Will WiMAX Win?

As the competition among alternative broadband wireless and wireline technologies heats up, the winning road map to 4G looks rather uncertain these days. The most vexing question for the mobile WiMAX community: Will WiMAX win over LTE in the 4G wireless market? From CEOs to engineers, many executives and investors would like to know the answer--be they semiconductor manufacturers, equipment providers, wireless carriers, application developers, or media companies.

The stakes are obviously high. The telecom industry has yet to reap the benefits of its earlier heavy investments in 2G and 3G wireless data networks. According to a recent CTIA study, revenues from these networks remain at less than 16% of total services revenues--years after their launches. Slow revenue growth has meant that the promise of a two-year breakeven period for most 3G investments has likely not been met. Will mobile WiMAX be any different? With an estimated $10 billion in venture capital and government funds committed to WiMAX to date, where will the returns come from?

Opinions differ on which platform is currently winning. As the title of a recent InfoWorld article suggests, some observers are beginning to think that "WiMAX may beat LTE to the punch." But as LTE continues to gain momentum and support, others remain skeptical for a variety of reasons. For example, Arun Sarin, Vodafone's CEO, implied at the 2008 Mobile World Congress that WiMAX is destined to be gobbled up into LTE due to "a finite number of R&D engineers" in the industry.

While the jury is still out, we think that the industry is doing many things right to make WiMAX a winning standard for years to come. In this article, we examine the relative strengths and weakness of WiMAX vis-à-vis LTE based on key success factors. We also suggest some ways to improve the competitive position of WiMAX as it ramps up in 2008.

Looking into the Crystal Ball

Over the years, PRTM consultants have been helping clients create, market, and deploy a number of leading-edge technology standards, ranging from CDMA and Bluetooth to Telematics and USB. From this experience, we have learned practical lessons about the key success factors, many of which are just now coming into play for WiMAX. Each of these standards relied on a complex web of interrelated component suppliers, manufacturers, software providers, and service providers to make it a success. Each competed aggressively against other capable technologies to win the consumer's heart and pocketbook. Many thrived, as WiMAX looks set to do. Others fell victim to regulatory hurdles, failed demonstrations of capabilities, and other woes.

There are many factors influencing the success of a new technology. Some of them are traditional, time-honored considerations, such as delivering superior performance and garnering regulatory acceptance. While no longer as critical as in the past, these factors can still pose major barriers to the success of a new technology. However, in the global information economy, a new set of criteria has come to dominate over the past 10-15 years. These include creating an effective supporting ecosystem, positioning the technology with the tech-savvy consumers, and timing the launch correctly. Here's how we would rank the relative advantage of WiMAX versus LTE on six key success factors, both new and traditional.

New Factors:

1. Ecosystem Support (Advantage: WiMAX)
To succeed in today's marketplace, an emerging technology must be supported by a complex web of component suppliers, equipment manufacturers, systems integrators, software developers, service providers, and media companies. The importance of such a nurturing ecosystem has been demonstrated more than a decade ago by the success of the USB Implementers Forum. Founded by seven major technology companies that came together to create a new ecosystem, the group defined the need for USB and drove the development and adoption of the nascent technology. It now continues to facilitate the advancement of compatible devices and promotes the benefits of USB and the quality of products that have passed compliance testing. With the end-to-end support from its ecosystem, USB succeeded over other, arguably superior, technology standards--despite opposition from some industry heavyweights.

Similarly, key mobile WiMAX proponents, including Intel, Samsung, Nokia, Motorola, Alvarion, BT, KT, Sprint Nextel, and Google, have all lined up to support the standard. Recent announcements at the 2008 Mobile World Congress, as well as product information leaks, such as the mention of an enhanced Nokia N830 Internet Tablet in Best Buy's February Mobile Buyer's Guide, demonstrate significant, growing support for WiMAX in consumer devices. This support provides critical mass for a rapid launch and creates a shared incentive for these key players to make WiMAX a success.

2. Consumer Positioning (Advantage: WiMAX)
While in the past marketing was irrelevant to choosing a new technology standard, today it can greatly influence how the consumer "feels" about making the purchase and signing up for service. Consider the success of Intel's "Intel Inside" campaign--the consumer-oriented branding of a complex technology architecture standard. Who would have thought that consumers would really care about the brand of the processor in their computers?

In the case of WiMAX, its key proponents have made the wise move of attaching the standard to the ubiquity of Wi-Fi--a user-friendly technology that has fended off other wireless and wireline home networking standards to become part of the consumer lexicon. While this move was somewhat inappropriate from a technical point of view, given the higher complexity and infrastructure-based network architecture of WiMAX, it appears likely to have the intended impact on consumers' perception. Will WiMAX really be as ubiquitous and easy to use as Wi-Fi? Surely not in the near term, but such a positioning with consumers gives WiMAX a leg up on LTE, which is virtually meaningless to most people as a brand.

3. Delivery Timing (Advantage: Undecided)
Another important determinant of adoption success today is aligning the launch of an emerging technology with other key events in its supporting ecosystem--as part of a comprehensive and coordinated market-entry strategy. Such a strategy may require preemptive cannibalization of existing technologies, products, and services. And it may require a wave of innovation across different disciplines to develop and support the new paradigm.

For example, the rise of digital imaging during the early 2000s relied on developments in several areas simultaneously: computing capabilities (memory, processing power, storage), imaging technologies (CMOS sensors, batteries, flash memory), printing technologies (inkjet heads, ink, paper), and user behavior (expectations for instant viewing, acceptance of digital quality, online printing, and photo sharing). This lucky confluence of events enabled the triumph of digital photography--all but replacing traditional film, processing, and printing in less than a decade!

What will WiMAX proponents have to do to achieve a similar paradigm shift in the wireless services business model? For one, they will have to persuade high-ARPU customers to "upgrade" from their existing broadband technologies, such as EVDO and HSPA. This may be a tall order, given that EVDO and HSPA already offer proven performance and widespread coverage, while the initial coverage of WiMAX will be (at best) uneven. The challenge for WiMAX is to find and piggyback on synergetic events in the ecosystem: perhaps a new release of Microsoft Windows that encourages PC upgrades, or a new Intel chipset that disrupts costs, or even a change in YouTube that radically improves the mobile creation and distribution of video content. It seems that leading WiMAX adopters such as Sprint Nextel will have to nail this one if they hope to add a substantial number of new customers.

Traditional Factors:

4. Technology Capability and Cost (Advantage: LTE)
While historically the sheer technical capability of a new standard was an important determinant of success, this factor seems to be less relevant in the adoption of new technologies. For example, compare Betamax with VHS recording. Beta was clearly far superior, but it lacked the consumer positioning and strong coalition of support that VHS had. The same argument could be made for Apple versus Wintel, or even HD-DVD versus Blu-Ray. Perhaps this consideration gives WiMAX a leg up, as LTE is arguably superior in many ways, including baseline speed and the road map for future capabilities, speed, and capacity. While the expected cost advantage of WiMAX may bring some initial advantage, the long-tern road map is unclear and may well drive convergence with LTE.

5. Standards Bodies Approval (Advantage: WiMAX)
The technology world is a funny place: On one hand, it has a proliferation of standards bodies, some of them self-declared. On the other hand, it lacks truly global standards for key attributes, such as spectrum and safety. As a result, the approval of standards bodies is nearly meaningless in the big picture of adoption success. Most new technologies, such as solid-state storage, LED lighting, HDTV, and even smart phones didn't get the approval of standards bodies before making a big impact on the marketplace. In the case of WiMAX, does anyone really care that the ITU classified it as a 3G (rather than 4G) technology? Surely not--except perhaps for a regulator who naively allocated spectrum to 3G technologies only.

6. Regulatory Buy-in (Advantage: Even)
We sometimes take it for granted, but regulatory buy-in to the launch of a new technology shouldn't be assumed. For example, the adoption of GSM technologies in the U.S. was slowed down by at least five years by the regulators who were reluctant to disenfranchise existing providers and customers of analog networks. The WiMAX community needs to avoid the same pitfalls in other geographies. While WiMAX already has received the go ahead for deployment across wide swaths of spectrum in many countries, the jury appears to be out with other local regulators in key emerging economies, such as Brazil. The WiMAX community and its representative bodies (e.g., WiMAX Forum) should be on the lookout for potential regulatory roadblocks and act quickly to prevent them from impeding a rapid rollout of the technology.

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So where does WiMAX go from here? Clearly, the WiMAX community must sustain and reinforce its unmatched ecosystem of support, as well as its superior positioning with consumers. The ecosystem has to stay on its trajectory to pull ahead in the time-to-market competition, with both the right offerings and broad coverage. This doesn't necessarily mean that there has to be a WiMAX cell site coming to your neighborhood anytime soon. But it does mean that pricing models, dual-mode options (with HSPA or EVDO), and roaming agreements need to be thought through and packaged in a compelling way to attract general consumers, municipalities, business, and other organizations. Anything short of that goal will likely mean a false start for WiMAX--and perhaps a long road ahead.