TECH TALES: WiMAX is Still a Risky Investment
Published on: 31st Mar 2008
Note -- this news article is more than a year old.
SAN FRANCISCO (Dow Jones) The next generation wireless technology, known as WiMax, is full of potential to drive cheaper, high speed wireless data, voice and video communications, or a dismal failure, depending on who you talk to.
On the one hand, rumors have surfaced that several cable and technology giants are poised to make a multi-billion dollar investment in the nascent technology. Last week, The Wall Street Journal reported on talks to resuscitate the failed joint venture between Sprint Nextel and Clearwire, a venture formed to build out a WiMax wireless network in the U.S.
Those talks reportedly include efforts to raise at least $3 billion from cable operators Time- Warner, Comcast, and Bright House Networks, along with tech firms Intel and Google.
And on the other hand, there is Garth Freeman, the chief executive of a little-known Australian Internet company called Buzz Broadband. A few weeks ago, Freeman spouted off at an industry conference in Thailand, where he lambasted the technology his firm had put into place, calling the episode a "miserable failure."
At face value, the viewpoints seem to be at the opposite ends of the spectrum. One dismisses WiMax, while a new venture, backed by big names and big bucks, could bode well for the adoption of the technology.
But both seem to confirm the increasingly skeptical view that WiMax, once touted as a lower-cost, wider-range wireless technology, is taking longer to deploy, is more expensive than previously estimated and it may not be the wireless panacea once predicted.
"Anyone who is going to spend the money better make sure they do due diligence to make sure it works," said Phillip Reedman, a Gartner analyst. "Like any construction project, it always costs more and takes longer than you originally anticipate."
In February, Andrew Parkin-White, principal analyst of Cambridge, UK-based Analysys wrote a critical report of the technology. He said 2008 will be a decisive year for WiMax after the serious setbacks suffered last year, when the plug was pulled on the venture between Sprint Nextel and Clearwire -- a company founded by cellular pioneer Craig McCaw.
As of Monday, no one was willing to confirm the reports that Comcast may be investing as much as $1 billion into a new joint venture operated by Sprint Nextel and Clearwire and that Intel is reportedly willing to put in as much as $1 billion or more.
Kari Aakre, a spokeswoman for the Santa Clara, Calif.-based chip giant declined to comment on rumors and speculation. But she added that Intel remains bullish on WiMax, saying the technology is definitely "ready for prime time." She declined to discuss the Buzz Broadband CEO's comments, since Intel was not involved in that installation. Intel plans to launch chips that will turn laptops and other mobile gadgets into WiMax-enabled devices.
"A WiMax network is not just WiMax equipment, there are a lot of things that have to go into it. You can do it well or you can do it poorly," said Chad Parelle, vice president of marketing at Airspan Networks (AIRN), a WiMax equipment supplier. "In the case of Buzz Broadband, they did it poorly and they refused to accept our help, or even the help of a third party to fix the issues."
Buzz Broadband's problems appear to stem from an inadequate backhaul network, a high-capacity line used to transmit data from the wireless network to a wired one. The company may have underestimated the number of users, and its pipe was likely not big enough. Freeman did not respond to email and phone messages to discuss his firm's experience.
"This is what happens when you try to cut costs to the bone," said Ronald Gruia, principal telecom analyst at Frost & Sullivan. "You should always give yourself some wiggle room."
Perhaps Intel's success with another wireless technology is partly to blame for the great expectations surrounding WiMax. Some in the industry had anointed WiMax as the next generation of WiFi, the now-popular wireless technology mostly used by mobile warriors on laptops to access the Internet via public hotspots, or at work or home. Intel was a big proponent of WiFi and its chipsets that work with their microprocessors, or brain chips, let laptop users easily connect to WiFi networks. Intel's cheerleading and work setting standards, plus the ability to buy computers with built-in WiFi capability, helped fuel widespread adoption of WiFi by consumers and corporate America.
"With WiFi ... there is really not a lot of complexity to it," said Francis Sideco, a senior analyst at iSuppli.
But with WiMax, he noted, "the devices aren't there yet ... The devices ... have to be there, the infrastructure/actual network has to be there, and the applications have to be there as well. Until those three things start to gather momentum, it's going to be this slow trickle."
The cable companies want to use WiMax to be able to better compete with the telecommunications giants like AT&T and Verizon Communications, which are gearing up to offer consumers more services that need more capable networks: home telephone service, high-speed Internet access, cell phone services and high-quality video.
Some analysts see WiMAX as competing with the emerging next generation data/cell networks, such as Long Term Evolution (LTE) and the High Speed Packet Access (HSPA).
"Even though there has been a lot of hype around WiMax, it's just another cellular technology," Qualcomm chief executive Paul Jacobs said last year at the big wireless show called CTIA, which is going on this week in Las Vegas.
Sprint had planned to invest $5 billion in building out the WiMax network by 2010, a hefty sum that activist investor Ralph Whitworth took issue with when he launched his fight with the company.
But just because big companies such as Comcast, Time-Warner, Intel, and others want to throw lots of money at a technology, doesn't mean it's going to succeed. One of the big reasons the U.S. lags behind Europe and Asia in cellular technologies is due to the fact that the U.S. is an alphabet soup of competing networks and technologies, and not enough standards. Perhaps WiMax will only split the market even further.
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