It's called WiMax -- and its promoters say
broadband will never be the same
By NICK WINGFIELD
Staff Reporter of THE WALL STREET JOURNAL
May 24, 2004; Page R8

Move over Wi-Fi. Here comes WiMax.

In just a few years, the popular technology known as Wi-Fi has given millions of computers wireless access to the Internet at broadband speeds in offices, homes and cafes.

But Wi-Fi equipment has one glaring limitation: It's typically designed to allow wireless access within only about 300 feet of a radio transmitter plugged into a broadband Internet connection, like a cable or digital subscriber line. That does little to bring broadband access to rural areas that don't have cable or DSL services, and areas where those services are patchy. And it means you can't just open your laptop anywhere you happen to be and tap into the Internet.

Now a new technology, WiMax, promises to free broadband Internet access from those constraints.

WiMax antennas will be able to beam high-speed Internet connections to homes and businesses miles away, eliminating the need for every building to be wired to the Internet. And eventually, by beaming signals over entire metropolitan areas and beyond, WiMax will allow true wireless mobility -- the ability to use your laptop, unplugged, to get on the Internet from all over the map, not just at the so-called hot spots where Wi-Fi antennas currently provide such access.
For fans of mobile Internet access, it will be like trading in a cordless phone for a cellphone -- though it will be years, if ever, before WiMax's reach approaches that of cellphone networks.

Laying the Groundwork

Wireless access to the Internet over long distances isn't a new concept, but as a business it has never taken off, partly because of the lack of a common industry standard. Incompatible equipment from different makers breaks the market up into such small pieces that costs stay high, discouraging growth.

WiMax proponents say the technology they are promoting can serve as an industry standard that would sharply reduce costs -- in the same way that the Wi-Fi standard first made wireless Internet equipment for the home and office commercially viable.

It will be some time before WiMax has a chance to prove its real potential: The technology isn't expected to be available broadly until around 2006. But a growing array of companies, including heavyweights like Intel Corp., the Santa Clara, Calif., chip maker, believe WiMax will spur a wave of spending on wireless technologies.

In April of last year, Intel, Finnish cellphone maker Nokia Corp., wireless-equipment provider Proxim Corp. of Sunnyvale, Calif., and several others formed a nonprofit group called the WiMax Forum, from which the technology gets its name.

The group's agenda: to promote a recently created technical standard for wide-area wireless communications, known in engineering circles as 802.16, and to certify that equipment based on the standard from various manufacturers works well together. That equipment will include the antennas that spray WiMax coverage over neighborhoods, rooftop antennas that pick up the signals for residential and business subscribers, and eventually communications cards that go inside laptop computers and hand-held devices, to allow for mobile wireless access.

The Wi-Fi Model

WiMax backers are taking a page straight from the Wi-Fi playbook.

For years, a hodgepodge of wireless technologies for connecting computers to local office networks bumbled along without gaining much of a following. Since the equipment was based on proprietary wireless technologies, manufacturers never achieved the economies of scale that come from having a single standard that allows all of their equipment to work seamlessly together. It wasn't until hardware makers like Intel, Harris Corp. and others agreed on a technical standard for local wireless communications, known as 802.11, that the market started to flourish. The technology later became known by the catchier name Wi-Fi, or wireless fidelity, after the Wi-Fi Alliance, an industry group formed to promote the standard and ensure compatibility between products.

Now, Wi-Fi is a hit with users who set up home wireless networks, and has become popular in offices, as well. Last year, Wi-Fi hardware revenues reached $1.7 billion world-wide, up from $700 million the prior year, estimates the In-Stat/MDR research unit of Anglo-Dutch publisher Reed Elsevier.

Failure and Promise

The goal is to spur the same growth in wide-area wireless networks, a market with a troubled history.

In the late 1990s, companies like Teligent Inc., Winstar Communications Inc. and XO Communications Inc. made big bets on wide-area wireless broadband networks for business customers; all three ultimately ended up filing for bankruptcy-court protection. Larger carriers have backed away from the market, too: Sprint Corp., for instance, took a charge of $1.2 billion last October to write down the value of radio spectrum it no longer planned to use for residential wireless broadband service.

Wireless carriers made a number of mistakes, including overspending on licenses for wireless spectrum and overzealous expansion plans. And the expensive proprietary equipment kept carriers' costs high, which in turn inflated the costs for individual and business users.

"They waited for [customers] to come," says Margaret LaBrecque, a marketing manager in Intel's broadband wireless division. "They didn't come fast enough."

Still, wide-area wireless broadband services have succeeded on a modest scale, a testament to the technology's potential. Prairie iNet LLC of West Des Moines, Iowa, provides high-speed wireless Internet access in 120 mostly rural communities throughout Illinois and Iowa. The company has about 4,000 customers, split evenly between businesses and residences, about half of whom don't have access to DSL or cable connections, says Neil J. Mulholland, CEO of Prairie iNet. Fees start at $50 a month for service that provides speeds roughly equal to those of most DSL connections. Customers can pay up to $1,000 a month for much speedier service.

Prairie iNet's customers receive service through an antenna about a foot square that sits on their roofs. The company's service is "line of sight," which means the path between the customers' antennas and Prairie iNet's towers, some of which are separated by as much as four miles, must be free of obstructions. That isn't a big problem, since much of the terrain the company covers is, well, prairie. Carriers in other areas can work around obstructions by using more transmission antennas.

Mr. Mulholland believes WiMax could help dramatically reduce the cost of wireless equipment. For instance, he believes the standard could bring the price of the gear a customer needs to receive wireless service down to $150 from between $300 and $500 today.

Cheaper equipment would make it easier for carriers to expand service, at affordable prices, to more areas that aren't served by other broadband providers. That includes rural areas in the U.S., as well as countries in Asia, Africa and other parts of the developing world. And it includes suburban and urban neighborhoods where either there is no broadband service or the quality of the wired connection is so bad as to make the service useless.

WiMax will operate partly in licensed radio bands, in which carriers pay for exclusive rights to chunks of spectrum -- important for offering high-quality service in dense urban areas, where the potential for radio interference from multiple carriers is high. But the gear will also operate in unlicensed bands, which should allow smaller carriers to cheaply set up networks in rural areas.

"It enables a grass-roots phenomenon to occur," says Intel's Ms. LaBrecque. As a carrier, "you don't need to have deep pockets."

There's less agreement on WiMax's potential to compete in markets where wired broadband connections are already widely available. Some WiMax proponents believe competition from WiMax providers in those markets could help drive down monthly subscription bills.

Mr. Mulholland, for one, says WiMax will help break the "duopoly" cable and DSL providers share in the residential market. "There's room for a third pipe; I think WiMax will help be a driver towards that," he says.

Others aren't so sure subscribers will ditch their wired connections to use WiMax technology for home access to broadband services. "I don't think it's going to be big news in the U.S. with residences where you already have a choice between cable and DSL," says John Yunker, an analyst who follows wireless technologies at Byte Level Research Inc. in Brookline, Mass.

A big opportunity could come in a later stage of WiMax's development. Equipment makers are focusing at first on using WiMax technology to bring fixed broadband access to areas that can't get it now, as that is considered the easiest market to tap. Eventually, though, companies predict the technology could allow "metropolitan area networks," in which mobile users can wirelessly tap into the Internet from virtually anywhere, instead of being confined to a fixed location. Hardware makers first will have to refine their WiMax technologies to support mobile users, a development that Intel, for one, predicts will occur by 2007.

Here, too, WiMax faces competition. For instance, cellular provider Verizon Wireless, a joint venture of New York-based Verizon Communications Inc. and Britain's Vodafone Group PLC, is pushing city-wide wireless broadband service for mobile users based on another technology, known as EVDO. At the same time, some cities, such as Athens, Ga., are trying to blanket wireless Internet coverage throughout downtown areas by creating many overlapping Wi-Fi hot spots. Such free services, still in the experimental stage, could limit the appeal of any commercial alternative.

Write to Nick Wingfield at nick.wingfield@wsj.com

For additional information contact:
Neil J. Mulholland, Prairie iNet, 515/440-0848, ext. 106