WiMax Must Choose Its Own Broadband Path

While it's been generating quite a static hum in recent years, WiMax, the new broadband wireless standard designed to work over wide areas, now appears to have a few 800-pound gorillas in its court
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While it's been generating quite a static hum in recent years, WiMax, the new broadband wireless standard designed to work over wide areas, now appears to have a few 800-pound gorillas in its court that may allow it to leapfrog broadband competitors in specific markets.

Heavyweight tech giant Intel recently announced plans to release chips for WiMax elements such as relay stations and towers in the coming months, and to add WiMax support to its notebook PC processors by 2006.

Around the same time, the FCC approved the WiMax (short for Worldwide Interoperability for Microwave Access) standard, also known as IEEE 802.16. This follows announcements from FCC Chairman Michael Powell that the agency will look into freeing up broadcast TV spectrum for wireless use, signaling a competitive landscape more amenable to startups.

ROUTER BE GONE

WiMax, using a variety of network elements to relay and boost its signals, from small residential towers to three-foot antennas mounted on homes, conjures a vision of a wireless future of ubiquitous signals and no clunky router/modem combos.

But before we rush out to buy and travel with the latest wireless gizmos, there are significant handicaps facing WiMax in other key areas.

First, there are still standards conflicts, typical in emerging technologies, that will affect market deployment. The term WiMax actually applies to two standards, 802.16REVd--more of a fixed wireless--and 802.16e, which can, to some extent, be mobile, with a future 802.20 mobile standard on the horizon. Network providers will have to choose between the two existing standards, depending on which market segment they wish to target.

MORE, BETTER, FASTER

Second, in broadband access, WiMax faces a market that's matured over the last few years. Most users--according to In-Stat/MDR, 28.6 million out of a total 29.3 million--already plug in via DSL and cable modems. Getting them to switch won't be easy, particularly when the established players are taking some significant steps to lower prices and improve service. Cable operator Cox Communications, for example, last month ramped up its download speeds for basic broadband access from 3 to 4 Mbps (at $39.95 when bundled with cable TV service); and for its discount access plan (at $24.95 per month), doubled its upstream/downstream rate to 256 Kbps. Cable players have had to respond to slumping subscriber growth rates as DSL providers boost speeds and cut pricing. SBC Communications now offers a low-cost service at 1.5 Mbps for $26.95 per month.

In one significant venue--voice services--WiMax does have some economic force on its side: It can be significantly cheaper to operate on a cost-per-line basis. With savings up to 40 percent over that of a fixed line, according to research firm Meta Group, WiMax would also generate lower capital expenses, reduced customer churn and improved service differentiation. That could grant telecommunications providers a critical competitive boost over fixed, copper-wire competitors.

This particular forecast, though preliminary, couldn't come at a better time. The FCC, with the support of the Bush Administration, is getting rid of the 1996 Telecommunications Act's unbundling clause requiring regional Bells to sell network access to rivals. The move is designed to allow the Bells to make their investments in next-generation networks without having to share them.

If that sounds like two-way competition is working, guess again; significant rural areas and even some smaller urban markets still lack a choice in broadband offerings. Plus there's some evidence, at least, that the two dominant technologies are stifling any third-party efforts.

In the most egregious example, SBC, which recently acquired a $500 million stake in EchoStar to jointly market voice, video and data services, announced in the wake of the FCC's unbundling actions that it will do an about-face and revive its original strategy to invest in fiber-to-the-home to deliver "integrated video, data and voice services."

So where will the FCC help, instead of hinder, competition?

The agency has already introduced a Rural Action Plan designed to allow flexible wireless spectrum licensing for operators in rural areas that have long lacked broadband service other than costly satellite-delivered access.

That has some analysts forecasting WiMax may have to follow the footsteps that satellite dish service providers took more than a decade ago.

If you recall ancient history, DirecTV and, later, EchoStar's Dish network made inroads in rural settings before plunging into more heavily populated areas to take on cable in its home turf.

The benefits wrought for consumers were enormous. Cable operators in the last decade invested approximately $80 billion in plant upgrades to offer a competing digital network platform, paving the way for digital video recorders, HDTV, VoIP and other advanced digital services.

As we monitor WiMax and the FCC's effectiveness in supporting a "Third Way," there are sobering updates on Broadband Power Line (BPL) services, noted earlier this year in this space. Some early ventures have hit significant stumbling blocks, belying Powell's faith in it as "the great broadband hope."

At least two small-scale U.S. trials have been shelved because of interference and topographical issues that have proved too costly to address, and several major international trials have slumped as well.

With a presidential election looming, the FCC can't afford to be distracted from its primary mission--supporting the successful rollout of technologies that serve American consumers. WiMax appears destined to succeed, and let's hope that's not in spite of our governmental representatives.

You can reach Will at willworkman@hotmail.com.