WiMax's bright future and five hurdles to overcome

Doubters question pricing, usage model

Last month's WiMax World 2007 conference in Chicago was filled with old-fashioned technology optimism, featuring twice as many vendors and visitors as the previous year's event along with new details of Sprint Nextel's nationwide Xohm WiMax rollout across the US for next year. One balmy evening, Sprint and Motorola executives toasted the future of the technology aboard a Chicago River boat cruise to demonstrate how well the wireless broadband technology works.

The future could hardly have seemed brighter for WiMax technology that night, with a US$5 billion, multiyear investment in Xohm expected to catapult WiMax generally. The performance of the broadband wireless technology, designed to boost speeds to all kinds of devices over greater distances than Wi-Fi, had been an uncertainty but was now being revealed.

But wait.

For some analysts and others who mostly disregarded the Chicago hoopla, there are still obstacles that WiMax will face prior to widespread adoption.

A potentially serious factor could be what impact the recent resignation of Gary Foresee as Sprint's chairman and CEO will have on the Xohm division. Xohm has a spirited backer with Barry West, Sprint's chief technology officer, as its president, who could insulate Xohm from Sprint overall.

But Philip Marshall, an analyst at Yankee Group Research, said West now must get support from the financial community outside of Sprint. "Without this [support], a new Sprint CEO might opt to back away from Gary's strong support for WiMax," Marshall said.

Of course, WiMax is much more than just Sprint's Xohm version of WiMax, with many vendors in the market already. Even so, it still faces some obstacles that range from concerns over pricing of WiMax devices, chips and network services to whether WiMax speeds of 2Mbit/sec. to 4Mbit/sec. will even matter when compared with other emerging broadband wireless technologies.

There are at least five concerns for WiMax promoters to face, according to technology analysts and the vendors:

1.What will it cost?

The prices that will be charged for WiMax chips, devices and network services are the key worry when examining WiMax's future. Pricing is clearly on the minds of the service providers, including West, who is expected to announce Xohm pricing after the first of next year.

West made headlines earlier this year for claiming costs for WiMax networks could be one-tenth of competing wireless networks. But will that savings be passed to end users?

In an interview at WiMax World, West said prices for hardware such as a WiMax laptop card would approximate the cost of a Wi-Fi laptop card, while a monthly subscription might approximate that of residential cable or DSL service. "It will be affordable," he said.

That "affordable" measure of costs would satisfy some critics, since the WiMax speeds with Xohm are supposed to range from 2Mbit/sec. to 4Mbit/sec., which is above the clock speeds of many broadband wireless plans running over EV-DO or other networks at a cost of about US$60 a month for business users.

"There's a pent-up demand for mobile broadband Internet access that's available anywhere," said Berge Ayvazian, a Yankee Group analyst, citing a survey in the first quarter of 2007 of 2,000 consumer Internet users.

The survey showed that the majority of users would switch to mobile broadband from their home-based DSL or cable connection and would be willing to pay a small increase over what they pay today for the added convenience of mobility, Ayvazian said. Average U.S.-based consumers would not want to pay the US$60 for monthly broadband wireless access via a laptop card. But they would be willing to pay a "small premium" over the US$30 per month they now pay for home DSL or cable service to receive speeds of, perhaps, 2.8Mbit/sec. over that wired connection.

"Clearly, people don't want to pay the rates offered today for business mobile broadband at US$60 a month," Ayvazian added.

Meanwhile, Intel and other chip makers must drive down the costs of WiMax chips, not just in laptop cards, but also for chips inside laptops and in the smallest wireless phones, said Jack Gold, an analyst at J. Gold Associates. "Wi-Fi took off mainly because of Intel's Centrino chip, so we still have to see if there's a WiMax chip that's affordable," Gold said.

"It's a Catch-22 situation right now," he added, since WiMax chip prices will go down when volume production of the chips increases. If a WiMax chip set boosted a laptop's cost by US$40 to $50, as is estimated today, Gold said users would probably not buy them. By comparison, however, users have easily adjusted to the US$5-to-$7 premium for Wi-Fi chips in laptops, Gold said.

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