Nortel, the often troubled voice and data network equipment provider, has been making noises of late about its ambitions in the emerging 4G – aka mobile WiMAX – market.
The company started selling fixed WiMAX gear, based on the 802.16d standard, two years ago. It buys OEM equipment from Airspan and resells under the Nortel brand. But it is developing and will manufacture its own mobile WiMAX (802.16e) equipment. Nortel expects to come to market with 802.16e infrastructure products – switches and base stations – before the end of this year.
The 802.16e standard is a significant enhancement to .16d, adding mobility, increased network capacity (two- to three-fold) and improved support for real-time rich media applications such as VoIP and streaming video.
In the lead-up to its big mobile WiMAX splash, Nortel is busy assembling an “ecosystem” of device, chip set, and application providers so it can offer carriers bundles of infrastructure and end-point equipment and applications. The latest partner to join is Wi-Fi and WiMAX equipment manufacturer ZyXEL Communications. Others include chip makers Runcom Ltd. and Sequans Communications.
“While Nortel has traditionally focused on infrastructure equipment, in this next-generation world, we see the need to offer – and prospective customers have told us they want us to offer – a full ecosystem of products to go along with the new infrastructure,” says Daniel Locklear, the company’s director of product marketing for wireless networks.
One of the factors that slowed uptake of UMTS (Universal Mobile Telecommunications System), a mainly European-based 3G technology that failed to live up to expectations, was lack of user devices, Locklear notes. Nortel believes the bundling strategy will help it avoid that fate with 802.16e. As the technology matures, though, and as more equipment makers enter the market, the company will step back from the bundling strategy.
Nortel is not exclusively wed to WiMAX. It’s just that 802.16e is the first true mobile broadband or 4G technology to come to market. It will deliver multi-megabit-per-second connections to mobile users. This has been proven in field trials, including one near Portland, Oregon run by Clearwire Corp., cellular pioneer Craig McCaw’s wireless broadband company, and Intel and Motorola.
The increased bandwidth means WiMAX can support effective mobile VoIP services that will not only rival traditional cellular voice services but also offer the advantages of presence management, plus high-speed Internet access. This will enable other streaming media applications such as mobile video conferencing, IPTV, and gaming.
Nortel believes WiMAX will eventually enable hyperconnectivity – the long-touted notion that anything and everything can and should be connected to the Net. Hyperconnectivity will make possible applications such as home automation control from a car and transmission of automobile telematics.
But the other 4G technologies – LTE (Long Term Evolution), the second coming of UMTS, and Ultra Mobile Broadband (UMB), the brand name for a project within 3GPP2 to improve CDMA2000 – will deliver similar performance and functionality. And Nortel may enter those markets as well. LTE and UMB could be two to three years away, though, Locklear says.
The three technologies are all similar in using OFDM (Orthogonal Frequency-Division Multiplexing) modulation schemes and MIMO (Multiple-Input Multiple-Output) technology in the design of antenna arrays. And all three feature a common flat IP network core – unlike 3G and 3.5G technologies such as EVDO and HSPDA.
“The real strength of WiMAX is its time to market and the fact that [unlike LTE and UMB] it’s not dependent on a legacy [cellular] network,” Locklear says.
Mobile WiMAX will play a disruptive role in both cellular and wireline markets, Nortel believes. Because of its spectral efficiency and coverage characteristics, it will be significantly less expensive to roll out than 3G and 3.5G technologies, some of which approach it in terms of performance. It will also, in the long term, make it less expensive for wireless carriers to acquire customers.
“When end users can go down to Best Buy and buy a [WiMAX-enabled] iPod, or standard CPE [customer premises equipment] such as a wireless home router and have it be WiMAX enabled, the carrier doesn’t have to invest as much to acquire that subscriber,” Locklear points out.
He sees four potential groups of customers for Nortel’s products: new market entrants, attackers (wireline telcos and cable companies looking to diversify with mobile services), second- and third-tier cellular players that have not made the move to 3G and will look to leapfrog directly to WiMAX, and first-tier cellular players that buy into the long-term economic and time-to-market advantages of WiMAX versus alternative 4G technologies.
New market entrants will move into areas currently underserved by wireline broadband providers or compete head-to-head with wireless incumbents on price – which Locklear says they will be able to do because of the cost efficiency of deploying mobile WiMAX versus 3.5G (or wireline broadband) technologies. Examples include Wind Telecom in the Dominican Republic, Craig Wireless in Greece and Canada, and, arguably, Clearwire, although Clearwire was not launched with the express purpose of deploying WiMAX.
In the attackers category, he includes companies like Telmex, the incumbent wireline phone company in Mexico. Telmex is looking to use WiMAX to offer wireless voice services in bundled offerings and to extend its fixed services into areas too remote or sparsely populated to warrant investing in wireline infrastructure.
Most cellular players in the US have already deployed 3G networks but many in other markets will see WiMAX as an inexpensive fast track to 4G. Sprint Nextel is the only first-tier player so far to commit to WiMAX for 4G. Sprint has announced it will invest $2.5 to $3 billion by 2008 to build its mobile WiMAX network.
Sprint may end up being unique in this regard among first-tier players, Locklear concedes. “Verizon, Telefonica, T-Mobile, Vodafone – those carriers are going to follow their own mode of evolution,” he says. “Most have already made investments in 3G. They will evolve into the next generation [of their current technologies] or LTE or Ultra Mobile.”
Still, the available market is attractive, and Nortel believes it has some key advantages over its main competitors, which according to Locklear include Samsung, Nokia, Siemens, and Alcatel-Lucent. The strategy around bundling devices and applications is one.
The primary application carriers will be looking for is VoIP. “We believe VoIP is going to be a must-have app for WiMAX [carriers],” Locklear says. “And Nortel has some unique capability around quality in VoIP from our experience with heritage VoIP technology.”
The company has also invested heavily in the MIMO-based antenna technology in its mobile WiMAX offering. Plus, it has the experience and skill with wireless technology to be able to optimize network coverage and capacity, extending the economic advantages, he says.
That Nortel, with all its marketing clout and experience selling to carriers, will capture a share of the mobile WiMAX market seems a foregone conclusion. But can it win a dominant share? It will be interesting to watch this market unfold.