Here and Abroad [Band]Tuesday, December 02, 2008
I just returned from a trip to China and Japan and I’m playing a little catch-up at the moment. The trip was a great one, I learned a lot (see Commentary for this week) and met a number of very smart people who, like me, believe the wireless industry may encounter some slowdown but will fare better than most industries in these hard economic times.
In Japan, I met with a senior executive of KDDI and we talked about the fact that U.S. CDMA phones now work in Japan (the Japanese spectrum is the reverse of ours, making our phones useless). Just before the Olympics, all three of the network operators turned some of their spectrum around. Today, my Verizon phone works on KDDI’s network and my T-Mobile BlackBerry works on both the Softbank and NTT DoCoMo 3G network—but not on DoCoMo’s 2G network since it is based on PDC rather than GSM. Over time, all of the operators will flip their entire spectrum around and Japan will be fully compatible with the rest of the world. It will take some time since all of the existing handsets will have to be replaced, but for now, there is enough spectrum available, at least in Tokyo, that the phones work just fine.
KDDI is also an investor in UQ Communications (Universal Quality), the company that was awarded the nationwide WiMAX license for Japan in 2007. Other investors include the Bank of Tokyo, Mitsubishi, Daiwa Securities Group, East Japan Railway, Intel Capital, and Kyocera Corporation. Like most of these companies, KDDI is targeting large cities first, including Tokyo, even though the city has three 3G wireless networks, DSL, cable, and fiber to most places.
As with other regions of the world, WiMAX (or perhaps Intel) has worked its magic on these companies and they have been convinced that the wireless Internet will make WiMAX an easy winner in this market. Since I was a guest, I did not try to dissuade these folks, besides, they are already committed to this venture. I did, however, give them their first real glimpse into the Baltimore system including the number of cells sites (170 going to 300), cell size (1.5 to 2 miles), and the amount of spectrum Xohm (now Clearwire) is using (10 MHz per cell sector for a total of 30 MHz per site). It was obvious that KDDI had no firsthand knowledge of the Baltimore system, and they were surprised at the amount of spectrum being thrown at Baltimore in order to be able to provide broadband services.
It turns out that the Tokyo system will use 10 MHz of spectrum for outdoor use and another 10 MHz for indoor use, a far cry from Clearwire’s Baltimore system that is using 30 MHz per cell site. I have to wonder what type of capacity they expect to be able to provide. At 10 MHz, it won’t take too many video downloads to bring the system to its knees. WiMAX works well where you have lots of spectrum, but when you compare it to other technologies in a 10-MHz block of spectrum, it does not fare nearly as well and it certainly does not qualify for 4G status. In fact, I am not sure it qualifies for 4G status even using 30 MHz of spectrum.
Incumbent network operators were forbidden to own the WiMAX system, but KDDI was permitted to invest in the company and seems to be driving the technical side of things as they begin building the system. According to KDDI, in Japan it takes less than a year to find a cell site location, get permission, and build it. Compared to the time it takes in the United States, this could be a real advantage to these wireless network operators.
Time will tell if their WiMAX system will be successful or not. It is facing the same issues as Clearwire in the major urban areas: lots of competitors, both wired and wireless, that can easily afford to drop their prices in order to remain competitive. This, of course, is one of the issues with building a new network and competing with existing wired and wireless services. The incumbents can force you down the price curve pretty quickly if they want to, and they have voice service to help pay the bills. I am told that WiMAX will support VoIP in Japan—but later, rather than sooner—so the initial network will have to produce revenue based on wireless broadband services. The future roadmap includes mobile TV and VoIP, but the service will be launched initially as a wireless Internet play only.
The Japanese have been very successful with wireless services. NTT DoCoMo, you may recall, launched i-mode, which was the first wireless access to the Internet. It was based on text but it was the only Internet access for millions of customers and was, therefore, very successful. Time will tell if their WiMAX play will also be a success. It is amazing how many places around the world Intel has embedded itself: a big investment in Clearwire, then in the new Clearwire, spectrum in Sweden, and money in a joint venture in Japan and in scores of other places. You have to wonder how many WiMAX chips Intel has to sell to recoup all of its money and, since it is bound and determined to beat Qualcomm’s Gobi chipset pricing, how much it will make on each chipset. You also have to wonder who is going to embed only WiMAX into a device when the networks are few and far between. It seems that Intel may be spending more money than it can recoup in the long term, but I guess losing $5 to $10 billion is not a problem for Intel.
I also learned that Nokia has bailed out of Japan, at least that is what is reported in the news. My Japanese sources tell me Nokia plans to launch an MVNO in Japan using the NTT DoCoMo network to try to make a comeback in that country. It will be interesting to see how well it does since MVNOs can be tricky and the revenue model, except for a few, is somewhat dicey to say the least.
Back to the USA
Upon arriving back home, I found that the 700-MHz D Block new auction rules won’t be voted on at the FCC December 18 meeting as originally scheduled and many people believe they won’t be voted on in the January meeting either, which is the last meeting before Chairman Martin loses his job. I hope the new administration will take some time to consider how to proceed with first responders to make this system work to the betterment of public safety, and so the commercial company or companies can predict a decent return on investment.
However, it appears Chairman Martin is bound and determined to auction the AWS-3 spectrum on a nationwide basis before he leaves office. His plan to provide free wireless broadband services to 95% of the U.S. population as part of this auction is very risky, but there is one company and one venture capital firm that seem to believe it is possible (at least prior to the economic collapse).
As I stated in my Fierce Wireless article, I want to go on record as being the first to say that the unlicensed use of TV white space will certainly become a legacy for the current FCC, but it will be a legacy they will wish they did not have when interference problems start raising their head as these systems are built out over the coming years (unless, as I expect, this matter ends up in the courts).
It is great to be home, but it was a very educational trip. What I learned that was of most importance is that most countries are struggling with wireless broadband—how to deploy it, how many operators should be permitted to offer it, and how it will compete with existing services. It is nice to know that in other parts of the world there are also more questions than there are answers. This is certainly where we are in the United States today!
Andrew M. Seybold