Waiting for the tipping point

Despite the global financial crisis and ensuing recession and the growing buzz around the 3GPP-backed Long Term Evolution (LTE) standard, the Wimax ecosystem experienced a surprisingly healthy year in 2008, although it also witnessed the end of the Wimax hype. Mobile Wimax in particular has made significant inroads, but shipments did not reach the levels many had predicted.

Almost 3.2 million broadband wireless access CPEs were shipped in 2008, representing a 53% year-over-year growth. A total of 51 000 base station sectors were shipped in the same period. Revenue from terminals and base stations exceeded $2 billion – a remarkable performance considering the particularly difficult conditions in the last two quarters of 2008.

Mobile Wimax has truly become a BWA industry paradigm. It not only accounted for about half of the total CPE shipments in 2008, but MIMO-enabled mobile Wimax devices were predominant with about 1.2 million units shipped over the course of the year. Although MIMO mobile Wimax devices had just been introduced into the market in 2007, new deployments in various regions worldwide created a substantial market for MIMO mobile Wimax terminals and for infrastructure equipment. The expansion of existing Wimax networks and the conversion of some existing networks from fixed to mobile Wimax has also contributed to these shipments.

What is really remarkable is that mobile Wimax did not really cannibalize the market for fixed Wimax and pre-Wimax equipment. The market for fixed Wimax equipment did not vanish over the past year; many operators continued rolling out infrastructure, sourcing terminals and adding new users using 802.16d-2004 technology. CPE shipments reached 880,000 in 2008.

In the infrastructure arena, vendors such as Motorola and Alvarion, which previously had a strong foothold in the fixed Wimax and pre-Wimax markets, were able to leverage their existing customer bases and secure comfortable market shares. Thanks to the maturity of their solutions in mobile Wimax and the richness of their device ecosystems, other vendors such as Alcatel Lucent, Samsung and Huawei gained key contracts.

The average price of a mobile Wimax device in 2008 was $145, and by year’s end the cost had dropped much lower. USB dongles were sold at prices between $60 and $70 for high volumes.

Mobile Wimax devices shipped in 2008 were mainly indoor units. Some 40% of mobile Wimax devices had embedded VoIP capabilities and about 7% had other advanced functionalities such as Wi-Fi. USB dongles accounted for 34% of total shipments and were operating in the 2.3-GHz and 2.5-GHz spectrums almost exclusively. Buyer pressure has continued to erode selling prices of mobile Wimax devices; several operators rolled out low-end indoor units to satisfy the needs of price-sensitive consumers. A total of 13% of shipments were simple modems with one single Ethernet port and no other functionalities.

The fundamental question about Wimax is this: can it ramp up to volumes that enable it to compete in a wireless world ruled by huge volumes of cellular phone sales? Wimax and future wireless networks that aspire to offer 4G services will attempt to become unified communications systems that fit diverse markets and have very different sets of customers and requirements. The common architecture is supposed to result in an overall advance in technology and a reduction in costs, the so-called “virtuous circle” enabled by a large ecosystem.

A term that has filtered through discussions of Wimax is the “tipping point” – where Wimax momentum skyrockets due to a nexus of contributing factors. The many pieces to the puzzle include:

• Gaining access to sufficient spectrum for wide-area coverage and roaming.

• Assembling large numbers of component core system, device suppliers and ODMs to fuel creative development and provide users with options for diverse markets.

• Fostering an IPR environment that lowers the barriers and risks.

• Creating an open system that leverages developments in other industries including internet, PC and server software, network systems and OS, service industries including voice phone, entertainment, advertising and unified messaging services.

Maravedis has stated in previous reports that we did not expect Wimax to become a “3G killer” in the near future. This remains true in light of the recent technical and commercial wins by LTE

Bilel Bouraoui is an infrastructure and devices analyst with Maravedis -- [email protected]