By Gerry Blackwell August 27, 2009

We’ve been on a virtual tour of WiMAX markets around the world. Now with this final installment in the series, we’re back home in North America. It may be the most interesting and singular WiMAX region of all.

Throughout the tour, one trend has been borne out repeatedly. In developed regions, such as the UK and Ireland, western Europe and parts of Asia-Pacific where wireline broadband and 3G wireless penetration is high, WiMAX ends up playing a niche role.

Established operators don’t need it, except to reach under-served regions. And the return on investment isn’t good enough for new entrants to risk building out national or urban networks to compete with established wireline and 3G players.

But in developing markets, such as Eastern Europe, Africa, parts of Asia-Pacific and most of the Latin America-Caribbean region, WiMAX shows signs of playing—and certainly has the potential to play—a much greater role.

In those countries, where 3G and wireline broadband are less well-established, or non-existent, WiMAX is being touted as a way to relatively inexpensively leap-frog the developed world in terms of communications capabilities, and provide new entrants an opportunity to build viable, competitive businesses.

North America, which for our purposes includes the U.S. and Canada—we treated Mexico as part of the Latin America-Caribbean region—would seem to fly in the face of this logic. It’s a developed region with highly evolved communications infrastructures, yet WiMAX appears poised to play a major role here.

According to 4GCounts, a WiMAX/LTE tracking service, North America already boasts more broadband wireless subscribers—just over a million—than any other region, with 34% of the global total. Quarter-over-quarter growth was slower than the global average, however, 4GCounts notes.

Gartner estimated the number of WiMAX connections—of which there could be more than one per subscriber—at about 870,000 in North America at the end of 2008. This was fewer than the more than one million in the Asia-Pacific region, according to Gartner.

Controlling interest

The North American WiMAX numbers are heavily skewed by the activity of one player: Clearwire Corp. It accounts for about half the subscribers.

Clearwire started by deploying pre-WiMAX gear to support mainly fixed wireless services, but is now in the early stages of building out an 802.16e-based mobile WiMAX network running over 2.5GHz spectrum.

The company claims that by the end of 2010, it will be up and running with mobile WiMAX service in 80 urban markets in the United States covering 120 million people.

“It’s interesting,” says analyst Caroline Gabriel, research director at UK-based Rethink Technology Research Ltd. “On the surface, yes, there are a few factors that suggest logically [North America] should be similar [to other developed regions]. But then there are some [factors] that make it very different.”

One is that 3G has not been established as long in North America as it has in western Europe, for example. Nor is coverage as dense. Part of this is simply that population isn’t as dense—more North Americans live outside heavily built-up areas.

Gabriel also notes that Wi-Fi, partly because of the relatively late arrival of 3G, has played a larger role in delivering broadband services to mobile workers in North America. That will tend to make the market more receptive to WiMAX, she believes.

While Clearwire is by no means the only WiMAX operator in North America—4GCounts says there are 22 active operators in the region—it has the most aggressive roll-out plan and it’s the only one targeting urban centers with mobile WiMAX service.

Clearwire is an anomaly partly because it owns enormous spectrum resources. The U.S. awarded larger parcels of 2.5GHz spectrum to successful bidders than have most other jurisdictions. Clearwire has as much as 100MHz in some markets. “Clearwire’s real competitive advantage is the amount of spectrum it holds,” Gabriel says.

It holds most of the 2.5GHz spectrum available, which is the band best suited to mobile WiMAX using 802.16e. There is little, if any, more to be allocated so it’s highly unlikely others will be able to copy Clearwire’s strategy. “No one else is going to get that much spectrum,” Gabriel says.

Other WiMAX players in the U.S., as a result, are pursuing much less ambitious niche strategies.

Open Range in Colorado, for example, along with other smaller local and regional operators, is mainly targeting under-served rural areas—a WiMAX strategy familiar from other developed regions in the world. Some of the markets it aims to serve are so remote that Open Range will sometimes use satellite links for backhaul.

Towerstream, based in Middletown, Rhode Island, is targeting major population centers—it’s already in nine, including Los Angeles, New York, Chicago, Boston, and San Francisco—but it uses WiMAX mainly as a last-mile solution to deliver fixed broadband services to businesses over 5GHz and 3.5GHz spectrum.

Seeing ‘Clearly’

Spectrum holdings are only part of the Clearwire story. The company is also well-backed, including by partner Sprint, the number three national player in the U.S. cellular market—and the only one to opt for WiMAX rather than LTE for 4G.

In partnership with Sprint, it launched the Xohm brand and service in Baltimore, Maryland last October. Xohm offers multi-megabit mobile service mainly for laptops and netbooks equipped with built-in, PC-card or USB-dongle modems. It works even in fast-moving vehicles.

(Clearwire and Sprint refer to this as 4G wireless, although WiMAX 16e does not in fact meet minimum performance objectives for 4G as set down by the International Telecommunications Union (ITU), a United Nations agency.)

Since then, Clearwire has added new strategic investors. The roster now includes Intel Capital, Comcast, Sprint, Google, Time Warner Cable (part owner, through its parent, of online bookseller Amazon) and Bright House Networks.

It also re-branded the mobile WiMAX offering as Clear 4G and launched three new markets, in Portland, Oregon, Atlanta and—as of last month—Las Vegas. (It’s the same technology as the Xohm operation in Baltimore and subscribers in any of the Clearwire “4G” markets can roam to the others.)

The company is currently available to about 7.5 million Americans, but that number should be up to 30 million by the end of 2009, including in new markets, such as Chicago, Philadelphia, Honolulu, Seattle, Dallas-Fort Worth, and Austin. In 2010, it plans to add New York, Boston, Houston, Washington, DC, and the San Francisco Bay area.

Clearwire won’t say exactly how many customers have signed up for Xohm/Clear 4G service. It reported 500,000 broadband wireless subscribers in total as of first quarter 2009, but “the vast majority” subscribe to its earlier pre-WiMAX services, says marketing director Todd Lewellen.

Lewellen adds, however, “We’re really pleased with progress so far on the customer take rate.”

Xohm and Clear 4G so far appeal mainly to consumers. (This is a region-wide trend: according to 4GCounts, 86% of North American WiMAX subscribers are residential.)  They use it at home, but also for commuting—including to watch streaming video while riding commuter trains, Lewellen says.

More and more businesses are now finding reasons to subscribe, though, he says. Construction companies can install a residential modem unit in a trailer at a building site, for example, and get broadband service on the entire site.

Commuter rail services are looking at using it to backhaul streamed video from Wi-Fi-based surveillance cameras on trains and to relay real-time train diagnostics back to a control center.

Clearwire is also offering VoIP services to residential customers, but Lewellen says there is no reason subscribers can’t use softphone-based VoIP services, such as Skype even while mobile.

Unlike WiMAX operators in some other regions—notably Yota in Russia—Clearwire has not yet introduced a dual-mode WiMAX/3G telephone handset that would allow subscribers to use VoIP services, such as Skype while fully mobile.

“We’re working on our own plans and our own technology and [handheld telephony] devices that we think will deliver the best possible subscriber experience,” Lewellen says.

He implies the company is waiting in part until it finds ways to seamlessly integrate 3G and WiMAX telephony.

“What happens, for example, when you’ve got a great call going over the WiMAX network and you drive out of coverage? How do you seamlessly switch to 3G. Those are the kinds of things we’re working on.”

One big question mark for Clearwire watchers is whether the company’s competitive head start in mobile broadband wireless can survive the anticipated 2012 arrival of LTE, chosen 4G technology of most North American cellular operators. LTE can theoretically deliver much better performance than WiMAX 802.16e.

LTE providers will also have the advantage of being able to offer telephony and mobile broadband data services over the same network on one bill, while Clearwire will only be able to provide a dual-mode 3G/WiMAX service through its partnership with Sprint.

However, Lewellen points out that LTE operators will also be offering dual-mode services—with 3G for voice nationwide and 4G for data and voice in major centers—for years after the first LTE build-outs. He also notes that the next version of WiMAX, 802.16m, which could come to market before or not long after LTE, will deliver functionality and performance similar to LTE.

Gabriel is “bullish” about Clearwire’s chances of surviving and thriving even after LTE arrives, although she admits other analysts see it differently. LTE providers won’t have as much network capacity as Clearwire, she points out. And Clearwire, with a well-established network by then, should be able to compete well on price.

“One reason we’re bullish is that despite the power of the big two [cellular operators, AT&T and Verizon], there is more competition in the region now. It’s a very sophisticated market and there is room for a variety of operators supporting different types of services and technology.”

Another reason: Clearwire’s adherence to principles of open access and Net neutrality. Unlike cellular operators, it allows any subscriber to attach to its network with any compatible device.

“The other carriers will have to adapt to that and it will be painful,” Gabriel says. “It will hit their margins.”

Neighbors to the north

The situation in Canada, meanwhile, conforms more to what might be expected in a developed economy. Inukshuk Wireless, a joint venture between incumbent telephone company Bell Canada and Rogers, a major TV cable and Internet access provider, looked initially as if it might play a role similar to Clearwire’s in the U.S.

But Inukshuk’s momentum has slowed and it now appears to be focusing on serving remote regions of the country. “We increasingly don’t hear much from them and they don’t have a lot to say about their progress,” Gabriel says. Inukshuk declined an interview request from Wi-Fi Planet.

Gabriel speculates that Bell, which has committed to LTE for 4G, may be unwilling to promote a WiMAX service in major centers for fear of giving the technology a toe hold in markets where it would compete with its own LTE-based service in the future.

The only other WiMAX operators in Canada are small local or regional players. Craig Wireless, an unusual west coast company with islands of coverage in Canada and Greece, is the only one with announced intentions of offering mobile WiMAX service.

Will North America continue to be the exception that proves the rule—a developed market that embraces WiMAX and sees it compete with more established players and technologies?

It depends almost entirely on the success of Clearwire. And given the company’s aggressive roll-out schedule, the next 18 months should tell the story.

Gerry Blackwell is a veteran technology journalist based in Canada. Read more of his WiMAX coverage here.

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