I Can See CLEARly Now - Part II

I'm back to The 747 and Helicopter analysis, again and again. Inevitably, Broadband is about both Capacity and Mobility, so this analysis looks at the impact of the WiMAX strategy from both those perspectives. Clearwire has adopted a strategy that attempts to merge the massive bandwidth of capacity with the ubiquity and flexibility of mobility through the technology of mobile WiMAX (IEEE 802.16e), so the impact of this move will be felt on both the wireline players and the wireless players.

Conclusions and Impacts

1. The rules of physics and RF mean that WiMAX is more limited than FTTH when it comes to capacity, less so when compared to Cable and DSL Broadband. Conclusion: WiMAX will bring more competitive pressure to bear on strategies that would seek to squeeze the last bit of value out of Cable and DSL broadband infrastructure, spurring on the drive to deploy FTTH.

WiMAX, Fiber, and Cable/DSL Broadband

A national WiMAX network will force the hand of Big Telco and Big Cable to invest further in 21st Century infrastructure (aka FTTH) if they are to hold on to customers and retain the subscriber revenue they depend on - see already how Comcast and Time Warner have joined the new Clearwire team (my guess is that this is only a part of their solution, with upgrades to their physical plant completing the strategy). Smaller Cablevision in the NE has opted to pursue Wi Fi Mesh in its service territory.

Verizon has a headstart on deploying a FTTH infrastructure, so their strategy has been vindicated somewhat by this latest move by Clearwire - I'm guessing that ATT is burning the midnight oil to re-evaluate its plans and develop new strategies to adapt to this new entry - many feel they have invested too little to date in fiber investments and I'm concluding that they will be more impacted by this new market entry than their rival Verizon.

The battle of these giants will take place first in the larger markets, the big cities and densely populated areas of the country. The entry of a larger, more robust Clearwire/Sprint will drive more competition in these markets sooner than we would otherwise see, which can be expected to spur on commercial adoption of mobile broadband applications and cultural acceptance and demand for access to high bandwidth mobile applications like video (why do you think the cable players and Brighthouse are in the mix?). After all, recent history has shown that in most cases, we tend to prefer pictures and sound over words, whether spoken or written - certainly, we value our video when it makes sense.

Those of us outside the major markets may have more time to adapt on a wire line basis, but will ultimately be impacted as well. WiMAX offers an alternative to DSL, Cable and FTTH, but there will be trade-offs - namely, fiber has a capacity advantage and WiMAX has a cost advantage. Fiber has virtually infinite capacity, while WiMAX is limited by both RF physics and the ability to allocate spectrum - this capacity advantage for FTTH won't go away over time. But FTTH costs far more to deploy. While the costs to block traffic, dig trenches, lay fiber duct, and pull fiber won't be going down, WiMAX equipment can be expected to improve in performance and drop in price, making it cheaper to deploy over time, extending the cost advantage of WiMAX.

2. WiMAX has advantages over Wi Fi Mesh and LTE when it comes to mobility, but those are balanced by certain disadvantages. Conclusion: WiMAX will not replace LTE or Wi Fi Mesh, but will lead to adaptations by the cellular wireless and wireless broadband industries to accommodate a larger, more lively playing field of options.

WiMAX and LTE

The very name says it all, doesn't it? Long-Term Evolution or LTE, is the cellular industry's plan to transition to an all IP network, someday. I mean, it practically screams for a competitor to come in and disrupt, doesn't it? And therein lies McCaw's advantage - plans for 3G and 4G have seemed to unfold at a glacial pace within the cellular industry. Granted, that's only when viewed from the outside, as the investment and complexity of making the shift from one generation of wireless communication technology to the next is not as simple as throwing a switch. Transition of both infrastructure and markets takes time and must be evolutionary.

But that is the opening that McCaw will use, as he enjoys the ability to move faster to gain an advantage on the leaders - Verizon Wireless, ATT Wireless, and their counterparts around the globe - by putting his money where his mouth is and starting his company early. This merger with Sprint, the increasingly frustrated and hapless third-place company in the US cellular industry, confirms the strength and validity of the threat Clearwire poses to LTE (4G). If WiMAX establishes a strong beachhead before 4G even launches, then the prize for 4G will be much less than expected, and the strategy of the cellular players will have to adapt.

But so big and powerful is the cellular economy, I wouldn't bet for a minute that WiMAX will be able to replace LTE. Still, we can expect significant influence, whether to accelerate expected bandwidth speeds, make the service more customer-friendly, or make service cheaper to consumers - in the end, more competition means that consumers will win.

WiMAX and Wi Fi Mesh

By now, I have to give a hand to all the Wi Fi lovers in the reading audience...for I've saved this part for last...thanks for your patience!

The good news is that Wi Fi Mesh remains a valid technology for the markets and geographies and consumers that it was before this announcement. WiMAX is different from Wi Fi Mesh, and it makes sense to take a little time to examine those differences.

On the one hand, WiMAX has built on the IEEE success that Wi Fi enjoyed, going beyond the industry standardization of all the technical elements down to the branding level. Thank Intel and others for that.

I thank Tropos Networks co-founder Narasimha Chari for this great analogy.

"WiMAX is like a really bright light mounted on the highest point in the city." It shines down on the whole city, but there are pockets of shadow, where the light doesn't reach. And the users are a long way away from the access point, way up there on top of the skyscraper or water tower. It is simpler to deploy, has greater carrying capacity per node, and costs less for a system than does Wi Fi Mesh. But it brings a different value proposition to a city than does Wi Fi Mesh. The choice between these two technologies, if there is one, depends on the rationale for a wireless network, the project economics, and the business plan.

"Wi Fi Mesh, on the other hand, is like the streetlights on which its equipment is mounted." They cover the city with lights that are not as bright as a mega-bright light in the center of town, but their multiple points give the streetlight system more flexibility to direct light where it's needed most.

As an aside, in Austin, we had a system of "artificial moonlight" towers at the turn of the century, which was replaced by the more modern streetlight system over time. The original moonlight towers are now preserved as historical landmarks, odd anomalies that dot the downtown area.

Access Points. Wi Fi Mesh thus puts the access points much closer to each client device that they serve. The nature of RF is that the signal strength is stronger the closer the receiving device is to the access point, and less signal strength is required to transmit a message back to the access point if it is closer to the client device. There are fewer access points per system with WiMAX - advantage WiMAX. Wi Fi Mesh access points are easier to communicate with going up - advantage Wi Fi Mesh.

Coverage Area. One way to look at WiMAX and Wi Fi Mesh is as two clouds that hover over an area, one a High Cloud (WiMAX) and one a Low Cloud (Wi Fi Mesh) - you can have both, or one, or the other. The nature of each technology is that the height at which a WiMAX access point is mounted will drive its coverage area, while Wi Fi Mesh access points need to mounted pretty uniformly at about 20 feet off the ground, and the number and dispersion rate of the access points will drive the coverage area.

Spectrum. WiMAX operates on licensed bands of spectrum, making it the preferred technology for carriers (and Clearwire is a carrier in every sense of the word). The advantage of licensed spectrum is that you know the resource will be there when you seek to use it. You can sue people if they interfere with your use of "your" spectrum license. But it costs money, man does it cost money. Wi Fi, on the other hand, has taken off in widespread consumer adoption, in large part, because it's cheap - first, it doesn't require a spectrum license. The advantage of unlicensed spectrum is that it is dirt cheap - low barrier to entry - at least in terms of getting started. The disadvantage is that once underway, you have higher operating costs, if you run into interference problems. You have to have a strategy for sharing use of the spectrum with others.

If you can work around the issues, it's golden. If you can't, it can be a pain in the ass. But it's a pain that many feel is more than offset by avoiding the need to buy a spectrum license. With 4.9 GHz Public Safety Wi Fi, you have the advantage of a licensed frequency that is available at no cost, but its use is limited to public safety. But that gives municipalities a strong reason to look hard and long at Wi Fi v. WiMAX.

Client side chipsets. WiMAX, because it is much newer, is way behind the curve in terms of consumer adoption. Any radio network system has both transmission and reception functions, and a two-way radio system like both WiMAX and Wi Fi Mesh incorporates that duality in both the network components (the access points) and the client devices. But the client devices in both technologies tend to have much less power than the access points, and that's where proximity comes in, which confers an advantage on Wi Fi: Wi Fi can upload data from client devices to the nearby access points more efficiently. A second advantage, perhaps the killer advantage, is that Wi Fi chipsets have reached a level of maturity and production levels have driven costs down to the point where it makes sense to embed Wi Fi technology in a variety of mobile devices, ranging from laptops, to cell phones, to music players, to game players, to digital cameras, to fixed video surveillance cameras, to police car light bars, to police car automated license plate readers - the list goes on and on. And that proliferation of Wi Fi Chips is a sustaining advantage that WiMAX will be up against, for the next decade or so, until such time as the cost of WiMAX client side chipsets comes down with widespread adoption and production increases.

It will take a long time for WiMAX to catch up, perhaps Wi Fi will be around for decades. It's hard to say, because the marketplace is at work now. Who knows how low the Wi Fi chip price will go and where they will wind up? I'm reminded of that first Casio Watch I saw in the early 1980s, with an LCD display, so long ago. They were expensive when they first came out, but soon, I was seeing clocks imbedded in giveaway pens at trade shows. And now, twenty-five years later, we have LCD HD TVs. Awesome. It took time, but the declining costs on LCD chips made this inevitable.

A similar pattern is progressing with LED lights, now showing up everywhere as production costs have dropped. From Christmas Lighting to hand-cranked survival flashlights (no batteries or light bulbs!), the future of lighting is more and more about LED and less about the revolutionary incandescent light bulb that Edison pioneered, which you have to admit, has had a helluva run.

So, back to reality, after that diversion on the cost digression of Wi Fi chips...my bottom line conclusions on the impact of a national WiMAX network follow.

Nothing but good, bring it on!

1. The advantages of WiMAX will drive it into the broadband conversation, both at the fixed and wireless levels.

2. The spending by Clearwire on infrastructure will not only force all players to adapt by moving more rapidly down the adoption curve and upgrading infrastructure, it will also stimulate the market to adopt wireless broadband applications faster.

3. WiMAX has a place in an integrated metropolitan area network (MAN), alongside FTTH, LTE, and Wi Fi Mesh (not to mention all the other flavors of wireless not covered in this analysis).

The Bottom Line

I believe that all four of these technologies will comprise an integrated broadband ecosystem when all is said and done, just as we now enjoy a highly integrated transportation infrastructure that readily accommodates a variety of technologies and infrastructures, interwoven to meet the different needs of the marketplace.

Society and the marketplace create forcing mechanisms that make the best new items mesh with the best of the old. Powerful interests can either delay the inevitable, buying time for an old technology as current cable and telecom incumbents have, or shoe-horning in new technologies, as Clearwire will attempt to do. They will battle it out, but the end result is a matter of when, not if. All technologies tend to be produced and introduced faster than society can adapt, so there is a lag between introduction and widespread adoption. Having the momentum of billions of investor dollars driving deployment of infrastructure and adoption of new technology is an accelerator of a natural trend, beyond being a catalyst to stimulate the process.

The Bottom, Bottom Line

WiMAX is at the very front end of the adoption curve, but it will find its role in time. That said, it will take longer than Clearwire thinks to accomplish Craig McCaw's dynamic vision of a national WiMAX network driving a mobile broadband society - I recommend that you take whatever time frame they give for ultimate deployment and double or triple it. But my hat's off to McCaw and the whole Clearwire team for trying, and I think we all will be the better for it. Now its time to get back to work!

Here are a couple of other viewpoints on Clearwire/Sprint: Agility Ventures and Light Reading. I agree. What they said.