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Delayed Reaction

By Tammy Parker

A mere couple of years ago, analysts were portraying wireless local loop as a turbo-charged speedboat topping the waves of international business at a record-setting pace. However, the WLL market has since taken on a more leisurely growth rate —one more akin to a meandering riverboat.

In fact, the analyst community that once predicted 100 million subscribers by the turn of the century has now delayed those predictions. Numerous factors have stalled this market, including the cyclical struggles of regional economies, technology debates and the fact that the poorest areas which most need WLL are the least able to afford it.

WLL has failed to show skyrocketing growth, but analysts still expect it to take off—albeit a bit later than expected. Allied Business Intelligence, based in Oyster Bay, N.Y., predicts WLL will "mushroom," with more than 100 million subscribers expected by the end of 2006. "It seems the interest is high in all regions," says ABI senior wireless analyst Larry Swasey. He counted some two million subscribers by the end of 1998, and added: "Most vendors have shipped, or are about to ship, hundreds of thousands of lines." Similarly, the Strategis Group in Washington, D.C., says WLL will grow 50 percent annually from 1998 to 2002.

WLL is especially attractive to countries that have low teledensity—perhaps less than five per cent—and those characterized by hostile terrain and remote areas, notes John Yerou, vice president of Asia Pacific for U.S. WLL terminal vendor Telular. Yerou, who is based in Singapore, observes that WLL selling points over landlines can include cheaper deployment, lower maintenance cost, and reduced risk of vandalism and theft.

The characteristics of WLL networks across various air interface protocols—as well as proprietary and standardized platforms—are pretty similar. On the most basic level, one will likely find features such as dial tone, call forwarding and conferencing in just about any WLL offering. More advanced networks require features like high-speed data access. Supporters of CDMA claim that it has a special role in local loop markets. According to the CDMA Development Group, cdmaOne technology in particular offers fixed wireless access with near landline voice quality as well as technical features such as variable rate vocoders; robust error correction; frequency, space and time diversity; and multipath immunity. The group claims that there are 43 WLL systems in 22 countries using cdmaOne technology.

CDMA technology shines in a fixed application because the network can be engineered for especially high capacity gains since there are fewer mobile handoff issues to deal with, says Alan Stoddard, director of CDMA product line management for Nortel Wireless Networks. "You can achieve air interface capacities that are in the range of double what you get in a mobile environment."

Further, he notes that the power control algorithms in CDMA allow an operator to run base stations and terminals at a bare minimum of power, thus reducing the overall noise in the system and increasing subscriber capacity. "That’s an aspect that’s unique to CDMA," Stoddard adds.

Vijay Aggarwal, chief operating officer of Bharti Telenet in India has termed CDMA technologies "a successful bandwagon to ride on" for WLL. Aggarwal notes that there are several CDMA breeds for WLL: IS-95 cdmaOne, which is derived from the mobile application; ETSI CDMA, which was designed specifically for fixed WLL and has been deployed by Airspan and Lucent; B-CDMA, a system developed by Pa.-based InterDigital for high-bandwidth mobile and fixed applications; TD-CDMA, a hybrid air interface that comprises part of the Universal Mobile Telecommunications Service (UMTS); and a frequency hopping version that is closely related to Time Division Multiple Access (TDMA).

According to The Strategis Group, cdmaOne will dominate the WLL market worldwide by 2005, accounting for 29 per cent of the subscriber base. "The assessment of CDMA’s positioning is based on this technology’s momentum for mobile networks and its relatively high subscriber capacity," the company notes.

However, Strategis also sees roles for proprietary technologies, such as InterDigital’s B-CDMA. Joseph Gifford, executive vice president of business development at InterDigital, notes that B-CDMA offers landline voice quality as well as numerous possibilities for multimedia communications. InterDigital is taking a different tack toward getting its technology into the marketplace, shifting from being a traditional WLL systems company to licensing its technology and providing other vendors with the ASICs necessary to develop their own WLL products. Samsung is part of a Broadband CDMA Alliance formed with InterDigital, and Samsung is also developing its own B-CDMA products. Alcatel and Siemens AG had also been part of the alliance, but Siemens left in February and Alcatel in May. (For an update on InterDigital’s B-CDMA plans, see our news analysis pages).

Considerable debate has surrounded cost comparisons of wireless vs. landline networks. What, then, constitutes an acceptable cost per line for a WLL network? ABI’s Swasey rekindles an old argument that a successful WLL system will come in at $500 or less per line. He adds that most WLL projects still cost around $650 to $850 for urban lines and more than $1,000 for rural access. However, vendors claim such numbers are overly simplistic and the value equation varies greatly between markets. For instance, Yerou notes that the formula for calculating line costs can include complex equations covering site leasing, traffic backhaul to the switch, billing systems and population density.

Nortel’s Stoddard says the key to a WLL sale is to make it "cheaper than wireline," noting that cost can vary greatly between markets. "We’ve had operators say that if you can do it for less than $5,000 a line, then it makes sense to deploy a WLL system. And we’ve had others who want a lot less than $500 a line," he adds. "There is no magic number."

Whatever the estimates, money issues recently contributed to WLL slowdowns in certain regions. WLL in Asia has staggered due to that region’s slide into an economic quagmire. "Eighteen months ago, we had RFPs (Requests for Proposals) stacked up extremely high from Indonesia, the Philippines, Singapore and any number of countries in Asia. Most of those plans have been put on hold or dramatically scaled back," says Stoddard. "You still see some applications from that part of the world—Sri Lanka, Australia—countries that have been less impacted or were fairly far forward on their plans." Most insiders say that situation is unlikely to change for six months to a year as the region recovers.

Hot spot
Russia had been a hot spot, though that country’s currency troubles appear to have crimped new WLL RFPs. There have, however, been one or two exceptions, notably the recent announcement by Leap Wireless International that Russian carrier Metrosvyaz (of which Leap is part owner) has entered into a local joint venture to launch WLL services, initially in the area around St Petersburg but with about eight regions likely to follow. The market has drawn attention from numerous vendors, including Korea’s Samsung, which last summer signed $20 million in contracts to export its cdmaOne fixed terminals to Vladikavkaz, Bryansk and Vladivostok. The company also is finalizing a B-CDMA system for testing in China by operator Unicom.

Bill Gorden, senior product manager for Motorola’s Wireless Access Systems Division, names India, China, Brazil and Mexico as WLL targets. Brazil and Mexico also were cited as hot spots by Gwenn Larsson, director of technical marketing for Qualcomm’s wireless infrastructure division that is being sold to Ericsson. That information jibes with figures released by the US Department of Commerce, which says that some 21 million terminals, representing a value of $10 billion, will be installed in the Latin American WLL market between 1998 and 2003. Commerce further notes WLL is considered an ideal solution for increasing teledensity in isolated rural areas, such as those around the Amazon River Basin.

Latin American operators are taking different approaches to WLL, however. Larsson notes that the Canbra consortium in Brazil is starting out as a wireless fixed access system but plans to eventually offer limited mobility. "That’s why they’re installing mobile switches and not direct-connect to PSTN (public switched telephone network) switches," she notes.

On the flip side, Pegaso PCS in Mexico is starting out as a fully mobile operator but is closely eyeing the WLL marketplace. Yet Victor O´Farril, Pegaso’s senior manager of business development, says any forays into WLL require caution. "Due to the fact that all markets tend to become niches, and that technologies work best only in certain scenarios, Pegaso is pursuing the right approach to this very complex and big market."

O’Farril adds that data could play a strategic role in WLL offerings to developed areas. "An over-simplistic but valid view is that there is two markets," he explains. "One is the very massive market lacking access to telephony that will do with plain voice and other simple features such as voice mail. The other is the bulk of markets that already experiences the advantages of telephony and will understand particular benefits of a given feature. We believe that speed data, packetized, will play a central role if Pegaso chases those customers who already have a phone. We also believe that our ability to present our features—call forward, caller ID, voice mail, conference calling, call barring—and the way we provide them in terms of simplicity could become the key to reach customers." Brawnier data enhancements may also help WLL break into North America and Western Europe. Nortel’s Stoddard notes that a WLL influx into these mature markets is predicted as existing wireless operators hybridize their networks with additional WLL capabilities in order to offer competitive second-line access markets.

Nortel has successfully tested WLL in rural areas of the United States as well as urban areas of Canada, and Stoddard anticipates that trend will continue as cdmaOne data rates pick up.

Current cdmaOne networks are generally capable of 14.4-kbps data. Network improvements in the next couple of years could greatly enhance that speed as cdmaOne evolves to CDMA2000, its 3G solution that uses three 1.25 MHz channels to deliver data at 1 to 2 megabits per second. And some operators are looking to proprietary technology for a data solution. For instance, Larsson notes that American PCS operator US West Wireless has signed up to test Qualcomm’s High Data Rate, or HDR, technology in high-speed, fixed-access applications.

InterDigital and its alliance partners also had been testing B-CDMA WLL technology with fax/data speeds of 28.8 kbps. Siemens, a former member of InterDigital’s B-CDMA alliance, had demonstrated ISDN rates in WLL trials. InterDigital hopes to learn more through a field trial of its TrueLink B-CDMA system that is being conducted by in Iowa by Pioneer Holdings and competitive local exchange carrier North West Rural Electric Cooperative. There are some 25 subscribers on the network, which began testing in December 1998, according to Gifford. He adds that the trial might be expanded if another vendor will step in to provide the B-CDMA equipment.

"High-speed data is clearly the direction that we’re going," Gifford says. He notes that data capability is becoming crucial not just to end users but to the designers of WLL networks. "We want to be in a position of using the Internet as a central part of our communications link in time," he says," so we’re not tied into an environment where the switch is centric to the system."

Since the departure of both Siemens and Alcatel from its B-CDMA alliance, InterDigital’s investments in WLL-related product and technology development are to be superseded by a concentration on third generation applications (see Why wait? opposite). However, the company has stated that it plans to honor its current obligations in the area of B-CDMA.

While value-added features such as data may make WLL more appealing to subscribers, Larsson says other factors determine a WLL network’s success or failure. A crucial element is strong government support for a competitive WLL market. Many nations, in trying to protect the state monopoly on telecommunications, have enacted such restrictive operating and tariff rules that WLL providers simply cannot survive, Larsson claims. Motorola’s Gorden agrees that "the regulatory environment has been a huge impediment". For instance, he notes that rules in India initially precluded operators from getting any revenues off of long-distance or international service.

Another essential element is low interconnect fees. "No matter how much of a buildout you get for a system, you’re always going to have to haul traffic through the incumbent," Larsson says. Successful carriers negotiate favorable terms from the start so the incumbent can’t destroy their upstart competition. "We’ve run into a couple of places where operators just hadn’t thought of that, and we’re paying much closer attention to the types of customers that we go after," Larsson says. "If you look at the successful wireless local loop systems out there, you can establish some criteria." Adds Gorden, "There hasn’t been a really solid model anywhere in the world that establishes how to appropriately deregulate, although everybody keeps trying because there’s this magic link between economic development and telecommunications growth. Sooner or later, a formula will be found.

Fixed or hybrid?
Depending upon whom you ask, dedicated WLL networks are either dead or being rejuvenated. Some note that dedicated networks are being driven by the allocation of specific frequencies. The Strategis Group notes that this has occurred in China and India. Large populations and pent-up demand for basic telephony services are expected to drive growth in the Asia-Pacific region.

Telular’s Yerou notes that infrastructure vendors have a vested interest in pushing standalone WLL networks because that means more network sales. However, he feels the industry is moving away from dedicated fixed networks and toward hybrid fixed-mobile networks. "We have what we call wireless alternative access, which is basically fixed wireless terminals on existing hybrid cellular networks. And our business is increasing substantially in that area. And on dedicated wireless local loops, it’s decreasing," he says. Nonetheless, Strategis states that standalone, specialized networks will account for one-fifth of world WLL subscribers in 2005, "as these networks can serve a variety of market segments from competitive telephony in developed markets to remote rural areas in developing markets".

Gorden of Motorola sees a shift to fixed networks because "there’s definitely a tax you pay in terms of your equipment costs and operating costs when you add mobility to your system".

There could also be different levels of service, notes Nortel’s Stoddard. While standalone networks often are expected to provide service that is equivalent to that of landline networks, operators of hybrid networks "are not as concerned with transparency because the customer knows it’s a different operator", he says.

Stoddard adds that he is "a big believer in convergence and hybrid networks". Given the choice of a fixed wireless terminal and a hybrid one, he observes, "People aren’t going to say: ‘Give me the fixed one: I don’t want the benefit of mobility.’" But Stoddard says he’s also "a big believer that nothing ever obliterates anything else", meaning there’s room for both types of networks.

Why wait?
One of the basic tenets of the ITU’s IMT-2000 project for next generation wireless is increased global teledensity through WLL access. Such an aim has raised the specter that operators might opt to wait for 3G technologies rather than implementing WLL solutions now. However, vendors say that is not the case.

"We haven’t had anyone say: ‘Oh, no, we’re going to hold off until 3G comes out,’" says Qualcomm’s Larsson. "No one is really expecting a lot of 3G systems to pop onto the market next year or even the year after that." She adds that because CDMA is the foundation for most next-generation networks, CDMA-based second-generation networks are well positioned for an evolution to 3G’s higher data speeds and multimedia capabilities.

Developing economies, such as those in India and around the Pacific, "can’t afford to wait," Telular’s Yerou says. Getting basic telephone service to those populations is essential to jump-starting their economies. "That demand needs to be met immediately," he says. Further, politicians in that part of the world have promised increased communications access, making WLL as much of a political issue as an economic one. Nonetheless, Yerou says that some operators in more mature markets may refrain from buying digital WLL networks because they still have excess analog capacity that can be exploited. This is especially true in areas where WLL is being looked at as a second-line solution requiring high data speeds. "Operators are saying, ‘It will take years for us to build out digital to all of the areas we need to, and by that time, broadband technologies will be available and we’ll have wished that we had waited for them. So, instead of deploying dedicated wireless local loop systems, why don’t we use the free capacity on the existing cellular networks to meet the initial shortfall and wait for the newer technologies to come?’"

Meanwhile, Finland’s Nokia has tapped InterDigital to provide 3G development efforts under an agreement that includes paid up TDMA and CDMA patent licences, indicating that today’s WLL technologies will likely show up in next generation wireless components.