WiMAX delay shakes investor confidence
Realistic deadlines required
Analysis The news that the 802.16-2004 certification process was delayed by about six months was not a great surprise, although it is ironic that lack of chips from Intel seems to be one of the problems. The main negative impact will be on investor confidence and overall perception of WiMAX, since most operators are either going ahead with prestandard equipment or have long roll-out schedules anyway. However, the delay will prompt scepticism about the program, and this will be far more serious if it has a knock-on effect on the upcoming mobile standard, 802.16e. It is essential that, from now on, the WiMAX Forum sets realistic deadlines and does not allow further risk of backlash against its technologies
Like an over-excited child, the technology industry is never able to stop itself wishing away the days until Christmas. Time and again, standards and products fail to meet their schedules, not because of any intrinsic problem, but because the deadlines were unrealistic to start with. Latest to fall victim to this vendor behavior is WiMAX, with the news that the process of certifying broadband wireless equipment against the 802.16-2004 standard has been delayed by six months, a blow that is more symbolic than real, but which highlights some real mistakes that it will be vital to avoid when the more controversial 802.16e mobile WiMAX standard comes along.
Many WiMAX Forum members had expected public interoperability testing or ‘plugfests’ to start this month with fully certified equipment to be available from vendors by mid-year. Now, conformance testing, which matches specific equipment's compatibility with the system profiles, will start in June, with plugfest beginning a month later and fully certified equipment appearing around the end of the year.
Gordon Antonello, senior technical adviser at Wi-LAN and chairman of the WiMAX Forum's technical working group, said the delays were caused by difficulties in selecting a plugfest lab and getting it equipped (an independent lab in Spain has been chosen and will be ready for initial testing rounds in the second quarter). WiMAX is several orders of magnitude more complicated than Wi-Fi, and even though it's not as complicated as 3G, it's just about," Antonello said. "It's taking a while to set this up."
Dean Chang, marketing director at Aperto and chair of the WiMAX Forum’s service provider working group, said in an interview that the delay was down to two factors – that it took longer to set up the certification team and laboratories than expected, and that the schedules of some companies making chips for customer premises equipment (CPE) “did not come to fruition”.
Impact on Intel
Whether he meant Intel or not, the chip giant springs immediately to mind. The two independent WiMAX chipmakers, WaveSat and Sequans, already have uncertified 802.16 silicon sampling with major customers, while Fujitsu has been detailed about its own delivery schedules. And Intel is tarred with the brush of its various products delays of 2004, including some to the critical Centrino range.
Everyone will assume Chang meant Intel and indeed, it is Intel that suffers the most from the WiMAX delay. It is Intel that needs the very low cost CPE to evolve as quickly as possible in order to jumpstart a mass market that it can dominate. For this to happen, the process of price competition and commoditization that follows on from standardization must begin.
We are only talking six months however – it took far longer than that for WLan standards to be fully certified in the early days, and is not a long enough period to derail a market. More significant for Intel is the credibility factor, both for itself and the standard with which it is so associated now. Intel, once rock solid on delivery schedules, suffered a string of delays and miscalculations in 2004 that shook confidence in the company, especially as it faces it greatest ever challenges – the change in nature of its PC heartland, the prospect of a challenge from IBM’s Cell chip.
Now it seems its first WiMAX chipset, Rosedale, may be another on the list. "Rosedale starts the WiMax clock ... in terms of building market momentum," said Scott Richardson, general manager of Intel's Broadband Wireless Division, at the recent WCA conference. This is true, but it has an equally profound effect on attitudes to WiMAX when it does not show up on time, and especially casts doubt over Intel’s aggressive timeline to mobility – it expects volume availability of mobile-enabled WiMAX in its Centrino chipset by 2007.
The credibility gap
There is also a credibility blow for WiMAX itself, which can be largely blamed on Intel. Many other WiMAX players have openly expressed fears that the chipmaker was being over aggressive in its predictions for 802.16 timelines, and that this would lead to disappointment and backlash. Certainly this will be good grist to the mill of the standard’s opponents, and will be taken up enthusiastically by the cellular community to indicate the flakiness of this would-be 4G challenger.
There is a danger that it will turn off the investment community, which itself takes some responsibility for the constant overoptimism of technology suppliers about schedules. If the supporters of a new technology do not make it sound as though it will be available within a year, analysts and investors cannot work up any interest, and this has a knock-on effect on general awareness and support among other vendors and possible customers.
However, having excited the investors with the promise of imminent disruption, those same parties turn away in disappointment when the deadline is missed. Investors – from shareholders in Intel to venture capitalists looking at WiMAX start-ups – are thinking in a short term way about a technology whose effects will be medium to long term, though dramatic, and this could cause some problems in maintaining the momentum until the certification process really begins.
Real world effects on operators
In the real world, though, the impact of the delay will be far less. Major would-be customers will hardly blink an eye. They are used to long deployment timescales and, if they are in a hurry, they can experiment with pre-standard equipment, some of which – notably Motorola’s Canopy – is already achieving the kind of price points we associate with standards-based gear.
Specialist vendors will have some potential problems. Although many, such as Wi-Lan and Alvarion, are shipping WiMAX-ready equipment already - promising the technological advantages of 802.16 and a guaranteed upgrade should any changes be needed for certification – the buyers are mainly small scale. Either they are traditional customers who are not particularly swayed by standards – but are not a significant new revenue stream either – or they are new broadband wireless operators, but ones that will run pilots using pre-standard equipment, but wait for an element of commoditization before they go for mass rollout.
This point can be exaggerated, however. The biggest adopters were not looking for mass roll-out for another year anyway, and so the WiMAX suppliers would always have faced some problem of hiatus before their new market picked up. And for service providers that see a pressing need to adopt broadband wireless – to bypass telco charges, access new broadband markets or take advantage of newly awarded spectrum licenses – there are Wi- MAX-ready options available (and no other options that do not carry the same problems of small scale manufacturers and resulting high costs).
The economics of WiMAX will not become as attractive quite as quickly, but the difference, in the scale of things for a major operator, will be marginal over the course of the lifetime of the network.
Clearwire – which admittedly has the advantage of owning its own equipment maker, NextNet – said its plans to roll out in 20 major US markets in the coming months were unchanged. The customer base that will be most affected, and which has the most sensitivity to short term delays and price patterns, is the ISP operating in unlicensed bands or the carrier looking to target the residential market at an early stage (itself a high risk option).
These companies will only adopt WiMAX when it has achieved price points, particularly for the CPE, that are close to those of Wi-Fi. For this to happen, the volume chipmakers must be on board, with their products fully certified, in order to achieve the necessary economies of scale. The certification is essential because the operator must be able to mix and match CPE from different suppliers in order to gain the benefits of price competition and ensure there is no need to swap hundreds of CPEs later for a fully standard version.
Graham Barnes, CEO of NextWeb, the largest wireless ISP in California and operating in unlicensed bands, said the certification process needs to speed up in order for the market to ignite. "NextWeb supports the WiMAX plugfest as a necessary step for vendors to solidify the standard and reduce future interoperability pitfalls," Barnes said. "However, vendors need to start releasing product soon. The whole industry is waiting for WiMAX."
However, the area where the commodity CPE becomes absolutely crucial is in mobility and the prospect of the laptop or phone-based WiMAX card. First stage WiMAX standards are still focused on traditional broadband wireless markets which are less time and cost sensitive. So there is a grace period, in which the mistakes made over 802.16-2004 will do limited damage and the WiMAX community can ensure they do not repeat them for 802.16e.
This is very important. Mobile WiMAX is the standard with the truly disruptive potential and the reason why most large players are interested in 802.16 at all. The cellular community is eyeing it with fear, the investors and fixed line operators with hope. Many companies, not least Intel, are laying huge stakes on 802.16e and it is important to its success that it delivers its promises.
There is a very serious onus on the WiMAX Forum and its key members now to set realistic expectations, to be ruthlessly honest and even over-cautious about timescales for mobility, and concentrate on selling WiMAX on the basis of its real benefits and potential, not its time to market.
Copyright © 2004, Wireless Watch
Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.
Sponsored: Today’s most dangerous security threats