PCCW cautious in UK broadband wireless rollout
Will launch a fixed wireless service in a 'major city' next year
One of the key lessons learned from the failure of many broadband wireless services around 2000 was that providers need to avoid the big bang approach. Companies like Winstar and Teligent built far reaching and expensive networks and waited for the customers to turn up, rather than adopting the step-by-step approach favored by more successful ISPs planning for WiMAX.
It seems that Hong Kong's PCCW has taken the lesson to heart too, ruling out a rapid national deployment of its Netvigator service in the UK, and planning instead to focus at first on some high value urban centers.
PCCW, which managed to acquire all the regional licenses granted by the UK for 3.4GHz spectrum, has been piloting its high speed internet service in the Thames Valley area around Reading. It is expected to upgrade this to include a VoIP offering shortly.
Although PCCW has, in effect, a national license, it said roll-out to all its territories would be too costly in the short to medium term and it will, instead, launch a fixed wireless service in a "major city" early next year.
Like US broadband wireless providers such as TowerStream, it believes that it must confine itself to high revenue areas where there is proven demand for differentiated services, achieving cashflow and proof of concept before expanding more widely.
Once it can achieve low cost subscriber equipment it will be in a better position to offer a mass market service, and particularly, to expand into voice over IP.
The terms of PCCW's licenses are very relaxed and although it is widely thought that it is prohibited from offering mobile services, it says there are no such conditions in the wording of its license. But likewise there are no timescales for roll-out imposed.
Such flexible licenses make it unlikely that new ISPs will race to fill the gaps in rural broadband access in the UK, leaving that task to British Telecom, which is required to deliver broadband to the bulk of the population before the end of the decade, and is already experimenting with WiMAX in remote areas such as the Scottish islands.
PCCW, which has used IPWireless gear, using the UMTS TDD technology, in its Thames Valley pilot, and is also trialing pre-WiMAX networks, has always said that it would make up its mind about the scale of its roll-out, either national or regional, based on what investment criteria its parent laid on it. Its parent is involved in merger and acquisition discussions back in Hong Kong.
It has never openly said that it wanted to go nationwide, only that it would decide later.
The cost of building a national network based on IPWireless technology could be $1bn. PCCW, which paid only $14m on the licenses, has spent around $40m so far in the Thames Valley network, which reaches 300,000 households. Its UK arm, branded UK Broadband, claims that it has won 20-30 per cent of new broadband accounts in its Thames Valley catchment area since launch, giving it 6 per cent market share in the region.
The company said it now "favors" continuing its phased approach to roll-out, after evaluating the market environment in the UK and studying the lessons from the initial soft launch period. At the launch of the Thames Valley pilot project in May, PCCW said it had six options for the future, ranging from focusing on only one area to covering up to 75 per cent of UK's households - an objective that is still not ruled out over the medium term.
PCCW's caution may be a blast of cold air for other, smaller would-be last mile challengers, but may also spur on start-ups operating in unlicensed bands, such Telabria, which seeks to build a national network using a combination of Wi-Fi and WiMAX in 5GHz space. Without the pressure of a national license, or its restrictions on applications, Telabria will take the approach that is proving successful for some US-based ISPs, focusing initially on underserved rural areas and on business customers, and waiting for the magic combination of low cost subscriber equipment, mobility and voice to attack the mass consumer base.
Whether or not it really is barred from offering services with mobile hands-off between base stations, PCCW needs to look at applications that rely on fixed or portable wireless, and can still be differentiated from DSL services by more than just price. Television is a likely factor in its plan, as is VoIP voice and portable voice. The company will enter the VoIP market, packaging voice with its existing Netvigator services as it rolls out to new territories next year.
Its success potential will rest heavily on how strictly its license terms are defined. The cellular operators are lobbying against it being able to offer any form of portability, but with the next generation Netvigator subscriber equipment to be manufactured by UTStarcom under license to IPWireless, being laptop-based, this would be impossible to police.
Since IPWireless's UMTS TDD technology base is a branch of the cellular 3G standard, there is no technical reason not to support mobile voice, and PCCW may also use WiMAX in some territories, with the option to provide mobility from late 2005.
The operator argues that users will be able to make calls in any area covered by any single PCCW base station at any point in time, which will be more flexible because of the longer reach of such stations, than a VoIP service based on Wi-Fi hotspots, but it could still preclude hands-off between stations while moving.
The cellcos argue that allowing customers to link to multiple base stations amounts to portability and breaks the license terms, an issue that regulator Ofcom will have to clarify once PCCW goes live with voice services next year.
Such decisions will have a material effect on the pace of PCCW's roll-out and the level of its success, even as it hesitates over timescales for its television offering.
It is clear, however, that it will be many years before the UK gains a truly national broadband wireless network, unless a company like Telabria creates one in unlicensed bands, and rural areas will remain dependent for broadband access on incumbent BT, the opposite of the outcome envisaged by the regulator when awarding the 3.4GHz licenses in the first place.
Copyright © 2004, Faultline
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