Move Over 3G, Here Comes WiMAX

From: Yahoo! News

Clipped Saturday, March 20, 2004 9:08 AM

Fri Mar 19,10:12 AM ET

By Lucas van Grinsven, European Technology Correspondent

HANOVER, Germany (Reuters) - Just when mobile operators are finally getting their costly third-generation (3G) networks up and running, a new wireless technology pushed by the computer industry is about to mess things up.

At stake are tens of billions of euros in mobile telecoms revenues, as semiconductor giant Intel (NasdaqNM: INTC -news ) is putting its formidable weight behind WiMAX, a powerful wireless technology that gives fixed-line telecoms carriers a weapon to hit back at the mobile rivals who have long been eating into their voice revenues.

WiMAX, an industry standard that travels under the alternative name "802.16," and is also backed by Finland's mobile phones and networks vendor Nokia ( news -web sites ) (NOK1V.HE), offers lightning fast wireless data communications over distances as far as 50 kilometers.

Compare that with the first 3G networks which, although much faster than today's mobile phone networks, are 30 times slower than WiMAX, and one 3G radio mast covers an area 10 times smaller than WiMAX.

But mobile phone companies have shelled out 100 billion euros for radio frequency licenses to run 3G networks and are currently spending tens of billions on the networks. WiMAX radio spectrum can be free, and carriers need fewer base stations to operate it.

Operators who do not yet have a mobile network can start one at low cost, using their fully amortized fixed-line networks to connect the wireless traffic to the Internet, and start grabbing back revenues that have leaked away to mobile rivals.

Analysys Research in Britain sees revenues from phone calls over the fixed networks dropping by 20 percent over the next six years, partly because of more calls going wireless.

"It's a marvellous opportunity for fixed-line operators. One has to assume that WiMAX is a disruptive technology," Adrian Nemcek, the head of Motorola's (NYSE: MOT -news ) wireless infrastructure division, told Reuters in an interview on the sidelines of electronics trade show CeBIT.

WiMAX is such a hot topic that Intel's executive board discusses its progress as much as three times a week, and by 2006 plans to start building it into its chip platforms, which power around 80 percent of all personal computers.

Nemcek believes WiMAX will be reality for many consumers in three to four years.

"By the time you see real market momentum, it will be 2007 or 2008. That gives 3G three years to get its business better established," he said.

EVERYTHING WILL BE INTERNET

The mobile phone industry embraced 3G because it promised better quality voice calls, similar to fixed-line calls, alongside faster data connections for multimedia services such as video, e-mail downloads, music and interactive games.

WiMAX is designed for data only, instead of voice and data, but this is becoming less relevant now that operators and telecoms makers are keen to move voice calls completely onto the Internet, using the Voice over Internet Protocol (VoIP) technology, in an attempt to simplify to one IP network and dramatically cut costs.

"The cost per bit of traffic has to come down. We have to go for some very significant changes," Nemcek said.

Merrill Lynch estimates that 80 percent of all calls are made from within buildings or campuses, where WiMAX and its close-range sibling Wi-FI work best. It points at Britain's Dartmouth College where students are offered free local and national calls by using the Wi-Fi Internet there.

"The longer 3G is delayed, the greater opportunity for Wi-Fi services to gain traction," it said in a recent note.

France's leading mobile operator France Telecom (FTE.PA) has recognized that it will have to run a plethora of different networks, including 3G, Wi-Fi and other emerging wireless networks.

"We were a company that ran a network, and we're turning into a company that is offering services to customers using the best network available for the job," France Telecom Chief Executive Thierry Breton said at CeBIT.

In order to cater to such customers, Motorola is planning to give operators integrated radio access networks that can handle 3G, Wi-Fi, WiMAX and possible future wireless versions. It believes WiMAX will first emerge in the United States, and later in Asia and Europe.

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