DUBLIN, Ireland-Having paid handsomely for their licenses at a time when wireless auctions were the flavor of the month around Europe, wireless local loop (WLL) operators face an uncertain future. Capital has dried up as the financial markets review their strategy toward telecommunications, customers are wary of having to install more equipment on their premises and the technology faces strong competition from its fixed-line rival digital subscriber line (DSL) technology.
WLL technology was originally described as the key that would unlock the mass market for many new telecommunications companies by giving them direct access to customers. But as its limitations become apparent, operators have become increasing agitated.
Initially, it was viewed as a cheap option for accessing these customers, but bandwidth is constrained. Narrowband WLL can only offer one or two 64 kilobits per second (kbps) channels, which is considered rather limited when many companies are thinking in terms of Megabits per second.
“Even on a 200 Mbps (Megabits per second) link, the capacity is not fixed because the available bandwidth has to be shared between all users,” explained Nicholas Blades, a consultant with research firm Schema in London.
Operators are instead pinning their hopes on broadband WLL, leaving DSL as the most likely bandwidth solution for residential customers, home offices and small businesses.
But even broadband WLL is not considered a solution in its own right. Many observers now feel that it will be deployed in a limited fashion alongside DSL and other access technologies. London-based Datamonitor analyst Dan Grundy reckons that fewer than 10 percent of small to medium-sized businesses will ever use wireless in the local loop in Western Europe.
“The majority of small to medium-sized businesses will be connected to high-capacity backbone networks via DSL. Wireless local loop operators have been forced to target urban areas to try and generate revenue, but these are the areas where most customers are more easily connected via copper wires.”
Grundy said DSL has benefited from negative feelings toward the telecommunications sector within the financial markets. “For example, the U.K. WLL operators have been forced to scale back their investment programs at the very time when they had a chance of supplanting DSL,” Grundy added.
As a result, he expects most companies-and networks-to use WLL technology as a secondary option. “I cannot see WLL developing critical mass,” Grundy said. “Customers will need new equipment on their premises, which is a deterrent, and because the equipment has to be configured, there will always be a percentage of customers who won’t use it.”
Blades expects to see some market consolidation as a result. “License holders are in a difficult position,” he said. “A number have been looking at selling their licenses, but some licenses can only be acquired by purchasing the whole company. Others are waiting to see whether the financial market climate improves.”
WLL operators hoping to cash in on increased demand for connectivity from third-generation (3G) mobile operators in the meantime are also being advised to look elsewhere.
International research firm Strategis Group estimated that more than US$125 billion will be spent on mobile networks and terminal equipment in Europe during the next seven years. Much of that investment will have to be directed toward the fiber networks that form the backbone of high-speed mobile voice and data services.
The options for increasing that capacity lie between building fiber and/or leasing capacity. While WLL technology is not a substitute for cellular traffic as it operates on a different frequency, explained Ovum local loop analyst Yum Petkovic in London, WLL operators are hopeful that mobile operators will use their services to access backbone infrastructure and even to carry long-haul traffic.
However, this is not going to be a high-value business, according to Grundy. “New and established mobile operators could certainly use wireless local loop as a cheap access route to the local loop. But why would 3G operators use high-speed WLL connections for long-haul traffic when they can interconnect with the incumbent fixed-line operators relatively cheaply?
“In theory, WLL is an option for carrying backbone network traffic between base stations, but I can’t see this happening. Mobile operators will lease fiber capacity, because it is available and the cost of leasing fiber is falling.”
There are also restrictions in relation to carrying other operators’ traffic, explained Blades. “In Germany, WLL operators can carry traffic from other operators, whereas in the U.K., regulations stipulate that an operator can only carry its own customers’ traffic. After all, WLL was envisaged as an access technology rather than a backbone alternative.
“It is not all bad news for WLL, but operators will need to look very closely at the potential applications. If they offer a valuable service and complement wireless access with DSL, they will attract subscribers, but they must not assume that the successful experiences of one country will be replicated everywhere else.”
