CTIA Wireless 2007 is over, and I am WiMAXed out. WiMAX was definitely the topic de jour this week.
A couple aspects I honed in on this week had to do with WiMAX devices and whether they would be ready for Sprint Nextel's launch and how fast the price of devices could fall.
Devices have always lagged behind network buildout. Remember that GSM once stood for "God send mobiles" according to former Omnipoint CEO George Schmidt when his company rolled out the technology at the 1900 MHz band in the 1990s. WAP once stood for "where are the phones?" while European operators were crying to W-CDMA devices earlier this decade.
But Sprint Nextel is guaranteeing a plethora of WiMAX devices at cost points low enough to avoid a subsidy when it launches. Sprint is so confident because it and a number of vendors have taken an unprecedented step pushing along the WiMAX ecosystem themselves. (In fact, there was a WiMAX ecosystem party at the show.)
The last thing Sprint wants to do is get caught in the subsidy trap because subsidies lead to walled gardens and per megabit overage charges instead of an open Internet model that the company wants to use. That's the whole reason why the operator chose Nokia, Motorola and Samsung as initial vendors. It also announced more activity on the device side this week. Samsung will make a single-mode WiMAX device as well as a dual-mode WiMAX/1xEV-DO modem. Chinese equipment maker ZTE will make single-mode 802.16e devices and USB cards, and ZyXel will make WiMAX modem products.
Ben Shin, vice president of broadband with Sprint, noted during a round table discussion with journalists, which was hosted by Motorola, that a number of companies are participating in its ecosystem program and are building devices that would not have done so without Sprint taking them under its wing.
In addition to Nokia, Motorola and Samsung putting efforts into devices, vendors without handset businesses, such as Alcatel-Lucent and Nortel are putting resources into building the ecosystem. Alcatel-Lucent, for instance, has a partnership with the government of India that will have a ripple effect of producing low-cost reference designs for device makers in the region. India recently opened up 300 megahertz of spectrum dedicated to WiMAX. Nortel recently hired an executive to lead its ecosystem play in Taiwan so he can be close to ODM manufacturers.
Therefore, it was with confidence that Barry West, CTO and president of Sprint's 4G business unit, said during a CTIA panel this week, that devices will be there even before the network is fully cooked.
But how fast will these devices move down the cost curve? Don Stroberg, vice president of 4G strategy, planning and development with Sprint, acknowledged during an interview that devices won't exactly be as cheap as Sprint wants them to be at the very start. He noted some creative ways to reduce upfront costs at the start, such as helping CPEs leverage investments over multiple product categories or embarking on co-marketing initiatives.
"It's a bit of a challenge because these vendors aren't building specifically for us. They are building for end users," he said.
Certainly price points will depend on how quickly volumes ramp up. That means it would be beneficial if a large number of CPEs jumped on board rather quickly and committed to WiMAX even before a commercial network is up and running. That might not happen. According to Lars Johnson, vice president of business development with WiMAX chipset vendor Beceem, CPE companies are surprisingly risk adverse. They need to see some validation in the form of running commercial WiMAX networks before making aggressive moves. Therefore, it's likely we'll see the usual suspects--namely Nokia, Motorola and Samsung--working to push the volumes.
Beceem is the chipmaker that is powering many of these devices. It has a deal with Samsung and recently announced two more deals with Sanyo and Motorola, which is developing its own chipset but will use Beceem's chip in its first-generation devices because of Beceem's head start. When asked about progress the company has made with CPE companies, Johnson said there were no deals to announce at this point.
Beceem's strategy is not to aggressively push the price of chips down initially. It plans to optimize performance of the chips first then work on driving down the price once the company hits a run rate of a million or so chips, Johnson said.
And there is still one other major unknown. Despite the fact that major players say intellectual property rights are spread across multiple players to keep costs down, there still isn't an official agreement on what these costs are going to be. We might all be surprised yet on that front. -Lynnette