Wednesday, August 04, 2004

Daiwa EuroTelcoblog No. 65: Wednesday 4th August, 2004 - The other side of the broadband wireless coin

We spoke last week with IPWireless (, to get a decidedly different angle on mobile broadband from our previous post on Flarion. Seen by many as the key competitor to Flarion, IPWireless is nominally a California-based company, with R&D and outsourced production efforts concentrated in the UK. Its traditional area of focus is UMTS TDD technology (also known as TD-CDMA, or 3GPP UTRA TDD HCR) originally using the 5MHz of unpaired spectrum awarded to carriers in the European UMTS licensing process of 2000 - 01. This has since been expanded, as the company has "rebanded" the technology to work in four other available frequency ranges, such as the 2.5GHz MMDS spectrum owned by Sprint and Nextel (which is also rumored to be trialing the IPWireless solution in addition to Flarion's Flash-OFDM), and also the 3.4GHz range, being employed by PCCW in its UK venture Netvigator ( A number of other commercial deployments are up and running in markets as diverse as:
  • New Zealand, where wireless ISP Woosh ( claims to be taking about 40% of broadband net adds within its footprint;
  • Portugal, where GSM operator Optimus and sister ISP Clix are adopting the technology as an alternative to what they view as a monopoly situation in the DSL market;
  • Germany, where Airdata has spectrum coverage in most of the main cities (;
  • South Africa, where state-owned broadcaster Sentech ( is assembling a footprint in major urban centers and, according to an article in Telecom Markets in late June, is planning on exploiting a loophole in its multimedia license to add VoIP to the mix.

IPWireless, using unpaired spectrum in a wider band than Flarion, claims double the capacity and effective throughput per cell sector in its 5MHz product (i.e., 6Mbps capacity and 2.5Mbps effective throughput) and a factor of four in its 10MHz iteration (being deployed by PCCW). This implies that a single cell site in the 10MHz network could serve something like 1,800 users with broadband connectivity, which in the case of Netvigator, costs GBP28 for 1Mbps and GBP18 for 512kbps per month (a c. 25% discount to existing DSL pricing in the UK). We think the pricing could go a lot lower, based on low greenfield build costs (sub $10 per PoP, we believe), fairly humble CPE costs (we think below $200 per unit and falling), limited marketing spend (Netvigator is anecdotally focusing on mobile demonstration pods and targeted advertising within its footprint), and relatively low payback threshold (PCCW got 40MHz of spectrum for only $12.6m). From public statements, PCCW currently offers service to 300k households, and plans 75% population coverage in the UK by year-end 2005. The roadmap beyond that is somewhat vague, but we expect that the service may evolve beyond mere broadband access over time. At the very least, it will have the same appeal as that expressed in the glowing reviews we have read of Nextel's Flarion trial in North Carolina - a robust replacement candidate for residential broadband technology of choice, but with mobility added in as an added advantage.

IPWireless partners closely with UTStarcom, which white-labels its products as the "Moving Media 6000" series ( and is also in active development of handsets, expected in Q1 2005. This opens up interesting angles on how such a hybrid service might be marketed. For example, there has been much speculation regarding the plans of Softbank in the Japanese market, where the company has publicly discussed national ubiquitous coverage (this article published today states that the company claims to have obtained 13,000 sites currently and plans as many as 20,000 sites in place at service launch [ Japanese only], in anticipation of what many expect to be a mobile version of the disruption that Softbank brought to the domestic DSL market. Clearly, with DSL access speeds in the Japanese market already well above the peak level currently achievable with TD-CDMA, there may not be much business case for the technology as a residential broadband substitute technology.

In Europe, however, there is arguably more to play for as a residential/mobile hybrid, and the existing operators are sitting on the requisite 5MHz of spectrum in the appropriate frequency range as part of their UMTS licenses. It will be interesting to see what approach the mobile players take - for instance would O2 UK see an advantage in adopting a technology in the home market which enhances its mobile product while also opening up a position in the residential broadband market, where it is not currently active? What incremental revenue and customer retention opportunities might this open up, and what impact might this have on O2's position in the corporate market? Orange France, on the other hand, might see inherent conflicts with sister company Wanadoo, which is moving towards an IP triple play based on DSL, as well as its own ambitions in Wi-Fi. For the mobile units of integrated operators outside the home markets, however, the opportunities are probably closer to the issues we define in the O2 example above - retention, differentiation, and incremental revenues.

Alternatively, this may be one way for the independent ISPs to extend their product range into the mobile voice and data arena (Tiscali is already using UTStarcom for a DSL IP triple play deployment in eight European markets). In our view, their scope to do so is likely to differ considerably from market to market, depending on licensing terms, and also definitions of mobility itself. For example, would mobile access to TD-CDMA using handsets be considered mobile telephony, while laptop or PDA-based access would be considered mobile internet access? More fundamentally, some licenses, such as that of Airdata in Germany, explicitly forbid handover between cell sites. Besides causing further challenges for national regulators in defining and regulating services, we think the widespread availability of TD-CDMA and competing mobile wireless technologies will increase consumer choice (and price competition) through allowing new market entry and service bundling opportunities for the carriers, as well as dramatically expanding the opportunities for consumers to make use of IP voice communications applications.

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