[Editor’s Note: Back in April, venture capitalist Paul Grim painted a somewhat bleak picture of the future of mobile WiMax networks, pointing to Sprint and Clearwire’s inability to strike a deal as one of its prime weaknesses. Last week, the Federal Communications Commission finally gave the agreement its blessing. But is this enough to rescue WiMax? Below, Grim revisits the topic in light of recent developments.]
While the world was busy celebrating the election of Barack Obama on Nov. 4, a less visible part of the government quietly pushed through some momentous changes. The Federal Communications Commission conditionally approved three milestone deals: a merger between Verizon and Alltel, the opening up of “white-space” airwaves for public use, and of course the Sprint/Clearwire deal (finally). Some observers say that, paired with a new administration promising broadband for all U.S. citizens, these deals could give mobile WiMax — which was arguably close to game over — a new lease on life.
Based on the evidence I’ve seen, I’d say this is still a little optimistic, though not unrealistic. Watching the great broadband battle between cell phone carrier standards (long-term evolution and high-speed packet access systems) and the Internet network standard (WiMax), I and others have argued that economies of scale will inevitably tilt the playing field in favor of cellular. Just look at the numbers — there are 3 billion users who subscribe to the cellular carriers, versus a handful on the alternative.
No matter how much money is thrown at promoting WiMax over the next several years, it would be nearly impossible for it to catch up to these cellular juggernauts in terms of pricing. More importantly, there is no substantial qualitative difference in the end-user experience between the two (WiMax fanboys may take issue with this, but here’s an illustrative example of WiMax vs. HSPA signals). If consumers don’t have a compelling reason to switch, few will.
The meaningful difference between the existing cellular systems and WiMax is more behind the scenes. Basically, cellular operators only need to make minor tweaks to base stations to upgrade their networks, whereas WiMax networks require potentially major hardware upgrades to achieve the same effect. This is about as fair as pitting Obama’s $600 million war chest against McCain’s $84 million (and we all know how that turned out).
But before we find ourselves giving up on mobile WiMax again, let’s look at these big FCC decisions from last week.
The $14.5 billion Sprint/Clearwire agreement has become mobile WiMax’s last great hope. Combined, Sprint’s 50 million subscribers (many of whom may migrate to WiMax) and a $3 billion investment in the deal from Google, Intel, Comcast and Time Warner may secure WiMax’s short-term future. The deal also commits to opening the network to all devices and applications, a key reason the FCC gave its stamp of approval.
Speaking of open networks, the concurrent FCC approval of unlicensed use of “white spaces” (the unused frequencies between broadcast digital TV channels) is being hailed by proponents — including Google — as the birth of “Wi-Fi on steroids.” The reality is that these white spaces can be used with with Wi-Fi, WiMax, or WiAnything (though power levels may be limited to cut down on signal interference). This decision has cellular carriers howling in disgust at what appears to be a free giveaway of valuable airwaves (seeing as how they had to pay for theirs), but their cries are falling on deaf ears. This is an enormous opportunity for small regional WiMax carriers to come out of the woodwork, a trend that will no doubt be encouraged by the FCC.
Finally, the $28 billion merger of Verizon and Alltel looks like a clear win for the cellular team — and probably is. But the consolidation will also mean less competition in the field and fewer alternatives for consumers, making WiMax a more attractive option. WiMax operators could really capitalize on this opportunity if they push the envelope on opening networks to more devices and applications, and by controlling their prices.
Meanwhile, the number of WiMax networks in existence is starting to grow globally. Right now, the total is 126, according to Telegeography Research, though that figure includes fixed networks (home Internet access, for example). Fixed networks make good economic sense for rural regions and developing countries — competing with DSL and cable modems — but should not be lumped in with mobile WiMax networks, which vie for cellular customers. Nonetheless, the expansion of both types of WiMax will help drive down the cost of the technology in the long run. Intel has also announced plans to include WiMax in its next-generation Centrino platform. This will cut the cost of device chips in laptops and handsets, but won’t make new base station equipment any less pricey.
Facing pressure from both licensed and unlicensed operators using WiMax, the big cellular carriers are rushing to become more open and available. But their decades-old mentality of testing, quality control, protection and interference concerns may be hard to shake. Sure, the major carriers are big and can buy cheap, but they move slow. And it’s hard to deny that team WiMax just got three big boosts from the FCC. They should do all they can to power ahead before the battleships start to turn.
Paul Grim is a general partner at SunBridge Partners, the U.S. affiliate of Japan-based SunBridge Corporation. Previous investments include Allen Technology, Eclipse Aviation and Salesforce.com. Prior to co-founding SunBridge, Paul served as general partner at Equitek Capital and spent ten years in Europe at Gemini Consulting and IBM.
VentureBeatVentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative technology and transact. Our site delivers essential information on data technologies and strategies to guide you as you lead your organizations. We invite you to become a member of our community, to access:
- up-to-date information on the subjects of interest to you
- our newsletters
- gated thought-leader content and discounted access to our prized events, such as Transform 2021: Learn More
- networking features, and more