Carl Weinschenk spoke with Jeff Orr, Maravedis senior analyst and author of a recent report, "Opportunities and Risks for Embedding WiMAX in Consumer Electronics."
Weinschenk: Where are we with the rollout of WiMax?
Orr: To a certain extent, it's a chicken-and-egg situation. One is building the infrastructure. The other is having devices that will connect to it. One often looks for the other to go first. Will a carrier deploy a service if they don't see the devices in place or if they are underdeveloped? Will consumer device manufacturers commit without seeing a network to put them on? In WiMax today, you see a lot of trials and pilots being announced by carriers. Within the report, we point to 50 products announced on the device side.
Weinschenk: So which does come first in this case, the chicken or the egg?
Orr: They both have to come together. What the report provides is insight and a good first look at how many and what type of devices are available. A good example is Clearwire approval for a PC card on wireless networks. We've been asked if that is the first WiMax device. In fact, it's pre-WiMax and not part of the group of 50 devices. There've been quite a number of devices announced. Most take the shape of things such as PC cards and USB adapters as well as consumer premise devices. These are very similar to today's cable and DSL modems. There also are wireless modems.
Weinschenk: Where are we today in terms of deployments?
Orr: The general concern is that it can't happen fast enough. I mentioned the ability to have enough infrastructure for operators to have a reasonable footprint like cellular. In the U.S. today, carriers are only talking about rolling out test cities. Sprint Nextel has three test cities. The beginning of 2008 will be the first time consumers or the mobile workforce will be able to access mobile WiMax service. We don't expect to see large networks available for commercial access until 2009. Sprint has given a very aggressive time line that calls for the second half of 2008 for commercial service. It's very aggressive, and it's hard to know the likelihood of success because they haven't lit up any of those cities yet. The expectation is to pass 100 million by the end of 2008.
Weinschenk: We read that there were disappointing trials in South Korea. What happened?
Orr: I think that what was reported was misunderstood. The operators in South Korea were under a government deadline to roll out service in calendar year 2006. If that's the objective, they completed it. That's what drove the business in that direction. In early April, the entire city of Seoul was covered in service and they announced several new services including mobile laptop and ultra mobile PCs, and new pricing. I think the rest of the year will be a fair indicator, rather than looking at what the subscriber uptake was in late 2006. It wasn't intended to be a fully commercial rollout over many cities. The key is what the next nine to 12 months are like.
Weinschenk: What are the early signs overall?
Orr: The devices are out there and that's encouraging. It hasn't been well publicized that devices really are there. Some of those devices have a prerequisite of a fairly large network. For example, for vehicles to have an information system that can provide navigation and overlays of information such as weather and traffic and Internet radio and rear seat entertainment, there has to be a large regional to nationwide network.
Weinschenk: Are devices up to that kind of service?
Orr: The devices are capable of doing it. One of the concerns initially is that the chipsets in early products are not optimized for battery-powered use. They rely on host power site, like home powering. That is not uncommon. Look at any contemporary wireless technology. It has gone through maturing steps of getting smaller, or getting faster, of consuming less power. Overcoming that is a matter of time, not a technology barrier or innovation that has to overcome. We see that coming in 18 to 24 months.
Weinschenk: You say that the people in the sector are managing expectations adroitly. Can you explain?
Orr: The WiMax ecosystem was very clear from the get-go that devices were going to come in in a phased approach. When we saw the introduction of 3G technology, a lot of [the initial disappointment was because the industry said] we are going to see it in all these devices. Then it came out only in handsets. In WiMax, we are saying the first devices will be computer-oriented and provide broadband access to particular locations like the home or business. What's interesting is that we have not run across anyone who says we'll make WiMax the next voice network. There are very good networks for that today.
Weinschenk: Will initial deployments be WiMax only, or converged devices?
Orr: It's certainly reasonable to say that devices moving into the U.S. market will not emerge as WiMax-only devices. Today, we have GSM handsets that have multiple bands that it supports. As it moves across the country, it can roam to different operators' networks and in many cases roam internationally. The same kind of multimode radios will be seen in the WiMax handsets. They are being called MITs, for mobile Internet terminals.
Weinschenk: Where will the device sales be greatest?
Orr: The previous assumption was that WiMax for broadband Internet access would be heavily driven by CPE devices. That's somewhat a one-to-one relationship between device and facility. When you are talking about devices on a person, you get into three and five devices per user and you see the number climb at a much more rapid rate. Take MP3 players, for example. We can not necessarily say now how many people will get mobile WiMax for Internet connectivity for their MP3s. We have to see how it comes to market and how much effort vendors put behind it. MP3s may be re-launched because people will no longer need a PC to download music. In another example, people in real estate can go on location and take pictures of a property and transmit them to a sharing location or portal for agents. They don't have to go to a PC or to Starbucks or find a Wi-Fi connection. It is good for users who don't want to go to Starbucks to do the side loading. It relates to the forecast. It gives us another category of use that we are otherwise not able to quantify. Now you can start to see what Kodak is thinking, what the business models are today, and how they may evolve with wide area connection options such as WiMax.