Insight Wimax Outlook in the US Market: Implications for Service Providers
Total Page:16
File Type:pdf, Size:1020Kb
insight WiMAX Outlook in the US Market: Implications for Service Providers By Hamilton Sekino, John Kwon and David Gates WiMAX has recently gained a lot of traction and attention in the market and media. We believe the technology has a large addressable market in the US but realistically may capture only a small share of that, competing against incumbent fixed and wireless technologies that are also evolving in terms of bandwidth and costs. The market penetration and success of WiMAX will be determined by how quickly its ecosystem organizes and collaborates to prioritize target segments, develop and market simple-to-use and affordable end-user applications and devices. Potential WiMAX players need to accelerate the adoption of the service and attract a critical mass of users before competing technologies can catch up. There is a diverse range of potential owned or leased-facility WiMAX players—pure wireless carriers, integrated carriers, cable and satellite operators, fixed incumbent and competitive operators, MVNOs, and content owners and aggregators. Each player should ask the right strategic questions to objectively assess the economics of WiMAX, only as one of the potential enabling technologies to support incremental growth, drive customer retention, or reduce its operating or capital cost structure. Introduction WiMAX, the trade name given to strategies as they face many unanswered technologies based on the IEEE 802.16 questions on both the demand and standards for broadband wireless supply sides of a WiMAX business case. communications, is finally emerging as In this paper Diamond addresses the a credible alternative for US telecom demand question by segmenting the market service providers looking to deploy next- for both fixed and mobile WiMAX and generation broadband wireless networks. by estimating the addressable market for WiMAX is gaining momentum among each of these segments. In addition, we both vendors and service providers in part use market benchmarks of new technology due to its promise to be a viable technology introductions in the telecom industry to to provide wireless broadband and to further estimate the potential market that reduce the mobility premium of 3G networks. WiMAX can capture. We also determine table of contents WiMAX-focused startup Clearwire, which the breakeven capital investment of fixed already operates fixed WiMAX networks and mobile WiMAX based on demand Introduction . .2 in more than 30 cities, received more than and WiMAX’s expected market share Context and Background . 3 $1 billion from investors led by Intel and estimates. Finally, we address the supply Positive Momentum for WiMAX . .5 Motorola. Meanwhile, Sprint has announced question by identifying nine categories WiMAX Market Forecast it will build a mobile WiMAX network, of potential WiMAX providers, including and Economics . .7 for which it may spend $3 billion to reach RBOCs, cable operators, local exchange 100 million people in major metropolitan carriers, Web portals and media companies, Implications for Service Providers . 12 areas across the US. reviewing the potential fixed and mobile Conclusion . 17 WiMAX plays available to each set of players, Despite the growing attractiveness of About the Firm . 18 and highlighting key strategic questions WiMAX, service providers are only these players will need to address before About the Authors . 18 beginning to grapple with potential offer they decide on any WiMAX initiatives. For more information contact: Hamilton Sekino, Partner Telecom & High Tech Practice [email protected] 2 Context and WiMAX Time-to-Market Advantage to RevA, which has theoretical speeds Background WiMAX will offer service providers an of up to 3.1 Mbps (downlink) and 1.8 Mbps attractive alternative to current and future (uplink). AT&T/Cingular will also continue to generations of CDMA 1xEV-DO and WCDMA bolster its HSDPA network. Future versions HSDPA technologies. In the United States, of HSDPA could achieve peak rates of today’s EV-DO networks (Verizon Wireless 14.4 Mbps (downlink) and 2 Mbps (uplink) and Sprint) are theoretically capable of although actual speeds will probably reaching peak speeds of 2.4 Mbps (downlink) be much lower. Despite these speed and 150 Kbps (uplink). Theoretical peak increases, the EV-DO and HSDPA networks rates are higher for Cingular’s HSDPA will be challenged to match the data network, approaching 3.6 Mbps (downlink) transfer rates of mobile WiMAX, which and 384 Kbps (uplink). are projected to reach 14 Mbps (downlink) and 5.3 Mbps (uplink). EV-DO and HSDPA will be challenged to compete against mobile WiMAX once the The performance gap between WiMAX and latter technology becomes commercially the 3G mobile technologies may widen available in the US (Sprint aims to launch a when service providers deploy new versions mobile WiMAX network covering about of each of the technologies, starting in 100 million people by mid-2008, and other 2008. Integration of MIMO and beamforming players could light up metropolitan networks technologies to mobile WiMAX will even sooner). EV-DO and HSDPA will dramatically increase its potential data offer higher speeds by this date. Verizon and transfer rates to 32 Mbps (downlink) and Sprint are upgrading their EV-DO networks 8 Mbps (uplink). By comparison, theoretical WiMAX Time-to-Market Advantage Evolution of 3G and WiMAX 2005 2006 2007 2008 2009 2010+ 3G EV-DO Rev0 EV-DO RevA EV-DO RevB EV-DO RevC • 2 x 1.25 MHz FDD • 2 x 1.25 MHz FDD • Multi-carrier (1.25 - 20 •“Ultra Mobile Broadband” • Enhanced DL • Enhanced DL/UL MHz) & Enhanced DL •Multi-carrier, Flexible •Peak = 2.4/0.15 Mbps (DL/UL) •Peak = 3.1/1.8 Mbps •Peak = 4.9/1.8 Mbps spectrum allocation • 850/1900 MHz bands in the US • 850/1900 MHz bands (2 x 1.25 MHz FDD) option & Enhanced DL/UL • 850/1900 MHz bands •Peak = 70+/30+ Mbps WCDMA HSDPA HSUPA HSPA+ LTE • 2 x 5 MHz FDD • 2 x 5 MHz FDD • 2 x 5 MHz FDD • 2 x 5 MHz FDD •Multi-carrier •Peak = 384/384 Kbps • Enhanced DL • Enhanced UL • Enhanced DL/UL (1.25 - 20 MHz) (DL/UL) •Peak = 14.4/2.0 Mbps •Peak = 14.4/5.8 Mbps •Peak = 40/10 Mbps •Peak = 100/50 • 850/1900 MHz bands • 850/1900 MHz bands • 850/1900 MHz bands • 850/1900 MHz Mbps in the US bands WiMAX Fixed WiMAX Mobile WiMAX Mobile WiMAX • Scalable bandwidth • Scalable bandwidth • Scalable bandwidth (5, 7, 8.75, 10 MHz) (5, 7, 8.75, 10 MHz) •MIMO, OFDMA & • OFDM & LOS •SISO, OFDMA & NLOS Beamforming •Peak = 14/5.3 Mbps •Peak = 14/5.3 Mbps •Peak = 32/7 Mbps (1 x 10 MHz TDD) (1 x 10 MHz TDD) (1 x 10 MHz TDD) • 2.5/5.8 GHz bands • 2.5 GHz band Note: Timeline depicts initial commercial availability. Those introduced beyond 2008 are under standardization and are subject to variability. Sources: WiMAX Forum, CDG, 3GPP. Figure 1 WiMAX is expected to have a time-to-market advantage of approximately 12 months and offer higher data rates suitable for broadband wireless access. 3 peak rates for EV-DO RevB will be 4.9 Mbps WiMAX Wireless Enablement technology creates enough economies (downlink) and 1.8 Mbps (uplink) while and Premium Reduction of scale to drive down costs. HSUPA will reach 14.4 Mbps and 5.8 Mbps, WiMAX has the potential to boost demand Additionally, WiMAX could dramatically lower respectively. If enhanced mobile WiMAX for wireless data by reducing the cost of the “wireless premium” for data services indeed realizes superior data transfer rates integration of wireless interfaces into (in other words, the difference between the without requiring significantly greater consumer devices such as laptops, MP3 price of accessing an application using capital expenditures, the technology will players, digital cameras and portable a fixed broadband connection as opposed to weigh heavily on US service providers’ video games, and by minimizing the “wireless a wide-area wireless network) by leveraging data network deployment strategies after premium” to accessing the same application potentially superior network performance 2008. Although subsequent generations with a fixed broadband connection. WiMAX (which implies lower price-per-MB to of 3G technologies (e.g. EV-DO RevC and could broaden the portfolio of wireless- consumers). To date, the much higher cost of HSPA+) will provide substantially improved enabled consumer electronics devices by 3G compared to fixed broadband (a 127 percent speeds, they will still trail behind WiMAX lowering the wireless interface chipset wireless premium for downloading an MP3 in commercial availability, coming to the costs in these devices. EV-DO chipsets song, or a 91 percent premium for high-speed market only in 2009. Their later arrival will currently cost $30 or more, while WiMAX Internet access) has inhibited demand for give mobile WiMAX a critical time-to-market chipsets are projected to be as inexpensive wireless connectivity. advantage of approximately 12 months. as $3 once demand for the emerging WiMAX Wireless Enablement and Premium Reduction Wireless Enablement of Consumer Devices US Households Owning a 2006 Fixed Substitute Wireless Application Pricing 3G Pricing Premium Data-Centric Device (Millions) 2011 Wireless Broadband $32 per month1 $60 per month 2 91% Laptops 40.1 64.1 Access MP3 Phones 24.4 81.0 Wireless Music $0.99 per song 3 $2.25 per song 4 127% Download MP3 Players 31.8 47.2 Digital Cameras 65.3 93.7 Wireless Free Photo (advertising- $0.89 6 N/A 5 Camera Phones 45 91.9 Upload based model) Source: Forrester Research, Company Websites, Diamond analysis. 1. Average of BellSouth DSL ($32.95) and AT&T DSL ($29.95), excluding promotions. 2. EVDO and HSDPA unlimited plans from Verizon Wireless, Sprint and Cingular. 3. Apple iTunes. 4. Average of Verizon VCAST ($1.99 via mobile) and Sprint Vision Music ($2.50 via mobile).