Editor’s Note: This opinion piece was contributed by Paul Grim of VC firm Sunbridge Partners.
Things are certainly happening quickly in the wireless industry — the iPhone has actually lived up to much of the absurd hype that preceded its release. It’s captured a big percentage of the mobile smartphone market and an even bigger percentage of mobile browsing activity -– because (duh) you can actually browse the web on it. It may become the one and only successful version of a walled garden in wireless, and is one of several developments that may permanently change how the industry operates.
Last year at CTIA, the US wireless industry’s annual conference, it appeared the great wireless wars of the 80s and 90s were set to continue, with a three-way battle between WiMax fans, Qualcomm’s Ultra Mobile Broadband (UMB), and the GSM crowd (HSDPA and ultimately LTE). In addition, there was plenty of hand-wringing about walled gardens and how bad the mobile broadband user experience was.
This year, Apple, and lately Google, have changed everything.
Meanwhile, Google has thrown everything but the kitchen sink at making wireless more open. It’s come out with its open-source mobile development platform, Android; it played the 700MHz auction to ensure some open spectrum; and it’s lobbied for unlicensed use of the white space frequencies. All these efforts have led even Verizon and AT&T to claim they’re really, really, open (or at least will be someday soon).
So at CTIA 2008, what have these changes led to? Qualcomm’s UMB looks a lot like auction-rate securities –- still technically for sale but no buyers in sight. But since Qualcomm owns plenty of IP touching all 4G alternatives, it’s just as happy to offer them, too (the customer is king, after all).
The recent 700 MHz auction is over, and the result is (gasp) AT&T and Verizon got a lot of spectrum. And (shock) they plan to roll out LTE on that spectrum as soon as it’s ready to deploy. One OEM predicted that 85 percent of all wireless broadband networks will be LTE in a few years.
So what does that mean for WiMax? Judging by the amount of floor space (WiMax booth, Sprint/XOHM, Motorola, Intel, Alvarion, etc.), it must be doing just fine. However, Sprint and Clearwire, the two main carriers committed to rolling it out in the US, can’t seem to get it together. The on-again, off-again partnership and its potential backers seems to generate a new Mad-Libs style article every month (‘BestBuy and Comcast will join Intel and Google along with BMW, Genzyme and Burger King in backing the new JV’ . . . you get the picture).
Sprint CEO Dan Hesse was rumored to be announcing a (mostly) cable company-backed deal at his keynote speech, and instead we got him holding a new Samsung iPhone clone instead. Current Sprint trials have not gone so well, and it’s delaying its nationwide rollout to sometime ‘later this year’ because of backhaul issues.
One CEO of a WiMax operator in Australia said the technology “failed miserably” with latencies (delays) as high as 1000 ms only 400m away from a cell site, and “non-existent” non-line-of-sight reception beyond a mile away. They had to switch back to TD-CDMA just to ensure their customers got a dial tone. Oh, and Vodafone CEO Arun Sarin said in his keynote that it would be really helpful if WiMax proponents could agree to fold the technology into the TDD section of the LTE standard (translation: throw in the towel now if you know what’s good for you).
Hmm. That doesn’t sound too encouraging.
However, there is a ray of hope for WiMax even now, and it’s linked to two other comments from Mr. Sarin (each one repeated several times for emphasis). He said customers want a better experience from wireless internet, and if the wireless industry won’t supply it, someone else will. He also said that wireless carriers cannot become “bit pipes” under any circumstances.
So the question is this: given two fundamentally different views of the future –- the “wireless internet” and the internet over wireless -– is there room for both? The current wireless industry, despite having almost ended its internal standards wars and settled on LTE, despite having “opened” its networks in theory (time will tell), believes in its collective heart that it knows how to provide an internet that is both superior to the fixed internet and leverages the unique features of wireless (location, detailed user profiles, targeted ads, etc.) in ways that a dumb bit-pipe never could.
The current fixed internet industry (think Intel, Google, Apple) believes equally fervently that the bit-pipe model is the best way to provide that customer experience. The reason everyone is browsing on the iPhone is because it’s a browser, not a WAP browser. Also, the internet crowd has far more experience providing services for free and drawing profits from targeted advertising. The wireless folks are starting to do that too, but it’s hard to give up those monthly recurring revenues. Maybe they’ll meet halfway — both sides have good ideas –- or maybe they’ll duke it out for a while longer.
I don’t know which camp will ultimately win out. That’s for tomorrow’s consumers to decide (assuming WiMax works as promised someday, AND that someone helps Sprint and Clearwire pay for their roll-out). But I do hope that the two options exist, because real competition (of models, not just companies) will produce something we all will ultimately benefit from –- ubiquitous connectivity.
Paul Grim is a General Partner at SunBridge Partners, the US affiliate of Japan-based SunBridge Corporation; previous investments include Alien Technology, Flarion (acquired by Qualcomm), Eclipse Aviation, and Salesforce.com (NYSE: CRM). Prior to co-founding SunBridge Partners, Paul was a GP at Equitek Capital and spent ten years in Europe at Gemini Consulting and IBM. Paul holds an MBA from MIT Sloan and a BS in Mechanical Engineering from MIT.
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