the development of the technology and the commercial opportunities it offers.

The MENA region's low broadband penetration represents a large untapped market that operators are keen to target, especially as regulators start opening up the fixed arena to expand connectivity. Numerous WiMAX licences have been awarded to date and several more are expected in countries like Qatar, Egypt and Oman in the near future and there are also several deployments already underway.

Furthermore, if the technology lives up to its promise of full mobility, the whole industry will be shaken up as new entrants join the market and fixed and mobile players are forced to compete head-on.

For WiMAX, an IP (Internet Protocol) standard-based wireless access technology represents a new, more cost efficient way to provide broadband services to end-users.

WiMAX is an all-IP standard based, wireless broadband technology designed for data that acts as a wireless last-mile extension of IP infrastructure. This allows WiMAX to leverage on existing IP network equipment and take full advantage of IP-based innovations.

The technology was originally designed for fixed data connectivity, but the latest revision (IEEE 802.16e) allows for nomadic and mobile services. This will pit WiMAX against different technologies as it progresses from fixed to nomadic to mobile in its evolution.

In a fixed setting, WiMAX can be utilised as a ‘gap in the wire' to provide DSL (Digital Subscriber Line) like services. For providing standard internet services, WiMAX will offer DSL like-speeds but will but will struggle to cost-effectively provide bandwidth intensive services such as IPTV, particularly as a mass market application.

Since the MENA region is largely dominated by satellite TV, the demand for alternative services is expected to be limited. Therefore, the principle end-user WiMAX device will be the PC, enabled through WiMAX CPE (customer premise equipment). The primary service over this connection will be internet access.

Additionally, the use of analogue telephone adaptors (ATAs) will allow VoIP services through WiMAX CPE using a standard phone, thereby enhancing revenue generating potential.

In a nomadic setting, WiMAX can be used to offer an ‘on the go' connection allowing Wi-Fi-like services over a greater coverage area and with quality of service guarantees.

The principle end-user device will continue to be the PC, which will be enabled by a PCMCIA card inserted directly into the PC, and the primary WiMAX service will be internet access. Intel plans to provide WiMAX integrated chips to PC makers, giving direct access via a laptop similar, similar to Wi-Fi, without the need for additional equipment.

Large network and device vendors (Nokia, Motorola, and Samsung) plan to launch WiMAX enabled devices by late 2008 or early 2009, allowing nomadic users to access their WiMAX network over PDA-like devices. This would permit more data-rish applications such as video streaming and music downloads to be offered over the network to highly portable devices.

In a mobile setting, WiMAX will offer mobile data services similar to 3.5G mobile technologies such as HSPA and EV-DO but at higher speeds and and potentially lower network costs. True cellular handover for data services is unlikely anytime soon since first generation devices are not planned until late 2008. Even when handover is available, there are currently few data applications that would benefit from it.

Therefore the end-user device will likely be a mobile phone with integrated WiMAX / GSM, utilising a GSM network for voice handover and WiMAX for nomadic data services. The principle WiMAX for nomadic data service will continue to be internet access, though by that time data-rich applications should have matured, offering a wide array of value added services such as video on demand, peer-to-peer gaming, and video conferencing.

Why WiMAX?

The decision to choose WiMAX, as with any technology, is a matter of balancing the unique advantages of the technology with the type of market and range of services an operator is looking to target. Though this is fundamentally a multi-dimensional decision, it is easiest to analyse using the fixed, nomadic and mobile distinctions.

Fixed deployments will represent the bulk of WiMAX offerings for the rest of the decade. These deployments will be targeted mainly in emerging markets where broadband penetration is still low and fixed-line infrastructure is poor, offering fixed internet and voice services. In this setting, WiMAX will compete against DSL and fibre.

WiMAX is essentially a DSL replacement with no real differentiation as a fixed service. In markets where wireline connectivity is low and poor in quality, WiMAX offers the greatest benefits. WiMAX is both less expensive and faster to deploy than copper line commonly used for DSL, while offering similar data speeds for broadband internet services.

The current high cost of CPE devices represents the largest single factor limiting the adoption of WiMAX in most emerging markets. Current prices for outdoor CPE (US$350-$500) and indoor CPE ($250-$300) will require most operators to offer entry subsidies to attract new customers. This is likely to change as CPE prices, particularly on indoor models, continue to fall.

The expressed target of several vendors is a $100 CPE, which could be reached in late 2008, permitting mass-market WiMAX deployments across emerging markets.

Fibre can also be seen as a competitive technology, as some fixed line providers will choose to invest in laying fibre to the home (FTTH) or fibre to the curb (FTTC) to offer high-speed devices both WiMAX and DSL are incapable of offering.

Fibre is considered a ‘future proof' technology in that it has the highest bandwidth potential of any known technology, but is more likely to be used in developed markets where broadband penetration is already high. However, it is already being deployed in several GCC countries where large real estate developments are utilising the technology.

WiMAX will not be able to compete with fibre in terms of speed but will be much faster to deploy allowing new entrants to capture much needed market share and return on investment more quickly. It also has the added benefit of evolving into a nomadic or mobile network in order to differentiate itself from purely fixed technologies like fibre.
Wireless local loop (WLL) technologies should also be seen as competitors to the WiMAX technology. Several of these solutions exist, including CDMA EV-DO which is being used across sub-Saharan Africa for internet and data services. This is a more cost-effective solution when data usage is low, but WiMAX will be more cost effective in high data usage networks due to inherent spectral efficiencies.

Nomadic deployments will become more prevalent as WiMAX evolves, bringing new devices to market and lowering the capital requirements to cover large geographical areas.

WiMAX will offer DSL like-speeds but will struggle to cost-effectively provide bandwidth intensive services such as IPTV, particularly as a mass market application.

This will be seen in both emerging and developing markets where data use extends beyond the home and office. Nomadic internet connectivity will be the key service, though value-0added services such as video streaming and music downloads will increase as WiMAX enabled devices become available. In this setting, WiMAX will compete against Wi-Fi, HSPA, and EV-DO.

Compared to Wi-Fi, WiMAX has two distinct advantages, despite its higher cost of deployment. First, it allows for quality of service (QoS) guarantees from the operator. And second, it has a larger coverage area than Wi-Fi. However, it is unlikely that WiMAX will compete directly with Wi-Fi.

It is more likely that Wi-Fi will complement WiMAX deployments, where Wi-Fi will help to fill gaps in coverage areas, particularly in difficult to penetrate indoor public spaces. Integrated WiMAX and Wi-Fi devices are already being considered for this scenario.

HSPA and EV-DO, as high-speed mobile technologies, represent the main nomadic challengers to WiMAX. All three technologies offer PCMCIA cards allowing connectivity directly to a customer's PC. HSPA and EV-DO offer the added advantage of mobile handsets which are already on the market and provide fully mobile voice connectivity.

WiMAX is specifically designed for data and will have lower CAPEX requirements when the network is predominantly used for nomadic internet connectivity. It also benefits from the ability to start as a purely fixed technology and grow into a nomadic offering, where an operator can captitalise on key market segments for revenue growth.

Due to the high cost of 3G licenses and the technologies used for mobile data services, it is unlikely that any 3G deployments would be targeted solely for nomadic offerings. This would mean that 3G start-ups would incur higher CAPEX to cover large areas for ubiquitous mobile services from the beginning of operation.

Operators with existing 3G deployments will be unlikely to switch to WiMAX, opening the space to fixed operators or new entrants looking to capitalise on new spectrum allocations. Nomadic deployment is also a natural evolution for WiMAX operators who started as fixed providers.

Mobile deployments of WiMAX are not to be expected over the next few years. The technology is still undergoing testing and lacks the capacity to saturate a coverage area necessary for ubiquitous mobile coverage. Instead, it is more likely that dual-mode WiMAX / GSM devices will fill the space in the medium-term.

This will be seen in both developed and emerging markets where mobile operators will face increasing competition and need to diversify and find new revenue streams. New services such as video on demand, peer-to-peer gaming and video conferencing will become available as devices mature, allowing additional revenue streams for WiMAX operators. In this setting, WiMAX will compete against HSPA and EV-DO, and later against LTE and Rev B.

Delta Partners is a Dubai-based integrated advisory and investment firm focused on telecoms, media and technology in high growth markets. www.deltapartnersgroup.com

Unleashing the broadband revolutionFor Federico Membrillera, a partner at Delta Partners, WiMAX gives operators a new cost efficient way to provide broadband services to end-users, and it is a development that he thinks could be a big hit in the Middle East.

We believe this technology will be very attractive to operators in the region since it will allow them to un-tap portions of the market that so far have not been served because their business case was not profitable," says Federico Membrillera, a partner at Delta Partners.

"In addition, Wimax will bring new competitors to the fixed line space and will unlock nothing less than a true broadband revolution. It will put the Middle East right up there with western markets - in the same way as it happened with mobile telephony."

The region has recently seen established fixed and mobile players, as well as new entrants analysing this new technology, asking themselves the question: "threat or opportunity?

It is not only a new technology that allows players to tap the broadband opportunity more profitably. WIMAX represents a business opportunity that fits right in with some of the main strategic questions the telecom industry is dealing with, like the convergence between fixed and mobile services.

Eventually it will also facilitate competition with mobile operators as full mobility on Wimax will become a technical and regulatory reality. "Having a clear vision on these topics right from the beginning will separate winners from losers," Membrillera adds.

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