|
International Issue: April 2004
FWA not fade away?
Despite its difficult past, vendors claim that fixed wireless access (FWA) still has a place in some markets — not least when WiMax arrives
by Ouida Taaffe
There was a time, around four years ago, when fixed wireless access was hot. This quickly passed, like a heat wave in the Hebrides, but that did not stop quite a few companies buying licences to provide fixed wireless access and planning IPOs. Many of the operators that took WLL licences in Germany, for example, planned to raise around US$1 bn to roll out services. Now, with investors gingerly getting back into the water, the emphasis is on WLAN and the coming thing is WiMax. Is the industry due to come unstuck with fixed wireless access again?
Going the last mile
The business model for WLL access grew out of difficulties involved in using the copper owned by the European incumbents. Setting up competing fixed-line access infrastructure was not only eye-poppingly expensive, there was also no guarantee that customer demand would ever make the investment viable. JazzTel, for example, which set out to build fixed-line last mile infrastructure for business users in Spain, spent €20.6 m in Q1, 2002 on covering the costs of its borrowing and other financial expenses — against revenues of €53 m. Unsurprisingly, it had to undergo financial restructuring, with a debt-for-equity swap in May 2002 that allowed it to swerve round bankruptcy.
Unfortunately for WLL access providers, their cheaper last mile infrastructure rollout did not necessarily make for a better business model. Revenues proved elusive. Lucrative business clients both had other options — in the shape of wireline access — and a need for reliability that WLL did not appear able to guarantee. Jokes abounded about the insurmountable difficulties that rain could pose to WLL services in London. (This is because the services being offered in higher frequency ranges were prone to rain-fade.) WLL operators failed in droves. Casualties included First Mark Communications, which raised private equity commitments of US$600 m and acquired its own European backbone. However, though FWA failed to take on DSL and win, it is still very much in the market.
Where copper has not gone before
The technological difficulties that plagued the rollouts at the end of the 1990s have been overcome, according to Zvi Slonimsky, the CEO of Alvarion, an Israeli-based fixed wireless access equipment vendor. “The new standards and products can work non, or near, line of sight, but it is not magic. It is physics, there are limitations, but, with current technology, no real difficulties,” he says. Slonimsky adds that rain fade is only an issue in the 26-28GHz range, while at 2-3GHz there is no issue with rain or snow.
He is also forthright on where fixed wireless might be deployed. “If copper is available and the population is large enough, of course ADSL is the better solution,” says Slonimsky. In line with this pragmatism, Alvarion is in talks with some — undisclosed — fixed-line vendors on bundling its fixed wireless solution with mini DSLAMs. The aim is to enable operators to access the hub by either wireless or wireline.
As Slonimsky points out, fixed wireless does not generally aim to compete directly with copper or fibre, which is why it is gaining more ground in markets that need to develop their telecom infrastructure than, say, in western Europe.
Russia, for example, has more than 80 active broadband wireless networks, serving between 13,000 and 15,000 clients in total, according to research from J’son & Partners, a Moscow-based consultancy. A typical FWA customer in Russia is, J’son & Partners says, a successful SME in a mid-sized city, such as Tumen in Siberia, where the fixed local loop connectivity is poor.
Moreover, as local loop unbundling (LLU) is still not available in many Central and Eastern European markets, FWA is a good means of reaching the customer. 2.4GHz frequencies are “widely” used for home networking in Russia, according to Svetlana Issaeva of Pyramid Research. She points out that around 30 per cent of all home networks in Moscow were using FWA in 2002. Russia is, though, an exception in serving residential users in this way and, even given this demand, will not necessarily blaze a trail for fixed wireless access deployment. According to research from J’son & Partners, Russia will have little over 60,000 FWA subscribers by 2007 in a country that has a population of 145 million (Figure 1).
Further, in most central and Eastern European countries the installed base in the residential market is insignificant. “Year end 2002, there were only about 4,000 FWA lines in the Czech Republic, and that’s the most competitive market in CEE,” says Issaeva.
Given that LLU is still in its infancy in CEE and a number of FWA licences are due to be allocated there this year, the uptake could increase. The Czech Republic will allocate three licences by beauty parade by end March; Poland is getting ready to auction ten duplex 3.5MHz channels in 3.6-3.8GHz spectrum; and Lithuania, Bulgaria and Turkey are all working on their FWA spectrum licencing, Issaeva reports. Further, in Russia, Issaeva says, “2.4GHz spectrum is nearly saturated, so there are plans to tender out 5GHz spectrum.”
All of this activity in CEE offers some hope to wireless access equipment vendors, of course, and similar activity can be seen in other regions where telecom infrastructure is less developed than in western Europe.
That said, western European demand is not dead. Irish Broadband, a privately-held company based in Dublin is rolling out fixed wireless access across the main urban centres in Ireland. It expects to cover 90 per cent of the population of Dublin by the end of this year and around 80 per cent of the population in total. “Eircom launched DSL in May 2003. Prior to that there was ISDN or dial-up and that was it,” says a spokesperson at Irish Broadband of the rationale for the launch. The company has not released any details of its revenues or cost base, but it claims to be the cheapest in the market at present and to face no difficulties should increased competition starts to bring prices down.
According to Aperto Networks, a US-based fixed wireless access vendor, fixed wireless operators can see quite fast returns on their investment. “We have seen, in many cases, 12-18 months, especially in business services. In consumer internet access, it tends to be, if you are lucky 3.5-4 years, more likely to be 4.5-5 years,” says Alan Menezes, vice president of marketing at Aperto.
This confidence in the technology is, unsurprisingly, shared by other vendors. Slonimsky expects western European demand to pick up. “The issue with western Europe is that unlicensed frequencies were not being used outdoors. We are currently seeing European regulators allowing unlicensed bands for access, as of the start of 2004,” he says. Slonimsky argues that difficulties with ADSL rollout will only become apparent in practice and that “VDSL refugees” will to go wireless. “My personal assumption is that in the UK, in France, Spain and Italy, users will not be able to get high speed broadband in the next couple of years over wireline. We expect the wireless broadband market to be worth several billion annually in the next 3-5 years,” he adds. However, what Slonimsky has in mind is not the point-to-point fixed wireless access of the late 1990s. He is expecting the development of a direct competitor to 3G. “People will want a mobile speed of 1Mbps and above and then we will see broadband wireless applications also tackling the mobile market,” says Slonimsky.
Wireless to the max
The technology that is expected to take fixed wireless access mainstream is WiMax.
“The market today, worldwide, is several hundred million dollars, but it has not crossed a billion yet. With the advent of WiMax, we expect the FWA market to really start taking off. There is a lot of investment from the whole ecosystem. We haven’t seen this before,” says Aperto’s Menezes.
WiMax, which operates on IEEE standard 802.16 — in a number of sub-flavours the most prevalent of which is currently 802.16a, revision b — is a fixed wireless solution that can provide burst speeds of up to 144Mbps over a range that can well exceed 30km. “Everyone will deploy WiMax. The window of opportunity on 3G is already closing, it will not be able to meet the demand for high speed mobility when it comes. The [3G] protocol is not efficient enough and the base station load will need to be offloaded onto other technologies,” says Slonimsky. Of course — a cynic might point out — a wireless equipment vendor would say that. Intel, which provides the chips in laptops necessary to make WiMax and, indeed, WLAN, a compelling proposition, sings a similar tune.
However, equipment vendors argue that WiMax really is a new departure. Not so much in terms of what it can do — many of the technology components are already in place — but in terms of standards that allow multi-vendor interoperability and mass-production of subscriber equipment, thus driving costs down.
There is also an interesting step change with regard to existing fixed wireless technology. This is the enticing lure of portability and using WiMax as though it were a mobile solution — it is considered by vendors to be still at least two years out. Slonimsky doubts that 802.20, which is envisaged as a version that allows full mobility, will ever happen at all.
In the meantime, they do see great things for WiMax. “I expect major savings from WiMax. It is IP, rather than ATM-based, which brings much lower costs. The fact that the client will be embedded in the notebook will also be a saving as the outlay on customer premise equipment will be negligible,” says Slonimsky. He adds that they are due to make some pre-WiMax deployments in Q2 this year, with early adopters, and that this equipment will be upgradeable to fully-fledged WiMax. Serious trials are anticipated in 2005.
|
|
|
