Tuesday, June 21, 2005

Wireless broadband: diverging strategies

A number of deals underscores the differences of opinion on broadband among high profile companies around the globe. Each has its own reasons, but investors should be aware - not to say: should have their own visions on broadband.

We look at recent developments related to short range (say WiFi) and long range (WiMAX etc.) wireless broadband technologies. And we close with a number of conclusions.

First, let's look at the short range WiFi standard.
Vodafone Germany is among many companies who see WiFi as a complement to 3G. See also Swisscom (not surprisingly, Vodafone owns 25% of Swisscom Mobile).
T-Mobile USA goes even further. It thinks there is not enough demand for 3G services, and therefore builds a huge network of hotspots. Yet it stands alone, for all the competitors in the American marketplace do build out 3G networks.
Still, carriers opting for WiFi have broad support from Intel, which will include 802.11n for 100 Mbps data rates in a new chipset. And possibly 802.11n will quickly be surpassed by new technologies, to go to a 1 Gbps throughput.

Second, we take a look at the world of WiMAX and related technologies (mainly from IPWireless, Flarion Technologies and ArrayComm) for the long range.
Breaking news came on Monday from IPWireless, as it announced T-Mobile CZ is rolling out a nationwide network in the Czech Republic this and next year. The company uses UMTS TDD technology. T-Mobile CZ defends the deal, saying it "ensures alignment of technology performance" (meaning IPWireless' gear is ready for business), "economics" (there is a valid business case) and "demand for value added data services" (not to mention that UMTS TDD can handle mobile voice too, making the ongoing build-out of EDGE, followed by HSDPA somewhat questionable, especially with VoIP hitting the mobile market). Further, T-Mobile CZ aims for complete mobile substitution of ADSL, handily leveraging a very low broadband penetration of only 2% in the Czech Republic.
Even as this makes IPWireless seem a winner in the wireless broadband space, other technologies such as HSDPA and Flash-OFDM (from Flarion) still compete (article on EE Times Asia, registration required). Compared to WiMAX, UMTS TDD has the advantage of being ready for business, whereas the mobile standard 802.16e of WiMAX is at least two years away form commercial deployment. On the other hand, WiMAX will profit from the cooperation between KT Corp and Intel, meant to harmonize the Korean WiBro standard with 802.16e.
On the side: only rarely is the maximum throughput of WiMAX put into perspective (it really makes no sense saying that WiMAX will deliver 50 Mbps, given that users will have to share a cell).

So which are the lessons of the above?
  • There is not one vision as to the usability of WiFi.
  • WiFi may compete with WiMAX, as the range is extended (supposedly to 4 km for 802.11b and 1.5 km for 802.11g), as is the data rate.
  • WiMAX 802.16e is steering toward ratification, but IPWireless and other technologies cannot be ruled out yet.
  • Zooming into Deutsche Telekom and its T-Mobile subsidiary, we see a very different strategy in different countries. This also implies that PTT's compete on each others home turf; probably the most important development of recent months in the telco industry.
  • Mobile substitution is far from over in the voice space. For data services DSL (and cable modem) still competes very well.

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