Market update

"It was the best of times, it was the worst of times." A Tale of Two Cities, Charles Dickens

WiMAX is a tale of two markets - one being WiMAX as an emerging technology gaining significant momentum in the last year, and the other being the larger converging broadband market, where the runaway success of rival mobile broadband system HSDPA threatens the market opportunity for WiMAX.

In other words, when viewed in isolation, WiMAX has seen the best of times in the last year. Consider these key developments:

• November 2007: The ITU accepts WiMAX as the sixth air interface for IMT-2000, virtually ensuring that WiMAX will gain access to IMT-2000 spectrum such as the 2.5GHz band in Europe.

• December 2007: UQ Communications - backed by KDDI and Intel - wins a 2.5GHz license in Japan and plans to launch commercial services based on 802.16e-2005 in August 2009, with planned investment of US$1.5 billion through 2013 to provide nationwide coverage. This is the second US$1 billion plus deployment by a tier-1 operator in the WiMAX market, after Sprint Nextel.

• April 2008: Intel commits to spending US$500 million on working with Taiwan's vendors to commercialize WiMAX equipment, a sign of the rapidly maturing WiMAX device and infrastructure ecosystem.

• May 2008: The new Clearwire venture is announced, bringing major new players into the WiMAX industry given that investors include not only Sprint Nextel, Clearwire and Intel, but also Google and major cable operators Time Warner Cable, Comcast and Bright House Networks.

• June 2008: Mobile WiMAX certification is launched for products in the 2.5GHz band (three months after certification was launched for South Korea's 2.3GHz products), a longawaited milestone that will help expand the equipment ecosystem and reduce costs.

• August 2008: India announces plans to auction 2.3GHz and 2.5GHz spectrum, removing one of the main hurdles holding back WiMAX in a key market. At least four major operators in India are committed to deploying WiMAX, representing a total investment of more than US$1 billion.

• September 2008: Sprint Nextel launches its Xohm Mobile WiMAX service, a vital development for increasing scale and reducing costs in the WiMAX market.

• September 2008: Argentina's government announces it will auction 3.3-3.7GHz spectrum, opening another key Latin American market to WiMAX.

• October 2008: The first notebooks are launched based on Intel's integrated WiMAX/Wi-Fi platforms, another key industry milestone.

Taken together, these show WiMAX is starting to achieve the scale and ecosystem support that will help create a virtuous cycle of cost reduction, market expansion and commercial success.

However, when viewed in the context of the overall converging broadband market, which has seen mobile broadband services based on HSDPA explode in the last year, it could be argued that it has also been the worst of times for WiMAX. Consider these developments:

• December 2007: The number of HSDPA subscribers across the globe hits 36 million, up dramatically from 2.7 million at end-2006, underlining the huge success of HSDPA mobile broadband services. In addition, the global EV-DO subscriber base hits 72 million, up 60% from 45 million at end-2006.

• February 2008: At the Mobile World Congress, Vodafone CEO Arun Sarin floats the idea of WiMAX becoming the TDD version of LTE, but the idea is quickly rejected by both the LTE and WiMAX camps. At the same event in February 2007, Sarin called on the industry to accelerate LTE in response to WiMAX momentum, and the industry responded with a surge of LTE investment.

• May 2008: Mobile WiMAX pioneer KT reports that it had 200,000 WiBro subscribers at the end of May, well below expectations given the service launched in June 2006 and was expanded significantly by May 2007. In contrast, KT's mobile arm KTF launched HSDPA services in March 2007 and had 4.8 million subscribers by March 2008.

• June 2008: The global HSDPA subscriber base hits 65 million, up 81% from end-2007, as operators continue to launch new devices and competitive service prices, sometimes undercutting fixed-line broadband prices.

• July 2008: The successful launch of the iPhone 3G, following the huge success of the original iPhone, underscores the increasing strategic importance of the mobile broadband Internet for the entire mobile industry.

• July 2008: The Next Generation Mobile Networks Alliance, which was originally technology neutral, adopts LTE as the preferred technology for NGMN. This leads WiMAX backer Sprint Nextel, a founding NGMN member, to leave the group.

• September 2008: The Global Mobile Suppliers Association says there are 805 HSDPA devices, up dramatically from 403 in October 2007. The 805 devices include 384 mobile phones/UMPCs, 222 PC cards/USB modems, and 118 notebooks.

• October 2008: China's Ministry of Industry and Information Technology (MIIT) reportedly sets up a working group to promote the industrialization of TD-LTE, and to integrate TD-LTE with TD-SCDMA. China's adoption of TD-LTE would make life tough for WiMAX in a huge market.

An optimistic view would be that many of these developments prove the business case for mobile broadband, and thus show the potential for WiMAX. In fact it is certainly true that the threat of WiMAX led mobile vendors and operators to accelerate both deployments of HSDPA and timelines for LTE. But the flipside is that rival mobile broadband systems such as HSDPA are now widely available and have been a huge hit. This means they already benefit from significant economies of scale and thus will provide stiff competition for WiMAX.

In addition, the financial turmoil of late 2008 could hurt WiMAX because it coincides  with a peak deployment time for the technology, given that 802.16e-2005 certification is now in place and portable and mobile devices are starting to hit the market. Although the new Clearwire venture may have enough committed funding to continue with its deployment plans, smaller operators across the world may struggle to raise capital for planned WiMAX deployments.

Of course the credit crisis will also have an impact on other mobile broadband systems, particularly new systems such as LTE, where R&D investments may be trimmed if operators and vendors suffer a prolonged downturn. HSDPA operator may also be reluctant to aggressively cut prices, or to fund capacity expansions to cope with booming network traffic. But WiMAX may suffer more than some of its rivals in the short term simply because it is in the capital-intensive deployment phase, whereas most HSDPA deployments are already done and LTE rollouts will not start for several years.

This is an extract from the WiMAX Broadband Convergence - 2nd edition report.