It has been more than 15 months since the first local multipoint distribution service auctions ended and brought broadband wireless access networks to reality. By all accounts, the prospect for broadband wireless access in the United States remains positive.
As evidence is the amount of interest the market sector has generated in the industry at trade shows, conferences and in the media.
Also, systems suppliers are rolling out a variety of point-to-point, point-to-multipoint and mesh technologies supporting access speeds ranging from several megabits to several gigabits. Orlando, Fla.-based Triton Network Systems Inc., for example, is launching its Invisible Fiber system, which promises to deliver Synchronous Optical Network OC-3 at 38 GHz with 99.999-percent reliability using its consecutive-ring technology.
It’s important to look at, too, the billions of dollars committed to broadband technologies in terms of R&D and operator financing by companies such as Lucent Technologies Inc. and Nortel Networks-and more recently the $251 million committed by Qwest Communications International Inc. and Oak Investment partners to Bellevue, Wash.-based Advanced Radio Telecom’s broadband Internet protocol network deployment.
The Federal Communication Commission’s LMDS re-auction that ended in May actually drew an even higher average net bid per pop than last year’s auction. A-block licenses drew an average of $1.42 per pop, up from $1.23 per pop in March 1998. B-block licenses drew an average of $1.02 per pop, up 126 percent from 45 cents per pop last year.
The broadband wireless access market is expected to generate billions in service revenues, according to industry analysts. Several reports estimate revenues will grow from under $2 billion in 1998 to nearly $10 billion in 2002.
Despite all the great expectations for broadband wireless access, there isn’t a clear, simple recipe for success in the local market.
However, broadband wireless access operators’ unique combination of bandwidth, the incremental nature of wireless infrastructure capital spending and major supplier support may be just the winning equation that competitive local access operators need to succeed in displacing the incumbents.
Factors for success
More than ever, this is the time when there is an incredible convergence of factors contributing to the emergence of broadband wireless access as a viable market. These factors include:
1) market demand for high-speed, high-bandwidth data applications;
2) telecom deregulation policies and spectrum allocation in the 28 GHz and 38 GHz bands; and
3) the availability of viable alternatives and complements to wired technologies, namely technologies based on developments in millimeter wave technologies, such as MMIC (microwave monolithic integrated circuit).
As they gear up to deploy their networks, broadband wireless access operators have to keep in mind the path ahead will not be a smooth one. There are a number of critical factors they need to watch out for, and since as an industry we have never been on the broadband wireless road, we can only draw from the experience of other, closely related and similar markets.
These factors include the need for total-solution offers, the importance of time to market, the risk of license payment default, the cost of competition, the need for total system design and the lack of standards.
Total-solution offers
Broadband wireless access operators need to provide a total solution or service offer to be successful. They need to become the one-stop shop for all of their customers’ major communications needs-from offering local telephony, high-speed data communications, to providing Internet and intranet access at a competitive price and with high reliability.
Moreover, an equally important and related requirement for success is the ability to grow the solution-in terms of services offered and bandwidth-as the needs and means of customers grow over time.
A total solution also implies having outstanding technical support, customer support and billing teams. The experience learned from the cable and cellular industry tells us these elements can make or break a service provider.
Time to market
If any lesson has been learned from previous spectrum auctions it is the fundamental importance of having a well-financed buildout operation.
Companies such as Teligent Inc., Vienna, Va., and New York-based WinStar Communications Inc. have a head start because they launched broadband wireless communications services using their 38 GHz licenses. Others, such as ART and Nextlink Communications Inc., are rapidly catching up, with several cities already launched nationwide.
Those broadband wireless licensees that have not completed their plans or have not launched run the very real risk of not making it in an incredibly competitive market. Many personal communications services licensees learned this lesson the hard way not too long ago as more experienced and quicker competitors in effect monopolized the customer base and drained most of the financing money available.
License payment default
The outcome of the latest broadband wireless access auctions and re-auction of LMDS spectrum leads us to believe there will be substantially less, if any, debt payment default. The FCC learned its PCS lesson well, it seems.
Nevertheless, it is likely many licensees simply will not deploy any networks at all, opting to sell their licenses to other interested parties. WNP Communications Inc., Earlysville, Va., applied this alternate strategy. After sitting on its LMDS licenses for nearly a year, it eventually decided to sell them to the highest bidder, Nextlink, in January.
Cost of competition
In a market characterized by hypercompetition, broadband wireless access operators have to realize they are not entering a green field. They will have to quickly establish their brand as a viable, reliable and capable service. The name of the game is differentiation through superior technology, marketing, customer care and billing.
Having established that, all local loop technologies eventually will provide the same quality of multimedia services. What will then make a broadband operator successful is not so much what they offer as how they offer it. The bottom line is customer satisfaction.
In evaluating whether they should enter a market, broadband operators should not just consider the economics of wireless access technology, which may or may not be in their favor. They also should consider the cost of competing against all the other operators trying to get to the same buildings and customers. In other words, they have to consider how much money they will have to spend just to get and sustain some visibility with potential clients. By all accounts, this is not an inexpensive proposition; even in second-tier markets, a brand marketing campaign can cost tens of thousands of dollars.
Moreover, broadband wireless access operators should not underestimate the ability of incumbent operators-incumbent local exchange carriers and multiple services operators-to effectively compete or engage in legal actions that will slow down or prevent competition from entering their lucrative local loop markets.
Keep in mind, cash-rich incumbent operators also have the opportunity, though limited, to acquire broadband wireless licenses and compete in the local market. In addition, broadband wireless operators should remember the experience of other competitive LECs whose local market ventures ended in a debacle despite all the encouragement fueled by the 1996 Telecommunications Act. Even AT&T Corp. and MCI WorldCom Inc., despite their brands and reputations in the long-distance market, cannot yet claim success in the local loop.
Total system design
Broadband wireless access operators should design complete networks rather than parts of the total solution.
A total systems approach is essential becaus
e a broadband system should have proper communications performance and hardware/software compatibility. This is especially true when the operator is deploying a network on a large scale, where even minor hardware or software changes can have repercussions on the total system performance or on the operator’s ability to provision and control the system.
The total system design requirement ties in to the selection of suppliers, and all currently commercial operators have partnered with major total solution manufacturers such as Lucent, Nortel and Newbridge. In addition to bringing total access solutions to their customers, these manufacturers also work with small broadband suppliers that bring key expertise to the total solution. These include vendors such as P-Com Inc., Campbell, Calif.; Netro, San Jose, Calif.; Triton Networks, Orlando, Fla.; Rooftop, Mountain View, Calif.; and many others.
Lack of standards
The lack of national, regional and international standards for broadband wireless access technology has a direct impact on network operators because they lose the benefits of a multivendor environment and the economies of scale that would result from volume production of standardized equipment.
Manufacturers claim there eventually will be some form of standard that will require them to modify their current specifications.
In May, the International Electrical and Electronics Engineering (IEEE) formed the IEEE 802.16 Working Group on Broadband Wireless Access Standards. The group met in Boulder, Colo., in May and plans to meet next month in Montreal.
Though the standardization process likely will take a lot of time to be completed, this development is encouraging and will take advantage of the lesson learned in the first- and second-generation broadband technologies currently being deployed.
Conclusion
The prospect for broadband wireless in the United States is very good. A considerable number of market, regulatory and technology forces have converged to make broadband wireless a reality to be reckoned with.
From an operator’s standpoint, network buildout and commercial deployment are the priority. However, they must take into account numerous factors and elements that can lead to success if understood and mastered, or lead to certain failure if misunderstood or ignored.
Bukasa Tshilombo is a wireless communications consultant based in the San Francisco Bay Area. Tshilombo has been involved in telecommunications for more than 15 years. Recently he was a senior analyst and program manager at Gartner Group’s Dataquest. Prior to that, he was the associate director for world wireless markets at Northern Business Information.
