Analyst Angle: Barry West, Founding Fathers and the (WiMAX) revolution

Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry. In the coming weeks look for columns from Current Analysis’ Peter Jarich, NPD Group’s Ross Rubin and Enderle Group’s Rob Enderle.
As those of us who have had the pleasure of listening to him speak might attest, Sprint Nextel’s Barry West does have a way with words and one cannot but marvel at the elegant manner in which he strings them together. One cannot but admire his sense of humor and his ability to get an audience to quickly warm up to him.
West, head of the carrier’s WiMAX effort, does this by tailoring his stories — as befits any good speaker — to the occasion. To wit, speaking at a dinner gathering of analysts and industry players in Europe some time ago, West endeared himself to his audience by offering a charming defense of drinking. Just as a herd may be strengthened when the weak and the emaciated lag behind and are killed by predators, said West, so too one’s mind may be strengthened when the decaying grey cells at the margins are destroyed by alcohol. Members of the audience, some of them two-fisted drinkers, roared their approval. (If memory serves me right, West shared this gem at Barcelona last year. Or maybe it was the year before. I am not sure — I admit I have not been drinking enough.)
So, I could not but smile in appreciation when I read in an industry newsletter last week that West was talking about Founding Fathers and Revolution at the recent Wireless Communications Association conference in Washington, D.C. West was reported as saying, “As many of you may know I became a U.S. citizen a few years ago, which has since given me time to think on the events of 1776. I wonder if the founders of this country ever thought: ‘To hell with a revolution — what we need is a long term evolution!’ Just a thought.”
I can understand West’s jab at LTE (Long Term Evolution of Cellular). Who better than him — the most prominent, and surely the most articulate, proponent of WiMAX — to rise to the technology’s defense? If I were him, I too would be “sick and tired,” to quote the newsletter, of having the industry deride and belittle a perfectly viable technology like WiMAX. But while I can appreciate West’s frustration, I cannot agree with his framing of the issue — or his larger, implied, position.
It is not that I hold any brief for LTE, or that I think any poorly of WiMAX, the data-centric, all-IP access technology that is being positioned as a potential competitor to the future trajectory of extant cellular networks. The difficulty, for me, is that I find West’s rhetorical framing of the issue in historical terms (evoking Founding Fathers, etc.), merely rhetorical. For, if he were seriously historical in his analysis, he would surely have reflected on the path dependency of technology.
Changing course
Path dependency, for those unfamiliar with concept, is the idea that the initial choice of a technological standard can have important and sometimes irreversible influences on future market allocation of resources. This is because changing course, what economists call switching costs, can be prohibitively expensive for all parties involved if there is a large installed base. The idea of path dependency is anchored in positive feedback mechanisms such as bandwagon and network effects. Path dependency of a technology or system persists because there are increasing returns as more and more people adopt the technology or system. In other words, history matters.
To be clear, I am not against WiMAX in any sense. As I have argued elsewhere, and often, WiMAX offers much promise. It is an IP-based technology unburdened with legacy issues associated with circuit-switched telephony networks. The Internet Protocol’s (IP) efficiencies associated with transporting data should enable WiMAX service providers to witness lower operational expenses and more rapid deployment of IP-based services.
Further, I have long held that, as a fixed wireless broadband access technology, WiMAX could find sizeable traction in developing economies that lack an installed base of fixed-line infrastructure — to service high-end residential neighborhoods and “technology parks,” for instance. In its fixed instantiation, WiMAX could also find reasonable traction as a backhaul technology.
It is only with respect to mobile or portable wireless broadband access that I find the case for WiMAX to be somewhat unclear, in part because the business models in which it might be embedded are yet to be fully fleshed out and articulated.
Critics of the technology have argued that WiMAX may present little if any performance advantage over cellular technologies, especially if deployed in the same channel bandwidth of, say, 5 MHz. While this may be correct, it would also be a moot point — at least in the case of West and Sprint — given that Sprint is blessed with broad swaths of spectrum in which it could deploy WiMAX in the USA. It may have serious implications for others elsewhere not equally blessed with spectrum holdings, but that is another story.
But to revert to the issue of path dependency. The mobile system today supports nearly three billion subscribers. Billions of dollars have already been invested in network infrastructure by operators and in mobile devices and services by enterprises and individual consumers. Equally important is the knowledge investment that the industry — the operators and their principal vendors, as well as the smaller vendors supplying components, platforms, and applications — has made in the system. Given that technological innovation depends on an infrastructure of knowledge, competence and skills, arbitrarily changing technological paths always carries the potential to undermine innovation and negatively impact the industry. The cost of switching away from the system and its future trajectory is also likely to be significant, especially when one considers social practices and behaviors that have become institutionalized around the present mobile systems.
In other words, a technological trajectory is, in an important sense, an institutionalized form of technological change in which individuals and companies have invested monies, careers and credibility. Like all institutionalized practices, it lends itself to change only at a cost — often a very high cost. However, this is not an argument to stay locked into existing ways of thinking, and the industry — any industry — should and must consider new options, new technologies.
But that said, one must also observe that new technologies are never born in a vacuum; rather, they are brought forward in existing structures of power represented by legacy systems. These legacy systems represent not merely old and/or obsolete technology or, in the case of mobile networks, antiquated network gear, but also relationships — among industry players, between industry players and capital markets, and between technologies and developers. In other words, they represent working ecosystems or ecologies of support that remain in place for long periods of time and continuously evolve with newer technologies. It is very difficult for any new technology to supplant a legacy system unless it is orders of magnitude more valuable to the industry and, more importantly, the end customer.
Surely it is possible for a new technology or technological system to be disruptive, to cause what the economist Schumpeter called “creative gales of destruction.” However, one must consider the ease with which a technology may succeed at being disruptive when the industry it is attempting to penetrate constitutes a critical global infrastructure anchored in well-entrenched ecosystems that currently support real-time and highly reliable communications and connectivity among nearly 3 billion people across six continents.
Judicious adoption
I believe that the mobile industry, like any healthy open system seeking continued growth, should be open to new ideas, new technologies, and new business models. But given the vast financial and intellectual capital vested in it, I also believe it should address the adoption of new technologies and business models judiciously, assimilating them in a prudent fashion within the larger complex of relationships. Options chosen by different players are likely to be a function of their access to resources and their strategic intent, and while West and Sprint may be right in pursuing the WiMAX option — given their spectrum holdings and their read on gaining potential market advantage — surely, so are others in choosing the LTE option.
Oh, and the argument about Founding Fathers. West is right, the Founding Fathers in the United States did choose the revolutionary path. But given his original nationality and mine, I cannot help inviting him to consider the course taken by the Founding Fathers of the other great democracy that threw off its yoke of British colonialism — India.
Gandhi, the father of that nation, as he is called, arrived in India (from South Africa) in 1915. Rejecting the revolutionary overthrow of the British, he engaged in innumerable Round Table conferences to negotiate the freedom of India, which was finally secured in 1947. Some might say he opted for the Long Term Evolution. And, it seems to have served India fairly well. As friend Barry West might say, just a thought!
Shiv K. Bakhshi, Ph.D., is Director of Mobility Research at IDC. He can be reached at sbakhshi@idc.com. You can learn more about IDC by visiting www.idc.com. You may contact RCR Wireless News at rcrwebhelp@crain.com.