The new,
data-friendly, wireless technology could challenge
local networks and offer scope for U.S. tech players
like Intel and Clearwire.
by
Jennifer L. Schenker, July
11, 2007, 12:32PM EST
For the past 15 years,
American tech giants such as Intel and Microsoft have been
largely shut out of the European-dominated mobile phone
industry. Not that they haven't tried—Intel (INTC)
made processors and memory for handsets and Microsoft (MSFT)
is still pushing a pint-sized version of Windows for
handheld devices. But the business was still largely
controlled by telecom companies such as Nokia, Ericsson, and
Vodafone.
Now, with the pending
arrival of a disruptive new wireless technology called
Mobile WiMAX, the U.S. crowd stands its best chance in years
at knocking down Fortress Europe. A kind of Wi-Fi on
steroids, Mobile WiMAX delivers data at speeds comparable to
conventional third-generation (3G) mobiles but promises to
be cheaper to implement because it uses newer, more
efficient technology.
More importantly, because
it's based on Internet protocols, WiMAX lets carriers offer
a single data service—akin to wireless DSL—that can carry
any kind of traffic, from voice calls to Web surfing to
video. That's a significant advantage over the separate
voice and data services now delivered by mobile operators.
"We're not just building a WiMAX operator, but a full telco,"
says Krassimir Stoitcheff, chief executive officer of
Max Telecom, a Bulgarian startup that plans to blanket
the country with wireless services by the end of 2008.
Forget triple or quadruple play: with WiMAX, all services
are delivered as one.
An Urgent
Call to Speed Things Up
The implications for
Europe's existing mobile players are enormous. Operators who
have sunk billions into 3G spectrum licenses and speedy new
networks will likely face significant competition from new
entrants, including fixed-line telcos such as Britain's BT
Group (BT)
that could add WiMAX services and compete with mobile
carriers. According to Washington (D.C.)-based
Telegeography Research, 345 operators around the
world—including 57 in Eastern Europe alone—either have
acquired WiMAX licenses, launched trials, or begun
commercial services.
At the mobile industry's
biggest annual confab, the February 3GSM show in Barcelona,
Vodafone (VOD)
CEO
Arun Sarin issued an urgent call for the mobile industry
to speed up development of 3G successors to fend off the
threat from WiMAX. Yet even Vodafone, which is expected to
stick mainly with traditional mobile technology, is
experimenting with WiMAX in Malta and Bahrain.
Handset makers such as
Nokia (NOK)
and Sony Ericsson (SNE)
(ERIC)
also must contend with the potential impact of WiMAX. For
now, they remain mostly committed to 3G and its successors,
but they're dabbling in the new technology to hedge their
bets. Nokia, for instance, has already said it will make a
WiMAX-compatible handset by 2008, as have Motorola (MOT)
and
Samsung. British researcher
Informa Telecoms & Media forecasts that the market for
WiMAX-enabled devices could amount to $4.7 billion in 2012.
Intel is Seeding the Market
Equipment makers
face a similar choice: So far, Alcatel Lucent (ALU),
Nortel (NT),
and Nokia Siemens Networks (SI),
among others, have committed to delivering mobile
WiMAX gear. But the industry's No. 1 seller of
wireless networks, Stockholm-based Ericsson, is
skipping WiMAX entirely and betting its whole future
on 3G and telecom-style successors. That could be
risky, but given that Informa pegs WiMAX
infrastructure sales at just $2.4 billion in 2012,
Ericsson may be justified in leaving the business to
its rivals.
The biggest
potential opportunity lies for companies like Intel
that have ached for years to get a piece of the
mobile action. The chip giant is aiming for a repeat
of its success in driving adoption of Wi-Fi:
Starting next year, it will build support for Mobile
WiMAX directly into computer chipsets used in PCs
and laptops. And to seed the market, Intel also is
tossing hundreds of millions of dollars into
wireless operators that are building WiMAX networks
to compete with conventional cellular operators.
Among the most
prominent: A $600 million investment in
Seattle-based Clearwire (CLWR),
started by wireless pioneer Craig McCaw, which
already holds the No. 2 position in WiMAX
frequencies in the U.S. after Sprint Nextel (S),
and now has snapped up WiMAX spectrum rights in
Germany, Spain, Belgium, Ireland, Poland, and
Romania. If Clearwire blankets Europe with WiMAX
service, it could become the Vodafone of wireless
data.
Best Opportunities Are in Emerging Markets
Intel also has
invested in Britain's
Pipex Wireless and Heidelberg-based
Deutsche Breitband Dienste, which is spending
$1.3 billion on a nationwide German WiMAX network.
Such upstarts will undoubtedly exert pressure on
existing operators. "Mobile operators clearly
understand that if they don't improve their business
models and offerings, WiMAX could come in and take
their customers," says Geoff Blaber, a senior
analyst at wireless consultancy CCS Insight.
The opportunities
for WiMAX are likely even greater in emerging
economies, where the existing infrastructure of
wired broadband service and 3G mobile isn't as well
developed. On July 5, a telecom provider in Russia
called
Synterra said it had awarded a contract of
undisclosed value to Alcatel Lucent to build a
mobile WiMAX network covering more than 1,000
Russian cities and towns by the end of next year.
Bulgaria's Max
Telecom launched WiMAX services in Sofia in late
June, with plans to cover the entire country by the
end of 2008. Zurich-based
WiMAX Telecom, which was recently taken over by
Nextwave (WAVE)
subsidiary Inquam Broadband, has grabbed nationwide
WiMAX licenses in Austria, Slovakia, and Croatia,
and plans eventually to expand into Romania, Poland,
Serbia, and Montenegro. Even tiny Macedonia recently
attracted 35 bids for a WiMAX license.
Reallocating the Analog Spectrum
The role of
governments in awarding wireless licenses highlights
an important caveat. In the end, analysts say, the
question of whether 3G or WiMAX wins out over the
long term—or indeed, whether they peacefully
coexist—will come down to spectrum allocation and
license fees.
In Britain, for
instance, a company called U.K. Broadband, owned by
Hong Kong-based telco
PCCW, has asked communications regulator Ofcom
to let it bid for a swath of spectrum near the 2.6
GHz frequency band that's currently set aside for
future evolution of 3G. If U.K. Broadband wins, it
could signal an end to a policy of mandating that
certain frequencies be used only for particular
technologies.
Similarly, a group
of European leaders meeting in Gothenberg, Sweden,
this week is weighing how to reallocate the analog
TV spectrum that will be taken out of service after
digital TV catches on. If regulators sanction the
use of the 500 MHz and 800 MHZ frequencies currently
used by analog TV in Europe for WiMAX, it would be a
big boost for emerging operators. Lower frequencies
allow for greater coverage at less cost, thus
lowering the barriers to entry, says CCS Insight.
But if traditional mobile operators grab the
frequencies to improve their 3G coverage, it'll take
a bite out of WiMAX's opportunity.
So it goes in the
high-stakes race for the future of European
wireless. The incumbents are hoping for regulations
that keep them in the driver's seat. And the
American interlopers are waiting for a crack to open
in the walls of Fortress Europe.
Jennifer L. Schenker is a
BusinessWeek
correspondent in Paris.
