Huawei Technologies

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2 MAIN TOPIC MAIN TOPIC Business Intelligence empowering your brain Wireless broadband commercial application accelerates By Yang Hu & Yao Zheng 19

3 Joining the 3G family Subscribers always expect mobile broadband services to provide p e r s o n a l i z e d a n d u n i f o r m multimedia services that are available anytime, anywhere, and via any terminal, plus the services should be secure, reliable, and inexpensive. To meet these expectations, operators and equipment providers need to supply seamless network coverage with a series of solutions for the fixed and wireless networks convergence. We should also provide diversified, personalized, and lowcost broadband multimedia services to attract and retain subscribers and boost our competitiveness in the marketplace. In the past five years, introduction and applications of various wireless voice and data services have spread like wildfire with end users fanning the flames. Since WiMAX leads the pack of current wireless communications technologies, it may very well become the technology that can maximally satisfy diversified consumer requirements. In October 2007, at the Radio Assembly in Geneva, WiMAX officially became one of the 3G standards. This as a milestone has greatly thrust forward WiMAX s largescale network deployment and cohesive development. Increasingly more operators and equipment manufacturers now have to seriously consider appropriate business models for developing WiMAX. Two mainstream applications From the beginning, WiMAX is widely known for its high flexibility in frequency distribution (2.3GHz, 2.5GHz, and 5.8GHz), channel bandwidth ( MHz), and application scenarios (wireless bandwidth, mobile bandwidth, and transmission of BTSs and Wi-Fi). However, flexibility also brings questions to WiMAX operators such as: In what way should it be used? What business models should be adopted? A b e t t e r u n d e r s t a n d i n g o f t h e application scenarios is necessary when researching business models. Up until now, wireless broadband and mobile broadband have been the only two mainstream WiMAX application scenarios. There is no definitive difference between these two types of broadband. A commonly accepted distinction is whether or not it can support speeds up to 120mph. Here in this article, wireless broadband is defined as the broadband access of large-screen terminals (such as desktops and portable computers), and mobile broadband is for small-screen terminals (such as mobile phones, PDA, UMPC, and CED). Two business models correspond to the two application scenarios. One is a DSLlike business model based on wireless broadband with the typical features of open access. The operators adopt the pipeline operational mode, and income derives from the increase in the subscriber numbers. Another is a 3G-like business model based on mobile broadband. Operators can get higher profits by providing value-added services, yet need to meet higher requirements and enhance the value chain, third party cooperation, and the multimedia service platform. Besides the business models above, no other ones have been proposed for WiMAX so far. However, when more versatile CED terminals are released, hopefully a great many brand new and creative business models will emerge. It is worth noting that the business model doesn t remain unchanged. Different phases might require different business models. Even in the same phase, Table 1 Two application scenarios of WiMAX Wireless broadband different models should be adopted for different areas. Selection of a business model should be based on the operator s core competitiveness, business expansion capacity, consumer demand, market environment, and product availability. Business models Presently WiMAX portable devices that support mobile broadband applications are still small in number. The WiMAX Forum is still certifying mobile WiMAX products, and the large-scale commercialization of WiMAX for mobile broadband access cannot be realized in the short run. Therefore, the business model of wireless broadband is a realistic choice. Market orientation Different markets and customers see WiMAX differently in respect of its orientation. Fixed network operators should first raise the broadband coverage rate, using WiMAX as a complement to DSL to make up for dead zones caused by difficult deployment and aging copper cables, and achieve universal services. For example, Swisscom uses WiMAX to provide broadband access in remote mountainous areas. Second, since broadband service is a cash cow for fixed network operators, they should provide diversified broadband access (such as DSL/Wi-Fi/WiMAX) to enhance their strength in broadband and prevent mobile operators from occupying Mobile broadband Services Broadband access, VoIP, VPN Mobile data, mobile VoIP Terminal CPE, data card Mobile phone, data card Coverage Hot zone City zone Advantage Speedy deployment, nomadic High capacity Weakness Limited by capacity Limited by coverage Business model Similar to fixed network Similar to mobile network Revenue source Subscriber growth, multiservice provided Subscriber growth, multi-service provided, revenue sharing with 3rd party 20

4 MAIN TOPIC Wireless broadband commercial application accelerates the market with data cards. BT is a good example. Third, traditional fixed operators choose WiMAX in order to enter the mobile market and expand profit areas. Moreover, they need to make room for FMC and garner new profits from multimedia terminals. Mobile operators in general are relatively less interested in WiMAX, but in areas with low penetration rates some of them may seize the opportunity. For example, Vodafone provides the wireless broadband access service in Malta. As HSPA develops, the spectrum becomes limited and cell splitting faces difficulty in obtaining sites, while WiMAX is capable of balancing the traffic load in areas with high volume usage. 2G operators without 3G licenses can use WiMAX to compete with 3G operators, remain competitive, and like all mobile operators, hope to earn more from multimedia terminals. For relatively new operators, WiMAX provides a stepping-stone to expansion. These newly players include: Enterprises first setting foot in the 2G/3G eras such as Internet service providers (ISPs), who have regular customer resources and rich experience in channel construction. Content providers such as television, news, and new service developers, who provide telecom value-added services, and are not satisfied with the fact that traditional operators draw high commissions based on rich customer resources. ISPs with many Wi-Fi hotspots, who hope to use WiMAX to make up for the coverage insufficiency of Wi-Fi. Representatives in newly developed fields, such as oil-rich tycoons with deep pockets, see the profit margin and hope to develop WiMAX to supplement their major services. After all is said and done, under the wireless broadband mode, WiMAX can provide ultimate mobile broadband services with limited mobility, especially for large-screen terminals. Target customers In terms of wireless access, WiMAX customers mainly consist of household subscribers and small and medium-sized enterprises (SMEs). Households that have not been covered by traditional fixed networks should be target customers. Many modern families become mobile only because they live in small houses and are in areas with a high mobile penetration rate. They do not want to be restricted by fixed lines. In addition, the IDC estimates that in million PCs will be sold and delivered, including 110 million notebook computers or 41% of total. The sharply increasing number of portables means that more people will choose portable broadband. As one of the most active sectors of the economy, SMEs are inclined towards choosing easily installed mobile access and IP-bound voice services. Floaters are loyal subscribers to wireless broadband. For example, many students and other young people in Australia, live in rental units and study or work in Sydney or Melbourne. In response to this, Unwire launched targeted services for this customer segment, and has attracted over 80,000 WiMAX subscribers (ranked No. 3 worldwide) to date. Products and prices Service modes for wireless broadband indicate mainly high-speed network access and VoIP. High speed network access provides a downlink rate of 1-2Mbps and an uplink rate of Kbps. Operators mostly adopt flat-fee charges without traffic restrictions, though in some markets there are certain restrictions such as a 5GB limit. As for VoIP services, operators mainly adopt flat-fee charges also. Price is always a prime consideration, and the price of WiMAX service currently is somewhere between DSL and 3G. Although provided ser vices are simple, bundling offers differentiation. Clearwire for example, provides two types of bundling. One is the bundling of broadband access and voice services, which attracts mobile only households and SME subscribers. The other is the bundling of modems and PC cards, which helps Clearwire get more customers from cable and DSL operators. A customer survey conducted by Clearwire last year showed that most of its customers were former cable and DSL subscribers (33% for cable subscribers and 26% for DSL subscribers). In a market with very low network penetration rates, a long waiting list means higher prices and greater profit margins for new product designs. In April 2008, Orange Cameroon launched the Livebox service over WiMAX network, offering a download speed of 512Kbps. individual prices range from USD86 to USD245 and 2008 is a crucial year for WiMAX development. Operators will have more options for creative and successful business models with increased sophistication and largescale commercial WiMAX application. Editor: Pan Tao pantao@huawei.com 21

5 enterprises pay at least USD500. Network construction Compared with cellular 2G/3G networks, the early phase of WiMAX construction does not have high requirements for nationwide coverage. Households and enterprises generally need broadband access only for their daily activities in areas like homes, offices, and common areas. National roaming is clearly an added valued area for these customers, but is not a must in the early phase. Like DSL, we can cultivate subscriber base while constructing the WiMAX network. An Indian operator with only one WiMAX BTS increased their subscriber base in coverage areas and had a positive cash flow within a short time. However, the construction modes of WiMAX and DSL are not totally the same. For cultivating PC card subscribers, limited mobility needs to be taken into consideration. Therefore, constructing a WiMAX network based on a city-by-city business model is a good strategy. Clearwire for example, has been successful by gradually expanding their network. In the early phases of construction, most cities can get a positive EBITDA within two years. Coverage area priorities depend upon the locations of different operators. For the location of the DSL-complemented WiMAX network, suburban and residential areas should be first considered. For the 3G-complemented WiMAX network, resources should be integrated into urban areas with heavy traffic. Terminal devices Wireless broadband terminals are mainly CPE, PC card, and USB Dongle devices. CPE usage is targeted at less mobile scenarios such as houses and SMEs, and divided into indoor CPE and outdoor CPE. In the 16d era, most terminals were outdoors, prices of which were relatively high and technicians were required for installation. Luckily, coverage requirements are lower than that for other terminals. In the 16e era now, the mainstream CPE is indoors. In areas with poor coverage, an additional outdoor antenna can be installed to enhance signal quality. One feature of wireless broadband terminals is that current subscribers do not have a strong demand for personalization or appearance and another is that the channel between the terminals and subscribers is similar to that of DSL. Before a notebook computer with a built-in WiMAX module is on the market, most terminals are provided through subsidies or rented from operators to end users is a crucial year for WiMAX development. Operators will have more options for creative and successful business models with increased sophistication and large-scale commercial WiMAX application. Smart WiMAX operators surely will grab this once in a lifetime opportunity to produce successful products and services and implement innovative business models. Editor: Xu Ping x.ping@huawei.com 22