WiMAX: Hype vs. Reality

By  Andrew M. Seybold — September 23, 2008

The deployment of every new wireless technology has been preceded by marketing hype. It happened with analog cellular, CDMA, GSM and on into 3G and the broadband world. In each case, when the technology was deployed it did not live up to its hype but it did work and customers were basically satisfied. However, the hype surrounding the introduction of WiMAX reached a point of total hype about six months ago. The good news is that as we get closer to the launch in the United States, those who are building the networks have begun to understand that they now need to be talking in realistic terms.

If you visited either the Intel or Sprint Xohm website six months ago, you were treated to statements about WiMAX being four times faster at one-tenth the cost of current 3G technologies. Earlier we were told that a single WiMAX cell site could easily cover 30 kilometers (18.64 miles) and that data rates would blow the doors off existing 3G networks. However, the WiMAX.org site today claims about 5 Mbps down to the customer at a radius of only three kilometers per cell site (1.86 miles).

At the SiRF Location 2.0 Summit in San Francisco in September, Barry West, president of Sprint's Xohm WiMAX organization, talked about many of the advantages of WiMAX. While he did not mention the size of a typical cell site, he did promise customers would get between 2 Mbps and 4 Mbps down to the device and 1 Mbps to 1.2 Mbps up to the cell site. These are good data speeds, but all wireless broadband systems are shared bandwidth, meaning that the more customers using the service in a given cell sector the slower the data speeds.

Still, if you compare these quoted speeds with Verizon and Sprint's EV-DO Rev A and AT&T's UMTS/HSPA data speeds, you find that they are only marginally better for a single user. However, because WiMAX has more spectrum in which to deploy its technology, the impact of bandwidth sharing should be less noticeable.

Today's 3G data speeds on AT&T, Verizon and Sprint will get faster over the next year or 18 months, and when that happens they will be on a par with Clearwire's system. Sprint, Intel and Clearwire are calling WiMAX a 4th-generation technology, but as of today there is no real definition of what comprises a 4G system. As you can see, WiMAX operates at about the same speeds as other 3G networks and, in fact, the International Telecommunications Union has approved WiMAX as a 3G technology.

As for system build-out, several cities including Baltimore are being launched by the new Clearwire/Sprint/cable company that will be known as Clearwire. WiMAX works, of that there is no doubt, but Clearwire's WiMAX is on the 2500-MHz band, well above the 850-MHz and 1900-MHz bands used by 3G operators. This means Clearwire will have to build more cells closer together to cover the same geography. It has been estimated that using the new 700-MHz spectrum, the incumbents could cover 75% of the U.S. population (not geography) with about 22,000 cell sites. At 2500 MHz, 65,000 cell sites will be required to cover that same 75%. Even if the cost per site is less, the overall system build-out will rival the cost of building out a conventional 2/3G network.

Another difference is that the WiMAX network is primarily a data network optimized for data (or so claimed) and all IP from end-to-end. The other networks started with voice and added data, and today data services account for less than 30% of the monthly revenue. Clearwire believes it can make a profit selling mostly data services based on its estimates of how many customers it can put on the network. Note that during the build-out, most devices will be a combination of WiMAX (data), Sprint EV-DO (data where there is no WiMAX) and CDMA (voice).

The belief is that as the WiMAX network is built out, customers will be switched less and less to EVDO and spend more time on the faster WiMAX network. WiMAX is also being deployed in many other parts of the world including Japan, but in some areas such as Europe, it has not yet caught on. In other places, the spectrum has not yet been reallocated for wireless broadband services. So for now, the Clearwire play is strictly a U.S. play and companies that need coverage in other parts of the world will be better off sticking to cellular technologies (EV-DO Rev A or UMTS/HSPA) because of their worldwide presence.

Finally, Clearwire is expecting the bulk of its traffic to come from the consumer side of the business, including new wirelessly-enabled consumer appliances, which is another good reason for corporate planners not to spend too much time listening to the hype that surrounds the launch of this network. Instead, it is advisable to take a wait-and-see posture and continue to deploy wireless broadband systems on the current 3G networks that provide coverage both in and out of the United States.

Andrew M. Seybold is President/CEO of consulting firm Andrew Seybold Inc.


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